Is Brexit a culture war or a class war?

The dynamic of today’s service based economy means that social liberalism is in part generated by class.

Imagine someone with a piece of thin card. They draw a circle with a compass and cut out the circle. Two people arrive and pick up the card. One says look, someone has cut out a circle. The other says there is no circle, its just a thin bit of card. The debate over Brexit within the Labour party is in danger of following a similar structure.

For most Labour voters and members its position should be absolutely clear. Labour should stand for openness and international cooperation. Brexit is the opposite of these things. However a minority says that many in Labour’s working class heartlands support Brexit and we should not abandon them. The first side sees a circle but is in danger of ignoring that it is made out of card, and the second side sees only a piece of card.

We need to think about politics in two dimensions rather than just one. The first dimension is the traditional left/right division that used to be the mainstay of politics. The second is the dimension of culture or identity. At one end of the cultural dimension you have social conservatives, who value local communities and the nation and are suspicious of outsiders, where being an outsider can involve sexual norms, race or religion. At the other end are social liberals, who value diversity and tolerance, and who dislike borders of most kinds.

People see in three dimensions, so the card circle is both a circle and a piece of card. Equally people care about issues in both the left/right dimension and the cultural dimension. For most people Brexit is an issue on the cultural dimension. The call for Labour to represent Remain is straight forward. Labour has for decades been on the liberal side of the cultural axis, and so they should support Remain. It is the main reason why the majority of Labour voters and members support Remain.

The response of a minority in the Labour movement is to talk about Labour’s traditions as a working class party. Examples are John Cruddas or Lisa Nandy. It is a powerful argument for Labour party members, who both respect the traditions that Labour represent and do want the party to represent the working class. It is particularly powerful because there is some guilt that the Labour party, like other parties of the left, has moved from a party of the working class to being a party of what Piketty calls the Brahmin left, and Paul Mason calls the new core of the Labour project. But this argument could be accused of seeing the card circle as a piece of card.

Of course Labour should represent the working class along the familiar left/right dimension, in terms of labour market policy, industrial policy, reducing inequality and so forth. Cultural politics in no way replaces class politics. But just because working class communities tend to be more socially conservative than professional classes does not mean we should abandon Labour’s liberal stance on issues like immigration and, of course, Brexit. Labour should represent the working classes in the economic dimension but not the social dimension.

To reinforce this point Danny Dorling points out that Leave was as much a middle class as a working class vote. Furthermore, as I noted here, once you take London out of the equation the North is now only slightly more pro-Brexit than the South, and there is as much a divide between the West and the East. Why should Labour be the party that supports middle class social conservatives?

Adding the dynamic of today’s big cities

This conceptualisation of Brexit as essentially a culture war and not a class war is powerful and contains a lot of truth. But it leaves some puzzles unresolved. The first is geographical. If Brexit is a guide to people’s position on the cultural axis, why is London along with other dynamic cities full of social liberals and the towns, depressed cities and countryside much more socially conservative? The second is about class. Again if Brexit is a measure of social conservatism, why is the working class more socially conservative than the professional class? If where we are on the culture axis reflects innate preferences, why don’t we find as many social liberals as conservatives in different regions and classes?

One possible answer may relate to the geographical and social dynamics of an advanced, service based economy, where towns and cities based around manufacturing plants are an exception rather than the rule. Suppose in countries of this kind, where the state does little to intervene (it is neoliberal), it is the cities that provide the dynamic that propels the economy forward, while cities based on old industries and rural areas are more stagnant. This does seem to be true for the UK and other advanced countries. In addition, people flow constantly between the dynamic and stagnant areas, in part because cities tend to be younger.

If this is the case, then this dynamic could play a geographic sorting role. Those who are more open, who like change and diversity will move to the city. Those who prefer continuity and community will stay, or may even move from the city to the town after a time. So over time you will find the more socially liberal tend to be in cities, and the more socially conservative tend to be in more rural areas.

