Is Labour crumbling on Brexit?

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What are we to make of last night’s votes on Brexit in the British parliament? Are we edging closer to a deal in time for 29 March? Or towards a crash out on the same date? Or towards a postponement? You can find advocates of each of these in this morning’s media coverage.

The official Conservative line is this: the victory of the Graham Brady amendment shows that there is majority for the government’s deal if only the Irish backstop can be made to go away. So the prime minister Theresa May will go back to Brussels, and the EU side will crack, in spite of all their protestations to the contrary, because they fear a no-deal, which will disrupt commerce, to say nothing of an advantageous legal settlement, and, not least, leave the Irish border in fog. Parliament will then endorse the revised deal, and scramble to enact the necessary legislation to ensure a smooth formal exit on 29 March.

This is straight out of the backseat driver’s guide to negotiations, beloved of the Tory Brexiteers, who have shown little skill at front seat driving, but remain experts in the backseat variety. I am very sceptical that the EU side is going to give anything like enough ground. The optimists are looking in the wrong place for potential progress. The key is not the EU officials based in Brussels, but the Irish ones in Dublin. If British Brexiteers show little understanding of EU politics, they are experts in it compared to their comprehension of Irish politics. I’m no expert in either brand of politics, and I had been expecting, even hoping for, signs of flexibility in Dublin, given the terrible impact a no-deal would have there. But there is absolutely no sign of it. I suspect that there is a deep-seated mistrust of British (and Northern Irish Unionist) politicians. The Irish seem to like the EU (in spite of the rough treatment meted out to them in the Euro crisis) because it is their best hope of reducing their dependence on their high-handed neighbour. What we are learning in the whole sorry Brexit business is that politics trumps economics. This is as true of Brexit supporters as it is of anybody else – but their leaders seem to think that what is true of them is not true of their Irish and other EU counterparts. But then again, they aren’t worried about a no-deal outcome either. They calculate that if there is severe disruption, public anger will turn on the EU institutions, which will consolidate the grip of hard Brexiteers on the British political system. They might be right.

So is Mrs May’s plan doomed to failure? Actually no. The deeper significance of last night’s votes is that, as the deadline advances, nerves are starting to fray. That is evident in the uncharacteristic unity of Conservative MPs. Only 8 voted against the Brady amendment, and nine abstained. But I think much more significantly there are signs of nerves amongst Labour MPs. Seven voted for Brady and six abstained. That is about double the size of previous Labour support for the government backed approach. Still not big numbers, but is it the growing trickle that suddenly turns to a flood? Furthermore the Labour leader appeared to offer an olive branch to Mrs May by suggesting a meeting, though we shouldn’t expect anything from this.

So Mrs May has reason to hope that, when she comes back from her renegotiation with no more than token concessions, enough Tory and Labour MPs who had previously voted against her deal will either change sides or abstain. There will need to be quite a few, though, as there is little chance of pleasing the Ulster Unionists.

If that doesn’t work, the only hope to avoid a no-deal is for the government to work with Labour on a new deal, moving to a softer Brexit, with a postponement of the leaving date until the summer. This doesn’t look very likely. Even less likely, based on last night, is that a cross-party group of backbenchers will be able to force a postponement of the evil day.

So my interpretation of last night’s votes is that both a deal, close to the existing one, and a no-deal crash, have become more likely, with an exit on 29 March. A postponement, either leading to a softer Brexit or to a referendum are both less likely. And the tension just ratchets up.

What would a new Brexit referendum look like?

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As we face another day of parliamentary chaos over Brexit, talk of a further referendum has subsided. Without Labour throwing its full weight behind it, there are nowhere near enough MPs to give the idea traction. And yet parliament is so split it offers one of the few ways forward if the country is to avoid a no-deal Brexit. So it is still worth giving the idea a bit more thought.

The first question is what should be put to voters? Never mind the exact wording for now, but what would voters be asked to choose between? Referendums are almost always binary affairs (indeed I can’t think of an example of a three way one). Official Lib Dem policy is for the choice to be between the government’s deal, and calling Brexit off altogether. It is hard to see that getting through. Many Brexit supporters won’t vote for the government’s deal because they want a stronger break with the union (i.e. a hard Brexit), and this may well be the view of most of those that voted for Brexit first time round. Excluding this way forward from proceedings would seem like a denial of democracy and make the idea even more poisonous amongst the public than it already is. However a two way referendum between a hard and a soft Brexit would not get the support of Remainers- which would be needed to get the proposal through. A three way referendum between hard, soft and no Brexit looks the best compromise. A more complex set of choices could be devised, but Parliament is more broken than even I think it is if it cannot limit the options to three. 

