Rapidly Reducing carbon usage and Deficit Obsession don’t mix

 

Renewables are now the cheapest form of energy generation. If all energy use in the UK was based on electricity, and all electricity was generated by renewables, our current cost of living crisis would be far less severe, and of course we would not be adding to climate change. Furthermore, there is huge potential in the UK (and most other countries) for far more renewable energy production than we currently have. So why isn’t this happening faster?

That is the question addressed in a new book by Eric Lonergan and Corinne Sawers. In many ways it is a very optimistic book, because it suggests the problem of climate change is mainly solvable with known technology, and there are no insurmountable barriers for doing this with sufficient speed to enable us to avoid severe global warming. They suggest that the reason this is not happening is, in part, because we are thinking about it in the wrong way.

Much of the discussion around avoiding climate change is framed in terms of costs. Economists are partly to blame for this, as the debate was originally framed by economists in terms of what current costs are we prepared to pay to avoid future costs (global warming). The book suggests that a better way of thinking about it is as an industrial revolution, such as the invention of telecommunications. Because renewable energy is cheaper, we are better off developing it and phasing out fossil fuels even without the problem of future global warming. When electricity was first invented, no one talked about the costs of installing electricity generation compared to future benefits, because it was obviously a better technology for everyone concerned.

An economist might retort that there is always an opportunity cost of investing in green energy and electrification, because that investment could be used for something else. In this sense it is always right to talk about costs and benefits. However in today’s world we have very low long term interest rates, and yet in many countries private and/or public investment levels are if anything lower than the past. The trade-off in many cases may not be between green investment and some other form of investment, but between green investment and the spending power of those who own shares in companies.

Another strand of thinking suggests radical change, like individually consuming less or eating different foods, or for economies to stop growing, or fundamentally changing capitalism. Again this makes stopping climate change seem rather unattractive or risky, and this puts both people and policymakers off. Framing the problem as a green industrial revolution to obtain cheaper and more stable energy is much more appealing.

In terms of doing this faster, the book suggests looking at what has worked so far, that has brought us to the point where renewable energy is also the cheapest energy: a combination of large positive incentives and hard regulations. Central to their argument are the use of “extreme positive incentives for change”. These have led to the rapid reduction in the cost of solar power, and the widespread adoption of electric vehicles in parts of China, Scandinavia and the US.

Extreme positive incentives (like providing large subsidies for electric cars or well insulated houses for example) combine three important pieces of psychology, politics and economics that are often ignored by economists. The first is that extreme incentives are much more effective than marginal incentives, because of the psychological fixed costs of changing behaviour. The second is that positive incentives (giving people money to do things) are more effective than negative incentives (like taxing carbon), because the latter generates resistance and as a result are unlikely to be pursued strongly by policymakers.

The third is that people do not ‘internalise the government’s budget constraint’, which is the idea behind Ricardian Equivalence. If they did. people would recognise that incentives had to be paid for by them one way or another, so positive incentives and taxes would work in the same way. This doesn’t happen not because people are irrational, but because it is very uncertain how governments fund incentives, and many of those methods of funding would not fall on those receiving the incentive. So people who receive an incentive really are better off, and those who are taxed are worse off, in terms of expected income. It is only the fiction of the representative agent (and various additional assumptions) that leads to the idea of internalising the government’s budget constraint. [1]

We can see all this in action when we compare the success of solar power to the many difficulties governments have had in raising appropriate carbon taxes (or permits that act like taxes). Carbon taxes make sense in many ways, because they are the economists’ standard response to an externality (i.e. a cost imposed on others that isn’t paid for by the people generating that cost). Climate change is the biggest externality of our lifetime. Yet in the case of climate change, when the costs are generated by everyone and the harm they create is in the future, the psychological, political and economic factors noted above mean positive extreme incentives are much more effective than carbon taxes.

All of which brings me to the title of this post. If extreme positive incentives are what is needed to speed up electrification and the use of renewables to generate that electricity, that will cost governments money. Ideally that should be paid for by higher general taxes rather than borrowing, because it’s better if the polluter pays. (Equally richer countries, that have already deposited a large amount of carbon in the atmosphere, should help pay poorer countries to go green.) But this ideal may not be feasible in political terms, because policymakers will resist the idea of tax increases and therefore will not provide the incentives.

The way to avoid this problem is to fund green incentives through borrowing. As I have often said, future generations suffering the effects of substantial global warming will not think that’s OK because we reduced their ‘burden’ of paying taxes on government debt. Instead they will positively welcome the borrowing required to reduce climate change in the past. [2] This is particularly so when that borrowing currently costs so little.

Which is where debt and deficit targets get in the way. To see how ridiculous it would be if they did get in the way, just compare why we need debt and deficit targets, and compare that to why we need to mitigate climate change. Deficit targets are useful to prevent irresponsible governments from buying elections or rewarding donors by tax or spending breaks funded by borrowing. We need to reduce global warming because otherwise we will see, for example, large-scale global starvation and migration, with all the political chaos that this will cause. If you had to choose between reducing the fiscal behaviour of irresponsible governments and reducing climate change, which would you choose?

