Winner of the New Statesman SPERI Prize in Political Economy 2016


Tuesday, 20 April 2021

Why neoliberalism’s evolution into a populist plutocracy was inevitable

If anyone gets these blogs via an email alert, unfortunately the platform I use is ending these in July. Sorry about this (outside my control), so please find another way to regularly receive this blog.


In last week’s post I referenced an earlier post I had written in 2017 called “Was Neoliberal Overreach Inevitable? The question it posed was whether Trump and Brexit were an inevitable consequence of Thatcher and Reagan, or whether there was an alternative ‘fork in the road’ which if taken could have saved neoliberalism from that fate. That post was written in the aftershock of Trump’s election and the Brexit referendum. Four years on I think it is worth revisiting that question. (This post is a slightly more focused version of something I wrote six months ago.)


The best way to look at this is to ask what normally stops plutocracies happening? The first obvious but important point is that the threat of plutocracy depends on the number of the very rich, and also perhaps the extent to which they gained their wealth by actions that could easily be reversed politically. Those who have money will often want to influence politics either to increase or preserve their wealth, and this can be done by lobbying or political donation that compromises but does not end democracy. However the more very wealthy people there are, the more likely it is that some will wish to go beyond this, and try and influence the nature of democracy.


A plutocracy is where at least some of the very rich play a much larger part in determining key political decisions than lobbying or donations allow. This is quite compatible with the continuation of a nominal democracy as long as the party that will ensure the influence of the plutocrats is dominant always gets elected to power. If that fails to happen the plutocracy can just attempt to win next time, or can attempt to overturn the democratic decision that saw them lose power.


So what stops some wealthy people trying to change a democratic system into a plutocracy that is almost bound to serve their interests? The most obvious answer is the democratic process. A party run by a tiny minority of the very rich is not likely to be seen favourably by most voters if they see it as such, and so has little chance of being created. The way plutocrats can get around this is by persuading the members of a political party (inevitably a party of the right) to follow their wishes.


The first sense in which neoliberalism makes a transition to plutocracy easier is by increasing the number of the very wealthy. The 1980s saw a huge reduction in the marginal tax rate on high incomes in the US and UK. A bit of neoliberal mythology is that this wealth is actually good for everyone else, because the wealthy are ‘wealth creators’. That myth was increasingly accepted in part because of another defining aspect of neoliberalism, the destruction of the unions as an effective political force.


By substantially reducing the power of trade unions, neoliberalism reduces the influence of organised Labour on the electorate. That makes it easier to spread the myth that the wealthy are wealth creators, rather than the reality that the high incomes of the wealthy are at the expense of everyone else. Reducing union influence also increases the potential influence of the media on voters’ opinions.


The third way neoliberalism makes plutocracy easier is that, in the name of reducing regulations, restrictions on bias in the media are reduced. Under Thatcher, Murdoch was able to significantly increase his share of UK newspapers he owned, and Reagan abolished the Fairness Doctrine. The link between plutocracy and media ownership is very direct because media barons are part of the plutocracy and their influence on both right wing party members and voters more generally is considerable.


These three aspects of neoliberalism in the US and UK are necessary for plutocracy to emerge, but not I think sufficient. The main reason for this is that, after an initial decade or so, progressing neoliberalism from the right becomes unpopular. Starving public services in order to reduce taxes (particularly if the main beneficiaries are the wealthy) is not what most people want. Partly as a result the Conservatives lost to Labour in 1997. Labour, while accepting the neoliberal changes under Thatcher, actually increased health spending by raising taxes.


The way around this for both the Republican party and (later) the Conservatives was to shift the political debate away from economic left/right issues towards a culture war. Taking the socially conservative side in culture wars is attractive to parties of the right in both the UK and US partly because it detracts from the right’s less popular right wing policies, but also because of the properties of the electoral system. Social liberalism flourishes in cities and university towns, so the bias in the US Senate (and therefore the electoral college) towards rural communities and the bias of FPTP towards social conservatives means the right can win without a majority of the popular vote.


Culture wars are possible because of the tremendous social liberalisation of society over the last 60 odd years. That transformation is led by the young and those who have been to university, so there will always be many voters who feel left behind by this pace of change. Furthermore, as much of the material on the broadcast media is made by university educated socially liberals, social conservatives are open to talk about a liberal elite. Culture wars are a natural consequence of neoliberalism because right wing parties will adopt them, and that becomes a fourth reason why neoliberalism encourages populism.


In the US the Republican party had for some time allowed money to greatly influence elections, and had fought culture wars. The radicalisation of the party increased substantially when the Koch brothers helped finance the Tea Party, and Murdoch’s Fox News stopped just being supportive of the Republican party and started trying to change it in a more radical direction. In both cases we have very rich individuals pushing their political line not only because it is in their interest, but also because their ideology tells them it is right for the country.


The Tea Party and Fox meant the Republican party lost control of its base, and therefore who stood for election for the house, senate or President. In truth Trump was nobody’s candidate initially, but his appeal to the Republican base reflected two main factors. The first is that he said in plain language what had been dog whistled before in terms of the culture war. Second, he broke with neoliberalism in two important populist directions: controls on trade to ‘save jobs’, and controls on immigration. With his election the transformation from consensus neoliberalism to right wing populism became complete.


While Trump is unique, a right wing party controlled by its more militant base fighting a culture war is always vulnerable to a populist leader. In some ways the US was lucky that the populist they got was also fairly inept at strategy once in power, although we should note that it is quite possible he could be re-elected having learnt important lessons. Neoliberalism, having created the conditions where there are plenty of wealthy people able to mount a Presidential campaign, and having lost control of their base because of the actions of wealthy people, provided ideal conditions for a very wealth populist leader to win the Presidency, and through charisma then take over the right wing party.


