The battle of our age

 

In my last post of 2024 I noted that the main political battles in many countries would be between on the one hand socially conservative right wing plutocratic populists and on the other centre or centre/left parties tentatively moving away from neoliberalism. The populists might be represented by what had once been a mainstream centre/right or right wing party or they could be represented by an insurgent party from the further right, but it really didn’t matter which it was, because their rhetoric and policies would be much the same. The last week in UK political discourse has been entirely consistent with that proposition.

Until November 2024 it was still possible to see right wing populism as an insurgency, as an entertaining interruption to the more sober business of conventional politics. At least that is how the mainstream media typically portrayed it. That was never the reality in the UK, the US and elsewhere, but with Trump about to enter the White House it is no longer even a story you can tell.

After Musk on 3rd January called Jess Phillips a “rape genocide apologist”, the Conservative leadership could have taken the high ground. They could (and of course should) have said that Musk’s comments about Phillips were both ludicrous and dangerous, exposing his lack of knowledge about the UK. They could also have said that we have had a national inquiry, and now what was needed was action. After all when in government the Conservatives had also turned down a request from Oldham councillors for a national inquiry.

In short, they could have said what Starmer said on 6th January, but before he said it. That would have turned the media debate into one between the Conservatives and Farage, where Farage would be parroting Musk. Clashes of this kind are just what the Conservatives need if they are to stem the rise in Reform. As this high ground is also the right ground, it is a debate that they could have won.

Instead the Conservatives followed Farage in refusing to condemn Musk’s remarks about Phillips and Starmer, and repeating his call for another national public inquiry. This is hardly surprising, as the Conservatives have followed a populist path since they chose Johnson as their leader, and also since Johnson they have shown no qualms in going for the Islamophobic vote.

For Farage, Musk and the Conservative party, anything that highlights the awful exploitation and criminality that happened in Oldham, Rotherham and elsewhere, and which was for far too long ignored by the authorities, is gold dust. Not only does it feed the old racist trope that some groups, in this case Mulsims or immigrants, are criminals and rapists, but it also allows them to show that concerns about racism can sometimes have negative effects. They know that individual stories selected to fit their racist agenda are for many voters more powerful than the statistics that say race, religion, or immigration is not the issue when it comes to men sexually exploiting women and girls. Of course anyone who supports the Trump administration, or who has as one of their five MPs someone who was sentenced for kicking his girlfriend and thinks Andrew Tate is an “important voice” for men is not really concerned about the victims in these cases. Their concern is to whip up Islamophobia, which is why they want yet another inquiry rather than actions based on previous inquiries.

On this there appears to be no difference between Musk/Farage and Badenoch/Jenrick/Philp. If anything, the latter group appears worse. Take the case of extreme far right leader Tommy Robinson (real name Stephen Yaxley-Lennon), who is in jail for 18 months for contempt of court. (A good summary of why he is in jail is here, HT Helen Lewis.) Farage has for some time distanced himself from Robinson, but Musk thinks he should be free. Badenoch refused to say whether she agreed with Musk or otherwise.

Musk’s interventions, and the right wing bandwagon that followed, are not just designed to stoke Islamophobia and anti-immigrant sentiment. They are also a classic example of how you turn reality on its head. Jess Phillips has done far more than most to help vulnerable women, and Keir Starmer made it easier to prosecute those that exploit them. But by attacking them personally, and suggesting the opposite, Musk and the political right play the mainstream media to hide that truth. Most of the mainstream media has done its usual ‘two sides’ thing, making Phillips and Starmer’s record on this issue ‘controversial’ in the eyes of most voters. The truth is lost to all but high information voters, and the strategy of distorting the truth is successful. The other thing the far right’s professed concern about male exploitation of women ends up achieving is retraumatizing the victims and putting the life of a female MP at greater risk.

As the UK’s political right has become more extreme and populist it has also increasingly aligned itself to Trump and a Republican party, who have been playing the US mainstream media in this way for years. As a result, we can expect to see this and similar tactics used more and more often in the UK. Of course the right wing press has often tried and sometimes succeeded in doing similar things, but in combination with Trump, Musk and others in the US they can become much more successful.

Increasingly the populist plutocratic right is an international project, and Trump’s victory gives its national representatives much more power. The UK is far from alone in having to contend with this kind of political interference. There is a danger that individual national governments that are not right wing populists may be too weak to combat this attack, particularly when resistance can result in economic retaliation from Trump in the form of tariffs. In addition, the uncertainty he creates will have other negative impacts on their economies, as it is doing currently in the UK.

Appeasement in the face of this onslaught just doesn’t work, but instead just assists those who want to see populist far right governments everywhere. If the first thought among policymakers outside the US is to avoid saying or doing anything that might annoy or upset Trump, then they have already lost. If there might be one silver lining to Musk's intervention, it would be to make Starmer realise that Trump is never going to helpful to the UK while Labour is in power, and pretending otherwise will just have domestic political costs. Given the strength of the threat, mainstream governments around the world need to cooperate and act together in planning resistance. With Musk that means using and enhancing the laws they already have to make social media platforms accountable. As I argued here, we should be prepared to stop the spread of disinformation via the media in the same way as we already stop other companies misselling their products. The new US government will fight very hard to prevent its social media companies being regulated, and to fight back other countries need to act together.

