Why the political centre needs to be radical

In a recent article on Tony Blair, George Eaton wrote:

“[Blair] said of Corbyn’s supporters: “It’s clear they can take over a political party. What’s not clear to me is whether they can take over a country.” It was Blair’s insufficient devotion to the former task that enabled the revival of the left. As Alastair Campbell recently acknowledged: “We failed to develop talent, failed to cement organisational and cultural change in the party and failed to secure our legacy.” Rather than effecting a permanent realignment, as the right of the party hoped and the left feared, New Labour failed to outlive its creators.”

I beg to differ. The rise of Jeremy Corbyn is not a result of Blair failing to “cement .. cultural change in the party”. It is a result of the financial crisis, of everything that has followed from that, and the centre’s failure to offer a radical response to that momentous event.

Echos of the financial crisis are everywhere for those that care to listen. Even in the EU referendum, which at first sight is about free trade areas and sovereignty. The main reason Brexit has such wide popular support is concern over immigration, and that in turn is driven by a belief that immigration reduces real wages and puts pressure on public services. Yet the main reason public services are under pressure is austerity, which in turn was a reaction to the financial crisis. Immigration improves the public finances. The main reason for the decline in real take home pay for the low paid is not immigration but stagnant productivity following the financial crisis (and increasingly austerity measures).

The financial crisis was a major event not just in its consequences, but because it raised crucial questions about our current economic system. For most on the political right that question was too threatening to contemplate, so they doubled down by reducing the size of the state using deficit deceit as a means. But as many people did not want less spent on the things the state does, and a smaller state did nothing to immediately inspire the private sector, that only intensified popular frustration with the economic status quo.

Rescuing the banks should have been a prelude to radical reform of the financial sector, yet the centre only seemed to be concerned with putting the pieces back together again and making minor changes that are very vulnerable to being unravelled by political pressure from the banks. In many countries the centre seems paralysed by the glare of populism, whether that populism is used by governments (austerity) or the far right.

For the UK’s centre-left this paralysis comes in a particular form called ‘electability’. Radical policies almost by definition upset the status quo, who will attempt to frame such policies as anti-business or anti-aspiration. If electability becomes synonymous with avoiding anything that might be framed in this way, that rules out radical solutions. Yet radical events or profound changes in society and the economy may well require radical solutions, and if the centre avoids them they let people like Donald Trump or Boris Johnson in.

In a recent article Dani Rodrik wrote about populist politics in response to the impact of inequality and globalisation, but it could equally apply to the financial crisis. The two are connected of course: it was the globalisation of finance rather than anything happening in the UK economy that destroyed UK banks.

“The appeal of populists is that they give voice to the anger of the excluded. They offer a grand narrative as well as concrete, if misleading and often dangerous, solutions. Mainstream politicians will not regain lost ground until they, too, offer serious solutions that provide room for hope. They should no longer hide behind technology or unstoppable globalization, and they must be willing to be bold and entertain large-scale reforms in the way the domestic and global economy are run.”

Where Labour went wrong

When the New Statesman asked me to write something on Osborne’s budget surplus law, they also suggested I talk about what Labour’s attitude should be. Space constraints meant that I could not say much on the second question, so let me amplify here.

Let's start in 2009. The Labour government's policy at the time was absolutely right. They provided fiscal support for the economy in the midst of the recession even though it meant increasing the deficit. Given the belief at the time that the recession might be short lived their policy was also quite clever, using a temporary cut in VAT as a close proxy for looser monetary policy.

What line should they have taken in 2010? I remember reading some reports that Gordon Brown initially wanted to continue placing the recovery above the need to reduce the deficit. If true, he was right. However it was perhaps inevitable that Labour began to also focus on deficit reduction: the recovery looked like it had begun, the debt problems in the Eurozone were constantly in the news, and the Conservatives and much of the media were saying we could become like Greece. So they instead fell back on the idea that recovery could be achieved at the same time as implementing policies designed to reduce the deficit. We can call this the ‘too far, too fast’ period, from the mantra Ed Balls used to criticise George Osborne’s policy.

This was when they made their first big mistake. Both Coalition parties had developed their own mantra, which I can call the ‘clearing up the mess Labour left’ line: Labour profligacy had maxed out the credit card, and so difficult measures would be needed. This is what Bill Keegan calls the big lie. Apparently Alastair Campbell advised Ed Miliband to get an independent figure to do a report on Labour’s fiscal record in an effort to counter this lie, but this advice was rejected. (The paper I wrote came out in 2013, but still to my knowledge Labour has never used it.)

I have seen two reasons given for why Labour chose not to defend its record: Miliband wanted to establish his independence from a government that had lost an election (to ‘move on’), and it was thought that the Coalition strategy of blaming the last government would lose its potency after a year or two. The second argument proved horribly wrong. Instead the ‘clearing up the mess’ line was used to blame Labour for damage caused by 2010 austerity. It was complete nonsense, but it worked. 

In a way 2011 and 2012 were too easy for Labour: the economy was stagnant and Osborne looked vulnerable. But Labour should have anticipated that growth would return at some point before the election - if I could, surely they could. They will not have anticipated the stagnant productivity that allowed unemployment to fall so rapidly, but in political terms growth would have probably trumped high unemployment anyway, as I suggested back in 2012.

What should have happened in 2012 is that the ‘too far, too fast’ line should have changed to become a full blown attack on austerity: that was their second big mistake. By 2012 it was obvious that fears about a UK debt crisis had been completely overblown. The problem with ‘too far, too fast’ is that it sounded like austerity-lite: the need to focus on the deficit was conceded. Labour could have easily got away with changing its line at this point. They could have said that we thought there was a debt funding problem, but now we know there wasn’t. The argument that austerity should be postponed until the recovery is assured (i.e. when interest rates are well away from the Zero Lower Bound) was right in terms of the macroeconomics, but it would also have allowed Labour to combat the ‘clearing up the mess’ line, and profited from Osborne’s move to plan B.

