Winner of the New Statesman SPERI Prize in Political Economy 2016

Thursday, 30 April 2015

Chaos theory

There is some evidence that the Conservatives have finally found a scare story that works. We probably will not know how large or long lasting it will be until after the election. However, as scare stories are generally myths, and I now have a professional interest in mythmaking, I thought it would be worth asking why this one has stuck whereas earlier attempts have failed. [1]

Here were some earlier but unsuccessful attempts.

1)    ‘Labour will bankrupt the economy, again’. Given mediamacro, this should have worked. But I suspect this line was ruined when Cameron started to promise to tax less and spend more and reduce the deficit. You cannot base your fiscal policy on home economics and then ignore the household accounts.
2)    ‘Labour will put up your taxes’ flopped, perhaps because voters didn’t mind too much if this helps save the NHS. A smaller state is just not popular, which is probably one reason why they had to make so much of deficit reduction.

3)    The ‘Miliband looks funny’ strategy fell apart when people realised he was rather better than much of the press made out. The problem here was that there was no half-truth to build a myth upon (beside a rather dark one), but the Conservatives believed their own propaganda.

So why has the Lab+SNP=chaos line worked? A myth it certainly is. If you want chaos, see what will happen to the Conservative party during the EU referendum. One scenario I have not seen discussed is that a new Con/LibDem coalition breaks apart after the referendum, either because Cameron fails to recommend staying in, and/or because large numbers of Conservative MPs defect to UKIP, which makes the coalition dependent on their support.

With my mediamacro experience, I can think of three reasons why this myth has stuck. First a successful myth has to be based on a half-truth, and the half-truth is that the SNP would have some influence on any Labour government. Not much, because to vote down a Labour government would be a huge gamble for the SNP. Their support in Scotland could disappear overnight if they could be charged with letting a Conservative government back in without due cause. But clearly there would be some influence, which is only right in a democracy.

Second, the non-partisan media finds it difficult to counter a myth when no major political party is calling it a myth, particularly during an election. The SNP have encouraged the myth: some would unkindly say because they want a Conservative government, but even if that is not true they want to talk up the influence they would have on Labour. Labour itself does not want to promote the idea that they could happily work with the SNP because they in turn want to scare former Labour Scottish voters from voting SNP. With no political party challenging the chaos myth, the media finds it very difficult to do so off its own bat. A few journalists like Philip Stephens in the FT can add some reality, but if politicians are not being challenged repeatedly on the news, then there is little to counter the formidable power of the right wing press.

Third, this is new territory, with few reference points, so people cannot use their own experience of similar situations in the past. The parallel with austerity would be the Eurozone crisis.

But before I convince myself, there may be something less myth like and more basic going on here: pure and simple nationalism. Although many on the left would like to believe that the Scottish independence referendum marked a new engagement with politics away from the Westminster elite, it could also just be another example of the political power of nationalism. And if nationalism can have so much force north of the border, it is not surprising that there should not be at least some echo of this in England. English feelings of resentment and unfairness might be perfectly justified, but their monetary and political importance is tiny compared to the huge differences between the political parties on other issues. But nationalism does not respect that kind of calculus.

So maybe this all has nothing to do with chaos theory, but is simply about a more basic strategy: divide and rule.

[1] There has been some criticism within the Conservative party about the negative character of their campaign. Why not focus on the positive achievements of the last five years? What is not clear to me is whether this was ever a viable strategy. In my own sphere I can think of one positive achievement, which was setting up the OBR, but I suspect I attach more weight to that than the average voter.



  1. There is some truth in this, but there is a real concern about the SNP.

    If Lab + SNP were a majority, and Labour formed a minority government (still, despite today's polls, the most likely outcome in my view) would that be a legitimate government?

    Of course it would be. Those are the rules, and so long as we have a United Kingdom the Scottish MPs get as much say as anyone else. You don't get to govern just because you are the largest party. We have first past the post for seats, not for who forms a government.

    Could the SNP 'hold the government to ransom'. No, not really. They would have far less influence than the Lib Dems in a Tory-Lib Dem coalition because (at least formally) they are to the left of Labour, whilst the Lib Dems are to the left of the Tories.

    So, the Lib Dems could block any attempt by the Tories to repeal the Human Rights Act, by simply voting against them with everyone else.

    The SNP could not block any Labour attempt to replace Trident, the Tories would vote with Labour on this.

    There may be some pieces of legislation that it would be hard to get through, but frankly most of that would be no loss. Do we need another Labour Terrorism Act whipped through by the government? No we don't.

    And if you look at the legislation enacted over the last five years

    (list here,_2000%E2%80%93present


    The vast majority of it is either uncontroversial (eg the Third Parties Rights Against Insurers Act) or unnecessary to govern.