The fight against right wing plutocratic populism is not like previous post-warpolitical battles between the right and left, over how society should be organised to best serve its citizens. Instead it is a battle over whether politics addresses the real world problems voters face, or whether it is instead preoccupied with a fantasy world. A world where politicians make stuff up all the time, pretend problems are caused by convenient scapegoats to feed off the divisions that causes, and when these scapegoats don’t exist, as with climate change, they deny the problem even exists at all. The fight against right wing plutocratic populism is the battle of this age, and it would be foolish at this stage to bet on which side will win.

[1] The BBC, on this issue as before, has helped the far right, as Ian Dunt notes here. Another approach is possible, as Beth Rigby shows here, but unfortunately it’s the exception rather than the rule for the broadcast media. The moment the headline is something like ‘Starmer defends his record against attacks from Musk’ it has distorted the truth.

Vibes for the economy and other things

 

As I and many others noted after Trump won, real median household income didn’t grow nearly as much under Biden as it did during Trump’s first presidency. But there is more to the story of why 45% of voters said they had become worse off under Biden. Paul Krugman, in his new subtrack that is obviousy essential reading, points to the Michigan Consumer Survey that asks consumers about their personal financial situation compared to five years ago. In October 2024, before the election, 45% said they were worse off, while 39% said they were better off. When the same question was asked one month later, after the election, the numbers were 41% and 45% respectively.

Nothing happened in that month to make 6% of the respondents better off. There are two possibilities. One is that a significant proportion of respondents were answering the question in a politically strategic way. The other is that the election result changed their perception of their personal financial position. But how could an election today change perceptions about the past?

Paul presents two pieces of useful survey evidence that may help answer that question. The first is that people generally thought that the economy in their own state (the ‘local’ economy) was doing better than the economy in the national as a whole. Obviously this might be true in some states, but for all states to be doing better than the US economy as a whole doesn’t make sense. Second, people had a more favourable view of their own financial well-being than the economy at local or national level.

Now if people were answering in a politically strategic way, we shouldn’t observe those differences. Instead it suggests that, when people are asked about how they think the economy is doing, they don’t just reference their own financial situation. Most people have a conception of how the economy as a whole is doing which doesn’t come from their own or even their friends and neighbours financial positions, but something else. For a tiny minority of people, like myself, that perception comes from looking at macroeconomic data. For everyone else, their perception comes from what they read or see in the media.

People know that ‘the economy’ is important. When the economy is in crisis, that will affect most people. In addition most people think that politicians are at least partly responsible for how the economy is doing. They probably grossly overestimate this responsibility, in part because economic and political news is so often linked in the media, and in part because politicians make false claims about what they can achieve and the failures of opponents. In short, what the media says about the economy influences how people vote, even if what they are saying is different from the individual knowledge people have about their own and local economic conditions.

A clear example of this in the UK was during the 2015 election. Voters generally agreed that pretty well everything was worse in 2015 than in 2010, with one exception: “the economy”. Media pundits agreed that the economy was the Conservative party’s strong card. Yet real wages had been falling every year from 2010 until 2014, and had only begun to grow during 2015. This was a period that should have seen a strong recovery from a very deep recession. So why did people think the economy was the Conservative party’s strong card? Because they believed reducing the deficit was the absolute priority, and the government had succeeded in doing this. Why did they think reducing the deficit was more important than an economic recovery or their own wages? Because that is what the media said or implied day after day.

The part of the media that is used by its owners as a vehicle for propaganda in favour of right wing parties will obviously push a view of the economy that is favourable to their side, be it the Conservative led government in 2015 or the Republicans and Trump in 2024. I wrote about this immediately after Trump’s victory, but this part of the media is not my concern in this post. Instead I’m interested in how the part of the media that thinks it’s being objective in its reporting (the ‘mainstream media’ for short) treats the economy and other subjects.

For this part of the media, it is wrong to see their negative reporting of the economy under Biden, or their positive reporting of the UK economy in 2015, as some kind of conspiracy. Large government deficits do sound bad if you constantly make analogies between governments and households, and the Eurozone crisis appeared to show how high deficits could create financial crises. Equally inflation was higher under Biden, and living standards didn’t grow as fast as they had under Trump as a result. The mistake the media made in both cases was to ignore economic expertise. The majority of expertise told them in 2015 that their household analogies were awful and why the Eurozone crisis wouldn’t happen in the UK. Any unbiased expertise told them over the last few years that US economic performance was the envy of the world, and many would have said this was in part because of Biden’s policies.

There is nothing particularly special about the economy that allows the media to sometimes present a view (a 'vibe') that departs from expert opinion. All you need is any issue that most of the public believe is important to their wellbeing and/or which touches on common fears, but where direct experience or knowledge is limited and most do not have the time and knowledge to directly access data and expertise. In an ideal world expertise and the media would cooperate, but all too often that doesn’t happen, particularly when debate involves senior politicians and so is handled by political reporters rather than reporters who are subject specialists.

