Productivity statistics expose deep weaknesses in theoretical economics

I hadn’t intended to post for another couple of weeks, but this article in the Financial Times is too good to miss. It tackles one of the central issues in modern economic debate: why productivity growth is so slow. Productivity lies at the heart of the conventional view of public policy – and yet it is very poorly understood. This article sheds light on what is happening in the UK – and it should give politicians and economists pause.

Productivity is in principle a very simple idea. It is the amount produced by a unit of labour in a unit of time – the number of widgets per person per hour, for example. This immediately conjures up a clear mental picture of a factory producing cars, say. Count the number of cars produced, and the number of hours of labour required and it is easy-peasy, surely? Alas in a modern economy  it is a much more difficult idea. What if your car factory is producing both Ford Fiestas and Mondeos, and switches to the smaller car? Has productivity gone up if more are produced? And how do you distinguish product enhancement from inflation?  And then there are problems treating capital outputs and inputs, research and development, and so on. In the end the productivity measured across an economy is a bit of a balancing figure, as we accountants would call it – or a bit of a dustbin – what’s left when you’ve taken everything else out. It is just a number relationship without a coherent meaning in its own right. It is not like the concepts that physical scientists are used to dealing with – such as the temperature and pressure of a gas. Macroeconomics is heterogeneous, to say nothing of being subject to capricious social forces that tend to corrupt all attempts at measurement.

Now, what is the productivity puzzle? It is that productivity growth, as measured by macroeconomic statisticians, has slowed markedly since 2008, when the financial crash caused a dislocation in measured income. This applies to all developed economies, but to the British economy most of all – UK productivity growth, according to the article, fell from 1.6% per annum before 2008 to just 0.3% after. This has profound implications, since in the long term productivity growth is what drives income per head, alongside the average hours people work (influenced strongly by workforce participation – such as how many women are in paid employment). And this drives tax revenues, from which public services are funded. Since we assume that quality of life is mainly driven by income, and that public services can constantly be enhanced by extra spending (apart from occasional periods of “austerity”), this has profound implications. Prior to 2008 most economists assumed that productivity growth of 1-2% pa was a law of nature and  main driver of “trend growth”, which could be baked into economic models. The corollary was that weak growth since 2008, and the failure of GDP to catch up with the pre 2008 trend-line, was a failure in macroeconomic policy.

But given the dustbin nature of the productivity statistics, it is very hard to drill down into them to find out just where the problem is – though that there is a problem of some sort is clear. This is licence for all manner of people to project their speculations into a fact-free zone. Mostly these are based on the intuitively obvious idea that the changes to the productivity figures represent trends in the efficiency of workers. Recently Bank of England bigwig Andrew Haldane moaned that the problem was that efficiency was stuck in a rut, especially in a swathe of mediocre firms. He based this on sectoral analysis which showed that the productivity had stagnated across all sectors – with economic growth mainly attributed to rises in employment, not efficiency.

The FT article, authored by Chris Giles and Gemma Tetlow, challenge that. A close examination of the numbers shows that the crash in productivity growth arises from changes in a small number of economic sectors, accounting for just 11% of income. These are banking, telecoms, electricity and gas, management consultancy, and legal and accounting services. Actually Mr Haldane’s and Mr Giles/Ms Tetlow’s analysis can be reconciled. Mr Haldane was taking a general view across the economy since 2008, where productivity growth is now very limited. The FT writers are looking at the transition from before and after 2008. The curious point is why productivity growth was so high in that small number of industries before 2008 – and the realisation that this is what was driving so much of the figures for productivity growth before that date.

And that leaves this blogger asking whether that pre-crash productivity growth – and by implication the pre-crash trend rate of overall economic growth – was in any sense real, other than statistically. In banking we know that in 2008 massive state resources were required to keep the industry alive, and that since then the industry has been much better controlled. This suggests that “productivity” would more correctly be described as “recklessness”. And in each of the other industries you can point to factors that demonstrate that growth was not simply incremental improvements in efficiency. For example in electricity and gas productivity was based on high inputs of fossil fuels and nuclear energy – and the switch away from these destructive sources of power has caused a decline in measured productivity. And how on earth do you assess the output of management consultancy, and accountancy and legal services? The transition may simply be from high margins in boom economy conditions to higher scrutiny when times were harder – or to put it another way, what was supposedly economic growth prior to 2008 was in fact concealed inflation.