There may be ways of not choosing between the two. Perhaps we could create two separate sets of government accounts: a normal account and a green account. Deficit targets could apply to the former but not the latter. If Germany can do this for military spending following Putin’s invasion of Ukraine, why not do it for spending required to reduce climate change? [3] Of course there will be many practical political problems, and it may require a fiscal council with teeth to avoid governments cheating, but it’s clear we should be at least discussing this possibility.

If we don’t do something like this, then we may be faced with a simple choice. Do we speed up greening the economy to reduce the extent of global warming using the ideas proposed by Lonergan and Sawers, or do we do what this government and the media are doing now, and obsess about deficit and debt targets? The fate of the planet may depend on what people and governments choose.

[1] In a simple model with a representative agent, a subsidy would automatically imply an equal tax today or tomorrow, which will leave the representative agent no better off, so they would be indifferent between positive incentives (subsidies) and negative incentives (like carbon taxes). In reality the tax increases required by any subsidies may fall on different people from those receiving a specific tax cut or incentive. In addition tax cuts today may be paid for by cuts in government spending, which again may not fall on those receiving a specific incentive, and so on. In other words people see positive incentives for them as redistribution to them, and taxes on them as redistribution from them.

[2] The classic case for funding by borrowing is an investment that doesn’t just benefit people today, but also benefits people tomorrow. This is why no macro restrictions should be put on public investment. However many activities that are not classed as public investment have these characteristics. A war, for example, is often an investment in the future, which is why wars are so often accompanied by public borrowing. Greening the economy also has those characteristics.

[3] Does it make sense to treat higher military expenditure as different from other forms of spending? If it represents a one-off increase in spending, reflecting for example an unusually aggressive ruler in a nearby country then yes, it is. However if it is seen as a permanent increase in spending, it is not clear why that shouldn’t be paid for by the current generation through higher taxes.

Some lessons in how to combat the Tory propaganda machine

 

The initial results of voting last Thursday are very easily explained. First, voters had a terrible year in 2020 and government help in getting the vaccine out means 2021 is looking much better, so naturally voters will reward the government. That means the Tories in England, Labour in Wales and the SNP in Scotland (modified by tactical voting against a second independence referendum). It’s like Brown’s poll bounce as he saved the banks, and therefore large parts of the economy, from the effects of the Global Financial Crisis.

Second, on top of that, Conservatives have recreated their Brexit success, because to many who voted Brexit, the vaccine rollout doesn’t just reflect well on the current UK government, it validates their choice to vote Leave and the party that got Brexit done. While many Brexit voters were beginning to doubt the wisdom of their choice in the second half of 2020, those doubts have disappeared. As a result to a first approximation in England the polls last Thursday were a repeat of the 2019 election, with the Conservative party becoming the Brexit party.

In hindsight, do you think Britain was right or wrong to vote to leave the European Union?

As the results further south came in, the picture was reversed. The Tories lost Oxfordshire and Cambridgeshire, lost the Cotswold's Chipping Norton to Labour, lost Tumbridge Wells and elsewhere, and Labour lost many contests in Bristol to the Greens. 

The odd thing about these elections was Starmer’s reaction to them. As he hasn’t given left wing social conservatives something left wing to vote for, how did he expect anything different from 2019 in red wall seats? Sacking Rayner is, to quote Stephen Bush, just “mystifyingly stupid, self-discrediting and self-destructive”. Johnson is a populist and to his target voters he promises whatever they want to hear. Starmer needs to start demonstrating that those promises are empty and he can do better, and not keep making the story about Labour’s internal wars. .

In terms of political deception, this idea that the UK’s vaccine rollout vindicates Brexit is the best kind of myth because it’s based on a half-truth. It is true that the UK’s vaccine rollout has been faster than the EU’s, and the EU had a joint vaccine procurement programme. That is easily enough for Boris Johnson, and it is enough for pretty well all Brexit voters. In terms of public perception it just doesn’t matter that what is stated as a truth is at best a conjecture (if the UK had stayed in the EU would it have joined the joint programme?). What makes this myth particularly powerful is that many Brexit voters want to believe they made the right choice, so they want to believe it is true.

Johnson is not the first Tory Prime Minister to create a powerful myth out of a half-truth. Perhaps the most successful in recent times was the Coalition government’s claim that austerity was necessary because of the previous Labour government’s profligacy. This was a myth that could be easily shown to be false by looking at just one chart, but that was too much for the media to do. They just recalled Labour being criticised over insufficient consolidation, which was a half-truth because any lack of consolidation was tiny compared to the impact of the GFC. Labour’s failure to challenge the myth ensured it became ‘common knowledge’, and it ended up forming the basis of Cameron’s 2015 election win.

That episode points to the first lesson in how to begin combatting the Tory propaganda machine: counter myths quickly and hard. Combating Tory spin and propaganda does not mean the odd fact check or statement by a minor minister - it means a senior opposition minister of better still the Labour leader doing the rounds of the broadcast media studios, because that is Labour’s only hope of communicating with most people. In addition only by doing this do you have any chance of preventing the political journalists from the broadcast media accepting the myth as truth, and this matters because the broadcast media is the only route to countering the Tory propaganda machine.

