Winner of the New Statesman SPERI Prize in Political Economy 2016


Friday, 14 June 2019

Bill Mitchell's fantasy about Labour's fiscal rule


My last post about outlandish attacks from some MMTers on Labour’s Fiscal Credibility Rule (FCR) was designed to be read by non-economists, and I didn’t want to bore them or waste space with all the fantasies Bill Mitchell has spread about the rule. But as I’ve had one of those fantasies tweeted back to me many times in response, I want to lay it to rest here.

That fantasy is that the Bank of England somehow has control of when the knockout happens. The knockout is when the rule is suspended and instead you have as much fiscal stimulus as is necessary to get the economy out of recession. It is triggered when interest rates hit their lower bound. At that point all monetary policy has left are unconventional policies, which are less reliable than fiscal policy, so it makes sense to go for a full fiscal stimulus. 

The way this simple rule has been spun by some is that it gives the Bank of England control over when the knockout is triggered. In reality the rule does no such thing. The Bank will have announced beforehand where the lower bound for rates is, and when a recession happens such that the Bank cuts rates to this lower bound the knockout is triggered. This is simple, unless of course you hate the rule because it is not MMT.

To see how MMters spin this as the Bank being in control of the knockout, you have to construct a fairy tale where the Bank is evil. Although they are supposed to do everything to end a recession, in this fantasy they have a higher calling, which is to impose austerity. So what the evil Bank does is announce that the lower bound is X, but when a severe recession hits they cut rates to X+0.25% and no further. They undertake all kinds of unconventional monetary stimulus but insist that rates are not at their lower bound, just because they do not want any fiscal stimulus.

What the fairy tale requires is that all 9 members of the Monetary Policy Committee (MPC), who actually set interest rates, collude to deceive the Chancellor and the public. In reality the M in MPC does not stand for Masonic - 4 of their members are external members. They would have to swear in public that the real lower bound is X and have to explain to parliamentary committees why rates have not been cut to X despite being in a major recession with rapidly rising unemployment and falling output.

I know many more past and current MPC members - both from the Bank and from outside - than I suspect Bill Mitchell does. What always impresses me is how seriously they respect the mandate they are given. They might have their individual views on fiscal policy, as Mervyn King did, but there is just no way they would collude to harm the economy because of those views. Most of those I have met are quite positive about the contribution fiscal policy can make in a severe recession, so they wouldn’t even want to deceive the public on this score even if they felt able to.

But let’s put all that to one side. After all I am sure MMTers would just say this shows I’m too much part of the elite, or I am incredibly naive, or whatever. Let’s just suppose this conspiracy happened. Each member of the MPC swore blind that rates were still not at their lower bound, and had concocted some kind of story about why rates should be kept above their lower bound despite rapidly rising unemployment and falling output etc etc.If all that happened, what would a Labour Chancellor do?

The Chancellor, together with much of the non-partisan press, would see what was going on. They would observe that in the middle of a recession the MPC were deliberately not cutting rates to the stated lower bound for no good reason other than a nefarious motive. The Chancellor would first embark on a temporary (less than 5 years) fiscal stimulus, which he is free to do under the FCR rule even without the backstop. If rates stayed at the same level for months as the recession continued, and the Bank embarked on all kinds of unconventional stimulus measures, the Chancellor would conclude, as any reasonable observer would, that the lower bound had been reached. The Chancellor would then invoke the FCR backstop, allowing him to expand on their original fiscal stimulus. Once the recession was over, I doubt very much that the current monetary framework would survive, which is yet another reason why no MPC would never embark on this fairytale.

MMters sometimes retort that the Chancellor would get political flack for triggering the backstop in this situation. In the middle of a recession with unemployment rising I doubt there would be much flack at all, besides the usual nonsense from the Tory press. But I find it supremely ironic that MMTers are prepared to use media reaction as an argument, as if the media reaction to any Chancellor adopting MMT would be all sweetness and light. Just imagine how abolishing the MPC, and saying taxes do not help finance spending, would go down with most journalists. People in glass houses shouldn’t throw stones.

Mike Norman Economics, commenting on my earlier post, says compared to Bill Mitchell I’m out of my league. That would be the league for telling fairy tales I assume. While one part of the left indulges in polemic and spinning fantasies against Labour policy, thankfully we have another part that is getting on with the serious business of preparing for a transforming government that will finally reverse what neoliberalism really is.