Another example which I wrote about at the time was how the pandemic was treated by the UK media, especially in the early months of 2020. The UK has a large amount of expertise on pandemics, how they spread and how policy should react, but we hardly saw any of that expertise used by the mainstream broadcast media. Instead the UK media mainly acted as a mouthpiece for the government. As a result, it largely failed to inform the public about basic concepts and alternative policy options. It was left to broadcasters on Irish TV to point out the absurdity of the UK’s ‘herd immunity’ strategy, and when that strategy was abandoned the mainstream media parroted the politicians in saying the ‘science had changed’.

In this case the media took the reasonable idea that in emergencies it was bad to scare people and translated that into the dangerous vibe that it should just act as a mouthpiece for politicians because politicians would ‘follow the science’. That made no sense in scientific terms (there is too much uncertainty to believe there is a uniquely optimal way of handling pandemics known ex ante), but most political journalists have little scientific background. It also made no sense in political terms, but too often political journalists assume that if something is not contested among the two main political parties then it must be right. Maybe at the time they thought it was the responsible thing to do to become the government's mouthpiece, but instead the vibe that the government was 'following the science' was extremely irresponsible and the media became complicit in the unnecessary deaths of thousands of people.

I have written a lot about why the mainstream media often ignores expertise, and instead creates vibes that at best reflect only part of reality, and at worst gets things very wrong. There are clear similarities, interactions and overlaps with the knowledge transmission mechanism between academics and policy. The fault may sometimes lie as much with expertise as with hard pressed journalists with very little time. One thing political journalists seem to do, however, is read or watch what other political journalists say, which makes the persistence of vibes easier. It also means it is easier to create vibes that benefit the political right, but not so easy that it happens all the time. Why and when the mainstream media collectively create and push stories about reality that conflict with a majority of expert opinion without being told to do so is an interesting area of study, made that much harder by a belief in much of the media that it never happens.

After neoliberalism: dynamics of transformation

As this will be the last blog until 2025, I thought I’d make it a bit more substantive than usual. Normal service will be resumed in 2025.

I started writing about how the UK and US under right wing leadership had become a kind of plutocracy in 2017, after the Brexit vote and the election of Trump. [1] That was relatively unusual at the time, because most of the discussion of Brexit and Trump focused on their populist aspects. However in the last few years talking about US and UK plutocracy has become more common: see in particular Martin Wolf’s latest book “The Crisis of Democratic Capitalism” (interesting review here).

Though I didn’t at first, I’m now inclined to view this development as an almost inevitable consequence of neoliberalism. Perhaps my most coherent presentation of this point of view can be found here, where I set out why neoliberalism is different from plutocracy, why neoliberalism encourages plutocracy, and how the political right that championed neoliberalism has become plutocratic. In this post I want to examine some of these dynamic links more closely, including why a plutocratic right can so easily turn populist and why it can also be easily subverted by charismatic leaders who are hopeless at governing.

Before and after

If you tend to describe everything that came from Thatcher and Reagan as neoliberal, it may seem hasty to say that the political right in both countries are no longer neoliberal. You would be right, because neoliberal ideology remains a core part of how many right wing politicians think, and it remains a pervasive influence on society more generally. Yet while it is obvious to describe the Thatcher and Reagan governments as neoliberal, it is much harder to use that label for politicians that erect rather than lower barriers to trade, and politicians who attempt to stop firms hiring workers from overseas.

This problem applies to a wide range of ways of describing neoliberalism. If you like to think of neoliberalism as an ideology that favours free markets, then erecting trade barriers or telling firms what labour they can hire is not promoting free markets. [2] I tend to think about neoliberalism as a collection of ideas that helps existing capital in general (e.g. reducing union power), or at least some parts of capital without harming others (privatisation). In technical terms they represent ideas or policies that are Pareto improvements for capital. [3] More colourfully, under neoliberalism the executive is at least in part “a committee for managing the common affairs of the whole bourgeoisie”. Yet immigration controls or trade barriers harm large sections of capital, so how can politicians that enact them be categorised as neoliberal?

As with neoliberalism, aspects of plutocracy, like lobbying or political donations, exist in varying degrees in all periods. For example large parts of the media have always been controlled by very wealthy individuals who used that media to further their political views or agenda as well as their own personal interests. The key point is that under Thatcher and Reagan those plutocratic elements largely promoted a neoliberal agenda, while subsequently that is no longer the case.

Dynamic 1: the growing unpopularity of neoliberalism, the weaponisation of culture wars and unintended consequences.

The (essential? - see below) background to the politicisation of culture wars is growing social liberalisation. In the US that included greater racial equality, and following Nixon’s ‘southern strategy’ the Republican party became the natural home for social conservatives reacting against social liberalisation. In the UK culture wars were not a significant part of Thatcher’s appeal, because reducing union power and the number of strikes, privatisation and tax cuts were initially popular policies. But after a time the popularity of continuing to reduce the size of the state fell away, and in opposition after 1997 the Conservatives began focusing on immigration as a political weapon.