All this supports the narrative that I have been promoting for quite a few years about the transition from growth to austerity. This is that the supposed growth of the economy of the early to mid noughties in the UK was down to excess demand, of which reckless fiscal policy was a part  – though you might alternatively argue that it was reckless borrowing by the private sector that the government turned a blind eye to. It also suggests that the lacklustre economic performance of the UK economy since 2008 reflects a lot more than just weak demand management: it is chickens coming home to roost.

This takes me to two very important conclusions. The first is that we have to be very careful about the recommendations of macroeconomists – and the eco-system of commentators and policy types that use macroeconomics as their starting point. The bandying about of aggregate statistics is all very well – but the aggregates hide as well as reveal – and we need to base economic prescriptions on the complexities of the real economy. That is hard, but necessary.

The second point is that overall productivity is indeed stuck in a rut, and has been since well before 2008. It must reflect structural issues in real economy – and not simply laziness amongst mediocre firms or poor macroeconomic management. There is no shortage of potential culprits: demographics; the nature of modern technology; the temporary nature of gains from trade with Asian economies. The world may still be becoming a better place – but because of things that are not captured in GDP, and hence productivity statistics. The problem for public policy is that tax revenues are largely driven by GDP (which is why it is an important statistic) – so we can’t expect an ever increasing flow of tax revenue to fund public services. In the long run we must either reduce the demand for public services (healthier people, fewer crimes, less skewed income distribution, etc.), raise taxes, or compromise what level of services and benefits we think that a civilised state should provide.

And that is a completely new way of thinking about public policy. The political right have grasped this (for the wrong reasons, perhaps) – but the left has not.

The Lib Dems hope that Britain goes Dutch

After a couple of days sightseeing in York, one of England’s most spectacular cities, I want to report back on the Liberal Democrats’ conference held there over the weekend. It ended with the traditional rallying cry from the party leader Tim Farron. He spelled out a bold strategy for the party: to replace Labour as the principal opposition, and then to take on the Conservatives for government. Well that’s not the first time I’ve heard such ideas from a Lib Dem leader’s speech – and the only result has been that the party’s wings melted like those of Icarus when it got too close to the heat of power. Could this time be different?

The Lib Dems are particularly taken by the result of the recent General Election in the Netherlands, and their hopes rest on similar trends being repeated in Britain. Now if your knowledge of the Dutch election was based reporting by the BBC News, and other mainstream news outlets, you might be a little surprised. The BBC pitched the contest as between the party of the Prime Minister, Mark Rutte, the VVD, and the populist-right PVV, a one-man vehicle for its leader Geert Wilders, and his extreme views against immigration, the EU and Islam. The BBC hunted out Dutch working class voters for its vox pops,  giving us the impression of a surge of support, in the manner of that that swept Donald Trump to power in the USA. The VVD meanwhile, though nominally a liberal party, seemed beholden to the PVV agenda, and anxious to sound tough on immigration, engineering a spat with the Turkish government to prove their point. When the VVD ended up with 33 seats, in the highly proportional Dutch electoral system, to the PVV’s 20, the BBC proclaimed the VVD as the winner, and quickly moved on.

But there a 150 seats in the Netherlands parliament, so the VVD and the PVV covered barely a third between them. Elsewhere something much more interesting was happening, which puts the whole picture in a different perspective. There were in fact two main losers in the election: the VVD, which lost 8 seats, though remained the largest party, and, most spectacularly, the Labour Party (the PvdA), which was reduced from 38 seats to just 9. The PVV advanced by 5 seats, but there were bigger winners. D66, the liberal left party most similar in outlook to the British Lib Dems, advanced 7 seats to 19; the Christian Democrats (the CDA), a party not unlike Britain’s Conservatives as they are being refashioned by Theresa May, also took 19 seats, gaining 6; and the biggest winner was the GreenLeft, which advanced 10 seats to 14.