Tuesday, 11 June 2019

Is Labour’s fiscal policy rule neoliberal?


That is the charge some on the left, particularly followers a movement called MMT, have laid against Labour's Fiscal Credibility Rule (FCR). MMT stands for nothing very informative, but it is a non-mainstream left-wing macroeconomic school of thought. Bill Mitchell, one of the leading lights of MMT, has run a relentless campaign against the FCR through his blog. As my own work with Jonathan Portes helped provide the intellectual foundation for the FCR, I will try and explain why I find the neoliberal charge nonsensical.

Although MMT has had its biggest impact in the US, it is increasingly discussed by those on Labour’s left (e.g. pro and con). Here I will give a lay person’s guide to only the aspects of MMT that lead to its dislike of Labour’s rule. MMT’s key idea is that fiscal policy (changing taxes and government spending) is better suited to stabilise the macroeconomy than a central bank setting interest rates.

Almost without exception, advanced economies use interest rates set by an independent central bank to control output and inflation. In the UK the Bank of England’s mandate (the inflation target and how quickly it has to be reached) is determined by the Chancellor. If the Chancellor wants to raise the inflation target or scrap it altogether they can do so. But the month to month task of actually choosing what interest rate is most likely to meet the Chancellors mandate is left to the Monetary Policy Committee (MPC), who are either Bank insiders or outsiders appointed by the Treasury.

Why is the choice of setting interest rates delegated to the MPC? Getting this choice right is a highly technical task, requiring detailed discussions of different forecasts and macroeconomic models. If the MPC is working well, they bring strong expertise to the table to help make a decision.

These experts could just give their advice in secret to the Chancellor, leaving the Chancellor to accept or reject their advice. The danger in doing that is the Chancellor will allow party political motives to influence what they do, to the detriment of the economy. As one Treasury insider once told me in the years before the Bank of England (BoE) became independent, the Chancellor recognised that rates had to rise but there is no way it was happening before the party conference.

A fundamental problem with today’s way of doing things occurred during the Global Financial Crisis. Interest rates fell to a level that became their lower bound. Central banks thought that cutting rates any further was ineffective and risky. When that happens, something else needs to step in to stimulate the economy. The BoE tried various measures (like Quantitative Easing), but they were all rather hit and miss because they had not been used much before.

Under the Labour government in 2009 fiscal policy was used to provide the stimulus that monetary policy could no longer reliably give. But in 2010 the Coalition government was elected and decided fiscal stimulus had to become austerity, with disastrous results in the UK and other countries that adopted it. Most macroeconomists rejected austerity in 2010, and their number increased steadily as the impact of austerity became clear.

It is now received wisdom among academic economists that when interest rates hit their lower bound, fiscal policy needs to provide a large stimulus to the economy. Labour’s fiscal credibility rule is the first in the world to formalise this. If interest rates hit their lower bound, the normal rule is suspended and a fiscal stimulus occurs that is sufficient to end the recession. Labour’s rule is therefore designed to prevent austerity happening again.

MMT wants to go one step further. It wants to use fiscal policy to stabilise the economy at all times, and not just when monetary policy is out of action. This is not a ridiculous proposal. The question is whether it would work as well as the current regime. Most macroeconomists prefer using interest rates when possible because rates can be moved quickly. It also allows this decision to be easily delegated to experts, which avoids party political influence getting in the way of macro stabilisation. However an obvious drawback of the current regime is that it cannot work when rates hit their lower bound, so in a bad recession you have to switch to fiscal policy. Labour’s fiscal rule hardwires that switch into policy.

If you are still reading you have probably decided by now that the debate between MMT and mainstream macro about whether to use fiscal policy all the time or just when interest rates hit their lower bound is pretty technical and best left to macroeconomists. I think that conclusion is correct. But why do many MMTers, as they are known, call Labour’s rule neoliberal? To understand this, you have to understand that MMT is far from just another school of macroeconomics.

MMT is also a political movement of the left. Mitchell himself supports Lexit. They are therefore naturally indignant that a Corbyn led government has adopted a rule that is derived from mainstream economics rather than adopting MMT. Their aim is to win a political as well as an economic battle. Pretty much anything is fair game in this political battle, including describing those like myself who defend Labour’s fiscal rule as neoliberal. (To see how ludicrous this charge is, see here.)

