Winner of the New Statesman SPERI Prize in Political Economy 2016

Tuesday 17 January 2023

What makes politicians act in society’s interests, and how have these mechanisms worked since 1979?


A cynical view would be that politicians always act in their own interests. [1] I think that is unrealistic, in that many politicians go into politics because they want to make society better. Nevertheless it may be interesting to look at why purely self-interested politicians might nevertheless also act in society’s interest. The obvious mechanism that might achieve this is democracy. It is in a politician’s own interest to be re-elected, and to gain votes a politician needs to do things that make people’s lives better. An important qualification, of course, is that they only need to make a proportion of people’s lives better, and this could involve making a small minority of people much worse off.

The imperfections of this mechanism are obvious, but it is also clear it works. Most politicians in a democracy work hard to garner favourable public opinion. Although general elections in the UK need only happen every five years, if it looks like a Prime Minister is not going to win in two or more years time MPs may decide to replace them, as we saw happen twice last year. The major proviso is that, just as advertising can sell you things you do not need, politicians can also fool voters.

One obvious limitation of a normal democracy is that voters only get to choose between political parties rather than individual policies. Under FPTP they in reality only get to choose between just two parties, which means a ‘bad’ government may still get re-elected if the opposition appears even worse. A clear example where a politician that has not tried or failed to improve society may nevertheless get re-elected is if they can find some issue which gains support despite these failures: fighting a popular war, for example. Another reason a bad government may be re-elected is if voters are fed misinformation by a biased media.

If we drop the assumption of self-interest, it may also be useful to think about different ways in which a politician can imagine they can help improve society. They may just believe, in David Cameron’s words, that they would be “rather good at it”, which may be a belief about competence at management and decision taking, but could also be about charming or fooling people. Alternatively they may believe they have a set of ideas that will improve society. Those ideas may or may not be part of a commonly shared ideology.

At the end of last year I wrote a piece in which I tried to think about why the government that began in 2010 appeared to be particularly uninterested in making society better, at least compared to the governments that began in 1979 and 1997. The evidence that they made society worse in economic terms is almost irrefutable: the UK’s poor growth performance over the last 13 years may be partly bad luck, but it is almost surely also a consequence of 2010 austerity and Brexit. I also suggested that, in failing to resolve today’s strikes or the NHS crisis, or in demonising asylum seekers, or starting new coal mines, or in being willing to "let the bodies pile high" during the pandemic, this government seemed to be putting political self-interest above national interest.

I want to use the points above about motives and democratic constraints to explore in more depth why the government that began in 2010 stopped even trying to act in the national interest. In the earlier post I speculated that ideology played some role. All three governments (1979,1997,2010) signed up to a broadly similar neoliberal ideology, but the contexts were very different.

The government under Thatcher can be thought of as pioneering basic neoliberal ideas, initially within a society (and even party) where there was some strong resistance to those ideas. These new ideas were therefore being continually challenged and argued for, their strengths and weaknesses tested. The economic arguments for privatisation, reduced union power and reducing the top rate of tax were real and serious, even if you think there were stronger countervailing arguments. Whatever the merits of those ideas, by the end of Thatcher’s reign and during Major’s, the major opposition parties had largely accepted these key innovations.

The Blair/Brown government wanted among other things to introduce changes that would reduce poverty, like tax credits, the minimum wage, sure start and so on. Later on they were able to raise taxes to expand public services, and in particular the NHS, which had been steadily underfunded under the previous government. This has been called neoliberalism with a human face, and it was broadly popular. In particular, even by 2020 only a small minority of people wanted to reduce public spending on health, education and welfare in return for lower taxes, and far more wanted the opposite.

Both governments, therefore, fought and won elections based on economic ideas that were not obviously nonsense, and which at least turned out to be popular among a majority or near-majority of voters. Labour under Gordon Brown lost power not because of incompetence at handling the economy, or the unpopularity of his economic views, but because the finance bubble - facilitated by both governments - finally broke in the United States as he became PM.

Although a larger state, and particularly a well funded NHS, were popular among voters, they were not accepted by the Conservative party at large (MPs, members, donors and the press). Before the Global Financial Crisis Osborne had been forced to promise to match Labour’s spending plans, but this was an example of voters forcing an opposition’s hands rather than an ideological conversion. The Global Financial Crisis allowed Osborne to return to the idea of a smaller state, by elevating deficit reduction as the major macroeconomic goal of the government.