What to make of this? Well it is fair to suggest that Mr Wilders and his PVV has set the political agenda. The CDA did well by coopting some of its ideas, and the VVD managed to hang on with similar tactics. But the two parties that where most vocal in promoting the opposite agenda, of voicing a sense of Dutch identity based on tolerance and being part of Europe, picked up 17 seats and have real momentum. The traditional Labour party was unable to hold together its coalition and collapsed.

And so the implications for British politics are clear. Mrs May’s strategy for the Conservatives, with a lurch to right on identity and social issues, and to the left on economic ones, looks sound enough. The polls show it has a commanding lead, crushing the populist Ukip, and even doing respectably in Scotland. Labour, meanwhile, are floundering – unable to find a formula that holds together its coalition of traditional working class, new working class (including ethnic minority workers) and liberal public sector workers. Its problems are compounded by spectacularly weak leadership, and a sense of political entitlement amongst its membership that makes them focus inwardly, rather than develop an effective political presence in the country at large. And the success of D66 and the GreenLeft shows the possibilities for the Lib Dems, by wearing its liberal and pro-European heart on its sleeve. There should be an opportunity for Britain’s Greens too, but they seem to have lost critical mass. Their move to being a party of the socialist left before the 2015 general election, including the adoption of Universal Income, was probably a major strategic error – and anyway the party seems allergic to clear leadership.

And so the Lib Dems at York went big for being pro-European, promoting a second referendum with a way back into the EU – and promoting the rights of EU citizens living in Britain. Political realists may dismiss this as being silly, but it lights fires. The populist surge, promoted by a hateful press, and supporting a hard Brexit, is generating a backlash, and the Lib Dems mean to exploit it.

But Mr Farron, and the party at large, are starting to look beyond that. That was evidenced by one fudge and one new idea. The fudge was on nuclear weapons. The party’s liberal principles point to unilateral nuclear disarmament, eloquently argued for by many activists. But members at large sensed danger and adopted a fudged policy that will go nowhere. As David Grace, one of those advocating the unilateralist position, rightly pointed out – the party was not afraid of the Russians so much as of the Daily Mail. While intellectually persuaded of the unilateralist line, I personally lacked the courage to support it. It would put off too many floating voters.

The new idea was put forward by Tim Farron in his speech: an economic commission of independent experts to develop new ideas on economic policy. This follows a similar idea on health and social care. This is a step that the Labour leader Jeremy Corbyn started to take and then dropped – no doubt because he feared it would be a hostage to fortune. The time is ripe for new thinking on economic policy, and the Conservative government is heading for some deep trouble, with its over-commitment to austerity and low taxes, not to mention hard Brexit. Tim’s commission cuts across the brief of an internal policy group (on the “21st Century Economy”), which I am planning to contribute to, but this looks like a sound move by him. The party can’t carry a new economic policy by itself.

Tim’s strategy is clear. Develop a core vote based on European identity and a liberal understanding of British values. And then pitch for floating voters, including those that voted for Brexit, based on economics and public services. Could it work? Labour could yet scupper it by dropping Mr Corbyn and going for the right replacement leader. Their German counterparts seem to be having some success with such a strategy. The most convincing alternative leaders are probably David Miliband or Ed Balls – but both are out parliament. Meanwhile the threat of complete collapse remains – the Dutch Labour Party is only the latest in a line of spectacular political failures by traditional socialist parties in Europe. The Lib Dems will still need a lot of luck – but this looks like their best chance.

I do not warm to Tim Farron personally. I am too cynical for his grand rhetoric, and bored of his jokes. But he is proving to be a very capable political strategist – much better than his predecessor. This will be interesting to watch.

 

Labour shows the problem with a core vote strategy

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Last week’s British by-elections prompt me to make one of my occasional posts. It is about the bizarre predicament of Britain’s Labour Party and the wider question this poses for the British left.

The first thing to say about Labour is that I am not a neutral observer. As a supporter of the Liberal Democrats I have endured near continuous vitriol from Labour supporters, especially since the coalition government of 2010. It doesn’t help that these Labourites were right to predict disaster for my party – against my constant efforts to look on the bright side. So I take some satisfaction in being right this time. I cannot deny a sense of schadenfreude. Perhaps it takes a victim of delusion to recognise the phenomenon in others – though to be fair quite a few Labourites are in despair rather than delusion.