The route taken by Trump to control the main right wing party was not available in the UK, because MPs could exclude any of their number they didn’t like from standing to be their leader. That, together with the absence of primaries, reduces the power of the right wing base. So if populism was to come to the UK, it would be through using a majority of voters to enable a populist takeover of the main right wing party. That could only be achieved by the right wing press and a charismatic politician who could convince a majority of voters that Brexit would allow them to take back control, which of course can only be done through lying on an industrial level. But it also needed a populist outside of the Conservative party that threatened its hegemony, Nigel Farage.


After Brexit the right wing party tried to keep control from populists, but the reality of those lies threatened to end the right’s control on power because they were being eclipsed by Farage, so Conservative MPs finally turned to Johnson as their saviour. A divided opposition and FPTP ensured the takeover of the right by a populist government under Johnson was complete. For those who still doubt Johnson’s government is a plutocracy, the group that provides 80% of Conservative party funds is called the Leaders group, and they meet regularly with senior politicians. Matthew d'Ancona describes the plutocratic world of senior Tory politicians. A defining characteristic of the Johnson government is that it provides public money to many of its donors through non-competitive contracts. With most of the press and a fearful BBC permanently on side, there is no accountability and so no reason why public wishes should be respected (see Barnard’s Castle, a second wave, bullying, corruption and so on).


Should we call the populism of Trump and Johnson a variant or evolution of neoliberalism? Certainly neoliberal ideas among both live on. That is for another time, but I would make one point on this. Neoliberalism (more precisely monopoly neoliberalism) as an ideology that acts in favour of the existing structure of capital. The populism of Johnson and Trump favours parts of capital (friends and donors) at the expense of others (particularly trading firms).


For the US it’s hard to argue against the proposition that the Republican party was wide open to a Trump like figure emerging. For the UK, it is tempting to focus on some 'if only' event. If only Cameron hadn’t agreed to a referendum, or Johnson had sent his other article, or Cameron’s campaign had been better and so on. But in a choice between losing power and giving in, at some point any Conservative leader was bound to give in, and a charismatic populist leader was bound to take over.


To summarise, neoliberalism in the US and UK was bound to lead to plutocratic populism, because it promoted growing inequality at the top, drastically reduced the power of trade unions, deregulated the media, and adopted culture war politics. These create the conditions in which populists acting in the interests of private money can take over the main party of the right.

Monday, 12 April 2021

Two types of recovery from the COVID recession, or how you cannot effectively fight plutocratic populism by returning to the recent past.

 

I don’t normally talk about forecasts, but last week’s IMF World Economic Outlook illustrates a point a number of people have made. While both the UK and EU countries are prepared to gradually return what they believe as their non-inflationary level of output from below, the approach in the US is to overshoot, running the economy slightly hot for a period. This table from the Outlook shows expected GDP growth. The key figure is the last column, which shows overall growth from the start of the pandemic to when the recovery is largely complete. It shows how focusing on just 2022 growth, as I’m sure many in the UK and Europe will, is completely misleading.


IMF Economic Outlook April 2021 Forecasts

GDP growth

2020

2021

2022

2022/2019

United States

-3.5%

6.4%

3.5%

6.3%

Euro area

-6.6%

5.3%

5.1%

1.2%

United Kingdom

-9.9%

5.3%

5.1%

0.0%


These are forecasts of course, but they reflect something that has already happened: the US has enacted a large stimulus package ($1.9 trillion mainly directed to individuals followed by at least $2 billion on infrastructure), while any expansionary measures in Europe are projected to be more modest (750 bn recovery fund). I pointed out the planned undershooting for the UK after the March budget. You can see the under and overshooting more clearly by looking at forecast output gaps, although all output gap numbers should be taken with a big pinch of salt..


IMF Economic Outlook April 2021 Forecasts

Average Output Gaps

Average, 2020-21

Average, 2022-23

United States

-1.26

1.19

United Kingdom

-3.73

-1.08

Germany

-2.52

-0.20

France

-3.75

-0.39


The OBR agrees that the UK is planning to approach ‘normal’ from below. As I noted after the budget, forecast UK inflation remains below target and so expected short interest rates hardly rise. The main measure Sunak announced in the budget to stimulate the economy, fiscal incentives to bring forward investment, is modest compared to the US stimulus. The rationale for and limitations of this stimulus are set out by James Smith here.



So what are the relative merits of undershooting compared to overshooting and thereby running the economy a little hot after the recovery? With interest rates stuck at their lower bound, the answer is unambiguous. First, it makes sense to end recessions as quickly as possible, rather than the more gradual end that undershooting implies. Second, running the economy with near zero short term interest rates has various undesirable consequences. Assets prices (including house prices) remain high and banks or other financial organisations may go on risky searches for yield. Economies where interest rates cannot fall are more vulnerable to negative shocks, because fiscal policy often responds more slowly (and erratically) than interest rates.


Third and finally, we need to think about risks. The risks of a more rapid recovery are not a problem in either case, because they will mean a mild inflation overshoot and a quicker rise in interest rates. The chances that any above target inflation (or inflation due to higher commodity prices) becomes entrenched in the US, UK or Euro area is zero. The downside risk is also not a problem if you are trying to run the economy hot, because you will just be running it cooler.