The Tory propaganda machine is formidable because it has most of the daily press on its side. The broadcast media tends to follow the press. It is one reason why people seem to have forgiven Johnson allowing the second wave to grow but credited him for the vaccine rollout. The only thing Labour has going for it is rules about balance that apply to the broadcast media. It will be hard for the broadcast media to ignore senior opposition ministers or their leader. It will also be hard for this media to accept as true something the opposition party fiercely contests.

This leads to a second lesson for Labour. Commission research on the airtime each party gets on each broadcast platform, and use it if (as I suspect) it shows Tory politicians appearing many times more often than Labour. (Comparable figures from the past are available.) Use that as a lever to get senior Labour politicians appearing on the broadcast media to counter important Tory misinformation.

The third lesson is to choose which myths Labour tries to counter wisely. As I have already noted, attacking the idea that Brexit allowed the UK’s superior vaccine rollout is hard to contest, partly because so many Brexit voters want to believe it but mainly because it might have been true. In contrast, the idea that the government’s policy of Freeports is only possible because of Brexit is easy to refute because some EU countries have freeports and parts of the UK used to have them while we were in the EU. Contest those lies that are important and easy to refute.

The advantage of this strategy is that it will begin to create the idea that Johnson is not trustworthy. Starmer’s approach to PMQs does not do that for most voters. Yes Johnson avoids his questions, but all most people see are the soundbites that may appear on TV. In that context Johnson’s avoidance of the question is not obvious but he gets to rattle off various uncontested and often false claims. When one of these claims is false Labour has to contest them, otherwise many voters who see the claim unchallenged on TV and in the papers will unsurprisingly assume it is true.

That is about correcting misinformation. But Labour also needs to counteract Tory spin. This government is very good at spin, partly because they are happy to depart from facts, and if you take this spin at face value you would believe it is championing a Green revolution (it is not), leveling up economic activity northwards (it is not) and spending large amounts of public money on public services (it is not). So the fourth lesson for Labour is to do far more to counteract this spin. If Labour is to have any chance of winning back any of the Brexit seats they lost in 2019 they have not just to make a strong economic offer before the election but also convince the voters that the government is not doing the same. The former means nothing without the latter.

For those rightly saying Labour needs to say what it stands for, challenging Tory spin will go a long way to fixing that, because a standard line of most journalists confronted with an opposition pointing out obvious government lies or spin is ‘what would you do then?’ Even if it isn’t asked Labour can say where their policy differs from the government. (What you do not do is this.)

Highlighting things that are not said is as important as attacking misinformation. For example Labour really should be making more noise about NHS privatisation. Rather than a general attack I would focus on one aspect almost exclusively: the takeover of 58 GP practices by Operose Health, a UK subsidiary of the US company Centene, and the likelihood that others will follow. This is a result of the 2012 reforms, and Labour can point out that a CEO of Operose has become a No10 advisor. Labour can hammer home that a GP services run for profit is not compatible with the ethos of the NHS. The NHS may remain free at the point of use, but GPs service run for profit do not guarantee quality of service, and almost certainly will reduce quality. [1]

Labour has had some success attacking sleaze and corruption, and there is enough material there to take us to the next election. This is important to do, not only because it will influence voters at some point, but also because corruption is so close to what this government is. I think trying to equate it to sleaze under Major (‘same old’) is a mistake, because the scale of it today is well beyond that. Instead two points need to be hammered home. First, how its scale is unprecedented. Second, why it matters to ordinary people, such as here.

I’m sure there are other areas like this where Labour just are not making enough noise. Above it all is the economy, but it will be hard to make much headway in the near future when the media will be banging on about record growth (which is just the consequence of the record recession caused by the pandemic). Over the next year Labour need to relentlessly point that out, by making comparisons to 2019. What it does after the recovery is over can wait for another post.

Why have I not talked about policies? Good policies are important, but there is no point having good policies if you are not getting them across. A populist government aims to dominate the media, which is why Labour must get better at being a counterpoint to the government's propaganda machine. A populist government will only be defeated when enough voters, with the help of the opposition, realise there is little substance behind the spin and lies.

Even if Labour did all this, I still think it has almost no chance of winning the next election without cooperation with the LibDems and Greens over which party stands in marginals. The reason is structural and simple. Labour do need to appeal to left wing social conservative voters, and that is bound to alienate many social liberals who feel Labour is failing to champion enough social liberal causes. (This is not helped by making those on the left in Labour feel unwelcome [2]). The Green party did well on Thursday, and will continue to pick up votes as a result of Labour’s strategy from those unwilling to vote tactically. Without cooperation with other opposition parties Labour’s strategy is highly likely to be self-defeating. This seems like a basic problem with Labour’s strategy that Labour have failed to address.[3]

[1] To any Tory apologist that talks about private sector efficiency gains, just compare the vaccine rollout under the NHS to the government’s test and trace infrastructure that had substantial private sector involvement, cost billions and kept failing its targets.