The immediate fuss is over Labour’s loss to the Conservatives of the Copeland by-election. For an opposition party to lose a seat in these circumstances is nearly unprecedented. Labour did see off a challenge from Ukip in the Stoke by-election on the same day – but they cannot take much comfort from that. Their vote fell, and they only retained the seat because Ukip and the Tories split the anti-Labour vote between them. It was a bit like the Lib Dem by election win in Eastleigh during the coalition, though the margin was much better.

But this fuss is a bit overdone. The main news politically is that Ukip is on the back foot, and the Conservatives seem to be picking up much of their vote. That’s still a big problem for Labour, though: while seeing off a threat from Ukip, the threat from the Tories has become much deadlier.

But the by-elections are only the start of it. It is Labour’s complete lack of political effectiveness since Jeremy Corbyn took over that is behind the criticism. Labour are totally unable to exploit the government’s difficulties over Brexit – a political gift that most opposition parties can only dream of. Just compare the party’s performance to that under John Smith and Tony Blair as the Conservative government pushed through the Maastricht treaty in the 1990s. Labour was then able to put aside its own differences and ambiguities over Europe to harry the Conservatives to near political death. This was an object the lesson in how to be on both sides of the argument at once – one of the chief skills in politics. Labour could unite pro and anti Brexit forces by rallying round a form of soft Brexit – and using every opportunity in Parliament to make the government’s life difficult. Instead Labour’s opposition sounds like whingeing Islington dinner table chat.

And what about opposition to austerity? The government is pressing ahead with cuts, and seems unable to handle a crisis in the NHS and social care. Schools are now under threat. Austerity was supposed to be the rallying cry for Labour under Mr Corbyn, and the basis of a popular revolt – with determined resistance both inside and outside parliament. Labour was going to employ high quality economic minds to develop an alternative narrative. Instead, Labour contents itself with more quiet whingeing, and austerity has dropped way down the list of politically current issues. The economic thinkers who had been commissioned to help the party have been sent on their way.

And Scotland? There was supposed to be a fightback here – but instead the party has fallen back to third place. At his speech to the Scottish Labour conference this weekend Mr Corbyn undermined the Labour’s Scottish leader, Kezia Dugdale, who is attempting to recapture the political initiative from the SNP with a call for a UK wide constitutional convention. Unable to come up with strong political initiatives himself, Mr Corbyn undermines any attempts to do so from anybody else. Politically Labour has stalled.

But a recent poll revealed something quite interesting. It confirmed Labour’s poor standing amongst the country at large, and the lack of confidence in Mr Corbyn, which is felt by over three quarters of the electorate, with remarkably few don’t knows. But among Labour’s remaining supporters, Mr Corbyn has majority support. His position looks secure.

And this reveals a problem for Labour, and the political left generally, that goes beyond Mr Corbyn’s profound lack of political competence. It is the temptation to retreat into your own comfort zone. For Labour, this process started under Ed Miliband, Mr Corbyn’s predecessor. It took the form of the so-called 35% strategy – whereby Labour was supposed to secure power by consolidating its position amongst left-leaning voters, especially those that had supported the Lib Dems, without having to persuade voters that had voted Conservative. They were relying on the idea that the right of centre vote would be split between the Tories, Ukip and coalition-supporting Lib Dems – and hoping that non-voters would rally to the party too. It left them helpless against a surging SNP in Scotland, and an entirely predictable and ruthless Tory campaign to pressure Lib Dem and Ukip voters in marginal seats.

But the idea of staying within your political comfort zone is enticing. The Liberal Democrats are now taking this up under the guise of a “core vote strategy”. This is designed to attract loyal supporters rather than marginal votes. This is more rational for the Lib Dems than it is for Labour, given how low the party’s fortunes have sunk. But neither party will pose a serious challenge to the Tories unless it works out how to appeal to marginal voters too. And neither will they be able to achieve this by forming some form of “progressive” alliance between themselves, with or without the Greens and the SNP.