But what would the hard Brexit option be? The obvious one is leaving without a deal. This idea is gaining traction amongst the public at large, but many people think it is completely irresponsible to present it as a serious option. Even hard Brexit MPs like Boris Johnson advocate it as a negotiating tactic rather than as a coherent policy in itself. But these MPs also see the Irish backstop as an insuperable obstacle, and there looks little chance of the EU side taking it off the table – so no deal may be the only practical way of achieving hard Brexit in the shorter term. I find it very strange that hard Brexiteers on the one hand say that there are viable solutions to the Irish border issue outside the Single Market and/or customs union, and yet fear that the Irish backstop could make a customs union permanent. Still, they are calling the shots on this.

And what of what the of the soft Brexit option? If no-deal is to be put on the ballot paper, then the obvious candidate is the current deal on offer. Both options would then be capable of being implemented quickly (if implementation is the right word for a no-deal crash), and so we could resolve the whole thing by the summer, after which any delays cause a mounting political mess. Otherwise two yet to be finally negotiated options might be presented. Hard Brexit could be based on a Canada type long-term arrangement or no-deal if an acceptable deal could not be negotiated. Soft Brexit could be Norway plus or the current deal as fall back. This would clearly take time to sort out. It is exactly this sort of difficulty that has made many baulk at a referendum in the first place. But the easier ways out have no parliamentary majority. 

So after that has been decided the next question is how to resolve a three-way choice. The first option, used to choose our MPs, is misleadingly referred to as first past the post (FPTP) (there is in fact no winning post: it is all relative). Voters have a single vote, plump for one of the three choices and the one with most votes wins. But that means the winning option may command barely a third of voters, and may be thoroughly disliked by a large majority. It would probably favour the Remain option, as the Brexit vote would be split. So Remain could win while a substantial majority, say over 60%, picked one of the Brexits. The problem with that is obvious, though the British public seems quite happy with it as a way of choosing MPs. 

The obvious alternative is some variant of the Alternative Vote (AV). Voters would rank the options one, two and three (or actually one or two would be fine). If one option did not get 50% of first preferences, the votes of the third placed alternative would be redistributed to second preference. The problem with this method is that it disadvantages the compromise options that might be the least divisive. The compromise option, in this case Soft Brexit, is likely to come third. These voters would be forced to choose between two options each unpalatable to a majority. This method would give Hard Brexit its best chance. 

There is another way forward, which is known as the Condorcet method. Voters have to make three choices between the three pairs of options: Remain/Hard Brexit; Remain/Soft Brexit; Soft Brexit/Hard Brexit. The option picking up the most cumulative votes wins. In this case a form of weighted preferential voting would amount nearly the same thing. Voters choose first and second preferences, as per AV, but the first preference would get 2 votes and the second 1. If voters refuse to make a second preference then their choice only gets a single vote. This isn’t quite the same as Condorcet, where you can vote once for each of the three options, but surely much more accessible. This approach gives compromise options, which attract lots of second preference votes, a much better chance than AV or FPTP. I’m not aware of it ever being used in referendums or elections, though it is familiar in other contexts. It is especially useful for ranking several options in order of preference. 

To get an idea of the effects of the different methods, consider the case of an electorate of 100 voters. 45 want Remain, with Soft Brexit as second preference. 40 want Hard Brexit with Soft Brexit as second preference. And 15 want Soft Brexit with Hard Brexit as second choice. Under FPTP, Remain wins with 45 votes compared to Hard Brexit’s 40 and Soft’s 15. Under AV Soft Brexit’s 15 votes are redistributed to Hard Brexit, bringing them up to be winners with 55 votes. With the Condorcet/weighted preference system Remain gets 90 votes (2 from each of the Remainers, and none from elsewhere). Hard Brexit gets 80 votes from first preferences and another 15 from seconds: making 95. Soft Brexit gets just 30 from first preferences, but 45 second preference votes from Remainers and 40 from Hard Brexiteers, giving it a winning total of 115. Everybody has voted for it as first or second preference, making it a good  compromise proposal. 

Given the divisive nature of the Brexit debate, the weighted preference system looks the most appropriate. Alas AV would be much more likely. Traditionalists who might favour FPTP tend to be Brexiteers and they will not agree to anything that might favour Remain. Remainers tend to dislike FPTP anyway, and recognise that a victory would look illegitimate if it failed to secure 50%. The weighted preference system, on the other hand, looks way too innovative for us Brits. 

The closer you look at the referendum idea, the messier it gets. But the strongest case for it is that it is a last resort, with parliament rejecting a no-deal, but not even close to agreeing any alternative. What a mess we are in!