The unpopularity of neoliberal efforts to reduce public services and cut taxes has only increased in recent years. (This tension might have shown itself more quickly had it not been for North Sea Oil in the UK and growing deficits in the US.) In the UK with lax regulation, privatisation at least in some areas began to become a means to extract wealth from the public. In the last UK election 52% of those who voted Conservative in 2019 wanted lower NHS waiting lists to be a government priority, compared to 19% for tax cuts.

Rather than abandoning the goal of a smaller state enabling tax cuts, Republicans and Conservatives increasingly used culture war type issues to win elections by attracting socially conservative voters. However this strategy contained two problems. First, because the use of these culture war issues was largely instrumental, it created a danger that social conservatives who had given their vote on this basis would quickly become disappointed.

Second and perhaps more importantly, when pursuing culture war issues clashed with neoliberal goals, neoliberal politicians were very reluctant to sacrifice these goals when in power. Immigration benefits capital, and perhaps as a result antagonism towards immigration was initially not part of the culture wars in the US. The economic costs of reducing immigration was why Cameron never seriously tried to hit his immigration targets. As long as the mainstream parties just ‘talked the talk’ on culture war issues but when it came to policy deferred to the collective interests of capital they remained neoliberal.

This led to the crucial outcome of this dynamic, which was growing discontent from the socially conservative element of the right wing coalition.

The emergence of populism

Populism is used in many different senses. The sense I prefer is due to Jan-Werner Müller, and involves an attack on the key institutions of liberal, pluralist democracies: parliaments, the civil service, the courts, the media and so on. Populists argue that these institutions have been captured by ‘the elite’, and to return power to ‘the people’ (as represented by the populist party or its leader) requires overhauling these institutions.

It would not be surprising for a left wing party that believed that these institutions were designed or had been co-opted to work in the interest of capital to be populist in this sense. But why would a party that wanted to achieve socially conservative goals be populist? I can think of two reasons for this. First as I noted above, most western societies have been becoming more socially liberal quite rapidly over the last few decades, so it is easy for anyone with socially conservative views to feel like an outsider, and be made to believe that while they represent a ‘silent majority’ they feel like an outsider because the elite has captured the institutions of a pluralistic democracy. Indeed the success of social liberalism provided a fertile ground for those who wanted to exploit social conservatism for political ends.

Second, social scientists often refer to the social conservative/liberal axis as the authoritarian/liberal axis, because authoritarian and socially conservative views often go together. This will not only lead to an impatience with independent sources of power or authority (or indeed democracy itself), but it will also mean that socially conservative voters may be more attracted to ‘strong’ (charismatic) leaders than those who are more socially liberal. Leaders who are elected not because of their policies or past history of competence, but who appear to conservative voters to be most likely to turn the tide against social liberalism.

Grass roots factionalism and competitors on the right

In the UK, divisions over UK membership of the EU had been a constant feature of dissent within the Conservative party for decades before that party emerged from opposition to lead the Coalition government in 2010. A new right wing party, UKIP, challenged it on this issue in particular, but its impact was small given the UK’s voting system for General Elections.

That changed after David Cameron insisted in 2010 on establishing targets for overall immigration numbers. These targets never came close to being met. Talking the talk but not delivering when in government greatly increased UKIP’s popularity (helped by the impact of his austerity and the government's use of migrants as scapegoats), leading to defections from Tory MPs to the new party. To attempt to stem this insurgency Cameron agreed to hold a referendum on EU membership if he won power outright at the next election.

The insurgency within the Republican party at around the same time came from the Tea Party. However this appeared not to be a reaction by disillusioned social conservatives, but rather by Republicans angry about the bailing out of banks after the financial crisis, and Obama’s healthcare reform. It quickly became an activist revolt against the party establishment, and backed particular candidates in primary elections. There is good evidence that the Tea Party played an important role in the 2016 election of Trump as Republican presidential candidate.

In the US, immigration policy under Republican presidents since Reagan had been fairly benign. It was Democrats rather than Republicans who tended to push for trade barriers. In retrospect this can be seen as repressing the instincts of the Republican’s socially conservative base. While the Tea Party deliberately avoided campaigning on social issues, there is little doubt that its membership was largely socially conservative. Trump was so successful in part because he mobilised that activist base.

Dynamic 2: a growing dependence on wealth and the media

When there is only one right wing party likely to gain power, and that party is fairly united, right wing individuals or groups with money they want to use to influence the political process have little choice about where to send their money to. Equally, most newspaper owners who have considerable power (as well as money) will generally have little choice about which party their newspaper supports. Even if occasionally they end up switching formal support to a centre left party, the filters they put on what news they report and how they report it will be designed to promote a right wing agenda and a neoliberal ideology.

