Winner of the New Statesman SPERI Prize in Political Economy 2016

Thursday, 3 March 2016

Cameron’s chickens

As many have written, although Donald Trump is despised by the Republican party establishment, he is an unintended and unfortunate creation of that party. They built up a system where you needed money to enter politics, because they controlled the money. (It is to Sanders’ credit, and the popular will behind his campaign, that he has overcome this hurdle.) But that allowed someone very rich to highjack the system. The Republicans have exploited prejudice to win votes, which allowed someone to throw away the dog whistle and openly attack those from other religions. [1] And so on. In these ways, Trump represents the Republican’s chickens coming home to roost. As Matt Taibbi writes (sorry about ad in link), Trump is a rather good con man and so for him the US political system is an easy mark.

Will the EU referendum be the moment David Cameron’s chickens come home? Although economic arguments are central, and the case for staying is strong and the case for leaving weak, how much will voters without any economics background be able to come to that conclusion? Most newspapers will push the weak arguments, or more generally just try and muddy the waters as they do all the time on climate change. The visual media’s natural format is to set this up as a two-sided debate, and if the leave campaign can find enough credible advocates to put the economic case for leaving the main outcome might be confusion. [2]

In contrast, to many voters the other key issue - immigration - looks clear cut. For the large section of the UK electorate that place migration among their top concerns the logic of the Leave campaign’s claim that we will finally ‘control our borders’ will seem obvious. This will be constantly reinforced by news about refugees and fears about terrorism. Here the Conservative government’s focus on the costs of migration (and the pretense that UK benefits are a big draw) may come home to roost. Many in the Conservative Party truly believe large scale migration is a threat to the country, but I suspect Cameron and others running the party are not among them. Until now ‘cracking down on immigration’ has been a useful ruse for the Conservatives to win votes, but for the Remain campaign it has become a huge liability.

That is one of Cameron’s chickens that may come home to roost. Another is his deal. From what I have seen so far, Cameron will not try and counter migration concerns by arguing the benefits of migration, because it runs counter to what he has previously said. For the same reason he will not emphasise that to maintain preferential trade agreements after leaving we would probably have to accept free movement. Instead he will argue that his deal will make all the difference, and in this case he will not impress. His deal will make no tangible difference to migration flows, and for once the right wing press will go with the evidence.

Nor can Cameron expect that much help from other party leaders. Andrew Rawnsley and Polly Toynbee give some of the reasons, but one they do not mention is what happened immediately after the Scottish referendum. Labour, and Gordon Brown in particular, came to Cameron's rescue when it became clear in the final days of the referendum that he could lose Scotland. The thanks they got was a speech from the steps of Downing Street the next day proposing English votes for English laws. In that case it was in Labour’s self-interest (in terms of being able to win an election) to be Cameron’s chicken, but the political arithmetic is far less clear this time.

The EU referendum is therefore another test of how much economic expertise can influence public opinion. As regular readers will know, we have been here before, and not just on austerity. The overwhelming evidence was that independence would initially leave Scottish people worse off, but for many this evidence was successfully counteracted by the SNP’s wishful thinking projections. From recent experience, therefore, I am not too optimistic that the economic evidence will prevail. [3] For a Prime Minister who has preferred the economics of the Swabian housewife to anything taught in universities, this too is a chicken come home to roost.

[1] Tactics those supporting the Conservative candidate for London mayor seem happy to employ, as Mehdi Hasan notes.

[2] In terms of the economics, you have first to guess what type of trade arrangements would be made if the UK left, and then quantify the impact of the reduction in trade that would result. Like most economics this is not a precise science, but the only question is what the size of the income loss will be. Yet the many alternatives if the UK left adds to any confusion.

Patrick Minford, on the other hand, argues that increased regulation and market interference will lead to large output falls if we stay in. Patrick is a very good and inventive macroeconomist who I learnt a great deal from, but his conclusions have always followed his political views. In this case his numbers depend on very dubious assumptions about how staying in the EU will raise future ‘costs’.

[3] For the record, as some will ask, I will be voting Remain. Apart from the economic arguments, in my own experience interventions from Brussels have more often been positive than negative. I also have an instinctive feeling that in today’s globalised world the UK should be part of Europe, for the reasons John Harris gives for example.




22 comments:

  1. "Patrick (Minford) is a very good and inventive macroeconomist who I learnt a great deal from, but his conclusions have always followed his political views."

    Surely, the same can be said of Simon Wren-Lewis.

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    1. Prof Wren-Lewis doesn't need me to defend him but this argument annoys me, mostly because it's just so lazy.