Britain’s political parties are stronger than MPs: that’s why no-deal is still likely

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I remain one of the few who predict that, following parliament’s spectacular rejection of the government’s deal to leave the EU, Britain will crash out on 29 March. Most MPs oppose such a no-deal, but until they can coalesce around an alternative, no-deal it is. And would the EU agree to an open-ended postponement of the Article 50 date? And as long as Theresa May leads the Conservatives and Jeremy Corbyn leads Labour, no such convergence will take place. Britain’s politics has become dysfunctional. How did we get into this mess?

This week’s Bagehot column in The Economist suggests that Britain might be about to undergo a great realignment, equivalent to that in the 1850s, following the Corn Laws, a free trade measure. Such great figures as William Gladstone changed sides, as believers in free trade were no longer welcome amongst the Tories. And yet people have been talking about realignment since 2015, when Mr Corbyn became Labour leader against the wishes of most Labour MPs. But since then not a single MP has changed allegiance. Instead MPs who can bear their party no longer quietly retire from politics. A new “centre” party has been plotted by MPs for a year at least. I was told by an insider that it would emerge last Autumn. But nothing. MPs feel strongly about Brexit but the chance of this leading to a serious realignment is negligible. At most a couple of dozen will resign from their parties and stand down at the next election. 

The parallel with the 1850s is misleading. The Bagehot columnist suggests that before the realignment politics was split between the Conservatives and the Liberals. And yet neither party was established until after the realignment, partly to consolidate it and partly to bring in more of the public as the electoral franchise was being progressively widened. Instead there were two loose tribes: the Tories and the Whigs. That is a critical difference. In those days party organisations mattered little. Now they matter more than anything. 

Parties bring many advantages. The first is organisation: the foot soldiers and donor networks that are the raw materials of political action. These days this includes data on voters gathered by canvassers and protected by ever stricter data protection laws. This is often critical. When Zac Goldsmith resigned temporarily from the Conservatives to fight a by-election (over Heathrow airport expansion), he was at a decisive disadvantage against the Liberal Democrats, even though he had the not so tacit support of the local Conservatives and was defending a huge majority. He was not allowed to have the Conservative data and he lost, only to regain his seat at the following general election when he had rejoined the party. A second advantage is a national brand, which reduces the need to explain to voters who you are and why they should vote for you. In modern politics this is even more important as the spending limits on national propaganda are much looser than those for individual candidates: even when this propaganda consists of individually addressed mailings just delivered to marginal seats. A further advantage is tribal loyalty. Political parties, especially those that are close to power, are fractious affairs, riven by bitter rivalries. And yet come an election, differences are sunk and all pull together. The far left Labour group Momentum sent its members to sympathetic and unsympathetic candidates alike in the 2017 election, judged solely by how close the contest was with the other parties. 

All these things are very hard to build from scratch. In my part of London a new “centre” party was formed last year to capitalise on disillusionment with the established parties. Not only did it perform dismally in the local elections that year, but afterwards it collapsed into rival factions. The most successful new party has been Ukip, and yet the more successful it was, the more fractious it became; it has now collapsed into farce.  

Add to this picture something else. Political parties are by nature voluntary organisations. For them to work you have to offer members and supporters something. Gone are the days when the simple honour and excitement of working alongside senior politicians was enough. So modern parties offer participation rights: a say in policy and, especially, the selection of candidates. Misleadingly the parties call this participation “democracy”; the form may be democratic but there is nothing democratic about decisions taken by a self-selected group of the more or less like-minded. Political parties were once controlled by their MPs and other senior elected representatives. That is no longer true, though the Conservatives have not gone as far down this route as far as the others – but then they have a membership crisis. 

So realignments led by MPs are very hard to do. You either go through the long hard and uncertain process of setting up a new party, or you join another one. But those tribal loyalties make the latter difficult too.

And that is why it is very hard for MPs to take control of Brexit. Mrs May and Mr Corbyn are about as unstatesmanlike as you can get, but they both place a very high priority on keeping their respective parties together. That is why neither will make a decisive move towards either a referendum or a soft Brexit, the two most viable ways of avoiding a no-deal, though Mrs May got as close to the latter as she thought she could. 

Mrs May feels she has to stick to a series of “red lines” that her party has unified around. These preclude any viable resolution to the crisis. Mr Corbyn fears (not without reason) that any decisive move in any direction would weaken his party, so he simply wants to get through the process and blame the mess on the Tories. To make matters worse, this focus on party rather than the interests of the country is not just a British thing. It affects how Irish leaders are dealing, or not, with the risk of a no-deal. Other European leaders are also showing inflexibility.