When the mainstream right wing party becomes factionalised, or when it is challenged from the right, this is no longer the case. Politicians recognise that this gives monied interests far greater power and influence. It is this that has fuelled the change from neoliberalism to plutocracy. Supporting causes that are no longer Pareto improvements for capital, or indeed harm large sections of capital, can no longer be dismissed because if they are, the right wing competitor may take the money and the mainstream right wing party may suffer as a result.

Choice also gives newspaper owners much greater power, for much the same reason. This became particularly evident during the Brexit referendum in the UK. Of course newspaper owners and some wealthy political activists understood this, and encouraged these divisions. In this sense they were not just beneficiaries of a process, but helped make it happen.

There are various ways in which neoliberalism made the emergence of plutocracy easier. By cutting the top rates of tax, and by facilitating excessive pay awards for senior management with its emphasis on maximising shareholder value, it not only increased the wealth of the wealthy but it also gave the wealthy more to fear (from a government prepared to reverse this) and therefore more reason for political involvement. In addition by weakening the power of the trade union movement, neoliberalism reduced a natural check on the power of wealth and also helped reduce union influence on centre/left parties. Wolf in his book is good on how financialisation directed resources away from productive capital to rent seeking (making money by taking it off others), helping create a crisis where almost everyone suffered except those who should have been held accountable.

But with only a single, largely united right wing party, there is little that the wealthy could do to further their individual interests other than lobbying politicians. When that unity on the right disappeared, it gave wealthy individuals much more power. Thus dynamic 2, the arrival of plutocracy, emerges from the break up of a unified right described in dynamic 1.

Electoral takeover

By encouraging and mobilising concern about culture war issues, but then largely ignoring those concerns when in power, the mainstream parties of the right encouraged voters to look to parties from the further right, or factions within the mainstream party, that appeared more committed to their views. Through the Tea party movement in the US and UKIP in the UK, the right wing establishment found itself fighting insurgency from the right, a problem that was mirrored in many other countries.

These parties or factions tended to be far more nationalistic than their mainstream rivals, and were happy to attack another key feature of neoliberalism: free trade and the globalisation it had helped create. Erecting trade barriers is not a Pareto improvement for domestic capital, but there will always be some businesses or wealthy individuals who either benefit from such restrictions or see them as a means to an end. With only one right wing party the Pareto principle generally held, however much the particular monied interest was willing to throw the party’s way. With more than one right wing party (or clear factions within it), the monied interest not only had a choice, but they had the power that went with that choice.

Within PR type voting structures, these further right parties could be excluded from power as long as the mainstream right party was able to join with parties further to the left to exclude them. In a two party system with open primaries it was ironically much easier for a populist faction to become dominant. In essence you just needed a quarter rather than half of all voters to take over the mainstream right wing party, and then hope that party loyalty, political polarisation or populism (with a good bit of help from media and gerrymandering) would be enough to win general elections.

In the US open primaries allowed a gradual takeover of the party by more conservative elements who now tend to follow Donald Trump. In the UK they achieved a takeover through the Brexit referendum, the subsequent turmoil, and Conservative MPs finally choosing to elect Johnson in an attempt to counter the growing popularity of Nigel Farage..

Dynamic 3: The centre left begins to (slowly) move away from neoliberalism

The evident failure of neoliberal ideas means that the centre/left when in power in the UK and US are also more likely to move away from neoliberalism than they had been immediately after Reagan and Thatcher. These failures included the externality of climate change, and in the UK the failure of at least some privatisations. The centre/left also began to increase its support for trade unions.

Needless to say this move away from neoliberalism was much more gradual than those further left desired, and you can reasonably argue that the governments of Biden and Starmer are closer to neoliberalism than 1970s social democracy, but right now at least the direction of travel for both Labour and the Democrats is away from neoliberalism rather than towards it.

While immediately after Thatcher and Reagan the centre/left felt it had to follow large aspects of neoliberalism, today the immediate threat is from right wing populism. To counter this more rather than less state intervention will be necessary, either by following socially conservative themes (e.g. over immigration) or more traditional social democratic measures that are designed to tackle economic inequalities that many believe intensify the concerns of some socially conservative voters.

Unlike dynamic 2, this dynamic is a result of the clear economic rather than political failure of neoliberalism.

A new landscape

In the UK we have a centre/left government and a right wing opposition seemingly divided (a mainstream Conservative party and the populist Reform) but where in reality there is little to divide the two right wing parties in terms of policy. In the US we have centre/left Democrats replaced by a new Trump administration. In these two countries and in some others, the big divide is no longer between traditional mainstream parties of the right and centre/left, but between the centre/left and a populist plutocratic right focusing on socially conservative issues. Whether that plutocratic populism comes from a mainstream right party or an insurgent party seems second order, and both may be run in an autocratic manner by charismatic figures ill-suited to government.

Needless to say, this last aspect of plutocratic populism is a disaster for those countries unlucky enough to suffer under one of these autocratic populists. Tens of thousands of people probably suffered a painful and early death in both the UK and US because the pandemic hit while Johnson and Trump were in power, and it could be even worse if Trump succeeds in appointing anti-vaxxer Kennedy as his health secretary and a new flu pandemic hits us soon.

