The Orange Book 10 years on: is this the way to reclaim liberalism?

Orange book conferenceToday I attended a conference organised by CentreForum to mark the tenth anniversary of its publication of The Orange Book. Viewed in hindsight, the Orange Book was an important political event, that did much to set the tone of the following decade. But does its version of liberalism have what it takes to drive political ideas in the next ten years? On today’s form the answer to that question is no.

The Orange Book was edited by David Laws, currently education minister, and briefly in the Coalition cabinet; other contributors were Vince Cable, Chris Huhne, Ed Davey and Nick Clegg – who are or were all members of the Coalition cabinet, along with a number of other people who became ministers – an event that none would have foreseen at the time. While it took on a broad definition of liberalism, it was its espousal of economic liberalism that caught attention. It was not favoured by the Liberal Democrats’ then management, as a General Election beckoned in 2005. But after Nick Clegg took on the party leadership it came to define the party’s official policy line. It can plausibly claim to frame the guiding principles of the Coalition government itself, and not just the Liberal Democrat element. To the book’s supporters this was a victory of a coherent political philosophy over the mushy protest politics and left-wing opportunism that preceded it. To its opponents the Orange Book’s success was the triumph of a “neoliberal” elite over the party’s core values.

The conference consisted of two panel sessions, with three speakers each, in the morning, a keynote speech by David Laws at midday, with a response by economics journalist Anatole Kaletsky, with a final panel session after lunch.

The first panel consisted of Mark Littlewood, currently of the Institute of Economic Affairs (IEA), a right-wing think tank, but also a former Lib Dem functionary; Tim Montgomerie, a Conservative agitator who founded ConservativeHome; and Vicky Pryce, formerly a government economist and Lib Dem member.

Mr Littlewood led with a lightweight defence of economic liberalism: a formula of smaller government and lower taxes, which, he claimed would lead to stronger economic growth, whose benefits he did not bother to spell out. He felt that the country’s governing philosophy was still social democracy, and that economic liberalism had not been given a true opportunity to show what it could do.

Mr Montgomerie was much more interesting. He pointed out that economic liberals needed to confront two issues which threatened to undermine their system. The first was “social capital”, the family and community structures and the value system without which a liberal economy could not flourish. The second was inequality, of which the most important aspect was the division between those who owned their own houses and those that didn’t. His take on both, and especially the first, had a conservative slant – but the challenge was good. He made the excellent point that the best way of reducing the size of government was reducing demand for it, through a stronger society. This is a point that few in the political elite grasp: the objective of most public services is to reduce demand for them – one reason that they have less to learn from the private sector than may think.

I found Ms Pryce rather less memorable. She made a call for stronger leadership and coherence in government. Our current system was too subject the a “do something” culture, responding to whatever the Daily Mail happened to be beefing about, with individual ministers acting without reference to each other.

The second panel session was meant to focus on public services. It consisted of Paul Marshall, who founded CentreForum and effectively funded the Orange Book; Greg Clark MP, a Conservative minister in the Cabinet Office; and Norman Lamb MP, the Lib Dem Health minister. They never really got to grips with the issue public services, confining themselves to generalities.

Mr Marshall is a hedge fund manager, who also founded ARK, a chain that runs Academy schools. He showed himself to be an economic liberal extremist, which he claimed was necessary for social liberal ends. He promoted the myth (as did Mr Clark) that it was the government’s policy of supporting independent academies that had caused a substantial advance in school standards, especially in London. This is a rather annoying rewrite of history: credit for London schools lies mainly lies is forcing proper accountability on local authorities and established schools, as well a degree of state assistance and support. For Mr Marshall education pointed the way for other services, such as health – that advances could be made through using a diversity of providers. He was right, however, in his passionate denunciation of the complacency within the educational establishment.

Mr Clark proved an interesting speaker. His big idea was decentralisation from Whitehall, on which he claimed a lot of progress had been made with the City Deals that he had worked on with Mr Clegg. Unlike some, he clearly understood the implications of this: that it meant breaking away from the idea that everything had to be done the same way across the country. He did not refer to the Coalition Communities’ Secretary, Eric Pickles, who recently decided to regulate the way in which local governments managed their parking enforcement.

Mr Lamb broadly agreed with this, but seemed a bit wearied by the political difficulties of executing reforms. He felt that our highly centralised government was the wrong way of going about public policy, as the many failures of the NHS had demonstrated.

Mr Laws offered a rather complacent speech, celebrating the success of the Orange Book, while barely acknowledging the challenges to it, such as rising inequality. Mr Kaletsky’s was much more interesting. He understood that the world had changed and that conventional liberal economics was not up to the task. Fiscal policy had to be restored as a policy instrument alongside monetary policy; inequality was not just a matter of social justice but economic efficiency; government would have to both to take up less expenditure and extend its regulatory reach; public pensions and the health service would have to be curbed. While I find this analysis is flawed, it at least challenged the complacency.

In the afternoon the final session had James Cameron, Chairman of Climate Change Capital, Maajid Nawaz, co-founder of Quilliam, and Jeremy Browne MP, a former Lib Dem minister, notorious for his robust economic liberal views. This session raised the issue of sticking to liberal values in an international context. Mr Nawaz said that liberals had to emphasise the global nature of liberal values, and not soften them for cross-cultural sensitivities. Liberals should appeal to individual members of ethnic minority groups, and not approach them via their paternalistic community leaders. Mr Browne put to much emphasis on global competition for my taste – but he did make the point that the Lib Dems were potentially missing an appeal to a younger generation who were both economically and socially liberal. While all speakers emphasised that challenges were increasingly international, and the cross-cultural nature of liberal values, none made the obvious progression that liberals should organise themselves internationally, rather than being stuck on national lines.

