Winner of the New Statesman SPERI Prize in Political Economy 2016

Tuesday, 16 April 2019

Why the European Elections will be painful to watch for some Remainers


In theory the forthcoming European Elections on 23rd May should be an opportunity for Remainers to translate the clear majority for staying in the EU that we see in the polls into actual votes. Remain has been ahead of Leave since the summer of 2017, and recent majorities have been above 5%. Indeed some in the smaller anti-Brexit parties have been suggesting exactly this: the EU elections should be about Remaining rather than Leaving. Unfortunately things are not that simple, as the following YouGov poll illustrates.


The smaller columns for the parties represent the data with ‘Would not vote’ and ‘Don’t know’ included.

The first point is that the anti-Brexit parties are polling at around half the level of the pro-Brexit, anti-People’s Vote parties. The key problem, as it has always been for the Remain cause, is that the Labour vote is mostly made up of Remainers. In this poll, 77% of Labour voters voted Remain in the 2016 referendum, and some of the other 23% may have changed their minds since then. Labour is an overwhelmingly Remain party in terms of who votes for it, but its leadership is in favour of its own form of Brexit and appears ambivalent towards a People’s Vote.

Some Remainers would love voters to desert Labour and vote for one of the three unambiguously anti-Brexit parties. But this is very unlikely to happen. Many voters, even though they might support Remain, want a Labour government above all else, and they will vote for Labour despite this being about elections to the European Parliament. This is of course exactly what happened in the 2017 general election. Voting left is hardly an irrational choice for these Remainers, because if we do not leave the EU the European Parliament does play a minor role in EU affairs and it is important to have left wing voices there.

The second point is that the elections for the European Parliament is actually about voting for MEPs, so seats matter as well as the popular vote. The D'Hondt voting system used in British elections for the European parliament combined with voting for MEPs on a regional basis does penalise smaller parties. The Liberal Democrats only received 1 seat out of 73 in 2014, even though they got nearly 7% of the overall vote. As a result, if the Remain vote splits badly it is conceivable that the total seat count for the Remain parties combined may only be a few seats, which will not look good compared to the double figures that Farage will get.

A very good question is why the anti-Brexit parties have not cooperated. It would be difficult to choose just one of the three parties to stand in each district, but it would not be impossible. Without this cooperation, tactical voting is unlikely to prevent the anti-Brexit vote being split three ways in each England region. It would seem these parties think it is more important to fight among themselves than unite in sending a clear message on Brexit. That will be sad if this failure leads to MEPs only being in the job for a few months. Remain can get a million on the streets and 6 million signatures, but it seems getting small parties to cooperate is a more difficult task.

Another possibility would have been for the People's Vote campaign to do as Nigel Farage has done, and put up candidates themselves on a pro-EU ticket. Unlike Farage, the People's Vote campaign would face problems in doing so. Electing individuals on a simple pro-EU ticket only makes sense if these MEPs only have a very short tenure. If the campaign is successful, you want proper MEPs representing different political perspectives. That is probably one of many reasons why the People's Vote campaign will not field candidates of its own, and is perhaps another reason why the smaller parties do not cooperate.

Given Labour's position and the lack of cooperation among the anti-Brexit parties, Remainers should not turn these European elections into a vote about being anti-Brexit, because they will lose badly. The combined vote for UKIP, the new Brexit party and the Conservatives is almost certain to exceed the combined vote for the LibDems, CHUK and the Greens. A smarter tactic would be, through the People’s Vote campaign, to make these elections into a vote about a People’s vote. The key difference of course is that Labour can potentially be counted as being in favour of a People’s Vote, and so making the European elections as a kind of referendum on a People’s Vote might succeed. Using the poll numbers above, the pro-People’s Vote parties have an overall majority.

In reality Labour’s position on a People’s Vote is nuanced, or perhaps just confused. It is in favour of a People’s Vote for a deal it does not like, but is rather ambivalent if the deal is its own. The leadership is divided on the issue. Apparently Keir Starmer was described by Tories in the joint government/Labour negotiations as the ‘ideologue’ for wanting a People’s Vote, while his colleagues were described as more reasonable! The European elections could force Labour’s hand on the issue. This is obviously what the People’s Vote campaign will hope for, but how much the Electoral Commission will allow it to campaign over the election is unclear.

If Labour did unambiguously commit to a People’s Vote in all circumstances it could take votes from the smaller parties, and this may well dominate any votes it my lose from Labour leavers. Labour has the opportunity for an overwhelming victory in these elections, as Brexit will take many votes away from the Conservatives to pro-No Deal parties. However that inducement may not be enough, in part because Labour are constantly thinking about the possibility of a General Election where they do not want to be painted as the anti-Brexit party. Remainers should also have the sense to see that a Labour victory in a general election would be a better option from a Remain point of view than a People’s Vote, for reasons I set out here.