These attacks do however raise a legitimate issue. Why the need for a fiscal rule at all? Why not let the Chancellor choose the deficit depending on the economic circumstances? The answer is provided by something called deficit bias, which preoccupied economic policy before the global financial crisis (GFC). In the 30 years before this crisis, the ratio of OECD government debt to GDP almost doubled for no justifiable reason.

Deficit bias happens because politicians like cutting taxes or raising spending through borrowing, because it puts off any obvious economic pain. But if deficit bias does substantially raise the debt to GDP ratio, as it did before the GFC, then more debt requires paying more interest which in turn requires higher taxes or lower spending. Deficit bias does not avoid the downside of cutting taxes or increasing spending, it just puts it off until a later date. Deficit bias has not gone away. Donald Trump cut taxes for the rich, but he avoided a lot of political flack by doing this through borrowing.

Contrary to many alarmists in the City, the world does not come to an end if you have deficit bias. Deficit bias just makes life harder for future governments. So it is good practice, and a sign of fiscal responsibility, for governments to follow a fiscal rule. Nothing about this good practice need be neoliberal.

You can certainly make a fiscal rule neoliberal through asymmetry (deficits matter, but surpluses do not) and saying the only spending should be cut and not taxes raised to reduce an excessive deficit. Labour’s fiscal credibility rule does neither of these things. It targets the current deficit, leaving public investment free to meet public needs and benefit from low borrowing costs. The target only needs to be met in 5 years time and this period rolls forward. As a result the rule is compatible with the Chancellor enacting a modest stimulus during a mild recession. In a severe recession a fiscal stimulus is mandatory, making austerity impossible.

MMTers like to suggest that government spending could be higher under MMT than under the FCR. This is simply false if the MPC is doing its job. Indeed if higher interest rates reduce demand, as most empirical evidence suggests, for given taxes government spending will be higher under the FCR than under an MMT policy.

MMTers might argue that leaving interest rates decisions to a central bank is neoliberal. That charge has less force for the UK, where the Chancellor has complete control of the Bank’s mandate, than in the Eurozone for example. Delegation of decisions to experts is hardly neoliberal. Is the UK organisation that decides whether drugs are cost effective, NICE, a neoliberal organisation? There is a legitimate issue of what happens when experts fail to do their job, but that is an issue for UK monetary policy that has nothing to do with Labour’s fiscal rule.

MMTers over the top criticisms of Labour’s fiscal rule do however raise some serious questions about MMT. MMT has been important in the US in helping to counteract excessive concern among many Democrats about budget deficits, and in fighting nonsense that says we cannot afford to tackle climate change. However both points can be made using entirely conventional macroeconomics, as my article on the Green New Deal showed. Yet MMT also wants to be a revolutionary movement that overthrows mainstream macroeconomics.

There have been two revolutions in macroeconomics in the last 100 years, but both have brought major and radical new ideas to the table. As yet, MMT only offers ideas that can easily be expressed as part of the mainstream. For example using fiscal rather than monetary policy was a big debate when I was studying as an undergraduate more than 40 years ago. That does not make MMT’s ideas wrong, but they are certainly not revolutionary and they will certainly not replace the mainstream, even if MMTers call all their opponents neoliberal.









Saturday, 8 June 2019

After the Peterborough victory, has Labour’s Brexit policy been redeemed?


In the 2016 EU referendum, Leave got about 61% of the Peterborough vote and Remain 39%. In 2017 Peterborough became a classic Labour Tory marginal where other parties were nowhere to be seen. It was exactly the kind of marginal that Labour’s policy of supporting Brexit is designed to keep. If you ask those who support Labour’s current Brexit policy, nearly all their marginals are like Peterborough.

The only thing that might confuse people is that Peterborough is not really part of the ‘North’, where if you believe some simplistic accounts is where all the Leave constituencies are. As I showed in my last post, this is something of a myth. If there is a UK divide, it is between Scotland, Northern Ireland and London where Remain has clear majority support and the rest of the UK, where there is a slight tendency for the Leave vote to be higher in the East than the West.