Overall impressions? To me this conference showed that the Orange Bookers are nearly out of road in the Liberal Democrats. All the most challenging speakers came from outside the party. The world, and Britain in particular, faces major challenges. The rich are taking too big a slice of the economy, which is slowly throttling overall growth. Everybody else is finding life increasingly precarious. Meanwhile the demographic challenge is threatening to overwhelm what taxpayer funded services can provide and climate catastrophe beckons. These developments are not the result of too large a government and an excess of social democratic policies. They result, at least in part, from the application economic liberalism. The Lib Dems will either sink back into the mushy world of protest politics that it inhabited in 2005, or develop challenging new ideas to confront the problems of now. The Orange Bookers seem to be doing neither, and are in danger of irrelevance.

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Rethinking Liberalism 3: defeating intolerance

In my first two essays in this series about rethinking Liberalism, I kept to my comfort zone of economics. I concluded that we need to retain capitalism as part of a mixed economy, but that we need to develop the language of economics so that policymakers become less obsessed with crude productivity and growth. Now I want to step back and look at what troubles me most about our society, both in Britain and elsewhere: rising public intolerance.

In my personal bubble, as a white middle class citizen of British heritage, here in a smart inner London district, it is easy to ignore the problem, or even to deny that much of one exists. It just isn’t visible directly. My neighbours are easy-going. The parents and staff that I meet at the local primary school where I am a governor are very positive about taking a tolerant society forward, notwithstanding its ethnic and social mix. I witness easy interactions between people of different ethnic and national groups everywhere. This is all much better than in my youth.

But venture beyond this and things soon get darker. Take this cry of pain from Asian Lib Dem activist Kavya Kaushik, on the relentless hostility and rudeness she has encountered while canvassing for the party, directed not just at Asians, but East Europeans. This is consistent with what other ethnic minority writers have said; things are getting worse not better. Ukip has done well by tapping into this angst, especially in working class communities. Britain First, an intolerant Facebook grouping, keeps coming up on my newsfeed, and has nearly half a million “likes”. Jewish groups are under increasing fear of attack, exemplified by recent murders at a Jewish museum in Belgium. A recent opinion poll found a growing proportion of people admitting that they had racist views, although the Economist has tried to talk this down.

This phenomenon seems typical of the white working class. But it would be a mistake to think that it is only prevalent there. One of the nastiest media outlets is the very middle class and female-oriented Daily Mail. On a local forum this morning it was a nice middle class woman that drew a connection between a local rubbish dumping scam and the arrival of travellers locally (something that I am sure is baseless, judging by the person that tried it on us).

First a note of caution. I have been careful to use the word “intolerance” as being the primary issue, not “racism”. Intolerant comments are typically introduced by the expression, “I’m not racist but…”. Ukip, and the mainstream newspapers who also promote intolerance, are careful to avoid outright racism, without complete success in the case of Ukip. The flashpoints are cultural (Muslim dress code, for example) or over the impact of immigration on the availability of housing and jobs and the take-up of state benefits. And the intolerance is itself multi-ethnic. Some of the things that I have read an Islamic writer say on state primary education are totally inexcusable (“worse than a toilet, because at least after the toilet you can wash your hands…”). On being challenged by me, incidentally, this writer quoted the Daily Mail. But it all boils down to the same thing – and talking about racism obscures rather than clarifies the problem. And anyway ethnic intolerance is leading to intolerance of anybody who is different, such as benefit claimants, the upper or lower classes, gays and so on, and an orgy of scapegoating,  of politicians, bankers and anybody else you don’t know personally.

There is an optimistic way to view this. It is like the anger stage in the seven phases of grief – just a phase that society must get through on the way to becoming more tolerant – and the product of temporary economic tensions. But behind that optimistic view there lurks a nightmare. In the 18th Century the Enlightenment ushered in period of rising tolerance, and especially the integration of Jews to mainstream society. But from the middle of the 19th Century there was a backlash. And this backlash was no temporary phase. It grew and grew until it burst out into mass murder and destruction with the Nazis.

What lies behind the current rise in intolerance? There are two big phenomena, at least here in Britain. The first what I might call a Muslim backlash. This is a complex thing; it is mostly a peaceful but angry battle between conservative Muslims and the rest of society over things like mosques and dress codes. But it also inspires terrorists – and since the 9/11 attack in New York, these have been elevated by our security services to being the greatest security threat the country faces. This backlash generates its own backlash. The second thing is the mass immigration of East European workers since the end of the Cold War, and especially the entry of former Communist Bloc countries to the European Union. This has visibly disrupted job and housing markets.

But I think there is an even more important driver: the insecurities generated by the world’s headlong process of globalisation and technological advance, of which both of these are aspects. People are stirred by events in far-away places (such as Iraq and Israel); jobs are made less secure by the rise of developing world industries and automation; people are more inclined to change their country of residence for better economic prospects or a more conducive climate. This creates both physical and cultural insecurity, as well as economic advances. This is not unlike the situation that persisted in the 19th Century, which fuelled intolerance then.