Without a general election, the Brexit position has become a stalemate. Theresa May is set against holding a People’s Vote, and so are Brexiters. Behind all their guff about such a vote being an insult against democracy (“War is peace. Freedom is slavery. Ignorance is strength”), the real reason Brexiters hate the idea of a second referendum is that they think they will lose. Nor has parliament been able to force the government to hold a referendum, with the latest vote in parliament being 280 voting in favor of a People’s Vote and 292 against.

However no other option looks like getting over the line anytime soon either. Brexit has become a war of attrition. Brexiters are in no mood to accept May’s deal, and instead some have pinned their hopes on replacing her. Even if they succeed, it is unclear how this changes the parliamentary arithmetic. The Tories also fear a general election for the same reasons Brexiters fear a People’s Vote. Talks between Labour and the government are unlikely to get anywhere because a compromise that didn’t include a People’s Vote would be devastating for Labour, and any compromise by the government would pour oil on the fire of Tory divisions. Finally the new October deadline set by the EU is unlikely to force anyone to change their mind, because there is a belief in the UK that the EU will always allow another extension rather than risk an exit with no deal.

In these circumstances, a People’s Vote (PV) is going to be seen more and more as the only way out. In parliament it is already the option with most votes. It is just possible that the European Elections could change some minds if it was seen as an endorsement for holding a PV. But for this to happen the PV campaign needs to persuade the smaller parties to stop talking about this election as being about Brexit and instead start talking about a People’s Vote.

As far as the media is concerned, the European elections will be about the showing of the pro-No Deal parties. Indeed it could all be about Nigel Farage. His new Brexit party is well organised, well funded (from sources unknown), and is likely to get extensive publicity from the BBC at least. (To see the BBC choosing his “put the fear of god into MPs at Westminster” line as their headline quote illustrates all too well the themes of last week’s article on how the media encourages far right extremism.) The poll above, taken before his party was formally launched, indicates that his Brexit party could easily end up beating the Conservatives and coming second, as UKIP voters switch to his party. This will become the main new story.

That will be painful to watch for Remainers, but ironically it could indirectly help the People’s Vote cause. Moderate Conservative MPs will see the poor showing of their party in the European elections and begin to understand more clearly the bind they are in. For as long as Brexit is an issue, they will be in danger of hemorrhaging votes to pro-No Deal parties, but if they accept No Deal the Conservatives will not be in government for decades. A People’s Vote on May’s deal may be the only chance they have of changing that situation any time soon.


Friday, 12 April 2019

Why have pundits got politics so wrong since 2015?


I have just read a paper called “Political science, punditry, and the Corbyn problem’ by Peter Allen, a Reader in comparative politics at Bath. It reflects on how most pundits, including some political scientists, got Corbyn’s initial success and then survival completely wrong. I will not attempt to summarise the paper here. It is well worth reading. I am going to take it as read that many pundits did get Corbyn completely wrong in 2015 and 2017. This has nothing to do with whether the left ascendency is a good or bad thing, but just the failure of pundits to see why it was happening.

Allen notes a kind of epistemic snobbery “‘whereby people who do not meet the above criteria of political inclusion are not seen as worthy participants or contributors in political discussions, or whereby their political opinions are devalued in some way”. It was a kind of “othering” that I felt personally when I joined Labour’s Economic Advisory Council. I was told, by people who I respect, that my academic standing would be harmed if I joined the group. It was if I had decided to give economic advice to the BNP rather than the Labour party.

Part of this represented a longstanding dislike by the centre and centre-left of the left in the UK that stems from the political battles within Labour in the 1980s. Andy Beckett tells some of the story here. There was a lot wrong with the Labour left at that time, and Labour leaders from Kinnock to Blair found they could gain a certain credibility by attacking both the left and the unions. Indeed some of those who attack the left today were part of the left back then, and now see the error of their ways. The Labour left came to be seen as generically toxic.

As Allen notes, another element in this failure to understand Corbyn was a belief in triangulation. In the world that takes triangulation as the theory rather than just a useful model with limitations, moving sharply to the left when a party of the right wins an election makes no sense. But why were the same pundits not already noting that the theory of triangulation had broken down, because the Conservative party from 2010 to 2015 had moved sharply to the right and yet had won a general election? This is what the rest of this post is about.

Allen does not mention austerity specifically, but I think misunderstanding austerity plays a large role in failing to see how far right the Conservatives were moving, and therefore Corbyn’s rise in 2015 and Labour’s gains during the 2017 campaign. If you look at what the Coalition did collectively there can be no doubt about what was going on. The hostile environment, privatisation of the NHS, demonisation of those on welfare and so on. Yet perhaps all of these things could be explained away individually if that is what you want to do: continuing Blairs policy on the NHS, responding to popular opinion on immigration and welfare. The dominant narrative, at least to begin with, was of Cameron the moderniser.