Party leaders take the view that what is good for their party is good for their country. For them a catastrophe is not the worst outcome – provided somebody else can be blamed, and that their own party isn’t split asunder. That is no basis for working though a crisis that splits the big parties so badly. Don’t expect our MPs to get us out of this mess.

Britain is heading for a no-deal Brexit on 29 March

If Britain shares a characteristic with the EU it is the capacity to muddle through with a fudged compromise. So I, like most people, expected Brexit to go that way. But after last night’s vote in the House of Commons against the government’s negotiated deal with the EU, I now don’t think that is likely. Like many English people I have underestimated the capacity of Irish politics to impinge on those of Britain.

Why? Let’s think of the possible ways forward. Apart from a no-deal these might be a referendum, a new deal based on a full customs union, or a new deal without the so-called Irish backstop. Last night’s vote showed how none of these are viable.

So why did the government’s deal fail so badly? Firstly the official opposition united against it. The SNP, the Lib Dems and the Green MP all hope for a referendum to end Brexit entirely. They voted the deal down to clear space for that. Labour voted against it so as to keep its options open: the leadership’s main aim is to take power, and to do so it would rather not take up a firm view on Brexit which could alienate a large chunk of its supporters. To the official opposition were added more than 100 MPs from the Conservatives and the DUP. A small number of these (no more than a dozen) are holding out for a referendum. The rest are hard Brexiteers who either do not want any kind of a deal, or who took exception to the Irish backstop.

The Irish backstop is key. The deal as a whole is the combination of a hard legal withdrawal agreement, and a soft political statement of intent about future relations. Alas the backstop, designed to ensure that the border between the north and south of Ireland remains open, is part of the former. Hard Brexiteers seem to think it is a Trojan horse which will allow the EU to impose a customs union on the UK against its wishes indefinitely. Personally I think that’s nonsense: the only way that the UK can stay in the customs union indefinitely is if that is what Parliament wants. Political reality trumps international law. But reason has never had much to do with politics.

What kind of new deal could be negotiated to replace the current one? Not that the EU side will admit that any kind of new deal will be allowed. One option is to build a commitment to the customs union (and single market) into the political part of the agreement, an option referred to Norway plus, because of its similarity to the Norway’s current status (though Norway is not part of the customs union, as it happens, and there are border checks on the Swedish frontier). That would render the backstop harmless or redundant. There are some Conservatives who favour this, but most dislike this approach even more than the current deal, because it would mean no independent trade policy, and freedom of movement for EU citizens. To be viable such an approach would need Labour to get behind it, and even then it would struggle. In fact this approach seems close to the sort of deal that the Labour leader, Jeremy Corbyn, says he wants. But there is no chance that Labour will play ball. The party is in fact very divided and any move to favour any particular solution would open up those divisions and prop up the hated Tory government at the same time. It is hard to see that such a deal could command many more votes in parliament than the 202 that the current deal got.

Hard Brexiteers, like the DUP spokesman and Boris Johnson, the former Foreign Secretary, that I saw being interviewed last night, have another idea. The EU will blink at the prospect of a no-deal and make the Irish backstop go away. That raises two questions: could the EU do this? And if they did, would there be a parliamentary majority for it? The answer to the first question hinges on the Irish government. If they were prepared to retreat on the issue, the rest of the EU would take their lead. But if they didn’t want to, then I don’t think the other EU governments couldn’t or wouldn’t force them too. And this is where I may have got things wrong in the past. The impact of a no-deal could be even worse for the Irish Republic than for the UK; and it would not help keep its border with the north open – so I assumed the Irish would prove flexible in the end. But the Irish prime minister, Leo Varadkar, seems prepared to endure a no-deal rather than cave in to the British. English Brexiteers affect a strange combination of idealistic fervour for national sovereignty with an easy-going realpolitik that assumes that other governments will fall in line because that is in their economic interests. But there are red lines in Irish politics that are not susceptible to realpolitik. The DUP is demonstrating this for the northern Unionist community. For the Irish republic caving into the British interests is another such red line. They will blame the mess on both the British government and the DUP.

But even if the Irish did back down, would that be enough to save the deal? It might add about 70 votes to the government tally when it needs 115. It would not be enough to satisfy a core of no-dealers, and neither the referendum supporters. It would need a number these, together with some opposition MPs, to shift out of desperation. This is such a long shot that Mr Varadkar is unlikely to budge, lest he gets the worst of both worlds: a retreat that fails.