[2] Those on Labour’s right who think they have to replay the 1980s to win again should look at the US, which is a far more relevant parallel when fighting a populist.

[3] I know Labour’s constitution prevents this kind of cooperation, so change the constitution! I suspect the main hurdle to this is not Labour members but the Labour leadership.

Politicians and experts: austerity, Brexit and the pandemic

 

I’ll be talking about fiscal policy during and after the pandemic at a Resolution Foundation/MMF event in a week’s time: https://www.mmf.ac.uk/resolution-foundation/

I have written quite a few posts on the relationship between policy and expertise, and between expertise and the media. The better ones are in my book, but they were all written before the COVID pandemic. How does the relationship between experts on the one hand and politicians and the media on the other that we saw with economists over austerity and Brexit play out with medics and the pandemic?

All three cases are different from each other. Although the evidence set out in my book suggests that the majority of academic economists opposed austerity (a majority that got larger as time went on), this plurality had no impact on either the media or the politicians pushing austerity. A few well known academics who supported austerity got a lot of publicity, but this was because they supported a policy pushed by politicians and the media, and not because they were influential in driving the policy. An obvious example in the UK was Ken Rogoff, who supported protecting public investment from any cuts while the government did much economic harm by cutting public investment.

The most notable feature of austerity was the almost total disregard by the media of the views of the majority of academics. As Alan Winters in his analysis of experts and Brexit points out, it was David Henderson who said in his Reith Lectures of 1985 “There is no doubt that the policies of governments … are influenced by economic ideas. But … these have not necessarily been the ideas of economists”. This applies with equal force to the media. The media appeared to apply the logic of the household to governments, so that the necessity of paying back debt as soon as possible became common sense, even though saying this would be a fail for any first year economics undergraduate. For that reason I called it mediamacro.

The power of media narratives should never be underestimated, as the Labour party has experienced many times to its cost. Austerity was just another example. It was a particularly devastating example, because in this case the media’s common sense did terrible harm to the economy, and the media was ignoring what it should have regarded as a key source of knowledge, academic macroeconomics. Needless to say, media organisations have never examined their own mistakes in this regard.

Brexit was different in two respects. First, what was a plurality over austerity was an almost total consensus on Brexit. Making trade more difficult, which almost any form of Brexit did, would cause considerable harm to the economy. The second difference compared to austerity was that the broadcast media had less of any common sense to appeal to, and so they played the ‘two sides’ game. On the one hand was the overwhelming consensus of academics, together with all the major economics institutions, and on the other was a handful of pro-Brexit economists the most noticeable of whom was Patrick Minford. (A few media outlets, and particularly the Financial Times, did follow the academic consensus.)

In defence of the broadcast media, this ‘two sided debate’ format is their default on most issues, and it doesn’t normally matter what the expert consensus is (which is typically not mentioned). However as we saw with austerity, there are exceptions. Whereas the exceptions should be based on the expert consensus, they instead seem to be based on common sense narratives. As with austerity, the media has never examined its own mistakes in relation to Brexit. As the referendum was very tight, the actions of the broadcast media in treating the overwhelming consensus of academic economists as just one opinion could well have influenced the result.

This trivialising of expert opinion is not inevitable. Strong pressure from academic bodies can yield results. The obvious example is climate change. When broadcasters began to increasingly ‘two-side’ the climate change issue, academics and others protested, and the BBC trust acknowledged that on this issue the expert consensus had to be followed. Not all BBC programmes have subsequently respected the Trust’s findings, but nevertheless you will generally see broadcasters treating the need to reduce man made climate change as a fact, and not as a controversial opinion.

The obvious difference between austerity or Brexit and climate change is that the former involves economists and the latter involves scientists. Actually the difference in methodology between climate change scientists and economists is not that great: both attempt to predict in a highly stochastic environment, and neither can easily conduct experiments. There are differences in public perception, of course. Besides the insight of Henderson noted above, there are various myths about economics that are part of the public debate. But the most relevant difference in my view is the absence of institutional pressure on the media from economists that matched the pressure over climate change.

Another academic discipline that has similarities to economics is medicine, and more specifically public health and epidemiology. The story of COVID-19 initially appeared to be more optimistic than austerity and Brexit. In many European countries, including the UK, governments took scientific advice, although in the UK with a short delay that probably cost tens of thousands of lives. But as Alan Winters notes, that optimism has been short lived. In most countries in Europe, including the UK, the second wave has been far worse because politicians ignored the expert advice.

The rationale they have given for ignoring the medical experts has been to balance health with the economy. The irony is that once again most economists I have seen who have studied this issue have agreed with me that there is no meaningful trade-off between the economy and health beyond the very short term. Once again academic economists are ignored, this time where lives are directly at stake.