The clearest indicator of a rightward shift was austerity. It should have been clear by 2012 if not earlier that the recovery was stalling. Thatchers experiment with austerity had been brief and was quickly reversed, but Osborne was not for turning. We had for the first time since WWII a government attempting sustained austerity during a recovery phase of a recession. Perhaps too many placed their faith in City folk that told stories of imminent bond strikes, so they believed deficit reduction had to be done. But when interest rates on government debt started falling curious academic minds at least should have begun to smell a rat. Did pundits not notice that the majority of economists were against austerity? This is a genuine question rather than a rebuke, because you had to do a little research to find out they were.

Once you miss the rightward move of the Coalition government, and note that it would have been worse still but for the Liberal Democrats, then you also fail to see that Labour from 2010 to 2015 had been following a triangulation strategy and failed. Did pundits put everything down to Miliband’s unpopularity? Once you understood that Labour had moved to the right and lost, then Corbyn’s victory should have come as no surprise, as I argued here before the result.

Understanding the deep damage that the austerity policy did to the country means that it is hardly surprising that under a left leader opposed to austerity the Labour party should attract half a million members. Too many pundits talked about this in terms that applied to the Labour party in the 1970s and early 80s, but this was a danger for rather than a description of the mass movement that Labour were becoming.

There was one feature of received wisdom that seemed to be holding true, however, and that was that Labour led from the left would be defeated decisively in any general election. Poll after poll suggested this was true. I was told too many times that the left were only interested in controlling the party (how surprising) and not interested in winning elections. It was nonsense of course.

As soon as Labour's position in the polls started rising in the middle of the campaign I suggested that Corbyn’s unpopularity before the campaign told us more about the media than anything else, but I’m not sure this is accepted by most pundits. Many will blame the Tories bad campaign, but what that showed us was that May and her team were pretty bad at doing politics, which was something that should have been clear given the evidence if the media had been doing its job properly. But underestimating the role of austerity is important here too.

Austerity was, after a time if not initially, designed to shrink the UK state. And it succeeded. Attitude surveys tell us that is very unpopular, with less than 10% of the population wanting lower taxes and spending. So a party proposing the opposite, with a tax financed fiscal expansion that was at the heart of the Labour campaign, was bound to be popular on that account. Again the Labour surge was a consequence of a media that preferred talking about Labour divisions and personalities rather than policies, so Labour's policy stance came to voters as a surprise.

Thus in my view the failure to see austerity for what it really was is crucial in understanding why pundits got Corbyn so wrong. However I would be fascinated to know how some of those same pundits themselves account for this failure, and whether they see my account having some validity or not.




Tuesday, 9 April 2019

The right wing partisan media is the elephant in the room in discussions of mainstream politics and far right extremism


Treason used to be a word associated with spies or assassins. Crimes against the state of the utmost severity. Yet, to take just two recent examples, here is an article in the Sun describing how “Treacherous Theresa” has surrendered our freedom. “May's name will rank alongside those of the worst eels in Western history - and she deserves it”. Cross the Atlantic, and here is a presenter at Fox News calling for the "the traitorous treasonous group that accused Donald Trump" to be locked up. “True justice” she calls it.

It seems that the word treason is now being used to describe the actions of a Prime Minister the writer disagrees with, or to describe a legal inquiry that successfully prosecuted a number of individuals who were once close to the President of the United States. How does this escalation of language happen, and does it matter? To understand both questions we need to start with what links these two examples. The are both from media outlets owned by Rupert Murdoch.

As a detailed analysis of the Murdoch dynasty by Mahler and Rutenberg of the New York Times shows, Rupert Murdoch created, and runs with the help of his sons, a supremely successful media empire. Media businesses in particular are subject to regulations, and part of Murdoch’s success has been to get round those regulations. As Mahler and Rutenberg write: “Murdoch’s news empire is a monument to decades’ worth of transactional relationships with elected officials.” These are not always right wing politicians, as his support for Tony Blair showed, but they tend to be, reflecting Murdoch’s own situation and views.

Murdoch is not part of a long-standing establishment but rather the opposite. In that sense he is a particularly influential example of what we could call the neoliberal elite that Aeron Davis describes so well in his book ‘Reckless opportunists: Elites at the end of the Establishment’. But why would someone like Murdoch, and the UK’s other press barons, be happy with people employed by their media organisations using inflammatory language like ‘treasonous’ in their papers?

The standard response of many people in the media to a question like this is that it sells newspapers. Newspapers or radio stations or TV channels like Fox are just expressing the views of their readers. There is no doubt that is partly true, but the reality is that this is a two-way relationship. The media reflects the views of those that read or see it, but it also shapes those views. The excuse that media just reflects their audience’s opinions cannot be used to absolve those media outlets of responsibility for what is said or written there.