    A minority administration does lose much of its (administrative) power to control Parliament (chairs of select committees and so on), but I doubt whether Con + Lib Dem will be a majority this time anyway (Con + LIb Dem minoritycoalition, with DUP support outside is the next most likely outcome).

    So, once Miliband is in office, he will have most of the levers of power that he needs.

    But, the problem comes if legislation is passed using SNP votes to pass legislation in the rest of the UK in matters that are devolved to Scotland

    The SNP position has been, up until now, that they would not vote on such devolved matters. The new position is that they will vote if it has some impact on Scotland. As almost anything can have some impact on Scotland (as it will on the Republic of Ireland) that is no restraint at all.

    I don't think that is ok. If, for example, the Health and Social Care Act is repealed (on the basis that the English NHS has some impact on Scottish finances) using SNP votes, that is legally valid, but politically illegitimate. If this is ok, how is devolution legitimate, as rest of UK MPs have no say in equivalent matters in Scotland that have some impact in the UK. The SNP will, of course, say that devolution is not ok either, and that the only solution is independence. Calls in England for separation will increase.

    See, the ever brilliant Martin Wolf in the FT (this is what I think)

    This problem is exacerbated because SNP MPs only purport to represent Scotland (see the party's constitution), unlike Scottish Labout MPs who purport to represent the UK.

    The Tories will shout, and they will be right to do so.

    What fun!

  2. tbh I think the SNP+Labour scare is aimed at getting waving voters who might be nationalist and might want to vote UKIP back to the conservative fold. A vote for UKIP (ie not conservatives) is a vote for Labour and SNP who will (honest guv') break up the union.

    I think both parties have identified that demographic as being important in a few swing seats and are deploying strategies thusly.

  3. The whipping up of the Maypoles and the Kilts since the economic crisis - see the manoeuvres of Rupert Murdoch in Scotland long before the Sun came out today for the Tories in England and Wales and for the SNP in Scotland - was perhaps inevitable.

    I return to my post yesterday, which noted how rightist elements in elite politics have taken positions that will weaken the size and capabilities of the UK's armed forces, which just shows how determinedly blinkered they are ideologically.

    Sitting in an England without UN Security Council membership with a country shorn of 5.5 million Scots: is this what Thatcherites wanted?

    Coz that's what they're gonna get.

  4. It's deeply cynical but effective strategy.
    For SNP-voters in Scotland the idea of 'SNP influence' is hardly likely to be a bad thing. Thus the they are helping the SNP to take seats off Labour. The tories are desperate to have more seats than Labour and then they can play the 'legitimacy card' in order to cling to power.
    For many undecideds in England the fear of the SNP is real. This may save a few English marginals.
    Thus this line of argument hurts Labour both north and south of the border and is very difficult for Labour to push back on. They can hardly defend the SNP - quite apart from amounting to a surrender in Scotland, Labour are genuinely pro-union. And apart from independence and Trident, Labour are actually quite close to the SNP - enough so that lots of Scottish voters who don't want independence seem to be happy to vote SNP in order to 'keep Labour honest'

    However if the Tories end up as the largest party I predict Cameron (with the help of certain segments of the media) desperately clinging to power. A no-confidence vote will have to be called.

  5. It's a shame nobody has said much about the repeated Cameron ploy of being hoist with his own petard. As soon as the coalition formed, his policy was to destroy the LibDem popularity as quickly as possible; now he needs it. Then he sabotaged the Referendum on changing to the AV system of voting; calculations published this week show AV would give the Tories more seats than they will get. When the economics weren't working and the "it's the fault of the last lot" had lost its edge he blamed Europe for the problems; this pushed more support to UKIP. He fought against the Scottish Referendum and then backtracked on promises made by talking of English Nationalism straight afterwards; now he needs the SNP to do well but has fuelled more Nationalism that will benefit UKIP again. He might be good at PR, but he's lousy at making the right strategic decisions.

  6. Oh, and talking of Nationalism, what is the BBC doing showing an hour of "How we won the war" after the Daily Politics on BBC2" on the last weekend before the election? To be honest, why is British society still talking about this seventy years after the event? Has Britain achieved nothing worthy of praise since then? Is our past the only glory we can look forward to enjoying in the future?

  7. The role of Rupert Murdoch in this is very interesting. The one thing that would guarantee support for a second referendum in Scotland, and a reasonable prospect of winning a 'Yes' vote for independence, would be a Conservative victory in Westminster. But Murdoch's schizophrenic 'Sun' is backing Sturgeon in Scotland, but fanning fear of the SNP in England, ostensibly to boost Cameron. But what is his real game?

    My own theory is that Murdoch is in the pay of China - trying to make major western countries ungovernable! His media in the US are fanning the flames of division by encouraging Republican nut-jobs, in particular the pro-war anti science lobbies. American led wars and destabilisations which the Murdoch media are so enthusiastic about are very costly for the US, and destabilising for Europe as it tries to cope with the poisonous politics of the refugee crisis.