And what about a further referendum? If parliament is as stuck as it is, it might seem logical to put it back to the people. Leaving aside the difficulty of what question to ask, and how many options to offer, I don’t think it will be possible to get a parliamentary majority for it. For all the smooth logic put by the idea’s supporters, a further referendum would be seen as a betrayal by most Leave voters. The repercussions would be terrible for both main parties. The leadership of neither will throw their weight behind it, which means that it would struggle to get many more than 200 votes in parliament.

Could the withdrawal date of 29 March be deferred? The EU is getting ready to do this, but why would they if there is no resolution in sight. And very soon elections to the European Parliament would be upon us, and Britain’s status needs to be resolved by then. The only good reason for a deferral is if there is a referendum – and I don’t think that has enough parliamentary support. If Theresa May came back with substantially the same deal as last night just before the deadline, and got it through, then doubtless the EU would extend the deadline to allow the necessary UK (and EU) legislation to be enacted. But can parliament conduct such a U-turn? The various factions would prefer to blame each other for the impending disaster instead.

Which leaves the prospect of a crash out on 29 March. Could this be Mrs May’s plan (as suggested by a friend on Facebook)? Once the UK crashes out, the Remainers are defeated, as there is no easy way back in. That means that the government can try rallying these towards reinventing the deal to rescue the country from the chaos that is likely to be overwhelming it. And some hard Brexiteers, and their many supporters in the public at large, might be less sanguine about the no-deal environment too. That latter is unlikely though: people do not admit they are wrong in politics, and always prefer to find others to blame instead. Attitudes against the EU may actually harden.

Gloomy stuff, but my optimism has deserted me. Britain’s weak political leadership is mainly to blame – not helped an inflexible EU negotiating approach. And above all the entrenched attitudes of people and politicians on both sides of the Irish border.

Postscript

Interestingly my view that the vote makes a no-deal Brexit more likely seems to be the exact opposite of the conventional wisdom, including from the FT’s lead political commentator and some financial market advice I have been sent. The betting odds of an exit on 29 March dropped to 6 to 1 against. For the first time I have made a political bet, that the UK will leave on that date!

Today’s confidence vote changes nothing. Mrs May’s attempt to engage with opposition MPs is both narrow (no party leaders) and shallow (with a restricted scope). It is not serious. I don’t think either major party leader will contemplate a referendum, which is the only thing that would stop an exit on 29 March, as far as I can see.

The Econocracy – is something rotten with the state of economics?

The Econocracy is a book written by three recent British economics graduates. It had quite a big initial impact, especially about the teaching of economics in universities. But although it rated a chapter in John McDonell’s recent book Economics for the Many,  it looks as if not much is actually changing. Does that matter?

The scope of the book (which is quite short) is broad, combining specific complaints about university tuition with more fundamental issues for public policy. That is both a strength and a weakness. It helps draw people in, but it ends up being rather lightweight as a result. I have identified five main claims, and two main proposals. I will consider each in turn.

Claim 1: Public policy is controlled by a class of economic experts who shape policy choices in a way that is obscure to non-experts. This is the “Econocracy”. These experts try to frame political choices as a technical exercise which only they are capable of engaging in.

This is undoubtedly true. It is one reason that I decided to take an economics degree in 2005 after I left the City. If I was going to make headway in the field of public policy, as I hoped, then I had to master the internal language, and that was based on economics. All experts try to accrue power to themselves by making their field appear technical and mysterious, and this is what economists have succeeded in doing with public policy. But the public largely accepts this. The importance of jobs, pay and tax to our daily lives naturally gives space for experts who understand how these things fit together, or think they do. Making economics more transparent to the public, however, is easier said than done.

Claim 2: Economists operate according to a set of ideas, which should be open to challenge but are in fact a protected orthodoxy. The core of these ideas is what the authors call “neoclassical” economics, based on a holy trinity of individualism (people treated as independent economic agents), optimisation (these individuals act to maximise their welfare, or “utility”) and equilibrium (the interactions between agents settle down to a steady state which remains stable until external conditions change).

This is too shallow for me. The holy trinity of classical economics (and I don’t think the prefix “neo-” adds anything useful) leads to the use of relatively straightforward mathematical tools which can be used in a wide variety of contexts. Orthodox economists use these techniques far too much without question. In spite of what some claim to be a “physics envy”, theoretical economics are stuck in the economics equivalent of Newtonian mechanics, the first law of thermodynamics and Boyle’s law of gases for physics – what used to be O-level in my day. True physics envy would mean that they would be trying to push the boundaries out from this, by looking at non-equilibrium systems, for example. This looks much more realistic for financial markets and monetary policy, for example. Thus far I agree with the authors.