There is now overwhelming academic evidence that the media can have a potentially powerful influence on what those who consume it think and do. A particularly interesting and powerful recent study by two economists looked at US cable channels, which remain the main source of news on political campaigns even in the digital age. They isolate viewers who view these channels just because of their place in the channel ordering, rather than because their political preferences seek out particular channels, in order to look at how influential the channel was.

They find that the existence of Fox News boosted the Republican vote share in 2000 by about 0.5%, which fits with another study that used a different method to isolate the influence of Fox. However the growing viewership and increasingly right wing stance of Fox increased its impact on the Republican vote share in 2008 to a huge 6%, which was far bigger than the influence of any other channel. An equally interesting finding is that the political stance of Fox is far to the right of where it should be to maximise viewers. In other words Fox is broadcasting material that maximises its ability to shift its audience to the right, rather than to maximise its profits.

Unfortunately there are no studies yet of Trump’s election, but it seems very likely that the influence of Fox was crucial in his victory over Clinton. In the primaries Fox had a more critical view of Trump, perhaps because Murdoch did not think he was up to the job. Mahler and Rutenberg found three sources who reported Murdoch saying “He’s a [expletive] idiot” about Trump, although Murdoch’s spokesman denies this. It was ironically other broadcasters that gave Trump much more coverage than his opponents, because he was “good TV”. Reporters then talked favourably about Trump, simply because he was gaining vote share. After it was clear he would win, Murdoch saw his chance to form a close relationship to a US President. That influence is now so strong that one recent article in the New Yorker was entitled “The Making of the Fox News White House” (HT @rupertww).

Would this level of influence also apply to the UK press? There is every reason to think so. For example this study found that when Murdoch’s Sun switched support to Labour, it increased Labour’s vote in 1997 by 2%. That was not enough to influence the result, but when the Sun switched back to the Conservatives in 2010 that had a similar impact in the opposite direction, which was enough to influence that result. Newspapers influence attitudes towards austerity, and the best predictor of attitudes on immigration is newspaper readership. I note other studies with a similar message here.

There is no doubt that both Trump and Brexit reflect deep underlying causes. What the media is able to do is help direct those causes in particular ways. To again quote Mahler and Rutenberg: “The Murdoch empire did not cause this [populist] wave. But more than any single media company, it enabled it, promoted it and profited from it.” Given the narrowness of Trump’s victory and the Brexit majority, it is extremely likely that Fox News and the Brexit press were respectively the difference between defeat and victory.

Once we accept that the media can have an influence on mainstream politics, it would be very surprising if it did not also influence the political fringe. We should be shocked at soldiers using a photograph of the leader of Her Majesty’s Opposition for target practice, but we cannot just put this down to soldiers expressing their personal views about Corbyn’s attitude to Nato and his past associations. What legitimises in soldiers’ eyes doing this is the constant demonisation of him in the press. The press both reflects and influences.

More serious than target practice, Corbyn was the intended target of the man responsible for the terrorist attack at Finsbury Park mosque. A Labour MP, Jo Cox, was murdered during the Brexit campaign, and a member of a far right organisation plotted to kill another, and many MPs have received credible death threats. According to Britain’s counter-terrorism chief, the man responsible for the Finsbury Park attack was “driven to an act of terror by far-right messaging he found mostly on mainstream media”. As Gary Younge writes, the threat from far right terrorism is growing alarmingly and while “the violence may come from the fringes, the encouragement comes from the centre.”

If you think the idea of terrorists being inspired by the mainstream media is fanciful, just listen to the extract from Fox I linked to in the first paragraph above. Of course this is an unintended effect of the extreme language the partisan media uses. Whether the rise of far right parties and groups is an unintended consequence is less clear, particularly when the BBC chooses to broadcast an interview with a far right leader straight after 49 people had been murdered in New Zealand. There is academic evidence that media coverage of far right groups like UKIP does increase support for these groups, and as I have already noted this is partly why Trump became the Republican candidate for President.

But the main reason for the language the partisan media is now using is to ‘fire up the base’, who in turn will influence politicians to do what the owners of this media want. This route of influence is well established in the US, which is why David Frum, former George W Bush speechwriter, says “Republicans originally thought that Fox worked for us. And now we’re discovering we work for Fox.” We are now seeing it happen over Brexit, as candidates who oppose No Deal are deselected and would-be leaders play to a base which is heavily influenced by the partisan press it reads.

There is one important difference between the UK and US, however. The US retains a widely read independent press that can discuss the influence of the media. In the UK, independent broadcasters would find that more difficult and in any case they mostly do not try. UK journalists tend not to talk about the partisan press as a key political player that can influence a party, perhaps in part because they would be talking about colleagues who work for that press. The myth that the media just reflects and does not influence is too convenient for many, so the media remains the elephant in the room in discussions about politics and political extremism in the UK.