And that will mean taking core supporters out of their comfort zone. Just where is open for debate. Conventional wisdom has it that this must mean embracing elements of what the left calls “neo-liberalism” – such as marketising public services and holding taxes and public spending down. This isn’t necessarily the case – but the electorate will not be convinced by the traditional left wing idea of accruing power to the centre and declaring “trust us: we are the people.” Political power is not trusted enough for that.

Personally I think Labour needs to embrace devolution of real political power to regions, municipalities and even neighbourhoods, even when it means passing it to opposition parties. This should involve a new constitutional settlement (just as Ms Dugdale advocates). And it includes breaking up central control of such hallowed institutions as the NHS and national public sector deals with trade unions. For Lib Dems I suspect it means developing a new narrative on rights – and the idea that key economic rights (as opposed to basic human rights) must be earned by contribution and residency, rather than being open to all comers. Also the parry’s doctrinaire line on the right to privacy needs to be rethought for the modern age – it feels too much like yesterday’s battle. Both parties needs to break out of the strait-jacket of political correctness and victim culture – while continuing to promote inclusion. And both parties need to think about a future Europe, rather than retreat into its past.

But once the left moves out of its comfort zone, power is there for the taking. The conservative coalition is not robust, and demographics are against it. Brexit will place huge strains on it. Populism will fail. But, alas, there are few signs that the left yet understands what it needs to do.  It may take another disaster.

Moral outrage against Trump is distracting people from his incompetence

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Donald Trump has made a whirlwind start to his presidency, acting much as he did on campaign. This has provoked predictable moral outrage from liberals across the globe. This leaves me with foreboding. It will not stop Mr Trump, or the political movement he represents.

As a Briton I feel a sense of deja-vu. It reminds me of 2010 when the Coalition government took power and launched an aggressive austerity programme, cutting many public sector jobs, benefits and grants to NGOs. There was moral outrage on the left. I remember screaming protestors at the Liberal Democrat conferences in Liverpool and Sheffield in the year that followed. The Lib Dems were particular victims: they were nearly wiped out at the subsequent General Election, and are only just starting to recover, thanks to the distraction of Brexit.

But all that fury came to nothing. The beneficiaries of the Lib Dem meltdown were their Conservative coalition partners, who gained a parliamentary majority as a result. This led to redoubled austerity and Brexit. The left’s response was then to move into even more extreme outrage, by selecting Jeremy Corbyn as Labour’s leader. This has only made the Tories look even more entrenched. For all its outrage the left has lost the argument amongst floating voters.

The left was convinced that the people were behind them in their anger. And, critically, they thought that they did not have to win over conservative floating voters. They dreamt of two things: attracting disillusioned Lib Dem voters; and getting people out to vote who had not voted before. Both strategies failed. Labour did manage to convert large numbers of Lib Dem voters – but in the process they weakened the party so much that many Lib Dem voters switched to the Tories to keep Labour out. And, anyway, since most Lib Dem seats were Conservative facing, weakening the party tended to benefit the Tories. And inasmuch as new voters were found, it was not Labour that benefited. Instead many disaffected voters turned out for the populism of Ukip, and then to vote for Brexit in the 2016 referendum. There is no army of left-wing non-voters waiting to be mobilised.

The hard lesson from this is that in politics passion cannot substitute for savvy. And it is no use just talking to people who agree with you already. That may boost your own feelings of self-confidence, but it will not help persuade the people who need persuading. Interestingly, this is not symmetric. The populist right have succeeded by stoking up anger, and loathing for “liberal elites” – and not attempting to persuade liberals. Such tactics in reverse are ineffective on the left.

I fear liberals in America are making the same mistake with Trump as the left did with the Coalition. Their outrage at Mr Trump’s actions is certainly justified. But to Mr Trump’s voters, many of them former Democrats, what he is doing must look like a breath of fresh air. A politician fulfilling campaign promises! Urgent action on trade and immigration! That there is a lot of outrage and not a little confusion will not concern them. On campaign Mr Trump was repeatedly outrageous, and that harmed his standing not at all. It doesn’t matter if liberals hate him.

And it will be hard for liberals to win the propaganda war.  There will be successes for Trump. Look at how the motor companies are changing their tune about jobs in the US; and NATO countries are talking more about their defence budgets; the economy looks just fine. And failures can readily be blamed on the usual suspects. Likewise some distinctly questionable handling of conflicts of interest will arouse shrugs: people sort of knew that would happen when they voted for him.