In this new landscape, the central political fight is between right wing socially conservative populists serving the interests of a select plutocracy, and more traditional centre or centre/left parties generally triangulating on culture wars but pursuing an economic policy that is a blend between neoliberalism and more traditional social democracy. Divisions reflect age and education rather than class. This suits the plutocrats in power, but why centre/left parties don’t do more to expose the plutocracy of the right is an interesting question.

Wither neoliberalism? From centre/left governments the move away from neoliberalism (dynamic 3) may be slow but it is clear. On the right, a focus on controlling migration and trade means neoliberalism is over as a unified ideology of government. Exactly what replaces it on the right is unclear. As Justin Vassallo notes here, in many cases it is hard to predict the general direction of economic policy in Trump’s second administration, as it will depend on who in Trump’s cabinet gets the upper hand. Some things are for sure, of course: there will be more tax cuts for the wealthy and the poor will suffer. It is a plutocracy after all. But, to quote Vassallo:

“It would be different from the neoliberal model insofar that the economy would, on one level, be much more regulated than before, but also radically deregulated, depending on which bankers, tech barons, and energy firms maintain Trump’s favour.”

This makes things much more difficult for businesses and corporations. Under neoliberalism corporations could be pretty sure that the government would not enact policies that did them serious harm. In a plutocracy that is no longer the case, and it becomes much more important for CEOs to ingratiate themselves with the populist leader. The incentives for rent seeking rather than innovation increase yet further, and of course corruption becomes routine. On the other hand business leaders get tax cuts!

Critique

This story is very much a top-down narrative of political developments over the last few decades. Politicians realising that extending neoliberal goals were no longer enough to win elections turned to culture war issues, but this created a dynamic that would eventually lead to socially conservative populism and governments run for the benefit of a select group of the very wealthy. In this account, it is no surprise to see plutocratic populism emerging among the major economies first in the US and UK, because that is where neoliberalism first became dominant.

In this account political actors seeking to extend neoliberal goals, who saw the financial crisis not as a neoliberal failure but an excuse for austerity, became the authors of their own demise. A critique might suggest that this is incidental, because a rise in socially conservative populism was inevitable anyway. This alternative story is more bottom-up. It would have a combination of growing social liberalism and wide-spread immigration radicalised social conservative voters, which helped by an ageing population became a dominant political force. For reasons described above, these voters would always look to the political right rather than left, and also for reasons noted above many were attracted by charismatic populist leaders. Plutocracy, rather than playing the causal role in my top-down narrative, simply benefited from the breakdown/transformation of the mainstream party of the right caused by this bottom-up movement. The fact that it happened in the UK and US before France, Germany or Japan may simply reflect different voting systems.

A third narrative stresses the economic conditions created by neoliberalism (or the absence of the redistribution that went with social democracy), and how this made a group of voters (the ‘left behind’) disenchanted with mainstream parties and suseptible to populists. Because this story, like my own, puts neoliberalism at centre stage it fits with populist first taking power in the UK and US. This narrative can downplay the importance of social conservatism and culture wars, and simply note that attacks on minorities including immigrants has always been how populists deflect economic concerns that might otherwise be directed towards the wealthy.

These three alternative accounts can be competing or complementary. Maybe in 2025 I will think about how to judge whether any one is more persuasive than the others. Have a great Christmas and New Year!

[1] I prefer plutocracy to oligarchy because it stresses the key point that political leaders are either very wealthy themselves, or answer to those who are. However the term plutocracy leaves unclear whether it is government by all the rich or just some of the rich, and I use the term in the second sense.

[2] John Elledge suggested an ingenious way in which Brexit could still be described as favouring free markets, if you view free as meaning free from government involvement. However I don’t think this is neoliberal because neoliberalism is quite happy for the state to take action that helps markets function better for capital, and that includes international standardisation of regulations.

[3] Sometimes policy has to decide between competing capital interests. Climate change is an interesting example. Neoliberals who are economically literate do not deny the existence of externalities, and so a natural neoliberal position would be to support green technology rather than fossil fuel companies. For some time in the US but more recently in the UK the position of the right has moved from this position to become more critical of measures to moderate climate change (see here or here).

 

The politics of stupid

 

I had a conversation on social media recently that went a bit like this (and I’m paraphrasing):

‘I want massive reductions in immigration’

‘But how? Stopping firms or the public sector’s hiring Labour, or collapsing a number of universities? How much poorer do you think people will be prepared to be?’

‘Figure it out or Reform will’

‘You want a large reduction in immigration so you tell me how it will be achieved and at what cost’

‘I'm not a immigration policy expert. What I'm saying is either Labour does it or the populists will.’

I feel that, since the success of Reform at the last General Election and Trump’s victory, a good deal of public discourse is a bit like this. It is dumb politics. Never mind the facts or the consequences, we need to do what the populists want, or repeat what they say, otherwise their march to victory will be unstoppable.