So what should liberals do? Many mainstream politicians, Labour and Conservative alike, are seeking a middle path. They accept that immigration is a problem; they want to push minority groups to integrate better into the mainstream way of life. This includes promoting “British Values” in schools, which include “tolerance”, as  away of promoting universal human values while at the same time nodding to the intolerant appeal to Britishness (see Britain First).

I don’t think this is working. It just encourages intolerant attitudes. “We spoke up by voting Ukip,” they might say “and now at last they are listening. Let me speak some more.” The more politicians talk about immigration as being a problem, the more members of the public think it is OK to be intolerant. That may not be logical, but it does seem to be the way things work. And as for “British values”, the trap is obvious. What the public thinks this means (“no foreign cultures here like Islam”) is different from what the politicians think (“Accept Muslims as being fully British”). It’s all a bit “I’m not racist but…”.

Instead liberal, and Liberal, politicians should concentrate on three things: challenging intolerant attitudes, without the buts; developing broad-based community education; tackling the insecurities.

First is challenging intolerance. This means taking on people who say that immigration is destroying society, that Muslim communities are a threat, that benefit claimants are scroungers, and so on. This is more difficult than it sounds. Most mainstream politicians say the words, but destroy them with a “but”. “This society could not survive without immigration, but it has disrupted communities,” for example. Instead politicians should try and divert the blame for the society’s stresses onto economic insecurity following technological and global development.

Next is community education. Schools, especially primary schools, should be celebrated as places where different communities meet. Pupils should be taught about different religions, world regions and so on. Of course Britain’s own special story must be taught as part of this, but not in such a way as to promote narrow nationalism. And the school curriculum should embrace wide life-skills, such as dealing with people who disagree with you, and taking responsibility for you own fate, rather than always trying to blame somebody else. This is not rocket science. Many of our schools are already doing this. But it is difficult to see how this is compatible with the government’s programme of fragmentation of school management, driven by parental choice – and focus on narrow skills such as literacy and numeracy.

Finally we must tackle the insecurity that drives intolerance. This brings me back to economics, and I will develop my ideas on this in future essays. But in essence I think we need to look for stronger local economies, with stronger local governance – to balance the global dimension with a local one, at the expense of our current national focus.

 

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Can the European Parliament address the EU’s democratic deficit?

As I have often remarked on this blog, the European Union plays the tortoise in Aesop’s fable to the United States’ hare. The EU’s forward motion is imperceptible and it is easy to make fun of it, compared to the easy strides made by its American counterpart. And yet when reviewed over the long term, progress is dramatic. At the moment we are witnessing an ugly row in the EU about who should be the President of the European Commission. This follows a rather dramatic election to the European Parliament (EP) in which Eurosceptic and populist parties made big advances, not least here in the United Kingdom. But these apparently discouraging could mask a major advance by the parliament.

At the centre of this drama is the problem referred to as the EU’s democratic deficit. A large proportion of the member states’ laws (to say nothing of most European non-members likes Switzerland and Norway) are now derived from the EU’s federal institutions. These are led by the Commission. These laws, and the Commission itself, do not seem to be subject to the same standard of democratic challenge and accountability that people have come to expect in a democratic polity. EU laws are presented as impositions from outside from an unaccountable bureaucracy. Two EU institutions are meant to provide democratic legitimacy. Firstly there is the European Council, consisting of the heads of government of all member states. This works mainly by a system of qualified majority voting, so that laws can only be approved with substantial inter-state coalitions. Some areas require unanimity. There are two problems. First, its attention span is necessarily short, so there is a limit to the extent of any detailed scrutiny – though this is improved by delegation to more junior  ministerial meetings. A bigger problem is that the public perceive their deliberations to be wheeler-dealing: an unseemly process of stitching voters up. Prime Ministers do not have their voting records at the Council examined in the way that US Senators do, and they easily pass decisions off as not being theirs.

The second institution meant to provide democratic legitimacy is, of course, the EP. European federalists see this institution to be the forerunner of an active federal parliament, like the US House of Representatives. So far it has been a disappointment. Elections have drawn a low turnout; there is little awareness among voters about what it does; voting is dominated by national politics. There is no “European polity” that forms the basis of its legitimacy, where there plainly is an American one for the House of Representatives.

European federalists have sought to address this problem by making the EP matter more. First it was given greater legislative power; its importance has risen to such an extent that its members are now subject to extensive lobbying by commercial and other interest groups – but the public has barely noticed. Who cares about the finer points of intellectual property or bank regulation, after all? Their next idea was to give it a bigger say in the selection of the President of the Commission – the nearest thing the EU has to a Prime Minister. Their idea was that each of the transnational political groups into which MEPs are organised would select a leading candidate, referred to by the German word Spitzenkandidat. The Spitzenkandidat of the largest party would be nominated to be President. This is the way Germany picks its Chancellor, and also the way Britain picks its Prime Minister. The winner of this process turned out to be Jean-Claude Juncker, the former Prime Minister of Luxembourg.

Here in Britain this process has been observed with a mixture of contempt and disdain by the political elite. It is nonsense to suggest that voters were picking one the Spitzenkandidaten when they were voting, they say. Mr Juncker’s nomination has no democratic foundation. And besides we don’t like him. One British journalist claims that this is no better a way of running the Commission, than monetary union was for running Europe’s economy, following the British elite’s view that the Euro has been a disaster (gently skating over their own country’s own troubles outside the Euro zone). David Cameron has led the charge to dismiss this process and pick somebody else, who would be more “reform-minded”. He has at least tacit support from other party leaders here, and in a few other EU countries. But this stand is looking increasingly costly, expending Mr Cameron’s diminishing stock of political capital within the EU. He has been out-manoeuvred, and it is likely that Mr Juncker will get the job.