The media have faithfully echoed the excuses for ignoring the expert advice, seemingly ignorant of the fact that they have little basis. From what I have seen they have given air time to experts and particularly politicians pushing the ‘lockdowns do not work’ nonsense, as if this is just another opinion. I suspect once again this is because it is ‘common sense’ that there is a health/economy trade-off, because most people do not think in dynamic terms. I have not seen government politicians questioned in interviews for not following expert advice in a similar manner to the way Labour politicians were questioned for doubting Osborne’s austerity.

Why did politicians initially say they were following the science of how to deal with the pandemic, while the same politicians ignored economists on Brexit? It is not because medicine is a science and economics is not. As I have argued elsewhere, the two disciplines have many structural similarities. Henderson’s point about prior beliefs is undoubtedly one reason: not many non-medics thought about pandemics before there was one. For politicians another reason is ideology. With austerity and Brexit it was ideologically convenient, and perhaps even necessary, for its proponents to discount expertise. Initially there appeared to be little ideology involved with controlling a pandemic, beyond libertarian instincts.

One reason attitudes to medical experts changed among government politicians between the first and second wave was the emergence of ideology dressed up as science: the Barrington Declaration and all that, and the influence that has had on many Conservative MPs. Once again, it became in the interests of those politicians to ignore expertise, just as they did with Brexit. The correlation with pro-Brexit and anti-lockdown views is no accident. The lesson is simply not to elect politicians who can so easily cast aside expertise.

Unfortunately that is less likely to happen as long as the media fails to tell viewers what the consensus among experts is. I have made this point before, but I think the lesson of climate change is instructive. The media are not going to change what they do, particularly when some feel their existence may depend on keeping certain politicians happy. What changed the media’s approach to climate change, at least in principle, was pressure from science itself. The reason academic economics gets ignored is that academic economists don’t organise to apply pressure.

I have seen so many accounts of why economics was ignored over Brexit that blame themselves: things should have been presented more clearly, economists should have been more open about uncertainties, and so on. All have some truth, but none will make any difference as long as the media treats the consensus among academic economists as just another opinion. For the media to do otherwise requires the strongest pressure from groups who represent academic economists. At the very least, we need institutions representing economists telling the media what the consensus view (if any) is on particular economic issues. [1]

I suspect that some medics will be beginning to ask similar questions about the pandemic: why did politicians ignore consensus advice, why did anti-lockdown politicians get so much airtime and so on. The answers I suspect are similar to those I have just given for economics. Medics have one big advantage over economists: the bodies that represent them are used to applying public pressure. They should apply that pressure on the media if they want to avoid expert views about the safety of COVID-19 vaccines to be treated as just one opinion to set beside the opinion of anti-vaxxers.

[1] When I make this point I often get comments along the lines that I’m trying to impose conformity, and the public should be told about mavericks opinions because (very occasionally) they turn out to be right. I’m doing neither of those things. What is missing from the media is any sense of what the expert consensus is, and for politicians who depart from the consensus being interrogated on why they think they know better than the expert consensus.

Some thoughts on Labour's campaign

The importance of this election cannot be overstated. Voters have a choice between re-electing a government that since 2010 has done untold damage to this country and which will be led by someone totally unsuited to be Prime Minister, or giving a minority Labour government a chance to do better for a few years. The fact that the polls suggest the public want more of the same illustrates how close we are to becoming an authoritarian, populist (in the Jan-Werner Müller sense) right wing state where it becomes very difficult for any opposition to break through.

This post looks at some key aspects of Labour's campaign so far, in I hope a helpful fashion.

Tax and spend

One of the dangers Labour faces is that they appear to be promising too much. Voters are skeptical of manifesto promises at the best of times, even though evidence suggests that in the past most manifesto pledges are fulfilled. If you promise so much it is possible voters will just not believe you can do all this.

In contrast the Tory manifesto is positively frugal. But there is a reason for this, and neither Labour nor the Liberal Democrats have emphasized enough why that is. Labour are not used to trumpeting the results of IFS election analysis, but on this occasion they really should. That analysis shows that one economic issue alone dominates the future of the public finances: Brexit. Here is the key chart

What this chart shows is that all these give-aways do not come close to matching the amount of tax we will lose if Johnson keeps his pledge not to extend the transition period. The reason the Tory manifesto is frugal is they cannot afford to do anything with any fiscal cost and implement a hard or no deal Brexit. Both Labour and the Liberal Democrats can afford much more, because they are not planning a hard Brexit. 

Perhaps Labour and the Liberal Democrats are reluctant to talk about this because it is going over ground covered in the referendum, and most Leavers just do not believe the economic consequences of Brexit will be negative. Yet the IFS has considerable credibility, particularly in the media. Furthermore the sparse Tory manifesto is a tactic admission that, whatever they say, the Tories believe the economy will take a hit from Brexit. Labour and the Liberal Democrats should make more of this. 