If Labour had lost in Peterborough, there were plenty of excuses ready. One would undoubtedly have been that by-elections are not like General Elections. But in fact the stakes were pretty high in Peterborough. If Labour Remain voters did not vote for Labour, there was the clear prospect of giving the party of Nigel Farage its first seat in parliament. This was not just of symbolic importance. As nearly all Remainers will know, the balance of voting in parliament is close. If you allow the Brexit party to capture a Labour seat, you make it harder to vote down No Deal and get a majority for a People’s Vote. If there was a time for Remainers to vote tactically for Labour, Peterborough was it.

In this sense you could argue that this by-election was for Remainers like a General Election, where the first concern is not to let the Conservative or Brexit party win. Does victory in Peterborough mean Labour's Brexit strategy is therefore working? The honest answer is no. The Liberal Democrats vote rose by a factor of over 3 compared to 2017. Labour won with just 31% of the vote. The main reason they won was that the Brexit vote split between the Conservatives and the Brexit party.

Will the Brexit vote split in a similar way in any future General Election, allowing Labour to win its Leave marginals with a much reduced vote? Maybe, or maybe not. We know the Conservatives will do whatever they can to avoid that outcome, and that may include cooperating with Farage so they do not fight in the same seats. It would be foolish indeed for Labour to assume that Brexit disunity saves the day for them in all their Leave marginals in any General Election.

The other important point is that the latest polling suggests that opinions have changed since 2016, with in particular many financially insecure voters turning away from Brexit. When you take that into account there as many marginals in Remain constituencies as Leave constituencies. These findings appear to be not on the radar of many supporters of Labour’s current Brexit policy. We have yet to see what would happen in these equally important Remain marginals.

Some supporters of Labour’s current policy can be very dismissive of polls. I find polls to be very informative, but only if they are carried out in an impartial way. This very recent poll described in the New Statesman by Christabel Cooper and Christina Pagel is more revealing about how the country as a whole currently feels about Brexit than the Peterborough by-election. It shows that since the 2016 vote, feelings about Remain have hardened with 70% of Remainers strongly preferring Remain to alternatives, while 24% of Leavers would prefer Remain to their least favourite Leave option.

This reinforces my point that the 2016 referendum is not a mandate for any particular form of Leaving. Any compromise deal is going to be disliked, and perhaps hated, by large numbers of Leavers and Remainers. (Leaving with No Deal will also be disliked by many Leavers as well as Remainers.) Another important result from this analysis is that among 2017 Labour voters, 72% of Remainers would mind “a lot” about leaving the EU, whereas only 25% of Labour Leavers mind “a lot” about Remaining. With as many marginals in Remain as Leave areas, why is Labour choosing to support a Leave option?

Tuesday, 4 June 2019

Labour’s position on Brexit is not a compromise, but is taking the wrong side


The elections for the European parliament showed us the implications of a basic imbalance in politics today. Brexit is the dominant issue, yet both of the major parties support one side, the Brexit side. The Labour leadership tells itself that it is trying to bring the two sides together. It tells itself, by aiming for a softer Brexit than May wanted, it is trying to compromise. But as someone once said, Brexit is Brexit, and those voting in the European elections agreed.

To see why Labour’s position will not bring people together, just look at what happened to the Conservative vote. May was trying to achieve a very hard Brexit, where we were neither a member of the Single Market or Customs Union. She failed mainly because the Brexit extremists in her own party did not support her. European election voters punished the Conservatives and sided with the Conservative extremists. They didn’t want compromise.

Suppose Labour, after winning a future general election, enacted their softer Brexit. Would voters come together recognising Labour had attempted to unite both sides? Those voting for the Brexit party of Nigel Farage certainly would not. That slightly more Labour voters from 2017 voted fot the explicit Remain parties combined than Labour in the European elections suggests no appetite for compromise on that side either. Labour would instead suffer the fate of Theresa May and be hated by Remainers and Brexiters alike.

It is for that reason that this discussion is purely academic. Not because Labour would not win an election advocating a softer Brexit: there is a non-zero probability they would. Instead it is because Labour would end up being like Theresa May in failing to achieve their desired Brexit. As I argue here, the Conservatives would say Labour’s Brexit was a betrayal. Labour would only stand a chance of getting it through parliament if they agreed to have a second referendum with Remain on the ballot, and they would lose that referendum badly because Remainers and Brexiters would vote against them.