Much of the criticism emerging from British commentators is true. Mr Juncker does not inspire confidence as the man to take the EU forward to something that will function better. The EP does not represent the will of a European polity. The battle of the Spitzenkandidaten never took off in the election debates. But they have missed two important points.

The first is that this years’ EP elections were a major political event, right across the union. Turnout remained low, but it was actually up on the previous election in 2009. The combination of it being seen as an election whose consequences are relatively weightless, and the use of proportional representation, have made the outcome unpredictable and dramatic. The rise of populist political parties has enlivened the election, and have given electors a voice that they would have been otherwise denied. This invites a crisis of confidence in the EU, but, paradoxically, it gives the EP a greater degree of legitimacy. The election results in the UK were described as a political earthquake. No longer are the elections a sleep-inducing irrelevance, but they have become an important test of the political temperature. Some of the consequences are ugly; mainstream politicians are pandering to the populists, allowing racism to make a comeback. But it puts the EP on the political map.

The second point that British critics miss is that the argument over Spitzenkandidaten is not about the present; it is about the future. The current candidate may have no democratic legitimacy, but in order for future ones acquire that legitimacy it is necessary for us to behave as if they did. This is not about the election in 2014, but the one in 2019. The tortoise beats the hare because he focuses relentlessly on the ultimate goal, while the hare is distracted by the issues of the moment.

Should we applaud this turn of events? The EP has taken a great step forward. There may be no sign of a European polity yet, but each of the national delegations has greater democratic legitimacy with their own national polities. That is a clear step along the path. Does the EP provide the answer to Europe’s democratic deficit? Or should it be abolished? Abolition is not an option for now. And the EP may provide part of the answer.

But we should remember one thing. In order to judge the success of the EU and its institutions we must look over the long term. While currency union has endured almost unbearable stress, it is much too early to write it off as a failure. As the EU stumbles forward into unmapped ground, the same must be said for the European Parliament.

 

 

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Rethinking Liberalism 2: economics

The discipline of economics pervades all reflection on public policy. This is only right, as it is this discipline that tries to reconcile supply and demand for resources, and present a rational framework for choices. But it can be pernicious. It can frame the policy debate in the wrong way. As we refresh liberal policy ideas so as to put sustainability and human needs at the heart of public affairs, this is becoming a major problem. Liberals must challenge many tenets of conventional thinking.

First of all, let me say what I’m not going to talk about. There has been much heated debate on the value of austerity policies in tackling the recent economic crisis. I have read some liberals who say that “Keynesianism” is a core liberal belief, something given added resonance by the fact the Maynard Keynes was a Liberal. These tended not to be professional economists, who are careful not to label their beliefs with the name a of a dead economist, however inspirational. And it is based on a misunderstanding that Keynesian policies implied free public expenditure at all times, rather than being a temporary measure in response to a short term crisis. The problem that I have with economics applies as much to conventional, liberal “Keynesian” economists, such as Paul Krugman, as it does to the neoclassical ideologues – though the liberals are the more pragmatic, and the more likely to support changes to the conventions of the discipline. Having said which, I am sure Keynes would have recognised the value of what I am trying to say.

The problem that I want to deal with lies at the boundary of what professionals call “positive” economics, which refers to the factual or “scientific” side, and “normative” economics, which deals with policy recommendations, and where personal value judgements play a role. Much normative economics is presented as if it positive. Policy makers have taken simplifying assumptions used in positive economics, and used them as the basis of concealed value judgements.

I need to get more specific. These are the sorts of things I mean:

  • Economic growth is good for a society and should be an objective of public policy.
  • High productivity, the key to economic growth, is therefore a critical policy objective.
  • Free trade promotes economic welfare and drives economic growth forward, and should therefore be maximised.
  • The more people consume the better off they are, and the healthier an economy is, provided that spending does not outreach income.

I could keep going. The issue is not that these assumptions are wrong – they have served policy makers well – it is that life is not as simple as that, and we should always question them before using them in the decision-making process. And increasingly they are taking us in the wrong direction.

To be fair, economics does not stand still. I did not put on that list that aggregated income is the critical measure of success, and how it is distributed is of secondary importance. Economists (some of them at least) are at last seeing through that idea, which had been universally accepted. Also a worship of open market mechanisms for allocating resources is coming under question. And indeed, you can have perfectly sensible conversations with professional economists in which it is clear that they understand the limitations of their discipline. But when they get back to their desks and analyse policy options, the same old things keep coming up.

The result is that policymakers are trying to push the economy in a direction that it does not want to go. Growth remains obstinately slow, distribution becomes more skewed, public services struggle for funding. We worship highly centralised, “efficient” and specialised models of business and public services that are failing to meet human needs. And we are heading in slow motion for an environmental disaster.

Economics needs to adapt to the modern world. To do so it must start to take on board ways of thinking. Consider the following, none of which are particularly wacky in terms of economic theory, but all of which undermine the conventional wisdom of public policy making.