The downside risk if you are planning to undershoot are serious, because that means a more prolonged recession with interest rates unable to fall because they are stuck at their lower bound. It is particularly a problem if you have governments that are committed to some kind of deficit target, because they are unlikely to respond to an unexpected slow recovery with a fiscal boost. This is exactly what went wrong in the UK with 2010 austerity: the expected recovery failed to happen because of the Eurozone crisis, and Osborne kept to his austerity plan.


Yet despite the lesson from the UK and Eurozone of a post 2010 recovery that crashed because of unwarranted deficit concerns, both the UK and Eurozone seem to be making the same mistake (albeit in a more modest way) after the pandemic. They should follow Biden’s example, and use fiscal stimulus to end the COVID recession rapidly once vaccination is complete.


Of course the significance of the Biden plan goes well beyond the macroeconomics of ensuring a good recovery, as both Philip Stephens and James Meadway discuss. (Noah Smith has a much more detailed analysis.) I personally find it rather hopeful that someone who was tagged as being rather dull before an election can turnout to be very different in government. But it is important to realise that anything dull following Trump would be a recipe for a near certain return to Trump. Biden’s plans are not so much seeing the beginning of the end of neoliberalism as a serious attempt to keep the US out of the hands of a party that no longer believes in democracy.


As I have argued elsewhere in 2017, neoliberalism in the two countries where it was created has already been turned into a plutocracy. I wrote

“It would be wrong to say that Brexit or Trump represent an evolution of neoliberalism. Both promote strong restrictions to trade, and so it would be more accurate to view Brexit as a split within neoliberalism. What is clearer to me is that populism is a consequence of neoliberalism as reflected in the policies of the political right.” [1]

And as I argued here, this plutocracy cannot be fought with a return to what went as normal before, because what went as normal before created the plutocracy that we are trying to escape from. Fighting for democracy requires a turn to the left (in economic terms), and that is what we are seeing in the US. The reason is quite simple - without radical economic change in a left wing direction the reasons why enough people in the US voted for Trump will re-emerge. Moving left does not guarantee that will not happen, but it gives democracy a fighting chance. Returning to the neoliberalism that created Trump is just asking for a return of Trump.


[1] Talking about a split in neoliberalism seemed right at the time, but now seems misleading. The opposition to Trump or Brexit on the right has all but disappeared (or more accurately been extinguished), and those on the right who oppose either say nothing or start supporting the opposition to plutocracy. So now I would call Trump and Brexit as just one final stage in the evolution of UK and US neoliberalism into populist plutocracy.

Wednesday, 7 April 2021

Labour should start contesting the Tory record in running the economy

 

I recently wrote a post entitled “Why are the Conservatives so bad at running the economy?”. By bad I meant both in absolute terms (so many home grown crises: monetarism, ERM, austerity), and relative to the last Labour government. My post was hardly contested, and what criticism i received was easy to bat away. Things like ‘Labour left the economy vulnerable to a global financial crisis’, where the post noted that the Tories wanted even less financial regulation before the crisis. However, as I also noted, Labour have for the last decade been well behind in the polls on who is best to run the economy.


Labour under Ed Miliband made the huge mistake of failing to contest the Tory lies about how Labour profligacy caused the ‘deficit crisis’. As a result, many voters blamed Labour for austerity. Labour are not going to reverse the popular misconception that they are bad at running the economy by being quiet and defensive. What Starmer needs to do (and it has to be Starmer as the media ignores anything else) after the local elections is to go on the attack, by setting the government’s current macroeconomic policy mistakes in a historical context starting in 2010.


He could list there major blunders made since the last Labour government in terms of running the economy.


  1. Austerity. Here Labour usually focus on the costs of this in terms of public services. It is fine to point out the impact of lower public services, particularly showing how austerity left us badly prepared for the pandemic. But this is weak unless it is accompanied by a macroeconomic argument about why austerity, far from being necessary, was actually harmful to the economy. Not just in terms of a delayed recovery, but wages perhaps permanently lower. There was no debt crisis, and many eminent economists supported fiscal stimulus rather than austerity. The golden rule is that in a recession you help the recovery first, because only after a strong recovery will you know how much of a deficit problem (if any) you have.

  2. The coronavirus second wave. By pushing against an early lockdown, Sunak allowed the second wave to gain momentum that required a prolonged lockdown to fix, where many lives were lost. The economy suffered because of this extensive lockdown. The golden rule here is that when cases start rising lockdown strong and early, which saves lives and saves the economy from a more prolonged lockdown.

  3. The Brexit deal. By ruling out any type of cooperation with the EU, Johnson’s Brexit deal created a bureaucracy mountain that has hit exports and many firms very badly. I suspect examples may be more powerful than aggregate figures here.

It is in this context that he can place the big mistake in Sunak’s March budget. A lost opportunity to obtain a strong economy, because once again Sunak was more concerned about the deficit than the recovery. The comparison with Biden in the US is revealing. The lesson from 2010 has not been learnt: in a recession focus on the recovery because only after the recovery is complete will you know how much of a deficit problem (if at all) you will have.

In contrast the first ten years of the Labour government, before the Global Financial Crisis hit virtually every major economy around the world, saw ten years of strong and steady growth. That strong and steady growth allowed Labour to direct more resources into public services, particularly the NHS. Virtually any NHS performance indicator can be used to show NHS performance is far worse now than when Labour left office. 

The reason that no Labour leader has made a speech like this, directly questioning the economic competence of Tory economic management, is that the response from the Tory press and MPs will be to rubbish the claim. The way they will do this is to focus on the Labour profligacy claims about the last Labour government. Better for Labour to say nothing, many will advise, rather than allow the Tory press to remind voters of this past. And from a short term point of view that is correct.