This dislike of a compromise is not irrational. Brexiters have ending up with No Deal because anything else fails to get complete independence from the EU. They are quite right to say that a softer Brexit would be worse for sovereignty than Remaining, because it amounts to pay, obey but no say. Equally for most Remainers a soft Brexit is qualitatively worse than staying in the EU. Look at the way the EU has supported Ireland in these negotiations, they would say. The moment you leave the club, you lose the backing of one of the most powerful political and economic organisations in the world. They are quite right to point to the many flaws in believing that the 2016 referendum is a mandate for any particular type of Brexit.

Why therefore are Labour antagonising their 2017 voters and their members by having a Brexit position that will be very unpopular and impossible to achieve? The answer normally given is that this is the only way to win a general election. Anything else risks losing ‘heartland seats’ because Labour voters will vote for a Brexit party. While this idea might have had some validity in 2017, it has since become an article of faith rather than an evidence based argument.

The basic problem with this argument is that there are many Remain voters in the constituencies that voted Leave in 2016. Polls throughout 2019 suggest a 3 to 1 ratio: by supporting Brexit Labour are losing three times as many Remain voters as any Leave voters they would lose by supporting Remain. The European elections backed part of that finding up with actual votes, and also suggested Labour are in danger of losing Leave voters anyway with their current stance. If anything like that ratio persists, they will lose their traditional heartland seats because Remain voters will not vote Labour.

The table below is from the Ashcroft exit poll for the European election. It compares the percentage of voters who voted for Labour or explicit Remain parties, and also the Leave/Remain balance, by region. The most Leave orientated regions are to the left. Overall this sample is almost certainly biased to Leave voters, because only a tiny number of young people (18-24) voted, and polls regularly show a small lead for Remain over Leave.

%
EM
NE
York
WM
East
SE
Wales
NW
SW
Lon
Scot
Leave
59
55
54
54
54
52
51
50
50
39
37
Remain
38
38
43
42
42
45
45
45
46
57
59
Lab
11
21
17
17
9
9
12
23
11
17
10
LD,G+
33
28
35
31
40
40
43
34
43
46
62
Lab L
4
7
6
6
3
3
4
8
4
6
3

The first point to make is that the outliers here are London and Scotland. Elsewhere, the Leave vote varies from 59% to 50%, and the Remain vote from 38% to 46%. The idea that leave voters are predominantly in the ‘North’ is nonsense. (If anything, the English divide is East versus West outside London, but it is still a small tendency rather than a real divide.) A key consequence of this observation is that areas like the East Midlands and the North East still contain many Remain voters.

These voters made their choice on the basis of the current policy stance of their parties. Nationally about a third of Labour voters in the European election want some kind of Brexit (Ashcroft does not give a regional breakdown), and two thirds want to Remain. The final row applies that percentage to the Labour vote in each region to get the percentage of Labour leavers. These are the maximum number of voters that Labour could lose from its European election result if it became a Remain party. Compare that to the total number of Remain voters, nearly all of whom could vote Labour if it became a Remain party.

The article of faith that those who justify Labour’s current stance cling to is that Remain voters will return to Labour in any general election, while if Labour became a Remain party any Leave voters would be lost. Examples in the past of protest votes that have all but disappeared are given to justify that faith. But it is never explained why Remain voters will come back to Labour even though it supports Brexit, but Leave voters will not come back in a general election if Labour supports Remain. In addition Brexit is not like anything in the past. It has divided the country like no issue before it. As I showed above, you really need pretty well all Labour Remainers to return to the fold to get a number smaller than the number of likely Leave losses.

The idea that Remain voters, and not the Leave vote, will return en masse to Labour in a general election relies in part on a universal use of tactical voting that is simply unrealistic. A good example will be the forthcoming Peterborough by-electon, which is a classic example of a Leave marginal that we are told Labour has to keep its current Brexit policy to win. If the European elections are anything to go by, Brexit will win. In 2017, when Labour just won, the LibDem and Green vote was small. Let’s see if Labour voters from 2017 will unite to keep the Brexit party out.

Some say it worked in 2017, so why will it not work in the future? Many things have changed since 2017 (when Labour still lost). The stance of the EU is now clear, and therefore so is the range of deals the UK could possibly get. The Remain movement is much stronger. But the Labour party has also changed. The 2017 election was the era of Starmer’s 6 tests, which included the ‘exact same benefits’. Today those tests are gone, and instead we have prolonged negotiations between the government and Labour over a possible Brexit deal. Too many Remainers who voted for Labour in 2017 feel they can no longer trust Corbyn on Brexit.