  1. Wealth must circulate for a healthy economy. This is the main idea of George Cooper’s book Money, Blood and Revolution. If wealth is accumulated by a rich elite, it drains the life out of an economy because they don’t spend it, or don’t spend it efficiently. They save too much, and the bulk of their saving goes into unproductive assets and speculation, and not enough into productive investment. Worse, they use their accumulated wealth to skew the workings of society in their favour. This presents an economic argument for progressive taxation and the taxation of wealth – as well for trying other interventions which distort the way incomes are set.
  2. Consumption should be optimised, not maximised. Once basic human needs are met, the utility of consumption rapidly diminishes, and often gets tangled in a zero-sum game of status competition. This challenges the idea that economic growth is the be-all and end-all, as well as bringing distributional issues to the fore.
  3. Don’t confuse the acquisition of wealth with its realisation. This is a related point. The conventional wisdom, based on the gods of maximising consumption and productivity, is that we should go out in the world and work as hard as possible for the common good. But what if somebody wants to work less and consume less? Or if she prefers to consume less goods, but which are made in a less “efficient” way (organic vegetables, say rather than mass farmed ones, for example). Provided that she does not consume more than she produces, does this really matter? What is the point of piling up wealth if we can’t use it in the way that we want? Economists frown on organic vegetables as they reduce productivity, but the ability to choose such low productivity goods is a sign of a wealthy society. They are confusing the creation of wealth with its realisation. This suggests that the more developed a society becomes, the less worried it should be about productivity and income growth.
  4. Trade is a means to an end, not an end in itself. No human activity has done more to banish poverty than trade. Yes we should celebrate it, and yes protectionism usually ends badly. But there comes a point when its uses diminish. Trade between the developed world and China had economic benefits when China had a pool of very unproductive agricultural labourers who could be used to make cheap industrial goods. But these benefits diminish as China catches up, and as this happens, it is more than likely that the volume of trade (and its benefits to the developed world) will diminish. That’s economics. Don’t panic. The party was fun while it lasted. Globalisation remains key in the world of information and ideas. Trade of physical things remains is important to helping undeveloped countries to develop (though the locus of that trade is likely to be mainly with middle income countries rather than developed ones, as these bulk larger). But trade of physical things over huge distances is not so important for the sustained progress of developed economies.

Liberals should believe that an economy should develop based on free human choices, long term sustainability and a degree of human solidarity which diminishes with distance. Increasingly human preferences, technology and world development will take us away from the mass-produced, high productivity, high consumption, global trading society that policy makers favour, guided by economic conventional wisdom. It isn’t what people want (free human choices), it isn’t sustainable (carbon emissions and world resources) and it is less needed for human solidarity (developing countries are increasingly able to look after themselves, while the need for more localised solidarity grows). The discipline of economics needs to catch up.

 

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Birmingham exposes the hollow heart of Conservative education policy

Britain is ill-served by its news media. There has been a growing kerfuffle about Muslim-dominated schools in Birmingham. The issues dominating this in media coverage are the extremism of some Muslims, and the explosive relations between the Education Secretary, Michael Gove, and the Home Secretary, Theresa May, which they assume is all to do with Mrs May’s leadership ambitions. This wantonly ignorant coverage is not only damaging community relations, but it failed to shine any light on the failure of the coalition’s Conservative-led education policy. This matters because this policy has been given nearly a free run in the media, and supported by papers, such as The Economist, that really should know better.

We must start with Mr Gove, who has been in post since the government was formed in 2010, and is one of the Conservatives’ big hitters. A journalist by profession, he has strong views on both education and extremism, which he has not hesitated to put into practice. Liberal Democrats have moderated some of his more extreme positions, but many suspect that the Lib Dem leadership (in contrast to its activists) sympathises with a lot of what Mr Gove is trying to do. Instead they have concentrated on their own pet policy, the Pupil Premium.

At the heart of Mr Gove’s policy is the idea that education should be run as a quasi-market, driven by parental choice, and without the need for much in the way of government direction – rather in the way the private sector does. Schools are being progressively pushed into being “Academies” independent of local authority control, and new Academies, “Free Schools”, are being established without much of the obstructive bureaucracy that would have strangled many of them at birth under the previous regime. These Academies were not subject to the National Curriculum, though they were subject to inspection by Ofsted, the schools inspectorate, which focuses on a narrow set of core subjects (literacy and numeracy – with “behaviour” thrown in to satisfy conservative prejudices). The idea was that bad schools would fail to attract pupils, and so they would end up being closed, or management changed. Competition would impose discipline on the schools, and the whole thing would be more democratic because parental choice would not be intermediated by busybody officials, elected and otherwise.

Two other themes ran alongside this. One was the idea that existing education was not based enough on factual learning, with too much emphasis on wishy-washy “skills” and mushy “values”. Mr Gove recalled the curriculum of old-fashioned private schools and selective state grammar schools, which educated most off Britain’s elite. A second was a distrust of educational experts and officials, who Mr Gove took to referring to as “The Blob”, who watered down and undermined the reform process. The “Blob” was progressively dismantled.

