The words “left” and “right” are no longer of real significance.

Some people still do not understand that the debt burden in Britain and across the industrialised world is so large that it cannot be paid down. The belief persists that if taxes on the rich could be raised a bit more, that would fix it. But, even if all citizens were taxed 100% of their income, the debt burden would still surpass the income. Therefore, there is no longer a very fruitful debate to be had between the “left” and the “right”. The bigger question is: what is the appropriate relationship between the citizen and the state?

After all, there is always the social contract that governs this relationship. Citizens abide by the law and pay taxes but expect the state to deliver certain outcomes in exchange. They expect a police force, a military, a certain level of universal education and a health system. What the financial crisis revealed was that the state has been over-promising for some time, possibly over the last two centuries. Those on the “left” want to believe that somehow there is a way to close tax loopholes, increase tax collection and thereby make ends meet. Those on the “right” want to believe that somehow markets can deliver enough growth and raise GDP to grow our way out of the malaise.

Instead, we now face an impasse in which the two sides harangue each other without any practical resolution. The left says the state must redistribute wealth more. The right says the state is killing the incentives for wealth creation. The solution then is to move beyond the left and the right and to find a new language to redefine a new social contract. The terms “freshwater” and “saltwater” may be helpful. In 1988 Peter Kilborn wrote an article of this title in the New York Times, pointing out that freshwater economists (who come from academic institutions like the University of Chicago near the freshwater Great Lakes) believe that the state can facilitate the efforts by individuals to generate greater wealth. The saltwater camp (who reside near the Atlantic Ocean at Harvard and Princeton) believes that the state must redistribute wealth and that these will not disincentive wealth creation.

It is possible therefore to have a freshwater Democrat like former US President Bill Clinton who believes that markets and the profit making power of the individual (including a corporate individual) must be supported and protected. In contrast, President Obama is a saltwater Democrat who is more profoundly hostile to those who have the opportunity to generate wealth and profits. It is the state’s right to take more and more of it to serve the needs of others. For him, the act of redistributing wealth is a positive thing. Bill Clinton sees such efforts as a mug’s game. President Reagan and Margaret Thatcher were perhaps the ultimate freshwater leaders on the right but both ended up engaging in some redistribution as well. It was Maggie who introduced the Poll Tax and Reagan who engaged in record deficit spending.