The weakness of the argument to keep current policy and ignore the European elections and the polling evidence has lead some to resort to nostalgia. The argument goes that the working class support for Leave is above the national average, and Labour should be a party of the working class. Labour is becoming less and less a working class party. Supporting Remain would be to “abandon much of the working class – and with it any prospect of a Labour government” according to Lisa Nandy.

There are three main holes in this argument. First there are plenty of working class voters that support Remain. Adopting a Brexit policy, even if it is milder than Theresa May’s hard Brexit, is in danger of alienating those voters. Second, Labour stopped being the party of the working class some time ago. Its heartlands today are in large cities and university towns, and supporting Brexit betrays its new heartlands. It betrays the young who overwhelmingly support Remain and overwhelmingly support Labour.

Third, the way you get the working class vote back is by promising or enacting economic measures that help the working class, and not by offering a weaker form (in their view) of Brexit to socially conservative working class voters. If Brexit, then why not immigration? If you think about it, Labour have been trying to appease exactly the same group of voters who voted Brexit for at least a decade, and they have failed miserably for one simple reason. Anyone who wants Brexit enough not to vote Labour is not going to be convinced by a party that is Remain at heart and which is offering them a half baked version of what they want. It was true for immigration under Blair/Brown and Miliband, and it remains true for Brexit.

I said there was still a chance that Labour with its current Brexit policy could win the next election. However the probability that it could win an election with a new policy that fully supports Remain is much higher, and certainly over 50%. The Leave voted could be divided, but the Remain vote if Labour supports Remain much less so. The key to any change in policy is to recognise that, thanks to the Brexiters, a ‘middle way’ (Labour’s current policy) is no longer possible. It will always be opposed by a blocking coalition of No Deal Brexiters and Remainers. The choice is now No Deal, a hard Brexit under the Tories or Remain. Of those three Labour have to support Remain.

What about a small shift in Labour policy, supporting an unconditional People’s Vote where Remain is always a choice on the ballot? The trouble with that policy is it traps Labour with endless questions of under what circumstances Labour would support Remain. Instead of the campaigning party Labour should be on Brexit, it becomes in most voters eyes the party of convoluted explanations. The next Brexit battle is to stop No Deal, and Labour can only do that effectively if it stops pretending it can achieve a softer Brexit.






Friday, 31 May 2019

The response to the European elections will define politics for some time


When I woke up on Monday morning and saw the European election results, I wrote this tweet
“Woke up to a triumph for Remain. On latest vote count from BBC, UK clear Remain 40.3%, clear No Deal 34.9%, Lab 14.1% Con 9,1%. Clear Remain even just beat No Deal Brexit in England. If that is not the headline you are seeing, it is another example of Brexit bias I'm afraid.”

For the next two days I got hundreds of messages telling me I was delusional (or worse), and often including a funny picture rather than any kind of argument.

Here is Farage doing exactly the same thing to exactly the same point on television. It is what people like him do when they have no answer. Here is the BBC making the same point, but badly because they mislabel No Deal parties as just pro-Brexit. Both Labour and the Conservatives are pro-Brexit.

Of the responses to my tweet that contained more than half a dozen words, the desire seemed to be to argue that Remain had not beaten abstract Leave. Indeed they had not. According to Ashcroft’s exit poll, 50% of voters backed Leave and 46% backed Remain. The reason why Leave won is obvious if you look at the age breakdown of who voted. In these kind of low turnout elections the old are more likely to turn up than the young, and this was no exception: only 3% of those who voted were between 18 and 24.

Why did I call the Remain vote a triumph? The Brexit party vote was neither unexpected or remarkable. It was clear from the start Farage would get nearly all the UKIP vote, and that he would also capture voters who want Brexit and were fed up that the Tories had not achieved it. He also got a few Labour votes. What was unexpected and I think remarkable that the Remain parties won so many votes. Previously I had hoped that the combined Remain parties vote might equal the combined Brexit party and UKIP vote, so I thought the actual performance was tremendous.

Did it matter that more Leave than Remain voters turned up? I cannot see why. What will shape politics in the months to come is the Tories reaction to Farage’s success, Labour’s reaction to Remain’s success, and whether this victory leads the Remain parties to cooperate in the next general election. The other important point is that abstract Leave totals mean less and less, given the chances of a Brexit deal passing parliament any time soon are zero. Their main relevance right now is whether those voters when faced with a No Deal Brexit back it or prefer Remain.