      If you read what S W-L writes, it's quite clear that any political positions he takes are as a result of his academic conclusions: not the other way round. The theoretical basis for austerity has so completely collapsed and the evidence base is increasing clear. (Mark Blythe's 'Austerity: the history of a dangerous idea' is a really good summary for non-economists). Any honest macroeconomist will oppose Osborne's 'long-term economic plan' (mostly because it's none of these things). (http://conservatives2015.blogspot.co.uk/2015/03/blog-post.html)

      It is the same thing as a asking a climate scientist to remain politically neutral in a debate where one side is packed with climate-change deniers.

      AFZ

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    2. alienfromzog4 March 2016 at 01:32

      The answer of a true believer. Your faith is blindingly strong.

      Delete
    3. "If you read what S W-L writes, it's quite clear that any political positions he takes are as a result of his academic conclusions: not the other way round."

      So he says. Isn't that what Minford says about himself, too?

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    4. alienfromzog:

      Blyth, not Blythe.

      Just look at this:

      https://www.youtube.com/watch?v=JQuHSQXxsjM

      If you'll believe that man, you'll believe anything.

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    5. Please forgive my typographical error.

      Now, any chance of an argument or are you just planning on handing out insults?

      AFZ

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    6. OK. If my conclusions followed my politics, why would I have praised the coalition government for setting up the OBR, and for the form of their fiscal rule:

      http://mainlymacro.blogspot.co.uk/2014/06/fiscal-rules-politics-and-economics.html

      Why would I have criticised Labour's proposal to cut tuition fees before the last election?

      http://mainlymacro.blogspot.co.uk/2015/02/tuition-fees-last-throw-as-election.html

      I can be accused of many things, but I'm no partisan economist.

      Delete
  2. SW-L, what do you think of the EFTA option, for whilst it may not be politically viable I am beginning to think it is the best way forward?

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  3. Why the Shameron would believe a referendum would salve the split in his own party over Europe is an oddity.

    By repeating the course Harold Wilson took, the Shameron again puts himself in a position where he will have to rely on the other UK political parties in the referendum to win that selfsame referendum, which must presume that the Shameron thinks the Tories' collective response will end up after the vote, presuming the Shameron wins it, being different to the Labour Party's experience in the late 1970s and early 1980s.

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  4. The economic arguments in terms of terms of trade (sic) may be strong but are they weighty? It is of course a common rhetorical tactic to focus on relatively unimportant arguments because they provide the most clear-cut 'win'. I can't help thinking that the market-economic case for Remain is an example; the downside risk of leaving may be clear, but even if so, is it actually that big in the scheme of things?

    From a centre-left perspective I see the EU as potentially a useful counterweight to US dominance both of Europe and of the wider world - but I don't see it fulfilling that role. It also promised a way to entrench employee and consumer protections, but that role too now seems in doubt as creeping de facto opt-outs appear likely to become the norm*.

    What I do see is ever-increasing pressure for 'liberalisation' and 'competition' encouraging privatisation and precluding nationalisation; the prospect of the social chapter's influence in the UK being gradually eroded; and, most specifically, the grotesquely secretive but apparently far-reaching TTIP treaty which threatens to grant international corporations immense and entrenched power over governments via, for example, ISDS provisions.

    I am not finding this an attractive offer at present, and I think this view is quite widely shared on the broad left.

    Against this, the promise of continuing a block trade deal rather than a set of bilateral ones (mostly, one supposes, 'borrowing' the frameworks set up by the EU in any case) doesn't provide a compelling case. And that's even before we take into account the absence of any proposal to address the democratic deficit in EU institutions.

    One thing I wish Labour would do, or had done, is demand that the referendum - and thus Labour's decision on it - be postponed until after the TTIP treaty process is concluded, so we know what we are getting into, and so that the UK government's position on the treaty actually faces some serious and potentially consequential scrutiny.

    *Cake having & eating: there is a political argument that insofar as the social chapter does tie the hands of Conservative governments, it actually helps them to resist some demands of their backers, and thus helps them to stay in power 'artificially' by holding back their rightward drift...

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  5. Response to SWL's main post:

    "Labour, and Gordon Brown in particular, came to Cameron's rescue when it became clear in the final days of the referendum that he could lose Scotland."

    Sorry to be a bit nitpicky, but the use of the word "clear" should probably be challenged here. If I remember rightly there was only one poll at the time that predicted 'leave' and triggered the panic, while the other polls were predicting a win for 'stay' and turned out to be right.