In this mix we should mention faith schools. The Birmingham row does not involve faith schools directly, which has led a number of, excessively defensive, faith school supporters to claim that they are a irrelevant. But they are heavily bound up in the consequences of the row. Faith schools were not a strong element of Mr Gove’s ideas. They were rather an enthusiasm of the previous Labour government, who, it must be added, started the whole process of setting up independent Academies. Britain’s state schools have always included those run by religious foundations, in particular the Church of England in (rather obviously) England. These were joined by Catholic schools. Under Labour these were extended to Jewish, Muslim, Sikh, Hindu and no doubt other foundations. The Labour Prime Minister, Tony Blair (a Catholic convert) had the idea that such faith schools gave children a solid moral grounding. Labour generally found that it helped their clientalist relationship with ethnic minority communities. These schools have been given a great deal of freedom to run themselves along their chosen lines. So long as you keep giving us good test scores and exam results, the suggestion was, we don’t care how you do it.

Finally in this background exposition, I need to mention Muslim extremism. Terrorist groups have successfully recruited a number of young British Muslims, and they have carried out a number of acts of violence both in this country and abroad, in such places as Syria. It is considered my many to be the biggest security threat the country faces. These extremists have very conservative instincts, such as believing in the veiling of women, but they tend to be converts and not very conversant with the actual teachings of Islam. Their extremism is fuelled by a general feeling of rejection and alienation.

In the public eye however, these young extremists have become tangled up with the conservative views of many Pakistani and Bangladeshi communities. These are horrified by what they see as the laxity of Western moral values, and do not want their children to be corrupted by them. They share many of the conservative instincts of their extremist co-religionists, along with an acute sense of injustice over the treatment of Muslims abroad, especially in Israel and Afghanistan; but there the similarity breaks down. Terrorism plays no part in their outlook, and certainly not in a domestic UK context – they may view Palestinian suicide bombers more sympathetically. But the extremists hover at the fringes of these communities, and that leaves the British state with a very tricky problem. They need intelligence from the established minority communities, and so to maintain good relations with them. But they are quite unsympathetic to many of their beliefs.

Into this delicate situation wade opportunistic journalists and careless politicians, Mr Gove among them. To them there is a direct line between the terrorist threat and conservative religious values. Most of the white community assume this to be the case, and happily lap up this message. Almost no politicians attempt to put a more realistic public gloss on this.

And so when allegations emerged that conservative Muslims had taken over a number of state schools in Birmingham (as part of a “Trojan Horse” plot), Mr Gove assumed that terrorism was at the heart of it, and so did most of the public. He steamed into a delicate situation, upsetting community relations and the Home Office, responsible for policing. The schools had been rated highly by Ofsted, who had focused on academic achievement, which was strong. The inspectors were sent in again with a different agenda, found evidence of  a conservative religious agenda, and, with a bit of ingenuity, ways in which these breached requirements of state-funded schools. The schools are in the process of being transferred to new management.

But the problems have only just begun:

  1. What has been alleged is that school governors, recruited from the local community, took the schools over and forced them into a conservative religious agenda. The school populations were almost entirely drawn from the local Muslim communities. But this is surely what school governors are supposed to do? They set the direction, ethos and strategy of the school. Their actions appear to have been perfectly popular with parents (though not staff). And though not faith schools, the widespread political support for faith schools would not have suggested to them that what they were doing was a bad thing. They were simply picking up the ball tossed by Westminster politicians and running with it.
  2. The actual alleged abuses are not so black and white. Segregation of the sexes? We still have 100% segregated schools. Allowing tradition Muslim dress? A lot of perfectly respectable schools do that already – and that is surely right. The same goes for making provision for prayer, which after all can be open to all faiths. A culture of intimidation? sounds a bit like my English private school education. And surely school management has a right to make the changes it wants, and this always leads to such allegations. The were, predictably, no demonstrable links to terrorist extremism.
  3. We are now told that Mr Gove wants “British Values” to be taught at all schools. Not only is defining this a minefield, but it is a step away from the “fact-based” principles that he had been so fond of espousing. And how will “real” faith schools, and not just Muslim ones, end up if judged to the same standards as those used in the second wave of Birmingham Ofsted inspections?
  4. Sorting out this mess is going to take a lot of work. Schools can’t in fact be left just to get on with it. They are going to need help, guidance and correction from an intermediate level of officialdom. A newly recreated Blob, in fact.

And so we find that parents are free to choose, provided they conform Mr Gove’s own version of political correctness. It is very easy to understand how the local Muslim community (and no so local ones) feel victimised – judged by double standards from a society that has lost its moral compass.

The government’s reforms are barking up the wrong tree. Here in London we have an outstanding example of how seemingly hopeless schools in deprived areas can be turned round. This did not need the creation of Academies; the existing local authority structures were up to the task. What it is did need was strong and credible leadership. Politicians can lead from on high, but ultimately this leadership has to come from experts who live and breath schools. The country was lucky enough to have plenty of these. But they have been side-lined and pensioned off.

Coalition policy is hollow at its heart, and the last four years have been largely wasted. Even Labour could do a better job than this.

 

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Rethinking Liberalism 1: capitalism

In my last post I suggest that liberalism, and its British variant Liberalism, had lost its way. To many people it does not address the key issues of today, and looks to be a political irrelevance. I want to address this by thinking about how liberals, and British Liberal Democrats, should deal with these critical issues. In my first essay I will take on the burning issue for the political left: what to do about capitalism?