I have written recently about how the Tories are likely to respond to these results. Labour have already responded by making their support for a referendum unconditional, but they have not said that any referendum would contain a Remain option and they have certainly not said they would always support Remain. Corbyn’s dream of a Labour deal remains alive and party policy, and he seems not to have realised that he could never implement it. Whether what they have already done is enough to win back enough Remain voters in any general election seems 50/50 at best, so their current stance certainly puts an election victory at risk.

Before anyone mentions seats in the North East, according to Ashcroft 15% of European election voters who voted for Labour in the 2017 election voted for the Brexit party. An amazing 45% of Labour voters in 2017 voted for combined Remain parties. That 3 to 1 ratio matches what opinion polls have been saying, but it is one thing to say it to a pollster and quite another to break in many cases a habit of a lifetime and actually vote against Labour. And to those who say Labour cannot desert its heartlands, what about those in the North East that want to Remain? Ashcroft suggests that 42% of voters in the North East think they voted Labour in 2017, and 38% of voters in the North East want to remain in the EU. See this post on how attempts to attract Brexit voters in Brexit constituencies are more likely to push away the considerable number of Remain voters in those constituencies.

Labour’ choice is do they keep being a Brexit party and stay an opposition party with a romantic dream of becoming once again being a party of the working class, or do they follow their voters and members and become a Remain party that can win an election and actually do something for the working class. The European elections showed up a fundamental imbalance. Brexit is the policy of both major parties, so no major party supports Remain, and that is a vacuum that will be filled. (The Tories got punished because they failed to deliver Brexit.) Hence Labour should support Remain.

Right now we want a Labour leadership that is actively campaigning against a No Deal Brexit, telling people how a No Deal Brexit Britain would become an impoverished and powerless satellite of the USA like Puerto Rico but with a tax haven status for the rich. We do not want a Labour leadership who spend whatever air time they get explaining what their Brexit policy actually is.

If Labour think things can only get better, they may have already inspired what could be a sea change in any general election. The lesson for the Greens and the Lib Dems is that if they cooperate they could do remarkably well in a future general election, particularly if the Conservatives go for No Deal and Labour stay a Brexit party. Cooperation would involve the LibDems giving way in some seats where both they and the Greens are strong, but in exchange being the only party of Remain in most other seats.

If that happened, it would be a disaster for Labour. I have made it no secret that I believe the next government must be a radical party that can challenge neoliberal hegemony and also do something about the sorry state of our media, and I do not think the LibDems are there yet, although they are moving back to their traditional left of centre position. I therefore view anything that could stop the next government being Labour as a disaster. It would be tragic if that was to happen as a result of Brexit.


Tuesday, 28 May 2019

Now is not the time to try to lessen the anger of Farage and Trump devotees

The EU Referendum is a strong sign that the so-called ‘culture wars’ of the US have arrived in Great Britain in earnest.

The big event for me personally this week is not Theresa May finally giving up or explicit Remain parties easily beating explicit No Deal parties in the European election. It was the belated launch of my book to nearly 500 people at Kings College London in an event superbly organised by the Progressive Economic Forum. But don’t worry. This article is not going to be an account of that meeting or a summary of my book, but an attempt to give a fuller answer to a question from that meeting.

The questioner had just witnessed at first hand the passion of a Brexit party meeting, also well described by John Harris, Sky’s Lewis Goodall, Owen Jones and other journalists. She asked what can be done to diffuse that anger? Thinking about the answer I gave afterwards helped me understand more clearly the overall strategy implicit in much of what I write. This does not focus on the people who attended first UKIP and now Brexit party meetings, but instead the less committed voter who voted for Brexit, the classic marginal voter if you like. Let me give you an example of something that is discussed in the book but using a new chart, from the Berkman Klein Center.


It shows the number of sentences in the US mass market media on different issues (source) during the 2016 election period. This is not just Fox News, but also reflects an odd obsession by publications like the New York Times or Washington Post about Clinton’s emails. (Some of the current administration also use their private email to conduct official business and it is hardly mentioned.)