    If Murdoch were an agent of a secret plot to ensure hegemony of the emerging Chines superpower, how would his actions be different? If there ever is a permanent manned base on the moon, I'm pretty sure it won't be American!

    1. "The behavior of any bureaucratic organization can best be understood by assuming that it is controlled by a secret cabal of its enemies".

    2. Sasha -

      But just from history, countries and empires self-destructing is nothing new; it seems an unfortunate trait for any human organisation that as soon as it has mastered external threats - for countries, war, or for companies, competition - you start to see factions within that organisations putting their interests first, until the conflict between these factions take most of the resources available.

      For countries, unless they can find a way to stop these conflicts consuming everything, the result is war or economic collapse; for companies it's simply a fact that they become incapable of meeting challenges and eventually go bankrupt.

      Unfortunately what Murdoch and others on the right have done is take positions that are moving more and more in the short term interests of a tiny minority at the expense of entire western economies. They've broken the systems that kept politics fairly close to the national interest.

  8. The evidence this post is based on is a poll where 47% Lab 50% Tory. These polls have an error of +/- 3%. In other words the exact opposite result 50% lab 47% Tory is within the error bars. This story has been the same with the polls for months. The polls say its too close to call. They are useless this time around. (You wasted your money Lord A).

    Consider the current odds from William Hill. A lot of money is on for No overall majority 1/9. According to betting money a labour majority is a no hoper 28/1. A Tory majority on the other hand is 13/2 (Yesterday it was 7/1). This still looks like a value bet. There were six races at Towcester today there was one winner at 10/1 and one at 15/2. These things can happen (unfortunately). We may yet end up with a Tory majority.

    The only thing we can say for sure is that the bars in and around Westminster are now stocking up on Single Malts. Alex Salmond is back in town.

    1. I put the link there not for the poll, but the stuff about the influence of the SNP-Lab chaos having an effect. Also read reports of same from Lab supporters 'on the doorstep'. Of course people could be just saying this because they have read it in the newspapers.

  9. I just don't understand why an Oxford don should go so extremely party political. You have an immense role in the world of ideas, and instead you concern yourself with whether the conservatives will be split on Europe (so will Labour) and other flim flam.

    One thing in your blog which I would have thought you should be shouting from the rooftops rather than arguing about 2010/2011 spending differences of a a percent or two is how absurd QE is. You talk about helicopter money. QE instead simply raises asset prices to the benefit of...asset owners. I own assets and even I find it absurd - and unsustainable.

    Another issue is the UK economy in the world context. What do we produce and how? In the campaign I heard that 25% of doctors in the NHS are from abroad. My dad was one of them. But what sort of a failure of our education is that? We do not have a population shortage so it is a spectacular one.

    Finally you talk as though all government spending is of equal value. The coalition appears to have rebalanced from welfare and defence to the NHS which given our aging population is no doubt merited. Is all welfare spending always and in all cases sacrosanct?

    1. Actually, pensions - the biggest part of welfare by a large margin - have gone up very significantly in this parliament. We also have the 'triple lock' in place which to my naive eyes appears to lead to certain bankruptcy (although a way off).

      Were I running the country.. I'd replace the bulk of the welfare system with a Citizen's income which would also replace pensions, and invest massively in housing to remove the shortages. This is the political problem, I find - there is an incredibly narrow range of policy 'up for vote' - Austerity or Austerity lite.

  10. Sorry just to be clear - I wasn't arguing about helicopter money, the point seems very correct. I just think that is a bigger issue than the move to control public spending slightly 2 years after the banking crisis.

    As a question, why shouldn't helicopter money be sent equally to all citizens? Has it ever been tried?

    1. Fiscal policy is my field. I have written an academic paper on Labour's fiscal policy record. So when what I know as facts about this period are horribly distorted by others, it would wrong of me not to go on about it. That such distortions can survive led me to think about macro myths, which led to this post. And I have written a great deal about QE and helicopter money.

  11. Thank you Andrew for some sanity on this blog. Higher of CPI, wages or 2% is indeed a bizarre way to run things when CPI is negative... Sweden doesn't do this. They have an anti-pensions lock! When the economy is tough, pensions don't rise, with a lag I think to ensure it isn't too pro cyclical. Because they care about generational equity...

    But in contrast the debate in the UK is still very teenage - epitomised by Miliband and indeed Sturgeon (the evil Tories, we will 'lock them out' of Downing Street), but also by the author and commentators on this blog. Evil City economists, conservatives hollowing out the armed forces bla bla bla.

    I am sure that academic papers have been written. I am sure many were written about the wonders of the euro. Or the gold standard. The question is are any of them any good. I don't have a problem with government spending per se. I would quite like to see it accounted for properly though. And we all know, as did last night's Question Time audience, that PFI and incredibly pension promises that now need to be paid for 30 years+ in retirement were made by the last govt, and perhaps this one too...