The fear is real enough. Trump did win, and in a recent poll 28% of people had a favourable view of Nigel Farage, higher than any other party leader. A majority of people voted for Brexit. But the lesson of Brexit is not that Cameron should have screwed the economy by even more than he already had in an attempt to hit his immigration targets. The only way Cameron could be sure to hit his immigration targets would have been to stop free movement, which would have meant Brexit, so Brexit to stop Brexit!

One consequence of Brexit is that the government can now largely control immigration numbers if they want to.

The chart above shows numbers have been unusually high because of people coming to study or work, so all the government has to do to get the numbers right down is to stop issuing work visas and tell universities to stop teaching overseas students. Suppose the government did just that. The negative consequences do not need spelling out, but does anyone seriously think that Farage would say that was great, my job is done? He would just go back to pointing at asylum seekers arriving by boat.

The politics of stupid is believing that the way to deal with Farage or Trump type populism is to do what Farage or Trump happens to be shouting about at the time. Concern about immigration is real enough, but it is important to ask why there is concern about immigration. To put it very simply, there are probably two types of reasons why voters find populists going on about immigration attractive. The first is that these voters don’t like foreigners. Immigration numbers don’t matter to these people when there are already plenty of foreign looking people already here. The second type are voters who mistakenly think that problems like finding it difficult to see a doctor or buy a house are because of immigration. Cutting immigration is only likely to make those problems worse, by stopping doctors or construction workers coming to the UK 

The last twenty years or more in the UK is a clear illustration of why populist appeasement doesn’t work. For example, in an effort to reduce immigration numbers the last government effectively closed down almost all safe routes for refugees to enter the UK. So now refugees risk their lives to cross the Channel in small boats. The last government spent extraordinary amounts of money on the Rwanda scheme to deter asylum seekers crossing the Channel that was never going to work. It did them no good whatsoever. The scheme was stupid, and the government was stupid to invest so much political capital in it. If you are genuinely worried about refugees arriving by boat, provide safe routes.

The most glaring example of the futility of appeasing the populists is Brexit. Leave the EU, the populists cried, and everything will be great. We left the EU, and pretty much everything is worse as a result. Has the failure of this populist cause done its main protagonist any harm? Clearly not. However it has made people poorer and more discontented, adding fuel to the populist fire. Following the populist path with Brexit has only encouraged populism.  

If believing that doing what right wing populists ask for will reduce populism’s appeal is dumb, then aping what they say is worse still. Describing immigration policy under the previous government as running an ‘open borders experiment’ is as misleading coming from Starmer’s lips as it is from Farage. The immigration system put in place after Brexit involves clear rules about who can get visas, excluding immigration into most unskilled (effectively low paid) jobs. That is not open borders!

Repeating that kind of nonsense does great harm. It misinforms the public, which is bad enough, but it does so in a way that helps the populist! Imagine if, when Trump said that he had heard immigrants were stealing pets and eating them in Springfield, Harris had replied that if she was elected she would put a stop to that. No one is going to vote for politicians because they start acting like Farage or Trump, when they can already vote for Farage or Trump.

For those who find Farage appealing because they don’t like foreigners, I doubt there is much you could do to reduce his appeal beyond exposing aspects of his behaviour (like his attitude to the Russian invasion of Ukraine, or the NHS) that are less attractive to those voters. This inability is particularly the case when the right has a media machine pumping out stories about ‘criminal immigrants’ and ‘invasions’. However, the outlook is less bleak for those with mistaken beliefs about the economic consequences of immigration. These misunderstandings must be engaged or they will continue. The first step in reducing the populist’s appeal to this group is to talk about the jobs immigrants come here to do. Such discussions are also the best way of both understanding immigration, and in some circumstances to perhaps potentially reducing it.   

I often say that asking people if they would like lower immigration is a bit like asking if they would like lower taxes, or if they want more money for the NHS. I use this example, because it shows that it is possible to move public discourse to routinely look at the consequences of actions. It has become second nature for journalists to ask politicians proposing extra spending to ask where will the money come from. (Although unfortunately less routine to ask the same question to those proposing tax cuts.) It could become equally routine to ask how cuts to immigration would be achieved, and what the costs would be.

If we don’t start doing this, public discourse on immigration will remain dumb, and in those circumstances only the populist wins.

Investment in politics, like economics, involves risk and present sacrifice

 

Rachel Reeves is absolutely right to make investment her watchword as Chancellor. So many of our current problems come from lack of investment over the last fourteen years, particularly in areas like the NHS. While France and Spain have dozens of high speed rail lines linking the country together, we cannot seem to build just one.

Yet investment also applies to politics. Immediate political incentives encourage short term thinking and playing it safe, yet often better long term outcomes for political parties as well as the country can involve taking more risks and some current sacrifice in popularity. I do worry that in many areas the Labour government is not making the necessary political investment.