Instead Labour seemed to be constantly triangulating between sensible macroeconomics and what the focus groups were telling them, and thereby producing a policy that failed to convince. Their fiscal policy proposals going into the 2015 election were much more sensible than George Osborne’s, but instead of attacking his renewed austerity they tried to pretend that they too were ‘tough on the deficit’. It was left to the SNP to argue against austerity.

The problem was that instead of presenting a clear alternative vision, Labour looked like it was always playing catch-up with Osborne. As John Curtice writes: “the Achilles’ heel of Labour’s campaign appears to have been a failure to convince those who were sceptical about the Conservatives’ economic record that Labour offered an attractive alternative.” As Lord Ashcroft’s polls show, and as I noted sometime before the election, by 2015 around half the public were against the continuation of austerity, yet Labour’s message on this was confused.

Today Labour continues to think that triangulating on the deficit, or worse just copying Osborne, is the answer. I think this tells us a great deal about the Labour party. That it is light on good macroeconomic advice and expertise, of course. But also that it spends too much time listening to people in the Westminster bubble and fails to spend time thinking about basic electoral strategy.

What Labour needs to ask now is what will prevent the Conservatives convincing the electorate in 2020 that Labour just cannot be trusted on the economy? Admitting their past fiscal mistakes when in government now, however much that is partial and hedged, will just give ammunition to their opponents in five years time. (Just read this, and extract the quotes.) More serious still, by allowing the focus to remain on the deficit, it lets Osborne get away with the damage he inflicted in 2010-2012, and the continuing social costs of austerity. What is the point in talking about the record on growth or productivity, when you appear to have conceded that reducing the deficit is all important, and Osborne is doing plenty of it?

In my New Statesman piece I say it is still not too late to change tack, stop triangulating and try something new - to start telling the truth. But I think there is a danger that this sentence frames the discussion in the wrong way, so it appears to be a contest between pursuing the right policy and winning elections. This post is all about the best way of regaining economic credibility, which means taking a strategic view rather than looking at what sounds good to today’s focus group. Put simply, if around half the electorate already think austerity should not continue, why on earth are Labour giving in to deficit fetishism? In electoral terms, the fact that attacking austerity is also good macroeconomics is just a bonus.

Don’t ask what lost, ask what won

I took a short break after the election, so I managed to avoid most of the immediate post-election analysis. But I could not avoid seeing some Labour people complaining about how Labour’s defeat was because they vacated the centre ground and went for a core vote strategy. This seems very odd. In terms of ‘vacating the centre ground’, I thought it was pretty obvious that occupying it was the main Liberal Democrat strategy, and that didn’t go too well. In terms of a core vote strategy, it seems to me this applied at least as much to the Conservative campaign.

Rather than Labour and Liberal Democrat people asking what they did wrong, they should ask what the Conservatives did right. What they did right had very little to do with actual Conservative policies, beyond fiscal sweeteners mainly directed to their core voters. Instead it was about attacking their opponents in areas where - for whatever reason - their opponents failed to fight back.  

In terms of Labour, the Conservative campaign mainly focused on three themes: how inadequate Ed Miliband would be as Prime Minister, how bad Labour’s macroeconomic policies had been when they were last in government, and how Labour would be ‘held to ransom’ by the SNP. With all three of these, the arguments were not based on clear objective facts, but on political spin.

As Peter Oborne has observed, Miliband’s performance as Labour leader had indicated a number of positive qualities which suggest he could also have been a good Prime Minister. However he is no Cameron or Blair, and the Conservative machine managed to spin this unfamiliarity as a weakness. A minority Labour government backed by the SNP would have been unusual, but would it really have been so much more unstable as this government will be given how split it is on the EU? This question was never asked in the popular debate, which instead managed to galvanise English nationalism against an imagined threat from north of the border. The Labour line that there would be no deals was inherently defensive, as well as being unconvincing.       

The distortion on economic policy was perhaps the greatest of the three pieces of spin. In a post written before the election entitled ‘UK election: it was mediamacro wot won it’ I ended with the following line: “if the coalition government remains in power after this election (or if the Conservatives win outright), then the title of this post will have rather more justification than the Sun’s original headline.” Harvard historians writing macroeconomic nonsense in Financial Times op-eds after the election shows that the mediamacro problem is not about to disappear.  

What the Conservatives achieved was to turn at best half-truths into apparent facts, which then became the talking points of the media’s coverage of the campaign. The Conservatives won because their spin was so much better than their opponents. That is the lesson of the 2015 election, and not anything to do with actual policies.

To many Labour or Liberal Democrats supporters, this argument will be very unpalatable. They hate the idea of political spin, and all it represents. I have a lot of sympathy with that view, but I suspect it may help lose elections. In fact, it is probably much more important for the centre and left to think a great deal about political spin, because they have to overcome the spin machine that is much of the UK press, as well as the specific problems associated with mediamacro. Left leaning think tanks prefer to focus on policies rather than propaganda, a characteristic less evident in their right leaning counterparts, but in terms of winning an election that is a weakness.

A few of the post-mortems on Labour’s defeat that I have read suggested they should have tried to counter the myth of Labour profligacy much earlier than 2015. Having written for some time about this myth, I could hardly disagree. I suspect within the Labour hierarchy the view was to look forward rather than go over the past, but you cannot abandon the writing of history to your opponents. However that was not just one mistake among many successes: instead Labour's political spin appeared to be consistently amateur compared to their opponents. While over the next few months the debate will be about selecting a new leader who can recapture some of the Blair magic, the truth may be that the more important task is to employ a lot more people like Alastair Campbell.