  12. After watching Ed for a bit last night and seeing him still flounder with the economic myths issuing forth from the obviously Tory bits of the audience. I felt your excellent work over the last few days to dispel these myths had obviously not been read by Ed and his advisers. Since it was pretty obvious that the economic performance over the last few years was obviously going to come up , that struck me as strange, as you had provided him with many answers to dispel these myths over the course of your posts. That he still chooses to ignore this information is very strange.
    It also struck me that all 3 of them have no idea whats going on or how to fix it and that's scarey.

    1. As far as I know, the only political party that has used my stuff is the SNP. I agree its strange. I even offered them a line to take, but I'm not sure they noticed:

    2. I didn't watch the debates but from what I have seen they demonstrated why Labour doesn't use these arguments. One of the audience members said something like 'if I spend too much on Monday by the end of the week I've got no money left'. This argument is so obviously and intuitively right, and the macroeconomic concepts required to demonstrate that it's actually wrong (or irrelevant) so unfamiliar and complex, that any attempt to refute it are doomed to failure.

    3. How about 'we all spend more at Christmas, but we do not immediately stop spending on 1st January'.

    4. "But what we as a country have been doing is not just spending more at Christmas: we have maxing out the credit card all year every year."

      In a political battle between what it intuitively obvious and what is true, the truth will usually lose.

    5. But when you max out your credit card, you pay lots of interest and get letters from the bank. For the UK, interest rates are at record lows - people are falling over themselves to lend us money.

      You may be right, of course, but I do think we could do better. Maybe the problem is that those on the side of truth are not paid to write spin.

    6. There you go again with your pointless 'logic'!

      I think the problem is that Labour decided that it couldn't win this battle. I don't know if this was the right decision, but when all political parties endorse a particular narrative, it's not surprising that it dominates.

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  14. So depressing the 1970s debate on this blog. Let's say Labour was great, even though they didn't have a clue about bank regulation. Actually, Alistair Darling did, when it really counted and he stopped Barclays buying Lehman.

    But if I read you, all that matters is how much the government spends. What about the fact that Europe inc UK's record of innovation is terrible? What about the fact that all internet and tech companies are American? Look at Tesla Powerwall - $3500 for 10kWh. I don't think you realise what counts towards creating wealth and indeed even what drives how we can have a civilised future.

    1. But if you had read my blog, you would know that I have been going on about productivity!

    2. Actually, my direct experience is this.

      I was part of a UK IT company. Leader in the field; expanding at 50% a year, crushing all competitors (and no, we were not Autonomy - our revenues were real). The kind of company that, in the US would have gone on to market sector domination and then multi-billion IPO. No, not joking.

      But what happened is that as soon as the VC backers decided they wanted out, we were sold to a foreign company, and as usually happens in these circumstances, the brakes slammed on.

      This not an isolated example either. Fact is that it's the endemic private sector short termism that causes these problems, and although the government could do something about it, the measures to do so - which would include a sharp curtailment of M&A activity and serious incentives to long term investment over short term - would lead to screams and howls of protest from the City.

    3. Its not my area so I have not talked about this in my blog - kind of left it to Will Hutton whose constant theme this is. I focus on monetary and fiscal policy not because I think they are more important, but just because that is where my expertise is.

    4. Andrew this is an EU wide problem. It is not 'The City'. City VCs are just as greedy as American ones. I don't know what the answer is, but I suspect it is to do with education, culture, employment law - a whole range of things.

      I think that is why I find the tone of this blog and of the "Labour good, Tories evil" mantra so ridiculous. We have problems that neither will solve. And simply "spending more", will hardly solve it either. In fact it could plausibly make it worse by further undermining people's autonomy and morality, as happened in communist Europe.

    5. In my experience of investing in companies investments justified on the basis of being 'strategic' or 'long-term' very often turn out just to be 'bad'. Companies that succeed in the long term are often companies that succeed in the short term, repeatedly.

      Of course this is something of a simplification but I think the idea that 'short-termism' is a terrible disease can be taken too far. Will Hutton is an example of this.

    6. The book The Entrepreneurial State: debunking public vs. private sector myths (Anthem 2013) by Mariana Mazzucato covers the rather large role the US government plays in basic (which is often expensive and slow) research which lays the foundation for later private enterprise often funded by VC.

    7. JD -

      It's more about the impact of M&A and VC exits than anything else. Which amounts to successful companies suddenly being made to do things completely differently..

      A lot of the big US tech giants (and this is purely from memory..) had buyout offers at various points in their history and seem to have resisted them; this is a crucial difference. How we encourage the culture of really 'going big' - the millions vs. billions question - I don't know. Problem is that the capitalists are not greedy enough..

  15. is the Powerwall presentation...


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