If Osborne and Cameron believed this was a sensible policy, they were simply ignorant of basic macroeconomics, which suggests fiscal expansion not contraction in a recession where interest rates cannot fall further. Perhaps the idea was just too attractive for them to question. Once in government, however, and as Osborne cut taxes alongside spending, the policy surely became deceit if it hadn’t been to start with. The key motivation for focusing on the deficit was to reduce public spending.

Deficit deceit was required because of the popularity of ‘neoliberalism with a human face’, and in particular the level of spending and taxes we ended up with under the Labour government. The Conservative government was in the small minority that wanted a smaller public sector and lower taxes. As an opposition Cameron and Osborne had lost this battle of ideas, so they planned to get what they wanted by the back door, which was by manufacturing an urgent need to reduce the deficit and to achieve that goal largely by cutting public spending.

The 2010 government therefore started and continued until 2016 with its central economic policy being based on at best ignorance and more probably deceit, in pursuing an underlying goal they knew was unpopular. Whatever you might think of the Thatcher or Blair governments, that cannot be said of either. In most cases they were prepared to argue for the economic goals they wanted to achieve.

Brexit, like austerity, was based on at best ignorance (‘there will be no economic downsides’, more money for the NHS) and more probably simple lies. For many Conservative MPs, it too involved deceit, with the real aim to deregulate from EU labour and environmental laws.

In both cases (austerity and Brexit), we still see neoliberal ideas being pursued, but now they were pursued surreptitiously rather than argued for at the ballot box. It is not surprising, therefore, that after some time when the impact of either policy became clear they would also become unpopular with a majority of the public. Because the deceit involved doing things that economists knew would create economic harm, then economic growth suffered.

A basic idea of neoliberalism was that a smaller government and lower taxes, together with reduced regulation, would help the economy grow faster. But neither Cameron nor Johnson were unlucky that neither happened. By 2010 the evidence against the idea that only small states or deregulated states could grow strongly was overwhelming. The Global Financial Crisis (GFC) alone should have made politicians question the idea that less ‘red tape’ is always better. The strong and steady growth of many large and small European countries with higher levels of taxation than the UK or US, and indeed strong and steady growth under a Labour government before the GFC, should have led any politicians who respected evidence to question the social benefits of pursuing low taxes and deregulation, let alone trying to achieve those policies by the back door.

This is why in my earlier piece I called austerity and Brexit an intellectual failure. The failure is easy to understand, however. Low taxes and deregulation were still in the interests of a small but wealthy minority, who could fund political parties and think tanks, a few of whom also owned major newspapers. For most politicians on the right, there was little incentive to try and rethink neoliberal dogma after the success of the Labour years and the failure of a deregulated global financial system. Those that tried would not have been successful because their message was unpopular within the party. As I have argued elsewhere, the influence of money and media ownership can turn parties of the right away from their early conceptions of neoliberalism as an ideology designed in the interests of business generally, into neoliberal platitudes becoming a cover for government in the interests of a wealthy few. The election and subsequent demise of PM Truss exemplified this transformation of Thatcher’s neoliberalism into something more resembling a plutocracy.

There remains an important question to answer, however. If democracy was doing its job, the deceit behind austerity and Brexit should have been exposed, and the politicians pursuing the deceit should have failed at the ballot box. So why, after five years as Prime Minister and Chancellor, did Cameron and Osborne win a majority outright in 2015? Why were the lies of the Brexiters not clearly exposed when they were first proposed? To regular readers this is old ground so I’ll only give one sentence answers to both. By 2015 the mainstream media had almost completely adopted the ignorance that was prioritising the deficit, despite the weakest economic recovery on record and stagnant real wage growth. In 2016 the broadcast media, and especially the BBC, preferred providing balance to providing knowledge. In both cases, the democratic constraint on self-interested politicians failed.

Unfortunately there is a dynamic involved in these particular failures. If a party that wants to represent the interests of a wealthy few at the expense of society as a whole sees how the media can fail to hold it to account, it will naturally devote itself to trying to make this happen again. It encourages that political party to see itself as apart and above the rest of society, including society's own laws. That in turn can lead to widespread corruption, which is another feature of Conservative  led governments that began in 2010. 

[1] By own interests, I do not mean their own personal interests. A self-interested politician unconstrained by democratic pressure may still act in the interest of friends, donors or future employers.

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