But if Labour keep retreating from this terrain they will allow the myth that they are rubbish at managing the economy to persist. It could lose them elections, because all Tory politicians need to do with any Labour promises is to point back at past Labour profligacy. The Tories will continue to talk about having created a strong economy and no one will contradict them in the media that matters. I fear that this has gone on so long that even some Labour MPs are starting to believe that it is true.

A few years from the next election is the time Labour should start contesting the received wisdom. That will mean having clear lines of response to the attacks coming from the government and right wing press, who will be desperate to preserve the Labour profligacy myth. Here are a few suggestions.


Q) Labour left office with a record deficit of over 10%. How can you claim Labour was not profligate?

A) That deficit was a consequence of the Global Financial Crisis (GFC), and the measures we took to stop the freefall in jobs after banks collapsed. The deficit is likely to be 17% last year. Is that because of Conservative profligacy or COVID?


Q) The IMF/OECD estimate that before the GFC, Labour had a structural deficit of around 5% of GDP.

A) That number is pure hindsight, produced by those organisations to help explain poor growth after 2010. At the time all organisations, including IMF/OECD, suggested very different numbers. The OBR, whose numbers are not revised in hindsight, think that in 2007/8 the cyclically adjusted budget deficit was just 2%, which is not unreasonable given estimates for the output gap made at the time.


Q) Didn’t the Coalition government’s austerity measures save the UK from a financial crisis?

A) No. It is now generally understood that in a recession you should use tax and spend policy to support the economy and not to reduce the deficit. In 2010 the Eurozone crisis led international organisations astray, but the only financial crisis was in the Eurozone. Just as we see today, the Bank of England would buy any UK debt if the markets wouldn’t do so. The idea that the Coalition government saved the UK from some kind of crisis is a myth spread by Tory supporters in the City. 


Q) The Labour government were planning austerity if they were reelected.

A) The Conservatives really do need to make up their mind. Was the Labour government profligate, or was it going to do exactly what the Coalition government did. Of course we cannot know what would have happened if the economic recovery assumed in that 2009/10 budget had failed to materialise, but we can be pretty sure a Labour government would not have continued with fiscal consolidation as the Coalition government did. [1]


Q) Wasn’t the Labour government partly responsible for the damage the GFC did to the economy, because it failed to regulate the banking sector sufficiently?

A) That would be a serious point if the Conservatives had been pushing for more regulation before the GFC. But in reality they were pushing for less regulation, as the Conservatives typically do.


I’m sure there are other lines of attack which need to be covered. In addition, these responses can be supplemented with comparisons of GDP per head or real wage growth under Labour and since 2010, which despite the GFC still flatter Labour.

The argument that Labour are more competent at running the economy can be seen as an essential part of a general attack on the competence of this and past Conservative governments. Just as the Conservatives were incompetent in dealing with the first and second COVID waves, there are also incompetent at running the economy (obsessed with deficits rather than economic recovery), they are incompetent at running the NHS (wholesale reorganisation under the Coalition government now being partly undone by the current government, with all the time trying to privatise), incompetent on law and order (huge delays in trials because of past austerity), and incompetent at looking after public money. 

It is true that this government have handled the vaccine rollout well, because unlike test and trace they have allowed the NHS to do the work. But besides that, the only thing they seem very good at is giving public money to their friends and financial supporters.


[1] An alternative approach, which is more honest, is to say that the Budget of 2009/10 was wrong to suggest substantial austerity so soon.










Tuesday, 30 March 2021

Vines and Willis on the future of macroeconomics

Mainly for economists 


I want to talk about the latest Oxford Review of Economic issue on ‘rebuilding macroeconomics’, and particularly the first article by David Vines and Samuel Wills. The first thing I want to say is that the title is pretentious. Academic macroeconomics is reasonably happy doing what it is currently doing and in that sense there is nothing to rebuild. A better title is future directions for macroeconomics.


The Vines and Wills article suggests two major changes in direction. The first, following Blanchard, is to partly reverse the microfoundations hegemony, by allowing models or parts of models that don’t include microfounded models routinely back into the top journals. The second is to focus on models that allow more than one long run equilibrium. I will take each in turn.


Ending the microfoundations hegemomy


I have argued against the microfoundations hegemony for some time. My own article in this issue presents a classification of different types of macromodel that tries to extend Blanchard’s own list of types in a systematic manner. Here is a diagram that splits models according to their bias towards theoretical consistency or consistency with the data, and how detailed the models are.



At the most data consistent, we have VARs and variations on them. In a simple VAR the only theory involved comes in variable choice, lag length and identifying restrictions. At the theory consistent end we have microfounded models, where any admissible model has to be internally theoretically consistent. These models can be ranked by complexity. What I call foundational models are things like RBC or OLG models: the kind of very simple model that would be taught in masters courses. DSGE models are the workhorse of today’s macroeconomics, which you will find in most journal articles. Once we start having disaggregated agents or sectors in a DSGE model it becomes pretty complex. However the dividing lines between foundational, DSGE and more complex microfounded models is not rigid.


SEMs are models that academics have largely forgotten about, except when they teach IS/LM type models to undergraduates. Again they can be divided up by complexity, but the dividing lines are not precise. What is precise is that these models are not microfounded, even though they may involve equations which are derived from a substantial and very up to date theoretical base. What these models, which Blanchard calls policy models and I call Structural Econometric models (SEMs), fail to demonstrate is internal theoretical consistency.


Vines and Wills call the set of all IS/LM type models and foundational models ‘toy models’. Their paper includes a nice history of macroeconomic thought focused on which toy modes have been central at different times.