But orthodox economists are more open to challenge than the authors do not allow for. The most important way is through empirical studies of evidence, which takes up much, or even most, of the energies of modern economists. This has its own flaws. Classical economics underpins the theoretical predictions that are tested, and the assumption of IID (independent and identically distributed variables) is not challenged enough. But it does mean that modern orthodox economics is subject to a constant process of challenge that will eventually shift the theory and tackle awkward issues. For example there is now much study of inequality and the “left-behind” – areas that orthodox theoretical models tend to glass over. New approaches grounded on evidence do gain traction – like Thomas Piketty’s ideas on wealth distribution.

Meanwhile the authors seem to be too taken with what they consider to be alternatives to “neoclassical” theory. They list a series of rival theoretical approaches: three flavours of classical economics, Post-Keynesian, Marxist, Austrian, Feminist, and so on. This is a dangerous break from the idea of dialectical process, where new ideas should lead to challenge and synthesis, rather than a series of academics ploughing their own furrows. I can well understand the suspicion of mainstream economists that a lot of these schools are either obsolete (i.e. having been rolled into the modern synthesis) or attempts to bypass proper critical challenge. In the former case a bit like the first law of thermodynamics, and in the latter like climate change denial.

Claim 3: The economic conventional wisdom is rigidly enforced by universities who reject and suppress unorthodox approaches.

I find this very hard to offer a view on. There is a very strong system bias towards the mainstream, and in particular for research ratings and publication data. But how much are fresh ideas being suppressed, rather than flaky approaches (by which I mean people who are not open to their own ideas being challenged robustly) being denied oxygen? Every heterodox economist thinks they are being persecuted, but that by itself does not prove things one way or the other. Some social sciences have gone down the route a fluffy inclusiveness, where academics are allowed to publish their wacky ideas, but others don’t properly challenge them. Researchers submitting spoof papers can make a surprising amount of headway. It would be disastrous if economics went down that route.

Claim 4: Economics tuition is based on a narrow, hollowed out version of the orthodoxy, reduced to mathematical formulae and multiple choice questions. Students are not encouraged to think about their subject in a broader perspective. The current system of university finance encourages this narrow approach. Institutions must both protect their research status, which discourages heterodox approaches, and maximise student numbers while limiting costs, which pushes them towards the hollowed out approach to tuition.

Here the authors are on stronger ground, as they are able to draw on their direct experience as students. This criticism would not be fair of my course at UCL in 2005-2008. Lecturers were careful to relate the ideas they were teaching to the world outside, which was going through the early stages of the great financial crisis. And they did include a certain amount about rival ideas. There were gratuitous mathematics and graphs, especially in development economics, which I found irritating, however. (That may have cost me my first, as I struggled to play the game in my last year). But that was then: before the new university finance system was introduced. The authors paint a credible picture of how pressures on universities are reducing the quality of tuition. Beyond that I find it hard to comment.

Proposal 1: The authors want universities to adopt a more liberal approach to both the ideas and the way in which they are taught, and allow the “neoclassical” foundations to be challenged.

It is surely right on the face of things to support a more liberal approach. The problem is that the universities have responded to complaints with a new curriculum, which the authors reject, asthey still do not embrace heterodox theory. The universities’ reform efforts are being led by Professor Wendy Carlin from UCL. She was both my tutor when I was doing my degree, and the lecturer that I found the most valuable. She kept very close to the conventional theoretical models, but was very skilled, and rigorous, in applying them to the real world. Her criticisms of the Euro proved very apt. I naturally tend to sympathise with her side of the argument on this. I think that the authors are pointing to a fluffy inclusiveness rather than a proper liberal education which includes robust challenge. That may be unfair, but their list of alternatives to “neoclassical” theory does not inspire confidence. Still I think economics should push their curriculums to more essay type discussions, even if they are much harder to teach and mark.

Proposal 2: The authors also want to open up the public policy making process so that it is more accessible to the public and not dominated by obscure technical analysis.

In principle I agree with this, but it will be very, very hard. A lot of economics ideas are counter-intuitive. This is evidenced by a lot popular fallacies which economists rightly see through, such as the fallacy of composition (e.g. a national economy can be run like a household economy), the lump of labour (immigrants take away jobs…), and trade as a zero-sum game. Even trained economists can be led by their intuition into traps, as I think they are doing in most of their analysis of productivity, for example, though another version of the fallacy of composition. It is exactly these counter-intuitive insights that make the discipline so powerful. But they also make the analysis very hard to make accessible. Improving economics education will only make the economically literate a slightly less tiny minority.

It should be easier, however, to expose economic analysis to more widespread challenge from the experts themselves. And their needs to be a broader debate on how impacts of human wellbeing and the environment are accounted for when examining proposals. But much analysis is doomed to be both technical and obscure.