In addition, those from middle class backgrounds will find it easier to gain the skills that the city needs, while those from working class backgrounds will find it harder through no fault of their own. The less the state intervenes to assist social mobility, the more this will be true. If you are middle class the more likely you are to be in environments (universities and then cities) that are diverse and therefore encourage social liberalism, while if you are working class you are more likely to get stuck in towns or stagnant post-industrial cities. This helps explain something else about Brexit: lack of education is one of the strongest predictors of support for Brexit.

I would like to add one additional dynamic here. The more educated you are, the more likely you are to be familiar with multiple sources of information, and the more open you will be to different perspectives. You are more likely to value expertise because your position in the labour market depends on your own expertise. As a result, you will be less likely to be influenced by what you read in one newspaper, and more likely to seek out what experts are saying on issues like Brexit. In my view newspaper coverage, both of immigration and then of Brexit itself, were important factors behind Brexit, and may be part of the reason that Scotland voted for Remain.

This suggests two social processes. First, this economic dynamic based on growth in cities sorts those at different points of the cultural axis by geography. Second, and I think more importantly, where you are in this cultural axis may not just be the result of your genes, but may also be a result of this sorting process itself. Liberal attitudes may be encouraged by a university education and working in dynamic, diverse cities.

In a dynamic environment where there are plenty of opportunities, diversity seems like a natural consequence of that dynamism. Indeed it may even be seen to contribute to the dynamism, which in fact it does. And of course a university education often gives you a skill set that defines your class position. In contrast, if you live in areas that are economically stagnant you are more likely to see things in terms of a zero-sum, us and them mindset. If immigrants arrive, or you fear they might arrive, you naturally think that they must take away something you already have. These are all tendencies of course. There are plenty in the cities who see little benefit from their dynamism, and plenty in the countryside who are much wealthier. There are Leave voters in dynamic cities and Remain voters in the countryside.

Power and Populism

There is one additional point about this segregation between dynamic cities and more stagnant towns. Political power generally resides in dynamic cities, and this leads to a perception at least that the political elite acts only in the interest of the cities. As a new and fascinating paper by Will Wilkinson argues for the US, this economic divide that both sorts for and encourages certain social attitudes among those in cities can cause resentment and alienation in the rest of the country to a degree that can create the conditions for populism to flourish.

Trump’s support, like support for Brexit, comes from rural America or areas of industrial decline, while most in dynamic cities view this type of populism with incredulity. Population sorting, where power and growing wealth lie in cities where the governing elite rule, leads to self-reinforcing resentment against the elite from those who live elsewhere. That resentment can manifest as simply protest, as happened with the gilet jaunes in France, or it can be captured by politicians or policies that pretend to attack the elite.

Where does that leave our original two dimensional conception where most of the Brexit action takes place on the socially conservative to liberal axis? We can now add two key caveats. First, while a position on this axis is often portrayed as reflecting innate characteristics, it may also be in part a consequence of economic forces and class. Second, support for Brexit may in part reflect some basic economic forces to do with the geography of economic dynamism in predominantly service economies.

Does this mean those arguing that Labour should support Brexit because the working classes are more likely to support it are right? Of course not. Brexit, like Trump, will do nothing to help the working class, and Labour should never become a socially conservative party. Indeed Brexit will do precious little to help any of those that voted for it: it is an utterly stupid policy. But equally seeing this as a culture war that the progressive side have to win is much too simplistic. The roots of our current populism are based on an economic dynamic where growth occurs in large cities, and an economic system that does not spread enough dynamism, knowledge, wealth or power to the rest of the country.

Those angry baby boomers who want to Leave

Flip Chart Rick looks at the generational divide in the EU referendum. Support for Brexit peaks in the 65-74 group, but is high in the 55-64 and 45-54 groups. [1] People in this ‘baby boom’ generation have on average seen rising prosperity, both in terms of private and public goods, over a period in which we have been part of the EU. If they own a house, they have seen its price rise substantially. They have pensions younger generations could only dream about. Rick asks why is this generation so angry, but you could equally ask why are they so ungrateful? As one former Prime Minister, who tried to join the EU [2] but was turned down, might have said: relative to their parents or children this generation never had it so good.