Friday, 5 April 2019

Why are we in this political mess?


I am sick and tired of being told that the 2016 referendum gave the government a mandate to leave the EU. It did not. It did not because it did not specify a method of leaving. The Leave campaign was all over the place on how we would leave, and deliberately so. It maximised their vote. It was Cameron’s failure not to see that. He could so easily have made it a condition for holding a referendum that the Leave side put together a coherent, independently assessed and costed plan for leaving, but he didn’t. That, together with austerity, will be his legacy.

I heard a good comparison the other day. Some colleagues after work decide it would be great to go out together for a meal. They all agree enthusiastically. That is decided they say. But then someone asks where they should go to eat. One says definitely not Indian. Another says they are fed up with Italian food. And so on: whatever it is someone says they definitely don’t want to go there. But they all agree they must all eat together. They end up calling the whole thing off.

The lack of a specific plan agreed in the referendum would not have mattered if one of two conditions were true. The first is that everyone who voted to Leave preferred all forms of leaving to staying in the EU. That clearly is not true. The second was that the majority to leave was so large, and stayed large, such that whatever form was eventually chosen commanded a majority. In reality the majority to leave was small, and polls now show a much larger majority wanting to stay. As a result, the first referendum in itself demands a People's Vote.

The logic of this is clear. Once you add in the fact that more Leavers than Remainers are changing their mind and the case for a People’s Vote is overwhelming. More people don’t laugh when Brexiters say a People’s Vote would be undemocratic because the Brexiters and the Brexit press are shouting so loud people find it hard to think. What is happening in parliament reflects these divisions within the country. It is impossible to get a majority for any form of Brexit in parliament, just as there is no majority for any form of Brexit in the country.

Parliament does differ from sentiment in the country for one reason: MPs are clearly intimidated either by the referendum vote itself, the Brexit press or the Brexit majority in their constituency. This gave Theresa May an opportunity. If she had understood what the closeness of the result meant, she would see that at best there was only a mandate for the softest of Brexits. I think she could have got that through parliament, especially if she had held cross-party talks before invoking Article 50 to agree a plan. The Brexiters would have huffed and puffed, but May would have got a deal passed with Labour’s help.

We all know what she actually did. One consequence of that was both sides hardened their positions. A key mistake in a long litany of errors was to believe that ‘No Deal is better than a bad deal’ was a good bargaining ploy. The EU saw it was nonsense, but it gave Brexiters hope that they could actually get No Deal. That in turn led to two heavy defeats in parliament. Thanks to the Brexit press Project Fear applies to anything negative said about leaving the EU, so many voters think having a ‘clean break’ sounds like a good idea.

This hardening of positions means that the current negotiations are extremely dangerous for May and Labour. But May has nothing to lose except her legacy. Labour have everything to lose. Too many Lexiters within Labour have the attitude that Remainers have nowhere else to go. That was never true, as they could always not vote or not campaign. Alternatives have no increased with the creation of UKC and a Lib Dem party that is no longer a party of austerity. To throw away the next election for the sake of not having a People’s Vote does merit the use of the word betrayal. Betrayal not just of Remainers, but also of all those people that want or depend on Labour winning the next election.

Tuesday, 2 April 2019

If the Tories lose an election before we leave, Brexit is unlikely to happen.


There is more talk of a general election, although of course that does not mean it will happen. In that context I frequently hear people say that a general election would do nothing to get the country out of the huge Brexit hole it has dug itself. I strongly disagree. If there is an election before we leave the EU and if Labour formed the next government, I think it would make a huge difference. Unless Labour win so many seats that it has a massive majority, I think the chances are that Brexit would just not happen at all.

Let us suppose that Jeremy Corbyn and Keir Starmer manage to negotiate some form of soft Brexit with the EU. The crucial question to then ask is what the attitude of the Conservative opposition would be. As a result of losing the election (if not before) they will have a new leader, and given the attitude of most Conservative members that leader is likely to be a Brexiter. As the Brexiters in the current party find it hard to accept the hard Brexit proposed by Theresa May, they will almost certainly oppose any soft Brexit negotiated by Labour. Brexiters are happiest when complaining, and so the line they will probably take about any Corbyn Brexit deal is that it represents a betrayal of the ‘will of the people’.

Another reason that they will oppose Labour’s soft Brexit is that they do not want Labour to be able to do something the Conservatives were unable to do. It would be the ultimate humiliation that a party that is increasingly defined as being the Brexit party could not negotiate Brexit, yet a Labour government could.