Protecting minorities

Labour should not just be defensive on charges of antisemitism. These attacks on Labour over the small amount of antisemitism among members distract not only from the more extensive racism in the Tory party and its actions, as Jonathan Lis describes so clearly here. It also distracts from the rise of right wing hate-crime. That the problem is growing is pretty clear. Attacks mostly involve race and sexual orientation, but it includes attacks based on religion: mainly Muslims but also Jews. Commenting on the steady rise in ethnic or religious hate crimes Dr Chris Allen said:

“The statistics show that for the third year in succession, religiously motivated hate crimes have not only increased in number but have again reached record levels. While some try to explain this as a result of better reporting procedures, doing so is over simplistic. From our research at the Centre for Hate Studies, one cannot underestimate the impact of Brexit and the divisive rhetoric employed by politicians and others in the public spaces. Affording permission to hate a whole range of ‘Others’ – especially Muslims and immigrants – it is likely that the upward trajectory of hate crimes numbers will continue for the foreseeable future.”

The police say that the alt-right is the fastest growing terrorist threat in the UK. A third of all terror plots to kill in Britain since 2017 – seven out of 22 – were by those driven by extreme-right causes.There is nothing comparable on the left. One Labour MP was tragically killed by a far-right terrorist during the Brexit campaign, and at least one serious plot against another has subsequently been foiled. The alt-right is well organised at an international level

What has that got to do with this election? The rise of the far right did not come from out of the blue. Campaigns against immigration, and particularly for Brexit, have encouraged racists into the open. So has over the top language used by Brexiters. It has mainstreamed xenophobia, and maxed out on crude nationalism. The media, particularly the right wing media, are happy to give a voice to anti-Muslim writers.

What will the current government, if it wins this election, do when Brexit does not lead to any improvement in people’s lives, and indeed makes them worse? The Tory manifesto has virtually nothing about redistributing opportunities in a more equal way across the country, and Brexit will not help. If the recent past is anything to go by, they will blame immigrants even more than they do now, which will only increase the threat from the far right.

Scotland

Do you remember pictures of Ed Miliband in Alex Salmond’s pocket? These came from the Tories towards the end of the 2015 election, when it became clear that Labour could only win with the SNP’s help. It wasn’t repeated in 2017, in part I suspect because no one on the Tory side believed Labour would do anywhere near well enough to make that attack line effective. I suspect they will not make the same mistake this time around.

The Tory attack was credited by some as helping Cameron get his majority, although I have no idea how true that is. But if Labour is attacked along these lines in a serious way in the final days of the campaign, what should they do? They shouldn’t do what they have done so far, and just say they will not do any deals. This doesn’t work because voters believe maths more than they believe politicians, and they remember the 2010 Coalition talks and the Tory give-away to the DUP.

What Labour should do instead is dig out one of the quotes where Sturgeon has ruled out allowing the Tories back into government and repeat it endlessly. If any interviewer asks why that is relevant simply point out in the most tactful way that the SNP only has bargaining power over Labour if they are prepared to put the Tories in power instead, and they have ruled that out because it would be political suicide for them. Not putting the Tories in power means they have no leverage over Labour.

The last week

The SNP (and of course antisemitism and law & order) are going to be part of the Tory’s lines to take in the final week, and they are likely to throw in a letter from business leaders if they can find enough willing to sign it despite Brexit. What should Labour emphasise? There is an embarrassment of riches to choose from. They could talk about

Revitalising the economy with public investment directed at the regions

Building more social housing

A Final Say on Brexit

Nationalisation and Free Broadband

Education

Revitalising bus services

A Green New Deal

Saving the NHS

And probably much more that I have forgotten about. Talk about them all and there is a danger nothing really hits home. More than ever before there will be an intense battle between the two major parties to get the media to talk about the topic they want talked about. In 2015 the media chose the SNP rather than the NHS which Miliband wanted to be the focus. In hindsight that represented terrible judgement by the media, but importance isn’t their key consideration.

What works best in getting airtime is to present something new. It could be a letter on the Tories climate change policy like this. It could be a new statistic on poor health service performance which should not be hard to find, or some gaffe by a senior Tory (like this). They can always use this. These are also the two obvious issues to focus on in the final day or two.

On climate change you can say that we cannot waste another five years before we take serious action. This is aimed, above all, at getting out Labour’s core younger vote. The NHS will have much greater resonance with the Tory core vote, and might discourage these voters from voting at all. On the morning of the election the newspapers most elderly people read will be full of scare stories about Corbyn, so Labour needs concerns about the safety of the NHS under Johnson, Trump and Brexit to counteract that.

How to pay for the Green New Deal

The Green New Deal has recently been promoted by a group of Democrats including the inspirational Alexandria Ocasio-Cortez. I first came across it in a report in 2008 by the Green New Deal group, most of whom are pictured above a decade later (HT Andrew Simms). The view that we face a potentially existential climate change crisis, which politicians seem currently reluctant to sufficiently tackle, and which therefore requires a government led programme on the scale in each country of Roosevelt’s New Deal, is something I share.

Why a New Deal? What is wrong with treating climate change as we would any other kind of pollution, with a mixture of regulations, taxes and subsidies? I think the answer is put rather well at the end of an article in the Economist (HT Laurie Macfarlane) which seemingly complains about the Green New Deal’s departure from what it calls ‘economic orthodoxy’. They write

“In fact, the criticism of the economic approach to climate change implicit in the Green New Deal is not that it is flawed or politically unrealistic, but that it is a category error, like trying to defeat Hitler with a fascism tax.”