Why use SEMs instead of DSGE? Because they are likely to come closer to describing the real world, and they are very flexible to change. The former is very easy to demonstrate. Imagine a DSGE model, where you take each individual equation to the data, adding in terms that are significant and make theoretical sense at an informal level. You would then have a SEM which almost surely is a closer fit to the data than the DSGE model. Greater flexibility is obvious to anyone like myself who has used both types of model. You can incorporate a new theoretical idea in a SEM in a week. To do the same in a DSGE model takes much longer, because you have to ensure internal consistency.


Most policy institutions outside academia use SEMs, although they may also use DSGE models. The Bank of England is unusual in not using a SEM, and its macroeconomic analysis is poorer as a result. By calling SEMs ‘policy models’, Blanchard makes clear that he thinks that SEMs should be an essential part of policy analysis, wherever that is done. But whatever the merit of this argument, my paper argues that this is not going to happen within academia, because the microfoundations hegemony is well entrenched and progressive in the Lakatos sense.


The only way to end the microfoundations hegemony is for central banks or the IMF to start commissioning work on equations or sectors that could be the basis of changes to their SEM model. That will then put pressure on journal editors to include empirical work which is not either microfounded or general equilibrium. This would mean that work like that outlined by John Muellbauer in his article in this issue, and work done in policy institutions all the time, can get published in the top journals. However, for reasons given in the paper, I’m pessimistic this will happen.


Multiple Equilibrium


The other key theme in the Vines and Wills article is the need for non-linearities in models. He gives three interesting toy examples of toy multiple equilibrium models, related to asset markets, growth and inflation. Other examples, related to geography (the paper by Venables in this issue) or beliefs (the paper by Farmer) are discussed. This is all interesting stuff.


However I do query that, quoting Martin Sandbu, “there is no question this would be a very big change in how macroeconomics is done.” To just give a personal example, when I taught part of an advanced macro class in Oxford a few years ago, two of the four models I looked at had multiple equilibrium. However it is also true that non-linear models are more complex, which undoubtedly puts researchers off. This brings us back to allowing non-microfounded models to be, at the very least, a preliminary investigation of new theoretical ideas as a prelude to ‘doing it properly’, as most academic macroeconomists would say.


My other question is whether, if you want to model the impact of severe recessions on long run output, two or more equilibrium models of the kind that Vines and Wills look at are the answer. It may be simpler and also more realistic to add forms of endogenous growth to a standard model, as various people have done, which gives you hysteresis. Indeed such an approach is used (in a more informal way) by the OBR to calculate the long run impact of the COVID crisis.


Which brings me back to revolutions. Many people outside the mainstream, such as Servaas Storm here, want a revolution that removes the many things about the mainstream they don’t like. But revolutions happen because mainstream economists see that one is needed. The Keynesian revolution occurred because academics and politicians saw that depressions were not inevitable. The neoclassical counter-revolution was a revolution within mainstream academia. Because the microfoundations hegemony is progressive, there will be no revolution. Neither financial crises or pandemics are impossible to model using standard tools.


I hope this issue of OXREP, together with the earlier companion volume, will do two things. First to help give ideas to younger academics about going beyond models with a single equilibrium. Second to help economists in policy institutions to see that there are other ways of doing things beyond microfoundations, and that many of the stories they were told about why policy models have to be microfounded are not as true as perhaps they once thought.


Tuesday, 23 March 2021

As things stand, the chances of defeating Johnson at the next election are minuscule

 

I don’t think this is understood by the leadership of the main opposition parties, along with many others. The Conservatives are way ahead in the polls at the moment, because the government had the right policy on vaccine procurement and delivery. That will fade, but it could quickly be replaced by an economic recovery bounce. The economy is likely to grow rapidly both this year and next, so the recovery bounce could last until 2023. As usual, much will be made of ‘record growth rates’ and rather less to where we are in comparison to pre-pandemic. For this reason, I suspect Johnson will call an election well before he needs to (having repealed the FTPA). Their erroneous reputation for managing the economy will appear enhanced. The Conservative election campaign will be slick, with vast amounts of money spent on social media, and the electorate will be rigged by insisting on ID. Johnson's victory will be assured.


Of course, as a former Conservative PM is said to have said, “events, dear boy, events”. For example Johnson could rush on with ending his third lockdown even though R becomes greater than one, and combined with not enough people being vaccinated this leads to another wave of COVID cases, possibly involving virus variants that make some vaccines less effective. But even during the second wave, the severity of which was entirely down to government ineptitude, Labour never took a consistent lead in the polls. [1] For reasons including those outlined in my last post, everything has been stacked against the opposition for some time.


Yet it is imperative that this government is defeated as soon as possible. It is an authoritarian government with immense power because of its solid majority, and the longer it stays in power the more difficult it will make the life of any opposition. So the only relevant question is what can the opposition to this government do to maximise its chances of winning before it becomes even harder to win.


The most obvious and familiar example of how it can be done is the United States, and the first lesson has to be for all of the opposition parties to cooperate in fighting seats in the next election. What that has to mean is that just one opposition party fields candidates in key marginals, as the LibDems and Greens did in 2019. Biden would not have won if there had been another significant liberal party contesting virtually every state.


Another way to see why a socially liberal (aka progressive) alliance is essential is to divide voters using two dimensions, the familiar left right and social liberalism or conservatism (sometimes called authoritarian). This breakdown is essential to understand politics today, and for those unfamiliar with it I outline the reasons why it is essential in an appendix. Without doubt nearly all socially conservative right wing voters will vote Tory, and socially liberal left wing voters will not vote Tory, and the two groups are similar in size. The battle in any election is to win over those in the other two quadrants: left wing social conservatives and right wing social liberals.