The Conservative party is increasingly looking like the Republican party in the US, with an activist and very right wing base fired up by Murdoch owned and other partisan media. The health care programme that Obama successfully introduced was very similar to something the Republican senator and presidential candidate Mitt Romney had passed in Massachusetts in 2006. Despite this the Republicans in opposition unequivocally rejected Obama’s similar reforms and fought them with all their might.

Some more moderate Conservative MPs might be tempted to support Labour because they themselves would be quite happy with a soft Brexit. They could quite plausibly argue that their aim should be to get Brexit over the line and a future Conservative government could distance the UK further from the EU. But something we have learnt over the last few years is that Tory Brexit policy has been strongly influenced by the Brexiters, and the rest of the party is extremely reluctant to break the party line. Furthermore many Tory Remainers may be happy to see Brexit fail. As a result, Corbyn cannot count on rebel Tories coming to his aid.

The final reason the Conservatives, and their supporters in the press, will not want to assist Labour in delivering Brexit is that they will scent the chance of embarrassing the new government. There are plenty of Labour MPs, backed up by many more Labour party members, who do not want to see Brexit at all, and they might vote against any agreement. In that situation the Liberal Democrats and SNP might also vote against. Shortly after an election where the Conservatives are still in shock they are extremely unlikely to help out a Labour government in difficulties.

With the Tories opposing any form of soft Brexit, Corbyn’s actions will be guided with what might happen if his Brexit plans were ever put to a referendum. Labour have now said they would hold a referendum on any deal they negotiated, and they would not be allowed to backtrack on this because a combination of Tories (yes, I know, but see above), smaller parties and Labour rebels would insist it be held. A People’s Vote under a Labour government will be a very different affair from anything held under the Tories. Tory politicians, and more importantly the Brexit press, would oppose it with all the vigour we have seen over the last few years. As so many Brexit supporters derive their devotion to the cause from the press they read, they are likely to follow that press in declaring Labour’s Brexit deal to be a betrayal. Of course Remainers would also oppose it. Labour would find both Remainers and many Brexiters campaigning against them. They would not have a chance, and Brexit would fail.

A Labour government trying to get a victory in a Brexit referendum looks like a lose lose option. They would fail to get a majority for their Brexit deal and be humiliated by the result. Once the Conservatives make their opposition clear, Labour should see this coming. But how do they avoid that outcome, as the clock will still be ticking on an extended Article 50? The issue cannot be kicked in to the long grass, and Labour will have a manifesto commitment to try and get a Brexit deal. One possibility is that after talking to other party leaders, Corbyn will announce that a Brexit deal is impossible because of Conservative and minor party intransigence and he will put to parliament that Article 50 should be revoked. That will be passed by a narrow majority (the Tories and perhaps a few Labour MPs would oppose). He will endure a day of negative headlines in the Brexit press, but just another day in a continuum of negative headlines is hardly a great cost. Most of the country will breath a large sigh of relief.

If this is the case, why would Labour promise to enact Brexit in their manifesto, if they could see it subsequently failing? For a start Labour could not be sure what the Conservative opposition would do, and it might hope to get a majority large enough to overcome its own rebel MPs. But the main reason is the same as it was in 2017. The party will want to avoid the election being about the merits or otherwise of Brexit. The Tories in an election will want to pin the blame for their failure to achieve Brexit on Labour, and if Labour switched to being a Remain party just before the election that tactic will probably be successful. Having come this far as a Brexit party, Labour will be on much firmer ground in an election if it continues to say it wants Brexit and has a better chance of succeeding than the Tories who have failed for three years.

Would it be ironic that a Labour government would fail to enact a form of Brexit because of Tory opposition? If you think about it, the Conservative government has failed to enact a form of Brexit laregely because of Tory opposition. The reason we are in this Brexit hole is that Brexiters who won a mandate for a soft Brexit then decided that only the hardest of Brexits would do. It would be poetic justice and good for the country if Brexit failed as a result.


Friday, 29 March 2019

Will Brexit make austerity worse?


There seems to be some confusion among some on the left about the impact of Brexit. Statements like ‘Brexit will make austerity worse’ by Remainers are imprecise, so let me spell this out. Because of the controversy this generates I’m afraid this is going to be a rather dry, analytical post. But if you think government spending can somehow reverse the negative economic impacts of Brexit, this post is for you.

Brexit will reduce UK trade relative to what it would be if we stayed in the EU. How much will depend on the type of Brexit. As I outlined here, it will not be possible to come near to replacing that trade through new trade deals. So less trade is a given.

Less trade reduces GDP mainly because it reduces productivity. Trade allows specialisation. Instead of Honda cars being produced in each EU country they can be made in just one, which allows (in part because of what economists call economies of scale) the cars to be produced more efficiently. Trade also increases competition (you can buy many makes of car in the UK) which improves efficiency. Therefore if you restrict trade, you reduce productivity. Less productivity means less GDP. I discussed how much GDP could fall under May’s preferred trade arrangement here.