I would put it in the following way. Tackling climate change is resisted by powerful political forces that have in the past prevented the appropriate taxes, subsidies and regulations being applied. Which is a major reason why the world has failed to do enough to mitigate climate change despite decades of warnings from scientists. You need something like a Green New Deal to push aside those vested interests, and get the right taxes, subsidies and regulations into place. Just as proponents of a Green New Deal are savvy about the need to overcome the resistance of, for example, the oil and gas industry, they also realise that the Green New Deal needs to be politically popular. So the New Deal package has to include current benefits for the many, perhaps at the expense of the few.

What the most effective measures are to mitigate climate change, and perhaps other global environmental disasters, is a fascinating topic. We can learn a lot from the successes so far. Solar energy is now at least as cheap as coal, oil and gas, but this was not always so. It required substantial subsidies or state help for initial development, despite protests that solar energy would always be too expensive. Once a technology is widely used it tends to get cheaper to produce because innovations continue when a mass market emerges, and that is what happened with solar energy. It is impossible to pick winners in advance, so we need to try a number of things some of which will fail. Partly because of those failures a great deal of the required research and development must come from the public sector. No stone must be left unturned when the future of humanity is at stake.

Which all sounds rather expensive, and in particular will require large amounts of public money. An interesting and important issue is how this should be paid for. In the scheme proposed by among others Thomas Piketty, higher taxes on multinationals, millionaires and carbon emissions generate funds to tackle poverty, migration, and climate change. Others have suggested that this spending is better funded by borrowing or creating money. To examine who is right, I want to talk about some of the work of John Broome, an Oxford philosopher and economist.

John Broome was a key advisor to the Stern review on climate change. He argued, and Stern agreed, that we should not discount the welfare of future generations as much as market interest rates appear to do. The reason is ethical: the current generation had no justification for valuing the welfare of the unborn less than their own welfare. This helped Stern to recommend much more current action on climate change than other US based analysis. As Broome emphasised, the key argument here was ethical not economic.

In terms of the funding debate, ethical arguments are also critical. The polluter pays principle suggests that the current generation should pay to mitigate the impact of the pollution they cause. So we should all be paying more for energy, for example, so that the carbon used to produce that energy is priced to reflect its impact on climate change. The idea that the polluter should pay makes economic and ethical sense. It embodies an idea of fairness that most people would accept.

Unfortunately this does not work well enough in practice because those with an interest in selling more carbon and their political allies make people doubt that climate change is real. In addition the connections between the prices people pay and the emissions that cause climate change are often not transparent. So how do you deal with societies that for these reasons fail to pay enough to mitigate climate change?

The argument that Broome put forward (following work by Duncan Foley) is that measures to tackle climate change can be funded by issuing debt. This breaks the polluter pays principle, but it can still lead everyone to be better off (what economists call a Pareto improvement). If government debt rather than taxes are increased to pay for, for example, investment in greener infrastructure the current generation gets away with not having to pay. If future generations have to pay back the debt used to pay for these measures, that cost falls on them, but it is more than matched by the benefits to them because of the climate change avoided as a result. In other words if you cannot make the polluter pay, it is still better to take action to stop climate change even if future generations have to pay the cost of that action.

The case for using government debt to fund the Green New Deal has been strengthened by recent observations by Olivier Blanchard. He noted that interest rates on government debt have over the last half century been below the growth rate of GDP. What this means is that a one-off increase in debt may not require higher tax rates in the future, because that debt as a share of GDP will gradually shrink.

If both these reasons for using debt finance to partially pay for the Green New Deal fail to convince, just think of it this way. No one in a 100 years time who suffers the catastrophic and (for them) irreversible impact of climate change is going to console themselves that at least they did not increase the national debt. Humanity will not come to an end if we double debt to GDP ratios, but it could come to an end if we fail to combat climate change.

All this means that the question of how a measure is financed should never prevent that measure being implemented if it has a reasonable chance of reducing climate change. The whole point of the Green New Deal is that measures should be judged on how effective they will be at achieving their goal, and not on whether they can be afforded. Funding through taxes should be the first option because the polluter should pay, but if this is not politically possible then government debt should increase.

What are the chances of either of the two main political parties implementing a Green New Deal in the UK? It is hard to see a Tory government doing so because of its aversion to debt finance, its neoliberal reluctance to have government lead the way, and because the party contains many climate change deniers. The Labour party is much better placed, and has already set out plans to create its own Green New Deal. Crucially their fiscal credibility rule makes the distinction between current spending that does need to be covered by taxes in the medium term and investment spending that does not, because future generations benefit from that investment. The Green New Deal is all about investing now to improve the welfare of future generations.