To get a flavour of how some on the left are thinking, read thus piece by David Graeber in last weekend’s Guardian: Savage capitalism is back – and it will not tame itself. Mr Graeber is a self-described anarchist, who wrote Debt: the first 5,000 years, which I reviewed last year. His view is that the capitalists are taking over the political system, and pushing everybody else into effective slavery (though he doesn’t put it quite like that). Stopping them will take more than a bit of polite political debate and a few tweaks to the tax system. He has jumped on the Thomas Piketty bandwagon, appropriating the French economist’s recent book to his cause. He says that it shows how the capitalism is reverting to it natural state whereby the wealthy accumulate the lion’s share of the riches. Mr Graeber is somebody I find extremely annoying. But he says a lot of perceptive things, and he should always be taken seriously – up the point where he runs dry and turns silly.

What do I mean by capitalism? It is best seen as the marriage of two ideas: maximising the reach of open market trade, and a system of private ownership for accumulating gains from trade. Both ideas are initially appealing to liberals.

Let’s start with markets. To many, the use of free competitive markets is the ultimate form of democracy. Consumers choose freely, and the producers must adapt themselves to consumer demand. This idea has currency on the political right, who think markets should replace many functions of government, and reached into Britain’s New Labour project under Tony Blair. There is some truth to this view, but there are limits. There are two groups of arguments against the extension of open markets: those concerning economic efficiency, and those concerning human preferences.

The arguments concerning economic efficiency are rehearsed often. Efficient markets require information and trust; these can be expensive to maintain. This gives rise to the shape of the developed economy, which is dominated by large organisations that are run using command and control methods, not market exchanges, and by strong governments that are required to maintain the institutions that allow markets to flourish, and supervise the delivery of services that markets cannot provide efficiently.

We talk less about human preferences. Market exchanges are of their nature transactional; they require very little of human relationships. Once the deal is done, the parties walk away from each other. The word “arm’s length” is often used to describe the arrangement, with the suggestion that markets will not be efficient unless transactions are conducted at arms length. Such arrangements do little to satisfy many human and social needs. People choose to limit market relationships to only part of their lives. If we lend a friend a hedge-trimmer, we don’t ask for anything in return, still less establish a fair price – because that would be inimical to friendship.

So markets are constrained by the requirements of efficiency on the one hand, and our preference for cooperative, trusting relationships on the other. But, if we allow for these important constraints, free markets are a vital part a modern, liberal society.

But that is only one side of capitalism. But, as its very name suggests, capitalism is about much more than this. It is about wealth and capital. The profits from trade are retained by owners of businesses, capitalists. The capitalists then invest this wealth. To optimists this is a thoroughly benign process: new businesses are created, which help economies to expand and innovate, benefiting all society. To pessimists the wealth is simply used to maximise status and power. In Mr Graeber’s view an important dimension of this is the loaning of the wealth as a means of establishing power over the debtors – a dynamic that has a long history. Both optimists and pessimists have a point.

On the optimistic side, investment and laons in modern society do not lead to enslavement as they used to. Expanding economies provide many opportunities to pay debt back. Furthermore modern legal systems place severe constraints on the power of creditors. They used to be able to cart your children off as slaves, even after your death. They aren’t allowed to nowadays, and there are many ways, through death and bankruptcy, by which debts are extinguished to the loss of creditors. Furthermore, the instruments of ownership, shares and bonds, are mechanisms by which wealth, and power, can be distributed more widely through society. It is the basis on which the middle classes, who form the bulk of a developed society, maintain a degree of independence.

On the pessimistic side, there is a tendency for wealth to accumulate amongst an elite. And for the last generation, it seems that this elite is growing while the fortunes of the middle and lower classes stagnate – one of the central political challenges of our time. There four interrelated sets of problems that should worry liberals:

  1. The capitalist system is creating an elite who are gaining undue political influence, which is tending to perpetuate their own dominance.
  2. The amassing of wealth, only a small proportion of which is invested in new production, is slowly suffocating the economy as a whole.
  3. The poor, and even not so poor, are finding their market power is diminishing, reducing their overall power and control that they have over their lives.
  4. The relationship between the capitalists and their employees, and, all too often, their customers is often abusive and exploitative.

There are alternative ownership models to the capitalistic one: state ownership; cooperatives including customers and/or workers; non-profit enterprises with non-commercial aims. But each of these carries its own disadvantages; it is difficult to see how a healthy economy can work without a large component under capitalist ownership.

So what are my conclusions?

  • The capitalist system remains essential to a modern, liberal society. Without it life would spiral into even greater depths of poverty and exploitation.
  • The capitalist system is only a part of that that modern, liberal society and should be confined to those areas where it is efficient, and where people want it to be. It should be part of a diverse, pluralistic system.
  • There should be specific measures to counteract excessive power accumulated by capitalists, and protection for those vulnerable to exploitation.

So that set’s a general tone. It is different from the hard left, like Mr Graeber, that wants the capitalist system dismantled entirely. It also differs from the far right, that wants the capitalist system extended into further areas of society, and for the capitalists to be given more power over their employees and customers. But it covers a broad spectrum of views, from mainstream left to centre-right. Any distinctively liberal ideas are going to come from precisely how the problems of modern capitalism are addressed. That is where my future essays will go.

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The search for a new Liberal narrative

There is a basic human need to understand the world in terms of simple stories. This is as true of politics as it is for other parts of life. Something that explains how we have got to where we are – and guides us towards what to do next.  These are referred to as “narratives” in the jargon of political marketing. A narrative is a critical part of the political “brand”, another useful piece of political marketing jargon, which refers to what the public understands to be the core elements of a political party or movement. And liberals the world over, but especially here in Britain, are adrift. Here it is brought on by the spectacular collapse in support for the Liberal Democrats since they entered coalition government in 2010, and the way the other parties are veering away from liberal policies. In the European elections only about 2.5% of the British electorate voted for the only avowedly liberal party on offer.