Conclusion

I find that this book disappoints, even as it makes a number of valuable points. Readers of this blog will know that I think there is much that is wrong with conventional economic analysis. But the authors fail to put their finger on where the problems really are, and what needs to be done.

True liberal: I will miss Paddy Ashdown

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Like many I was shocked by the recent death of Paddy Ashdown, the former Liberal Democrat leader, at 75. Having seen him in only September I thought that he had a lot more to give. That’s cancer. He was a very special person.

I only met him a couple of times. The most substantial was early in his leadership in 1989 when he held a reception for local party chairs at the House of Commons. I remember little of our conversation, except that he had that way of giving you his total attention… and then he was whisked on to the next person by a colleague. After that I was in the same room as Paddy many times, but rarely got beyond a handshake. Unlike many of my Lib Dem friends I have no photo of him and me.

I first became aware of him after he entered Parliament as a Liberal in 1983. But his main impact came when he became the first Liberal Democrat leader in 1988, following the merger between his Liberals and my SDP. He was inspirational. His speeches to conference were thought-provoking and inspiring. Looking back on it, a couple of things stand out. First, he really did seem to be in it to promote a cause rather than pursue a successful career. It was typical of him that he saw that the purpose of the party was to achieve real political ends, rather than just being a feel-good place for liberal activists. After saving the party from the oblivion that faced it in 1988 (its standing was even worse than it is now), he therefore engaged with Tony Blair’s New Labour project, looking to a possible coalition. This gave rise to a sort of non-aggression pact which helped crush the Conservatives in 1997 and, with over 40 seats, took the party into the political second division – still the happiest election night I can remember, even though the party lost vote share. The size of the New Labour victory, and ongoing Labour tribalism, meant that coalition was in fact out of the question. But a degree of collaboration with Mr Blair’s government achieved a number of things, especially in the area of electoral reform: establishing a regulatory framework for political parties, which in turn allowed proper disclosure of donations; proportional representation in the Scottish and Welsh parliaments and the London Assembly (and the European Parliament too, though that had less to do with the Lib Dems). The collaboration was quickly dropped by his successor, Charles Kennedy, in 1999, who was much less focused.

A second characteristic was his willingness to engage with people. While he did not have much patience with formal consultative processes, he was very happy to listen to people that disagreed with him. He managed to engage with the party’s conference Glee Club, a notorious hotbed of party whingers, while leader and afterwards. No other leader has come close to managing this.

Towards the end of his leadership the chorus of whingers was becoming ever stronger. Members struggled to keep up with his bright ideas, and he tended to run roughshod of the party’s internal structures. By the time he stepped down the party was ready to move on to a less charismatic leader who would be more comfortable to be around. He then disappeared from party politics as he was awarded tough diplomatic jobs in the former Yugoslavia, especially as UN High Representative in Bosnia. He impressed many with his energy and toughness, though he inevitably attracted snipers. The contrast between him and his SDP counterpart David Owen, who had earlier also taken on an international role in the former Yugoslavia, showed the latter to be a much less effective operator, for all his clever talk. Paddy was nominated to an equivalent role in Afghanistan, but was vetoed by Hamid Khazai, the Afghan president, doubtless because he knew that Paddy would call out the corruption in his regime. That tells you all you need to know about the failure of western policy in that country.

Paddy then returned to Lib Dem politics as an elder statesman, where his role was quite selfless. He supported the party leadership in the difficult coalition years of 2010 to 2015, though he must have had reservations. The then leader, Nick Clegg, then put him in charge of the 2015 General Election campaign. This was not Paddy’s finest hour. He was dynamic and focused, but badly misjudged the Conservative campaign. Whether anybody could have saved the party from its relegation to the political 4th division in that campaign is open to question, but others might have less the party in a less weakened state afterwards.

But the really striking thing about this dismal episode was how quickly he bounced back. Unexpectedly the party’s membership surged after the 2015 election, and grew some more with its unequivocal stance for Remain in the EU referendum. Paddy made it his business to engage with and encourage this flood of new members, which had done so much to encourage him. A new generation found him inspirational.

By 2016 Paddy’s political judgement was much more realistic. A couple of weeks before the referendum he came to visit us in Tooting, where we were fighting a hopeless by election. He was very gloomy about the probable outcome of the referendum: he had seen the writing on the wall. And, he said, if the referendum was lost then exit would almost certainly follow. He said that it was possible that a Leave result could be reversed, in the event of a constitutional crisis, but that would be so bitter and messy that “it was not to be wished for”. How right he is proving to be. Brexit might yet be averted, but the mess that would leave does not bear thinking about, even if it pales beside the mess a no-deal Brexit would create.