Once you see this, the folly of dividing the English socially liberal vote among three parties becomes obvious. Cooperation of the kind mentioned above will greatly increase the chances that the Conservatives will not win. Given the strong possibility of an election at the end of 2022 or early 2023, the sooner discussions start the better. An alliance is a clear win for the two main UK wide opposition parties (by seats). Labour will play a leading role in the next government rather than staying in opposition. The Liberal Democrats will win more of their target seats where there are currently many wasted Labour votes.


But such an alliance alone is not enough, as the appendix explains. Each party needs to play to its strength. The LibDems target seats are winnable in part because right wing social liberals could be persuaded to vote with their liberalism rather than their pocket. But that in turn means Labour have to focus on winning socially conservative left wing voters. The Tories know that is their route to power, which is the reason for all this nonsense about wokeness, being nasty to asylum seekers, ending the right to demonstrate and so on.


I should say at the start what this post is not about. It is not an argument for Blue Labour. Labour’s base today is socially liberal, and if Labour were to become a socially conservative party its core vote would go elsewhere.


Nor is this post about the left vs centre-left within Labour. What I have to say is relevant to Labour led by the Left or Centre-Left. After my last post, many on the left pointed to 2017 as proof that Labour could do relatively well without compromising its liberalism. But in 2017 the issue that divided social liberals and conservatives in a way no issue has for decades was Brexit (see appendix). Because Labour in 2017 supported Brexit, then this together with a strong left wing economic package helped win many social conservative left wing voters.


The activist, marginal voter divide


I recently wrote a post trying to justify Starmer’s strategy of avoiding being seen to champion social liberal issues. I think it is fair to say that many people hated that post. But to try and convince people that I was right in principle, I want to reference a fascinating discussion between Noah Smith and political data scientist David Shor. Although that concerns US politics, the parallels with UK politics are very close. What Shor is saying is very similar to what I was trying to say in my earlier post.


One of the first points Shor makes in this discussion is that party activists are the worst judge of what works at winning elections. He gives the example of the mirror ad used by Clinton in 2016, which used Trump’s derogatory comments about women. The Clinton people thought it was a great ad and put a lot of money behind it. What Shor found was that among the marginal voters that any Democrat needs to win over, the white socially conservative working class (and to some extent the non-white socially conservative), it actually lost votes.


In my view a great deal of comment on twitter is based on this fallacy. Activists typically want their politicians to talk about the issues they care about, and get upset when they don’t. But if a party leader just talks about what activists want them to talk about, they will probably do badly in an election. Specifically for Labour, a leader who wants to win elections needs to appeal to socially conservative left wing voters. Labour almost certainly, and a progressive alliance probably, cannot win without these voters. No Labour leader in opposition is going to change these voters socially conservative beliefs (for what does, see later). That means a Labour leader has to focus on economic issues from a left wing perspective, and not champion social liberal issues and concerns.


A Labour leader who understands the argument above has to walk a tightrope. If they go so far as to advocate for socially conservative issues, they risk losing their socially liberal base to one of the other social liberal parties (or to not voting). The clearest case of that was Labour during the course of 2019. Labour leaders do best when they don’t adopt socially conservative issues, but don’t push socially liberal issues either. (Issues where many social conservatives agree with liberals are fine.) A progressive alliance avoids that tightrope to a large degree, because social liberals fed up with Labour’s silence on these issues don’t get the chance to vote Green or LibDem in key marginals. But it does not eliminate it entirely because voters may not vote, but more importantly it is crucial to keep your base onside [2].


Because it is a tightrope, it is very easy for Labour leaders to get this wrong. In particular a leader, or the team around them, may become so focused on their target voter that they go too far in denying their social liberalism. [3] The recent bill allowing the police to prevent noisy protests or protests that cause annoyance is a good example of where Starmer made a mistake and corrected it. The best thing to do is turn an issue around so that people think about it differently. Whatever you think about Blair, his ‘being tough on crime and the causes of crime’ did exactly that.


What you do, and what you talk about


Many of the reactions to my earlier post failed to make the distinction between what an opposition talks about to win power, and what it then does in government. Not talking about certain issues in an election campaign is not the same as being indifferent to them in government. All I am talking about is what a Labour opposition uses its scarce airtime to talk about.


This point is so obvious to Conservatives that it is second nature. A Conservative party will not campaign on privatising the NHS but that does not stop them doing it when in office. Equally the Labour party under Blair did not campaign for an independent Bank of England, but it still enacted one.


What many people remember is a Labour government, both with rhetoric and actions, trying to appease the anti-immigration mood created in large part by the right wing press. That was worse than pointless, because it failed to put the case for immigration and validated the idea that immigration was a problem. It failed to use the government’s ability to put a case (which a Labour opposition hardly ever has), and alienated many of its own voters. Once again, that is not what I’m talking about here.


Election campaigns, which for oppositions last five years, involve promoting your most popular policies. For successful Labour oppositions that is going to involve left wing economics policies but not socially liberal policies. Governments have much more latitude in how they conduct election campaigns. Because they get much more exposure in the media, they can focus on the popular things they have done rather than the more unpopular. To take an example, Shor argues for the US that on gay marriage making those issues partisan is dangerous.


Another reaction I got to the earlier post was that someone needed to champion social liberalism when the Conservatives are in power. But Shor argues that what changes public attitudes in a liberal direction is the broadcast media. The broadcast media, either through documentary or fiction, can normalise minorities among those who were previously antagonistic to them. The reason the broadcast media promotes social liberalism (and has done so during the steady advance of social liberalism over the last 50 years) is that programmes are typically made by younger people with university degrees, who tend to be socially liberal.