But is support for Brexit really such a puzzle? The last eight odd years have not been so good. Real wages have seen a record fall. Public services, and particularly the NHS on whom pensioners particularly depend, has seen sharp cut backs and in recent years clearly deteriorating services. So people who have known better might naturally ask what has gone wrong.

Now pretty well all of those reading this will think the answer to this question is obvious. It was the financial crisis and austerity. And pretty well all of those reading this will have a university degree, which means you are overwhelming likely to support Remain (source):

But supposing your only sources of information are the tabloid press and the broadcast media. You have been told by your government that funding for the NHS has been protected. The media hardly mention the financial crisis these days. Instead the newspapers you read tell you that the real problem at the moment is the large increase in immigration over the last decade, and this comes from freedom of movement in the EU. Politicians and the media seem to agree that this is a very important problem: immigration is hardly ever described in positive terms, and when it comes to refugees they are seen as a threat. You do not have that much contact with immigrants yourself, but some of the things you read about in the papers … Here is the breakdown of Brexit support by newspaper readership:

Newspaper readers tend to be old: 77% of those who read the Mail are 45+. The old are also the most concerned about immigration. And amidst all the claim and counter claim in the media about the economic effects of Brexit, one point seems blindingly obvious: you cannot control immigration from the EU when you are part of the EU.

[1] Among those 75+ support for Brexit is lower than in any of those groups. Could this be because they were around when Europe was not at peace?

[2] Then called the EEC

Faux meritocracy

When Canadian Prime Minister Justin Trudeau was asked why his new cabinet had as many women as men, he replied “because it’s 2015”. But as Owen Jones notes, when it comes to the UK and educational background, many people still presume that our leaders should come from the elite universities.

In an ideal world these would be different issues. In a truly meritocratic society those going to elite universities would be doing so on the basis of their abilities rather than who their parents were. In the UK and I suspect elsewhere we are some way from that ideal. Although I am pretty sure the reasons for this largely occur before 18, I also agree that Oxbridge could improve matters greatly if they stopped selecting students on the basis of interviews. It is one of many reasons why Oxbridge interviews reduce social welfare.

Here is a more minor observation which I think is quite revealing. As Owen says a big part of the problem with Oxbridge is that those from many backgrounds are put off from applying because they think it is only for toffs. It isn’t, but sometimes Oxbridge seems to pretend otherwise. For example there is the ludicrous Oxford tradition of making every student dress up in gowns and worse when they take exams. It means that just at the time that prospective students come for open days they are sure to see a large number of students walking around wearing funny clothes. If I was thinking about coming to Oxford it would put me off. It is rather sad that Oxford students keep voting to continue this tradition, but perhaps it tells you something about the wisdom of elites.

Which brings me to what I think is the crucial point: why is there this presumption that we should be governed by a meritocratic elite? Ability in a particular subject does not seem to be critical. No one suggests the Chancellor should have an economics degree rather than a 2.1 in modern history. (In the past even numeracy seemed not to be required.) The idea that politicians are having to deploy skills that you can only develop at university is a little naive. Most do not have the time to think very deeply about anything, and when issues that involve any knowledge arise they take advice. This is why I have no problem with the kind of delegation you get with central banks or infrastructure commissions. The main difference in those cases is that the public get to hear about what the advice is.

People in universities talk a lot about non-subject specific skills, like developing critical faculties, but arguably some of the crucial critical faculties for a politician are better learnt by leaving university and doing a job. Good judgement does not come from intellectual ability: Chris Dillow argues there is little correlation between high IQ and career success. Now I’m not going to pretend that, other things being equal, I would be indifferent to whether my MP had an economics degree or an NVQ in catering. But other things are not equal. We have a representative democracy, and one way to make sure it works well is if the people chosen to represent us are to some degree representative of the population as a whole.

Of course compatibility between democracy and meritocracy, and the merits of a meritocracy itself, are big issues. It is telling that the book that coined the term meritocracy, by the great Michael Young, had difficulty finding a publisher and was not reviewed by any scholarly publication. But I suspect what is going on here, at least in some quarters, is far simpler, and is a reflection of Trudeau’s remark. It is 2015, so it is no longer acceptable in public to argue that we should be governed by people from a particular class or background. For people who would still like to make that argument, the next best thing is to talk about which university (if any) a politician has been to.        