Above all I remember Paddy as a liberal whose values I share. A loyal servant to his country, he hated nationalism. He saw that our Westminster-based politics was failing most people, and needed radical surgery. He was not afraid to speak bold ideas, even if many of them did not stand up to close examination. I will miss him a lot.

Extraction to sustainability: Australia is at a crossroads

Bushfire Dreaming (2003) by Ronnie Tjampitjimpa

Every nation is riven by historical tensions that are overlooked by their boosters, and yet come to define them. In Britain, the island’s relationship with the rest of Europe, an especially visible problem now, is just the latest iteration in an unresolvable conflict that has been playing since before Julius Caesar. In America we see the conflict between the individualism and vigilantism of the frontier playing out against a worship of the rule of law. Australia, from where I have returned after a six week visit, is no exception. And it approaches a decisive moment.

The tension that runs through the Australian nation is that between the people who have migrated there and the natural environment and indigenous people they found. Those immigrants are the people that made the Australian nation as we understand it. Before that the continent was a complex tapestry of indigenous tribes with much commonality but no national identity. Those immigrants have treated the land they found as resources to be pillaged for their greater wealth, and indigenous peoples as an obstacle to be cleared. The artist William Ricketts had this searing indictment:

From William Ricketts Sanctuary, Mount Dandenong, Victoria

And yet Australians love their country and all the things that make it unique in the world – its breathtaking series of natural marvels; its unique plant and animal life; the astonishing landscapes; the incredible Barrier Reef. They are philosophical about the dangers they bring: poisonous snakes and spiders, bushfires and so on. They are even coming to incorporate aspects of aboriginal culture, especially its art, into their own identity. (Indeed in my view the work of modern aboriginal artists, like the one at the top of this piece, are the country’s most striking contribution to the world art scene). All these things are part of what it is to be a modern Australian. Ricketts’s diatribe and the reserve it is displayed in are as Australian as an open-cast coal mine.

And yet the culture of extraction remains dominant. Recently the Economist produced a special report on Australia praising what is, in conventional terms, a very successful economy. But dig deeper and a darker picture emerges. This economic record has been driven by very successful export industries in mining and agriculture. In conventional economic analysis these are highly productive. So much so that they have driven up the Australian dollar to kill off a lot of more traditional industries. In the 1980s most vehicles on Australia’s roads were manufactured domestically. Now local motor manufacturing has ceased to exist. But the conventional analysis does not include damage to the environment. This damage is pretty obvious in mining, which destroys whole landscapes, but it is also severe in agriculture. Australian agribusinesses (I can’t call them farms) are highly mechanised and dependent on artificial inputs such as fertilisers. Earth is left bare for long periods, often allowing the soil to blow away (we experienced a big dust storm in New South Wales). Ideas such as soil rotation are for nostalgic romantics. Meanwhile many of these agribusinesses are being bought by Chinese corporations with no stake in the country’s long term future. Agricultural (and mining) run-off is killing coastal eco-systems, including the Barrier Reef. Meanwhile wasteful agricultural use of water (for example in growing cotton) is also placing huge strains on the landscape. The Murray River runs dry before it reaches the sea.

Nobody is more aware of this than the Australians themselves. But the current political leadership, from the Liberal and National coalition, are indifferent. For them the focus is on short term living standards and low taxes. They deny that climate change is anything Australians should do anything about. They readily give permission for new coal mines, even in prime agricultural land. These policies command widespread support, and the coalition’s leaders seem to think that by following Trumpian tactics they can mobilise this support to stay in power.

And yet this may well fail. Australia is no America. The coalition has become very unpopular after they ditched a moderate Prime Minister, Malcolm Turnbull, who sought compromises to face up to environmental challenges. The Liberals were crushed in a recent state election in Victoria. Most Australians, it seems, want to find a different way.

Actually a more sustainable Australian economy should be perfectly feasible. There is plenty of sunshine and wind to produce renewable energy. The masses of agricultural land could easily be farmed more sustainably. Australians are well-educated, technically savvy and commercially enterprising. They could make more themselves rather than import, using modern AI and robotics.

But moving towards such a path would be a shock. It would require a much lower exchange rate, and doubtless a cut to nominal living standards. Are they really ready for it? Perhaps it will require an economic shock. That may happen. Changes to the Chinese economy could weaken the country’s terms of trade. Excessive property prices and personal borrowing may also force a crisis.

Australians have come a long way to facing up to their demons. But they now face some important and difficult choices. Australia’s national identity could be o the threshold of a transformation.