That does not mean activists should just sit back and wait for this progress to happen. There is a key role for non-partisan campaigns to put issues on the agenda, and to expose government hypocrisy on issues like climate change. But a Labour leader fighting an election campaigning on social issues that divide social conservatives and liberals is unlikely to persuade any marginal voters and will just lose Labour votes.


[1] The broadcast media is critical here. The Conservative politician that persuaded Johnson not to follow the scientific advice in September was the Chancellor Sunak, yet Sunak remains the most popular politician. The reason is that the broadcast media never mention this key point, so it remains largely unknown to most voters.


{2] This is one reason why Starmer attacking Corbyn is a bad idea. Not only does it not play well with many activists, it also reminds voters of party divisions.


[3] Basing policy too closely on red wall focus groups can be a big mistake in many ways. To give one recent example, I agree with Michael Walker here that Starmer failed to present an alternative way of thinking about the pandemic. He needed something positive rather than the negative of Johnson acting too late. In particular he needed to bust the excuse the government uses constantly of having to trade off lives with the economy, and he needed to quote numbers for the deaths the government caused. What might appear negatively as an aggressive and unsupportive stance among focus groups will reap dividends in the period which matters, which is post pandemic.


Appendix: Two dimensional mapping of voters


Rather than just categorise voters as somewhere on the left-right continuum, more recent voter analysis has looked at two dimensions, where the second axis is social liberal to social conservative. To assess where voters are on this axis, a standard method is to look at answers to questions of national surveys. You can then see how those individuals voted on key issues. Here is an example from the Financial Times at the end of 2017.




The labels given to the extremes of the ‘cultural’ axis vary a lot. I prefer social liberal to libertarian for obvious reasons. Here is an example of the kind of questions used to plot where voters are, taken from a presentation by Paula Surridge.


The FT diagram is typical: most Labour voters are somewhere in the social liberal/left quadrant, and most Tory voters are in the opposite quadrant. It is the two other quadrants that are more contestable by the two main political parties. I’m going to follow an excellent
paper by Noam Gidron and label those voters who are left wing but socially conservative 'welfare chauvinist', and those that are right wing but liberal 'market cosmopolitan'. The trick for parties of the left or right is to get voters in these two groups to vote for them. Gidron argues that the decline in left wing parties in Europe is due to both groups tending to vote for right wing parties rather than left wing parties.


The policy in the UK that did this most successfully for the Conservatives was Brexit, as the diagram shows. It is clear that Brexit appealed almost exclusively to social conservatives, capturing the welfare chauvinist group. It follows that this was why Corbyn’s 2017 campaign was the most successful for Labour since Blair: Labour appeased social conservatives (by accepting Brexit, and also talking about police funding) and focused on left wing economic policies, thus capturing many welfare chauvinists.


In both the UK and US, geography together with unusual voting systems mean that the marginal voter is left wing but socially conservative (welfare chauvinists). Social liberals are concentrated in large cities or university towns, and are normally in the minority elsewhere. That means that in a battle between social conservatives and liberals (like Brexit) voters may be evenly balanced in numbers but social conservatives will win far more seats. The 52% to 48% Brexit referendum, if fought over seats, is estimated to have produced 406 Leave seats and just 242 Remain.seats.

Tuesday, 16 March 2021

The Royal Family is today’s England

 

Don’t worry, this isn’t really about that interview. But what struck me most about the whole situation is that the Royal Family had turned down a huge opportunity to revitalise its image, and the main reason it has done this was because of the right wing press, and possibly fear of change, and possibly race. Now I know many reading this don’t spend much time worrying about the Royal Family’s image (neither do I) but please bear with me.


Looking at how public opinion about the affair splits by age should be very worrying for a monarchy that wants to survive. If the Palace had embraced the couple, which would have meant publicly defending Meghan against press misinformation and supporting her as much as they could in dealing with that misinformation, it would have shown a monarchy that had no problem welcoming a mixed race divorced American celebrity to their midst and a monarchy that was strong enough to take on the press in defence of one of their own. There was also the bonus that the couple were very good at doing their job.


Anyone who has seen the film The Queen will know how bad the Palace can be at adapting to public opinion. But the lesson they seemed to have learnt from that episode is to follow the tabloid press. Harry in the interview talked about the ‘invisible contract’ between the monarchy and the tabloid press. In this case that contract involved not trying to stop the press trashing a member of the royal family. A sacrifice to keep the beast on side perhaps. While the Queen is untouchable, I think Prince Charles is very worried that he is not untouchable. To again use a phrase from Harry in that interview, the monarchy are trapped in a relationship with the press. A press, as Anthony Barnett points out, where the owner of a large part of the press is a republican.


That, remarkably, is the most favourable view to the Palace of what happened. The alternative is that elements within ‘the firm’ connived with the press in making the couple feel unwelcome. Whichever it was, my overriding impression is of a monarchy that has allowed itself or has chosen to live in the past rather than embracing the future.


Thinking about how parts of Britain (England for sure, and perhaps Wales) have moved over the last decade you could not avoid concluding that it had made much the same mistake the royal family made over Harry and Meghan. The decade began with a Conservative party campaigning against high immigration on the back of a concerted attempt by the right wing tabloids to publish as many negative stories about immigration it could. This was coupled with a Labour government that had given up arguing the positive case for immigration because they feared the power of the right wing press. It also saw a period of unnecessary austerity that typically encourages nationalism and attacks on minorities..