Class interests

This is a small contribution to answering Paul Krugman’s question about why the wealthy want to raise interest rates, even when the economy remains depressed. (See also Steve Randy Waldman, Peter Dorman and Brad DeLong.) The preliminary point to make is that this is not just a US phenomenon. In the UK the right wing Institute for Economic Affairs set up what they call the ‘shadow MPC’, and they were voting for higher interest rates before the recovery began! The highly influential FT journalist Chris Giles, who has become a bellwether for right wing interests, has been championing the cause of an early rise in rates for many months.

I want to start with inequality, and the rising share of the 1% in the US and UK. This began in the 1980s, and is associated with deregulation of the financial sector and large cuts in top tax rates. The dominance of a neoliberal ideology, associated with Reagan and Thatcher, occurred at the same time, and there is no doubt that those who started becoming much wealthier at that time understand the connection.

Both politicians began their administrations during periods of high unemployment - higher than anything seen since the war. Both were the result of tight money: in Thatcher’s case this was a clear political choice, whereas in the US it was the result of the Volcker Fed. Whether intentional or not, this high level of unemployment greatly helped both administrations achieve their neoliberal goals, in part because it fatally weakened the power of organised labour. The period also helped the neoliberal cause because it appeared to discredit the idea that governments could intervene in the economy to achieve full employment.

Is it any wonder, therefore, that the ‘1%’ who started to become much richer in the 1980s should see tight money as an essential condition of their new found wealth? But what about the ‘interests of capital’: surely the owners of business should see that firms will be less prosperous if demand is kept too low through tight money? Here I can only quote Michal Kalecki:

“But 'discipline in the factories' and 'political stability' are more appreciated than profits by business leaders.  Their class instinct tells them that lasting full employment is unsound from their point of view, and that unemployment is an integral part of the 'normal' capitalist system.”

This was written in 1943, and the post war consensus appeared to suggest Kalecki was being too pessimistic. But that was before neoliberalism and the rise of the 1%.

Nowadays we see achieving the ‘natural unemployment rate’ as predominantly the task of monetary policy. Most economists see independent central banks as a better means of achieving this than direct political control for familiar reasons. However if you think that lasting full employment can be unsound for your class interests, then giving monetary control to conservative central bankers would also seem like a good idea.

This sets up two areas of political tension between the interests of the wealthy and, of all people, academic macroeconomists. First academic macroeconomists, and their occasional number who become central bank governors, see monetary policy as a means of achieving the natural unemployment rate and steady inflation. The wealthy see monetary policy as a means of maintaining a degree of unemployment that reduces the political threat to their wealth. Second, when monetary policy stops working in a liquidity trap, most academic macroeconomists want to use fiscal policy to take its place. To the wealthy this not only seems unnecessary, but it also calls into question their ideology about the failure of pre-neoliberal times.

As macroeconomists we know (or think we know) that it is impossible to keep unemployment above the natural rate forever, because inflation will continue to decrease, although there is now a lot of evidence which suggests it may not decrease by much. So if you wanted to critique my (and Kalecki’s) characterisation of the views of the wealthy, you might say that keeping unemployment above its natural rate is not a sustainable strategy (and therefore not rational). To which I would respond maybe, but there could be a reason why now, like the 1980s, is a particularly important time to keep unemployment high for a while.

The reason for this is that the aftermath of financial crisis is extremely threatening to the neoliberal political consensus and the position of the 1%. I remember saying shortly after the crisis that the neoliberal position that government regulation was always bad and unregulated markets always good had been blown out of the water by the crisis. This was politically naive, in part because a crisis caused by unregulated markets was morphed by the right into a crisis caused by too much government debt, or too many immigrants. But that fiction will not be sustainable once a strong recovery has reduced both government debt and unemployment. For the 1%, these are very dangerous times, and they want to be on favourable territory for the battles ahead.