The smart people in all this are the mainstream Republicans, who control both houses of Congress. They are keeping their heads down and taking the credit as much as they can. It is by no means clear that Mr Trump will last the course. He is old for a first-term president; he is not grounded in the ups and downs of politics; an implosion of some sort cannot be ruled out. But the Republicans, and especially with Vice President Mike Pence, will be there to pick up the pieces, and create a more sustainable version of the Mr Trump’s politics that will lock the liberals out of power.

You can’t, and shouldn’t, stop people being angry of course. But opposition also needs to do two things. First is to avoid personal attacks, on Mr Trump or his supporters. Jokes about the size of Mr trump’s hands, or accusations that those that voted for him were bigots or idiots, need to be toned down and reserved for private conversation. Second, which follows, is that the conversation needs to be about competence rather than morals. The Trump administration (unlike the Coalition, by and large) is astonishingly incompetent at actual policy, as opposed to messaging.  To give this criticism credibility it means acknowledging the government’s successes when they occur.

Remember George W Bush. He was the target of a torrent of sneering attacks from liberals – but his power only grew. But when he appeared utterly incompetent in the face of Hurricane Katrina, and then Iraq,that’s when his popularity fell off a cliff. And yet his incompetence had been evident for years before that. I have read a similar account of Italy’s Silvio Berlusconi. Personal attacks did not harm him; scrutiny of his policies did.

So far, opposition to Mr Trump has failed these tests. The president’s executive orders have been badly drafted and are leading to muddle and injustice. But he is able to shrug all this off while liberals indulge in ill-directed anger. While liberals congratulate themselves on the size and noise of their protest marches, Mr Trump’s relationship with his base is intact.

What the left lacks is leadership, both here in Britain and in America. A liberal fightback can be successful. Demographics are in their favour. But they must rally around a clear and competent alternative. Alas none is in sight.

Theresa May’s Brexit moves from tautology to oxymoron but makes the best of a bad job

An oxymoron replaces a tautology. Theresa May, the British Prime Minister is contemptuous of intellectuals that try to weave policies into a wider, coherent narrative. Instead she concentrates on a series of tasks, whose solutions may clash with one another. In her speech on Brexit last Tuesday Mrs May moved her defining slogan on from “Brexit means Brexit” to “Global Britain”. This last expression captures the essential idea that Britain can remain open to the world while being closed to it.

Predictably enough, the media coverage has been beside the point, lapping up the bait left for them left by the spin-doctors, without bothering to question the speech’s real meaning. Last week I said that the government’s strategy would be a hard Brexit via a soft one, with a General Election in between. That, more or less, is what this speech delivered.

The media has focused mainly on Mrs May’s stated destination after the exit process is complete. That was always going to be a very hard form of Brexit, given her insistance on two red lines: control over immigration of EU nationals, and escape from the jurisdiction of the European Court. This is a perfectly fair interpretation of last year’s vote. Some Brexit campaigners painted a picture of a “Norway option” of Britain staying in the Single Market while outside the political Union. But Remain campaigners, including me on many occasions, pointed out that this was nonsense. Mrs May is conceding to this obvious reality. A third red line is emerging: Britain wants to be free to negotiate separate trade deals with non-European countries, like the USA or China. So one of the main points interest of her speech was her hope that Britain could have a half-in/half-out relationship with the EU customs union. This looks very hard, but we can hardly fault it as an aspiration.

But, as I argued last week, the critical issue for Brexit is the transition, and Mrs May did have something to say about this. She talked of a “phased implementation” of Brexit: in other words, a transitional deal. She said very little about this, and nothing about how long the transitional period would be.  That is quite a big door she has left open.  This transition amounts to a soft Brexit for a limited period, and getting progressively harder over the years. This starts in 2019; there must be a General Election by May 2020, which will be quite early in the transition process. Politicians should be focusing on their stance in this election.

The strategy for Remainers who want to put off hard Brexit therefore becomes quite plain. The next parliament must prolong the transition process and renegotiate what comes afterwards. They will be caught in the same logical bind about membership of the Single Market, but they might be able to move the talk on to eventual re-entry.