Let’s look at some evidence. Many would argue that we should start while Labour was still in opposition and the Conservative government cut employees NIC rates. By that time a Labour victory was pretty likely, and everyone including Labour knew that these tax cuts were completely unaffordable and were justified only by fantasy austerity. If Labour had committed in opposition to reversing these cuts they probably would have lost some votes, but the risk of losing the election as a result was small. The benefits of taking that stand in opposition would have been much more scope in Labour’s first budget.

I don’t know how strong that evidence is because I’m not a polling expert, but I do think Reeves’s first action as Chancellor is a good example of missing an opportunity to make a sacrifice for future gain. As I said at the time, her ‘the books are much worse than we thought’ statement was an opportunity to reverse those NIC cuts, and raise far more revenue than ending the winter fuel payment. The sacrifice was to go back on a pre-election pledge, but she had an effective political riposte. Any time the Conservatives used higher NIC rates to argue ‘Labour cannot be trusted’, it would allow Labour to remind voters of the mess the last government left the economy and public services in.

Another potential piece of evidence of political short termism is the budget itself. If you want to recharge the economy by expanding public investment you need to substantially increase public investment relative to the past. Yet after the budget the average share of net public investment in GDP over the next five years is projected to be 2.6%. That compares to 2.4% in the five years up to and including 2023/4. This will do almost nothing to boost economic growth or private sector investment. It is of course far better than the growth sapping plans left by the last government, but that measure will be quickly forgotten.

So why so modest on public investment, when both the public sector and the economy is so desperately in need of something more radical? The answer may be that the redefined falling debt to GDP fiscal rule prevented anything more. Yet Reeves could have been more radical on that rule, but she instead chose the option that would cause least offence in the short term.

Another example is in defending the budget, she implied that this will be her last budget where she raises substantial amounts of tax. That is an answer that is convenient to give in the short term, but it is also a hostage to fortune. If tax receipts are less than predicted, or public services clearly need more than she has provided, is this statement going to be another self-imposed constraint in the future?

Or take Labour’s current rhetoric on immigration, where they are stealing the Conservatives’clothes. That works at the moment because of the last government's record and because numbers are currently falling. While it may score political points right now, in the longer term numbers will depend on economic developments that can neither be foreseen nor, as Cameron found out, controlled. It might be far better to take the opportunity of bringing some honesty into the public debate, which would provide some cover if numbers rise again.

Finally there is the media. Right wing populism becomes a much more potent threat when half the media acts as its cheerleader. So far the media’s ability to lie and distort has gone unchallenged. If it is the case that Labour agreed to not press ahead with Leveson 2 in a deal with the Sun before the election, it was both a bad deal and another example of getting small short term gains at far higher long run costs.

Labour cannot be faulted for not having long term goals. Its missions do that, and in many cases they are pretty ambitious. My worry is that short term political pressures are preventing the actions needed today to meet those goals. Take economic growth for example. There is a real risk that growth in living standards will be lacklustre and well below what the government has promised and is aiming for. (The OBR expects an average of just over 0.5% annual growth in real disposable income over the next five years, with initial growth of around 2% tailing off in later years.) While Labour was entirely correct to highlight the terrible growth and living standards record of the last government, if in four years time it is felt to be doing not much better it will put itself at real risk. Even if that poor performance is partly due to the antics of President Trump, we know many voters will still blame the UK government.

Which brings us to Brexit. I think Labour was quite right in opposition not to reopen that debate, although Peter Kellner argues that Red Wall voters were not as important in Labour’s general election victory as many assume. Now Labour are in government the costs and benefits of being more radical on trade with the EU are very different. I argued here that there will be a tipping point where voters in Labour’s key marginals worry more about persisting with some key aspects of Brexit than sticking with the policy. While Labour are moving closer to the EU in minor ways, any major economic impact can only come from either joining the EU’s customs union or Single Market. For obvious political reasons it makes sense to do the former first.

The tipping point for public opinion will depend on events as well as demographics. As others have suggested, the election of Trump for a second term could be one of those events. Trump likes tariffs because they are a real threat that can be used to obtain deals that he can argue are favourable to the US. Other countries can either play along with that strategy, or call his bluff by threatening retaliatory tariff increases. The first option, particularly in countries that will give a lot of airtime to Trump’s boasting, carries high political risks.

Both the Conservatives and Farage will plausibly argue that in dealing with Trump Labour are at a natural disadvantage, and they would be much better placed. If Labour allows the political narrative to become one where making deals with Trump is the general presumption, they will suffer politically. By contrast, if they make it clear that protecting free trade is both in the UK’s interests and requires standing up to Trump’s threats alongside others like the EU, then trying to appease Trump can even be made to sound unpatriotic.

To join with the EU in calling Trump’s bluff on tariffs, Starmer does not need to be part of the EU’s customs union, but this is not the point. What Trump’s actions will do is give Starmer a perfect opportunity to argue the situation has changed, Labour’s previous policy on the EU is not enough and we now need to substantially strengthen our trading links to the EU to weather the Trump storm. Of course this will have some short term political costs, but with longer term political and economic benefits for both Labour and the UK economy. Avoiding any short term political pain and passing this opportunity by means Labour will once more make things difficult for themselves in the longer term.