Trump: Misleading the People

Introduction (added 10/11/16)

I originally wrote this piece with a start and ending that assumed Trump had lost (yes, I know), and re-wrote it after he had won. I mention that because I think an unfortunate consequence of that is that many will read this as another 'why did he win' piece. It is not that, It is more a 'how did someone who was openly despised by most Republican politicians (included past Presidents), who broke all the normal rules, and generally acts like the dictator of some poor country unused to democracy, get a clear chance at being POTUS' type of question. Whether he won or not is irrelevant to that type of question.

Asking why he won is a whole different type of question, because you are looking at marginal shifts in the way people vote. His appeal to those in the rest belt who were adversely effected by globalisation is clearly relevant in that case.   


So the US has had its Brexit moment. Perhaps the lesson is that if people are promised impossible things and no one tells them they are impossible, you can motivate some potential voters to vote who would not otherwise have done so. But it would be wrong to get hung up on the polls: Nate Silver was clear that there was a good chance Trump could win.

The question to ask is how could the United States elect to its most powerful office not just a demagogue, but someone who lied openly all the time, incited hatred against other religions and ethnic groups, and promised to lock his opponent up if he won. We have to ask how this could happen.

You will hear a lot of talk about those left behind by globalisation, looking at charts like this

Share of income growth going to income groups from 1975 to 2007. Source OECD

They are remarkable, and they may explain some of the detail of how he swung votes at the margin. But, as Ezra Klein notes in an interesting article in Vox (written when he thought Trump would just lose), Trump support comes from people who are well off, do not live in areas hit by globalisation and are not in areas of recent immigration. They do not explain how a demagogue and liar gets to win so many votes. And they don’t explain how the chart above can lead to people electing a President who now almost certainly will cut taxes for the 1%.

His explanation instead comes from political scientist Julia Azari, who writes “The defining characteristic of our moment is that parties are weak while partisanship is strong.” It is certainly true that the Republican party hierarchy failed to stop Trump, and that a great many of them then went on to endorse him. It is also true that Sanders, an insurgent from the left, did very well in the Democrat primaries. But there the equivalence ends. Sanders is no demagogue who lies openly all the time, incited hatred against other religions and ethnic groups (unless perhaps you count bankers as an ethnic group), and promised to lock his opponent up if he won. He is hardly a threat to the democratic process.

This is one problem that I have with this argument. It implies a symmetry which is just not there. That is because it ignores a key feature of politics in the US over the last few decades, which is a steady march to the right. The threat to democracy comes only from the Republicans and their base. Let me put it another way. Republicans have become more partisan because the believe a centrist, experienced and relatively honest Hillary Clinton is beyond the pale, while Democrats have become more partisan because Republican policies are often mad. (Think climate change, guns, teaching evolution)

The other problem is that the analysis does not spell out why the Republican base has become so extreme, and why plenty of people who are not so extreme will have voted for Trump. You can certainly say that this extremism was encouraged by Republican politicians before the rise of the Tea Party: think of holding the government to ransom when Bill Clinton was President. But I think the biggest factor missing from Klein’s account - as it often is by those in the media - is the media itself.

This consists of two parts, much as it does in the UK. First there is Fox news: a highly partisan news provider with a clear right wing bias. Second there is an inability of the non-partisan media to provide any kind of counterweight when someone like Trump arrives, and in some cases provides help to his cause. I have talked about this second factor before, here and more briefly here, so let me concentrate on the first today.

The story is in fact told better than I ever could by Bruce Bartlett, who worked in the Reagan White House and for George HW Bush, so I’ll just summarise it here. The story starts under Reagan, who provided pressure to withdraw the Fairness Doctrine, which was similar to what keeps UK broadcasters from being partisan. Initially that allowed the rise of talk radio, and then Fox News. Gradually being partisan at Fox meant misinforming its viewers, such that Fox viewers are clearly less well informed than viewers of other news providers. One analysis suggested over half of the facts stated on Fox are untrue: UK readers may well remember them reporting that Birmingham was a no-go area for non-Muslims.

But why is this causal, rather than simply being a mirror on the rightward drift of the Republican base? The first point is that there is clear evidence that watching Fox news is more likely to make you vote Republican. The second is that, like the tabloids in the UK, this propaganda machine can turn on party leaders and keep them from moving left. The third is that it is also a machine for keeping the base angry and fired up and believing that nothing could be worse than voting for a Democrat. It is Fox News that stops Republican voters seeing that they are voting for a demagogue, conceals that he lies openly all the time, incites hatred against other religions and ethnic groups, and makes its viewers believe that Clinton deserves to be locked up. Just as UKIP (and perhaps now the Conservative party) is the political wing of the tabloids, so Trump is a creature of Fox news.

Trump’s election is a disaster for humanity. That may be true in ways we can only speculate about, but we know that he does not believe in climate change, thinks it is a Chinese hoax, will not follow the Paris agreement and will do all he can to support coal. With a Republican congress no one will stop him. When you think about that, remember also that Fox news (like sections of the UK press) encourages climate change denial, and the issue was not mentioned by the non-partisan nightly news election coverage (which obsessed about emails) or raised in any of the presidential debates. If you continue to mislead people in this way, they will continue to make terrible mistakes when they vote.