A reduction in productivity is a supply side decline in GDP. It is very different from a demand deficient recession of the kind we had after the GFC. In a demand deficit recession fiscal policy (more government spending or lower taxes) can be used to restore demand and therefore GDP, and must be used if interest rates are stuck at their lower bound. The tragedy of austerity from 2010 is that the opposite was done. The decline in GDP brought about by lower productivity following less trade cannot be tackled in that way.

When GDP falls, taxes fall. To keep the deficit constant, that requires a reduction in government spending. Brexit will reduce government spending compared to what it would be if we stayed in the EU. To that extent Brexit makes austerity worse. To say that those who point this out are advocating a continuation of the policy of 2010 austerity are wrong.

It is important to note that what I am doing here is comparing two states of the economy, and saying what the differences would be between those two states. This type of comparison confuses many people. I am not saying government spending is going to be lower than it is now - it almost certainly will not be. People say cannot we do something to mitigate the impact on GDP of Brexit? There are many things that can be done to improve GDP, like more public investment, but they could also be done if we stayed in the EU. If you think there is still spare capacity in the economy then GDP can be raised by fiscal or monetary policy, but that is equally true in or out of the EU.

Does government spending have to lower out of the EU compared to inside the EU? The answer is no, which is why statements like Brexit will make austerity worse are incomplete. You could keep government spending at the same level in and outside the EU. But that would raise the deficit, which requires higher taxes. So in that case Brexit would increase taxes. So a correct statement would be that Brexit either reduces government spending or raises taxes or some combination of the two.

At this point you get MMTers up in arms. The deficit does not matter for a country with its own currency and so on. Or even worse, that government spending determines taxes and not the other way around. This is a very good illustration of how misleading MMT rhetoric can be. To see why, go back to the case where government spending falls in proportion to GDP under Brexit, which means the deficit is unaffected by Brexit. Now suppose you increased government spending to the level it would have been without Brexit. That is an expansionary fiscal policy, which stimulates demand which raises inflation. The obvious way to reduce demand and inflation is to raise taxes so the deficit is back to its original level. It does not matter whether you need to keep the deficit unchanged because you have a fiscal rule, or you have fiscal policy stabilising the economy as MMT advocates, you get the same result.

Some MMT followers never admit they are wrong, so I got a lot of stuff about how you can use other measures to reduce inflation like credit controls. But you could use them if we stayed in the EU as well to allow higher government spending or less taxes. There is no obvious reason why leaving the EU makes such measure more effective.

The correct statement about the impact of Brexit on the public finances is that it means government spending will be lower or taxes higher or some combination of the two. Furthermore the overwhelming majority of economists think GDP will fall as a result of Brexit, and I have not come across an academic whose field is trade economics who thinks otherwise. If you think, as I do, that this government has reduced public spending way beyond the level that people want, and therefore you want to raise that spending, Brexit makes that more difficult. .



Tuesday, 26 March 2019

Left behind movements do not just reflect deindustrialisation, but also geography, inequality and lack of representation.


There was extensive analysis after the UK EU referendum of the characteristics of those who voted for Brexit and those who didn’t. A robust finding was that those who voted for Brexit tended to be older and had less years of education. But some noted a link between a tendency to vote Leave and areas of deindustrialisation. The idea of the ‘left behind’ was born. It gained force when rest-belt states in the US swung to Trump in the same year.

This characterisation of the left behind was attractive to many on the left, who have been critical of the globalisation they saw as the cause. Yet as Martin Sandbu points out, the period of what is often called hyper-globalisation is the 1990s, and much deindustrialisation occurred before then. Some of that was a result of automation rather than globalisation, and in the UK 1980s deindustrialisation was hastened by a large appreciation of sterling caused by a combination of discovering North Sea Oil and monetarism. Why the 30 year delay for the left behind to finally find its political voice?

If we look at the geography of the Brexit vote, areas of deindustrialisation is not the only thing that strikes you. Much more obvious is that people in large cities voted against Brexit, and those in smaller cities or towns or the countryside voted for Brexit. The same was true for Trump, and Trumps core support comes from rural areas. Is this simply a consequence of differences in age and education already discussed?

It could well be. As the Centre for Towns showed, UK villages and towns have been getting older and cities have been getting younger. Jobs that attract the university educated tend to be in cities rather than in towns and villages.The old tend to be more socially conservative, and so are attracted to the anti-immigration message that was a key part of the Leave and Trump campaigns.