I particularly like this article, The not so strange death of Liberal England, by Simon Radford in Left Foot Forward. I think he articulates very clearly what many liberals are currently thinking, especially those on in the Liberal Democrat and Labour parties. I will draw shamelessly from it as I develop my own narrative of how liberals and Liberals have reached the current dark patch.

Mr Radford suggests that Liberalism (as I will call the political movement which started with the Liberal Party) started in the 19th Century when the key political battle was between landowners and tenants. The state was tilted heavily in favour of the landowners, both terms of trade (particularly the lack of free trade of food) and taxation (little or no income tax). Liberalism was the movement that took the side of the tenants, and free trade was its central organising principle. To this were added the ideas of social insurance, and the birth of the welfare state. It was a long struggle, but the Liberals won, led by Asquith, Lloyd-George and Churchill, before war struck in 1914.

But the game had already moved on. The central drama was now the battle between the capitalists and workers. Liberal policies of free trade did not address this conflict. Instead the Labour movement arose, based on organising workers and forcing capitalists to give up a more equal share of the wealth – through better wages, workers’ rights, taxation and an expanded welfare state. The Liberals faded into irrelevance between the two wars.

Then came what many mistakenly regard as a golden age, after the Second World War. The forces of technology and demographics combined to give steady growth in which the wealth of all advanced. Social democracy was the prevailing wisdom, with a large role given to labour unions. Labour had a strong enough hand to ensure that they a decent share of the gains went to the workers. Liberalism had little to add, although liberal instincts accorded well the optimistic and more tolerant ethos of the times. Many in the Conservative and Labour parties described themselves as liberals.

Then came the 1980s, when capitalists advanced and labour retreated. Some on the left see this as the result of a sinister coup, masterminded by politicians such as Margaret Thatcher, to corrupt a system that was already working well. But the social democratic system was by then collapsing under its own weight, and it did not need much of a push to send it crashing to the ground. The old liberal ideas of free markets and trade came to the fore, and brought forward economic growth, but the process was not led by liberals; state services were neglected and taxes cut. By the 1990s new technology and globalisation were adding to the mix. The hope was that the benefits of growth would spread to all.

But the public weren’t happy with the political leadership. Labour were not trusted because they were associated with the collapse of the social democratic system, in  welter of industrial disputes and stymied productivity, in the 1970s. And yet they disliked Mrs Thatcher’s Conservatives, and their rejection of social solidarity and neglect of public services. Liberalism started to revive. It offered a kinder version of the capitalist system. Tony Blair’s Labour Party managed to capture much of this liberal enthusiasm (calling his ideas a “Third Way”), which, allied with traditional Labour supporters gave him a ruling coalition which lasted from 1997 to 2010 (though he himself had been turned out by then). Although Mr Blair’s “New Labour” was the main beneficiary, the Liberal Democrats prospered too, establishing themselves as a credible third force, in a way that would have seemed unimaginable in the 1950s, 60s or 70s. And it seemed to work; the country enjoyed steady economic growth, the benefits of which were distributed widely – inequality of income may not have been reduced, but it didn’t increased either.

But then came the bust of 20008-2009. It turned out that the growth enjoyed in the Labour years was built on air. They had expanded government ahead of what the economy could sustain, and much of its new infrastructure had to be dismantled. Living standards fell, hurting especially for those on low or middle incomes, while those on very high incomes still seemed to prosper. Worse, the quality of work seemed to fall for the majority, especially for most young people entering the job market. Steady, if mindless, factory jobs were swapped for rootless service ones, often badly paid. Meanwhile the low interest rates required by the sagging economy hit the country’s growing army of pensioners, as bank deposits yielded less and annuities became more expensive. A sour political mood has resulted.

Populist, conservative narratives are taking hold. Globalisation is seen as the problem, and especially two obvious elements: immigration and the country’s membership of the European Union, which is blamed for loss of control over immigration, bad laws and regulations, and excessive subsidies to foreigners. This narrative is incoherent, but it is not my purpose to pick it apart. The problem is that liberals have lost confidence in their own narrative.

Capitalism is not working for all. A minority is raking off profits and amassing wealth, while most of the rest are having to put up with increasing insecurity. But how to replace capitalism, since the usual alternative, state ownership and direction, has proved such a spectacular failure under Communism? The left say that increased state power is the answer. The Labour party has come up with various ideas for forcing capitalist enterprises to behave better. But these are hardly liberal. Liberals dislike the idea of putting peoples’ fates in the hands of wise bureaucrats. And also Labour’s ideas are pessimistic. It’s all about stopping people from inflicting harm, and little about allowing people to better themselves (as this week’s Economist Bagehot column points out).

Liberals are optimistic about human nature. They want to help people to help themselves, and allow them to make their own choices. I think there is an optimistic narrative to be found. It is about taking on both big government and big corporations. Working internationally to curb multinational businesses. Developing more sustainable lifestyles which are more locally based. It means ditching an obsession with economic growth for a broader understanding of well-being.

I aim to develop these ideas further. But it is clear that such a narrative implies some hard choices. It may mean that liberals are unable to accept the compromises entailed in coalition government. But if there are no hard choices there is no credibility.

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