A recent video in Vox by Carlos Maza explains brilliantly one reason why this happens. What Fox News does time and time again is create a story out of very little and obsess about it. The non-partisan media feel obliged to cover it to disabuse the right wing image of a liberal media. You can see exactly the same thing happen in the UK where the right wing partisan press often sets the agenda for our broadcasters. You can see it after the European elections, where the broadcasters focused on seat totals for the party that hopes seats will not be taken up rather than the 40% or more who voted for explicit Remain parties compared to less than 35% who voted for explict No Deal parties.

Trying to stop the non-partisan mainstream media from doing this might influence the marginal voter (as I note in my book, more voters trusted Trump rather than Clinton before the election), but it will not influence those who attend Trump or Brexit party rallies, who consume Fox news or believe the right wing UK press. You might persuade the non-partisan broadcast media that their practices lead to bias and should stop, but doing something about the partisan media and the economic and social issues that are their lifeblood requires political change.

You will only get that political change by changing the mind of the marginal voter, because it is much more difficult to change the mind of a Trump or Brexit party supporter by rational argument, or by trying to expose who Trump and Farage really are. Trump once boasted he could shoot someone in 5th Avenue and not lose his core support, and that is not far from the truth. Showing Farage’s background and income and associations will likewise do little to influence his core following.

This is why so many who voted for Brexit are prepared to Leave with No Deal. As Kirby Swales writes in a joint NatCen and UK in a Changing Europe report:
“The EU Referendum was highly divisive, highlighting a wide range of social, geographical and other differences in Great Britain. This was less a traditional left-right battle, and more about identity and values (liberalism vs authoritarianism). It is a strong sign that the so-called ‘culture wars’ of the US have arrived in Great Britain in earnest.”

The underlying causes that are the fuel behind Trump and Farage are not exclusively non-economic, but deindustrialisation due to globalisation is a small part of the economic story. I have talked elsewhere about the growing divergence between the towns and the large cities since the 1980s. In the US you have the same thing, but it is talked about as a rural urban divide. This is the result of a new source of economic dynamism in service and IT dominated industries that is actually assisted by the diversity that those in the towns and countryside find threatening.

To bring more of that wealth out of the cities requires abandoning neoliberal platitudes, and so requires radical political change. But a large part of the fuel behind the Leave vote and Farage and also Trump is not economic, but instead reflects a clash of values and culture. It has been noted many times that many Leave voters have a deep nostalgia for an imagined past, and this is coupled with a desire to bring back hanging, corporal punishment and reverse other aspects of what we call a liberal society.

Anti-liberal views may have deep psychological roots, roots that may also be linked to being attracted to authoritarian figures, which in turn goes with irritation with a pluralist democracy. If these people are calling the shots, a pluralist democracy is fragile. Here the partisan press can be important at legitimising these authoritarian and anti-liberal views, as is appeasement by centre and left politicians, but it would be a fantasy to believe they would go away in their absence.

The extent of social change in the UK and elsewhere over the last 60 or more years is perhaps unprecedented. Here the left and liberal ‘elite’, as their enemies refer to them, have been outstandingly successful. But as James Curran argues, liberals and the left in the UK have hit strong headwinds on the question of race, with he suggests a stubborn 25% of the population expressing racist views.

I like to stress the importance of beliefs about whether immigration causes lower real wages and puts more pressure on public services (probably not and the opposite is true, respectively), but once again this is something that influences the marginal or changeable view on immigration. There will always be a core where hostility stems from racist attitudes. Again a two stage approach makes sense. You focus on changeable views by providing facts and an alternative narrative, so you can elect a left liberal government. Only then can racist views be stigmatised and income and spatial inequality reduced to help the ‘left behind’. We can also, as Maya Goodfellow pointed out at my book lauch, start telling a more accurate history that goes beyond WWII.

An interesting question is how much we should worry about those still spooked by the rapid pace of social change. We know that this is concentrated among those over 60, but is this a cohort effect of those brought up in the repressive 50s who were untouched by the 60s revolution happening in the cities, or is it some inevitable consequence of age? If it is the former, perhaps the best policy is containment until the problem goes away.

The upshot is that I don’t think liberals or the left, who are in opposition in the UK or US, need to worry too much about convincing those who go to Trump or Farage rallies. What we do need to worry about right now is that those same people have been given power with the help of appeasement and an unbalanced media. As we watch the sickening spectacle of Brexiters choosing our next Prime Minister what we want above all else is to take power away from these people. Changing minds, if it is possible, can come later.