    There shouldn't really have been any panic at all since only one poll out of about ten predicted 'leave', and it seems like the over-reaction has led to the current drawn out disputes over English versus Scottish laws. It's hard to say if this is an example of collective incompetence on the part of our politicians or if they are somehow incentivised to amplify such situations to keep themselves in power. Probably a bit of both really.

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    1. Response to myself [Slackboy2007 3 March 2016 at 07:28]:

      By "one poll out of ten" I meant that there were probably around that many different polling groups (I haven't checked the actual number), and not that many polls in total over the course of the process.

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  6. Not impossible of course.

    Rather more likely however is that Cameron will leave office, having won two General Elections, three referendums, and leaving to his successor an opposition in a state of comic disarray.

    Some chicken, as one of his predecessors said.

    "Labour, and Gordon Brown in particular, came to Cameron's rescue"

    This is of course the story Labour likes to tell itself. There isn't any evidence for it.

    Once Cameron won the Scottish referendum, he turned to trying to win the General Election.

    That isn't cheating.

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  7. Cameron is stuck in what might be called the Miliband Conundrum. How to propose an alternative that is unacceptable to a large proportion of his party and the media, and without repudiating his past.

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  8. The out-campaign I think is heavily driven by immigration. We are debating about accepting 20 000 or so Syrian refugees, but we don't say anything about the hundreds of thousands of workers entering completely unimpeded from the Eastern European states before we even talk about who can be let into the UK. Perhaps the people most affected by this influx of cheap labour will benefit from having the doors more closed to such economic immigration? Perhaps it would force firms to train up our own labour? May be the arguments for staying in the EU on equity, and perhaps even on efficiency grounds, are not as strong as you think? There is also a social element. It is a way of dealing with groups that have long been marginalised in the UK - both under the Conservatives and New Labour. Britain does not have an inclusive wage bargaining system like continental countries and is much less protective of its own workers. The economic and social results speak for themselves (Britain vs Germany). Sure technology may have played a major role in the plight of low-skilled labour and the unemployed, but there is a good reason to believe that free movement, for which Britain is far more exposed, has also played a part.

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  9. It is rather extraordinary to hear Cameron and his supporters briefing that leaving the EU would be an unacceptable risk, when the decision to call a referendum was his and his alone!

    To be clear, I also think it is an unacceptable risk to leave the EU - and not only for economic reasons. As I argued in the Scottish debate, there is something demeaning about telling people to vote against 'sovereignty' because it might cost them a few hundred pounds a year. Much more honest and, in my view, effective to insist that sovereignty does not really exist: that we cannot have free trade and unfree borders; that regulations are an essential part of an interconnected life; that the consensus of a larger group is better protection against extremism than the pressures in a small group and so on.

    The mistake of the 'pro' lobby has for years been that we have been focused on the facts - the steak - while the antis have been attacking the sizzling trivia of bananas etc. Now we need to challenge the image and not just the detail. Show that the EU offers more sovereignty in the real world, more chances to do the right thing for people in this country and elsewhere, more opportunity. Not easy, and maybe too late, but we have to try.

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  10. It doesn't matter to Cameron - he is Demob happy and looking forward to spending more time with his lifestyle.
    Let The People decide...

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  11. On the matter of Trump and the Republicans, is it possible that in addition to money, the Trump phenomena was also made possible by:

    a.) A way of life that has become plagued by a constant anxiety? I'm thinking here of anxieties over personal finances due to a weak safety net, over the risk of becoming socially isolated, and over health due to the difficulty of maintaining an active lifestyle in many communities, and;

    b.) Politics literally having become too important; having become an industry, in fact, which thrives on division and encouraging people to self-segregate?

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  12. I don’t agree that Trump “openly attacks those from other religions”. He has no problem with Buddhists or Hindus, far as I know and nor do I. What he does object to (as do I) is a bunch of people who are responsible for grossly disproportionate percentage of terrorist attacks, who desecrate 2,000 year old architectural gems, who kidnap school girls and sell them into slavery. I could go on.

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    1. "... bunch of people who are responsible for grossly disproportionate percentage of terrorist attacks ..."

      You really need to read some history, Ralph.

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    2. Everyone objects to terrorists. Trump equates them with all Muslims. Most people see that for the racism it is.

      Delete
  13. I think this referendum will break down along the lines of the baby boomer's v/s the rest. The BB's kept Scotland , the BB's gave us a Cameron majority and the BB's will I think on the day vote to leave the EU. I cannot believe Cameron has been so naive as to think he can control the situation to ensure the vote is only on his silly "Chamberlain" piece of paper. He has as Private Eye used to say "he has opened a Du Cann of worms" and he has badly underestimated the will of the worms.

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