There is no doubt these factors are important, but do they explain all the the geographical nature of the support for Brexit and Trump, or is there more to it? I think the gilet jaunes from France can shed some light on this question. As John Lichfield outlines, the gilet jaunes come from peripheral France: the outer suburbs and countryside. That may include some areas of deindustrialisation but it goes well beyond that. Their protests are self-organised and remarkably persistent. They do not fit any clear left/right categorisation. Immigration, or race, are not high up among their concerns, which is why they do not feel represented by the far right party of Marine Le Pen.

What do the gilet jaunes want? Specific demands are varied and often contradictory. But a dominant theme is that they want to be valued and represented. They feel that the centres of power in France, the government but also other organisations, do not speak for or even respect them. They think the major cities are getting all the benefits of growth while they are falling behind.

The gilet jaunes tend to be working or lower middle class, sometimes self-employed, sometimes retired. Initially their protests were sympathetically viewed by most French voters, which was one reason why Macron responded with tax breaks for pensioners and low income workers. As time goes on and the violence has continued their popularity among French voters has waned. Whether they have a future as a coherent force may depend on whether they can transform themselves into a conventional political group that wins seats in the forthcoming European elections, a process which has already led to some fragmentation along traditional left/right lines.

Macron’s election as President of France had led many to think that the wave of populism influencing democracies around the world could be held back or even beaten. What the gilet jaunes show is that this cannot be done just by electing a charismatic President. Indeed the character of Macron, clearly part of an affluent city elite, may even have been a provocation.

Can the gilet jaunes tell us anything about those who voted for Brexit or Trump? All three movements come from outside of the main cities, so perhaps geography is more than just an incidental factor. What is unique about the gilet jaunes has been self-organisation, made possible through social media, and the variety of their political demands. In contrast Trump is a Republican, and Brexit is a very specific cause. But perhaps this difference just reflects the ability of some politicians and parts of the media to capture the discontent of the geographical areas that feel left behind?

The EU was not considered an important issue among most voters until the referendum. Immigration was, but a good part of that was because the government and press had managed to deflect anger at declining public services and wages on to immigrants rather than their own policies. Whereas the gilet jaunes had to organise themselves using social media, Brexit and to some extent Trump had sections of the conventional media to do that job. While many gilet jaunes want to overturn the government, Brexit supporters succeeded because they had the help of politicians and the media.

Underlying causes in all three cases include geographical and financial inequality, and a feeling of being ignored by conventional politics. In the UK, looking mainly at the first decade of the century, a NEF report found that nearly all of the 20 fastest growing constituencies were in cities. Often the prosperity of towns depends on the success or otherwise of a nearby city. Those in the periphery see money going to projects like crossrail or HS2 while local bus services are cut.

People look at others to measure their own prosperity but they also look at their own past. In the UK real wages are still below levels before the financial crisis, and in the last year the disparity between the incomes of most people and those at the top of the income distribution has started to increase again. (It is one reason why the Chancellor is getting more tax receipts than he expected.) In the US most of the proceeds of growth have for some time been going to the top of the income distribution.

We can see the same thing, although to a lesser degree, in France. Here is a revealing graph from a study by Thomas Piketty and colleagues. It shows how average annual growth rates of pre-tax income has varied by where people are in the income distribution over three time periods. To the right we have the richer income deciles, including at the end the top 1%, 0.1% and 0.01% respectively. In the two periods before the 1980s incomes at the top grew less rapidly than all other groups. From 1983 to 2014 the opposite has been true: growth rates of top incomes have been up to three times those of everyone else. In addition the growth rate of incomes of the non-rich have been historically low.




Low average growth in most incomes together with much faster growth in incomes at the top is provocative, particularly if you are in parts of the country that are stagnating with few prospects. I do not think it is any coincidence that a week ago we saw the gilet jaunes targeting the exclusive shops and restaurants of the Champs-Élysées.

Inequality based on incomes or geography is not enough to get the gilet jaunes on to the streets, to get UK voters to want to take back control, or Trump voters to vote for the worst President in a century. This also requires a feeling that your voice is not heard in the political process. In the UK a feeling of powerlessness was hijacked by politicians and the press who pretended it was a result of the EU, or in the US by Trump who pretended to speak for ‘real America’.

Speaking up for those left behind should naturally be something parties on the left do. Yet in the UK, as the NEF report shows, Labour have been increasing their vote share in dynamic cities and the Conservatives from areas in decline. This may be part of a longer term trend in both the UK, US and France, where the left party that once represented the less educated now is the party of the educated. The chart below taken from another study by Piketty shows this trend, which he calls it the emergence of the “Brahmin Left”.


Yet I think this alone is an incomplete explanation. To explain recent developments we should add the adoption by traditional left parties of a neoliberal framework which discouraged regional, industrial and redisributive policies that might have transferred more of the benefits of city dynamism to the periphery. That created a left behind that went beyond areas of deindustrialisation, that felt unrepresented and deprived, and which in the UK and US was open to capture by a populist right.