London is a remarkable cultural mix that seems to work pretty well, but just like the royal family might have effectively scorned a mixed race American, most English towns and rural England decided they preferred the monoculture they knew or remembered, in large part because of fear stoked by the right wing press or simple racism. Brexit was really a continuation of the same, but here the return to an imagined past was much clearer. The idea that the UK could divorce itself from the Europe that surrounds it can only be imagined if you are steeped in a mythical past where the UK stood alone. Global Britain (far less global as a result of Brexit) appealed to ideas of Empire. But the idea of taking back control proved irresistible, even though what they were trying to take back had not been taken away by the EU.


Just as the right wing press had been pivotal in generating fear of immigrants, so it was critical in persuading a tiny majority of the UK to start a divorce with most of Europe. If there are any in the 'firm' that wanted the split with the Duke and Duchess of Sussex, they were equivalent to those Conservative politicians who wanted to go back to that mythical past and so pushed Brexit. With the phrase “the will of the people” (in reality just over half the people allowed to vote on the day of the referendum) the Brexit press entrenched the idea that Brexit was unstoppable, and anyone who tried to stop it by democratic means became in their eyes a traitor. Only a country that is living in its past could think that attacking a statue is worse than attacking and seriously injuring a human being. 


A large section of the British public also has an implicit contract with their press. They read it for celebrity gossip or sport, and in exchange readers allow their attitudes to be influenced in whatever direction the owners of the press (mainly old white men) choose, frequently laced by nationalism. Attitudes to royalty are part of this. Readers do not have any first hand experience of Meghan Markle, so their opinions are bound to be heavily influenced by what they read in the press. Younger people who are far less influenced by this press think differently. Part of the age difference also reflects the fact that younger people have a better understanding about what racism is, and a greater interest in living in the modern world.


The invisible contract between the royal family and the tabloid press is dangerous to the royal family because it reduces support for the monarchy among the young. This invisible contract between parts of the English public and the press is much more dangerous, because it threatens meaningful democracy in the UK. There were two kinds of politician that backed Brexit. The first were more like the public who were nostalgic for an imaginary past. The second, and far more dangerous, were those who saw this nostalgia as a means to permanent power. These are the politicians who lead this government today.


Permanent power is achieved in four ways. The first, taking its cue from the US Republican party, is to make any election battleground about this socially conservative/liberal divide that was at the core of Brexit. The right wing press and this government’s ‘war on woke’ is designed to achieve exactly that. The second means to permanent power, again borrowed from the US right, is to make it more difficult to vote, and to saturate elections with social media ads paid with uncontrolled amounts of money. The third, and most dangerous, is to control enough of the media to ensure they will always win. (Controlling the media is the most important part of a general attack on a pluralist democracy as outlined by Mark Thomas here, and which in turn is the hallmark of populist leaders like Trump or Orban.) The fourth, which follows from the third, is to lie constantly in order to construct an alternative reality it’s supporters can believe in: an alternative reality where the important issues of the day involve preserving a mythical past rather than the health of the economy [1], and where fighting a mythical cosmopolitan elite is more important than preserving civil liberties and minority rights.


Control of the media requires first control of (or working in tandem with) a majority of the press, and that has been assured at least since Brexit. The right wing press has become a propaganda machine working very closely with the government. With a compliant tabloid press and reactive broadcast media, the government can get away with corruption, bullying and other scandals. However most people who read this press also watch or listen to the BBC, and in the past this has been a check on the ability to construct an alternative reality. Because of popular trust in the BBC, it prevents the use of the Trumpian tactic of talking about fake news.


So key to controlling the media has been to tame the BBC, and this has also been largely achieved. Of course all governments attempt to influence what the BBC does, but when these attempts are coupled with enough senior appointments and threats to the BBC’s existence it will have a much larger effect. The aim is not to control every BBC programme, but just the main news bulletins that most people watch. Fact checking or Newsnight is not threatening on its own, because the government’s target voters don’t read or watch them. Nor is the aim to change this into a state run media, but just to ensure coverage in these news bulletins does not threaten the government’s alternative reality. For example the government needs to ensure that these bulletins never call out Johnson’s lies and never acknowledge government corruption. [2]


People often point to Biden’s victory to suggest that this kind of strategy can easily fail. But in the US most newspapers and media networks are not so intimately bound to the right wing project as they are in the UK (hence Trump's frequent use of fake news), and the opposition to the Republicans is not fragmented as it is in the UK. A better model to what is happening in the UK is the recent past in Hungary, which still appears to be a democracy but in reality a democracy in name only, with total government control of the media. Hungary bans protests during the pandemic just as the UK does, but even Hungary is not attempting to ban demonstrations because they might be noisy.


An increasing number of people in the UK are beginning to think about this country in the same way that Harry and Meghan think about the monarchy, but most do not have the fame, resources or even desire to leave. The only way to safeguard UK democracy is to recognise the unique severity of the threat and the difficulty of stopping it. We need to put factionalism to one side in trying to persuade England to leave the past behind, make peace with our neighbours and return to the modern world.


[1] This can be achieved if your core vote is protected from economic stagnation. Pensions protected from earnings stagnation, and using subsidies to keep house prices high, may be enough to ensure this.

[2] For this reason cancelling a satirical comedy programme, I suspect largely watched by those who will never vote Tory, seems to be off message. But authoritarian leaders hate one thing more than they hate someone telling the truth: they hate the idea of being made fun of. And for many in the government/press, the ultimate goal may remain destruction of the BBC by removing popular support for it.