But to reverse the tide of Brexit will require a shift in public opinion, with a large block of Leave supporters put off by the prospect of hard Brexit. At the moment, though, the acquiescence of Remain supporters looks more likely. This is helped by the behaviour of the UK economy since the vote. There is no sign of a serious economic impact, and forecasters are putting off their predictions of one. The chief economic effect of Brexit has been the lower pound, and this has been doing the job that advocates of floating currencies always maintained it would. Any loss of inward investment put off by Brexit has been made up for by other money tempted by the reduced price of British assets. It may be that property speculation is replacing business development and research, but in the short term what matters is the cash. And British consumers have seen no need to save more and spend less; consumer demand is robust. The balance of payments deficit may even be easing. My sense is that summer holidays in Cornwall are selling faster than usual. Britons may be worse off, but not enough for anybody to be seriously worried.

This is something of a Brexit honeymoon. When will it end? That will happen when, or if, the costs of exit become more concrete, with job losses and travel restrictions in particular. The government will, as it should, try to put these off. There will no doubt be a big focus on protecting the British motor and aerospace industries, which are particularly vulnerable. Skilful navigation of these pitfalls could head off any serious backlash – and if they do the Brexiteers will have won the economic argument, so far as most people are concerned. That may or may not happen, but for now the endless speculations of doom from the Remain camp aren’t helping; it will the fate of real businesses and jobs that will win the argument either way.

But for the time being the focus will probably move away from business. The immediate focus of negotiations will be the terms of Britain’s exit – the divorce settlement, and not the basis of the future relationship. Probably the most combustible part of this will be the status of Britons resident in other EU countries, and vice versa. So far such media attention has focused on people from EU countries living in Britain, who have become embedded in British society. Most Brexiteers feel that they should have full residency rights, but the ability of Britain’s bumbling Home Office to design a bureaucratic process that can deliver this is very much in doubt.

Actually the more politically important case is British retirees who have moved to other EU countries (Spain is especially popular) and dependent on access to local health services. The government hopes that people who moved before a cut-off date (such as the referendum date) can preserve their current status. But the situation is not symmetrical, especially when you look at individual EU members. A deal should be easy with Poland, but what has Britain to offer Spain in return for continuing to look after a community that pays few Spanish taxes and demands increasing care costs? The prospect of thousands of British retirees coming home to use an NHS struggling to recruit foreign staff cannot be inviting.

It is with such matters that the British government will become absorbed over the next two years. It will be a hard slog, but Mrs May’s plodding, practical, task-oriented, anti-intellectual approach may be just what is required. Expect many more tautologies and oxymorons.

 

Brexit makes the Nortern Ireland crisis harder to solve. That should make us worried.

Major catastrophes often arise out the disproportionately small. The First World War arose from a conflict between a second-rate power and a third-rate power over a tiny Balkan province. Some time before Britain’s referendum last year, I and some friends were speculating on the impact of a Brexit vote. I suggested that the it would be so far-reaching that some unforeseen complication might derail the whole process. Somebody suggested that the unforeseen complication was quite likely to come from Northern Ireland. I worry that she may have been right. It is not that I see Brexit being derailed, but I do sense that most people will deeply regret it. And I hope I am wrong.

What put me in mind of this was a bit of long overdue catch-up TV viewing, last week,  of a programme broadcast way back in 2014: The Long Shadow. This was by Cambridge Historian David Reynolds, and it dealt with the legacy of the First World War on subsequent history. In this programme (the last of a series of three) he dealt with the unbottling of nationalism, and the attempt to create states based on a dominant nationality. By 1918 it was accepted that multi-national states, like the Austria-Hungary were doomed to failure, and, indeed, were undemocratic empires.  Austria Hungary was carved up into supposedly coherent nation-states, as was the Ottoman Empire, and much of the Russian empire. But this had dire consequences. The nationalities that the people of Europe identified with (primarily based on language) did not fit into neat boundaries; minorities were everywhere. At first the small states, like Czechoslovakia tried to impose their own nationality on the minorities within their borders, by force if necessary. And then the Germans tried to impose their own idea of nationalism on the whole continent. Perhaps 40 million people were killed.

The European Union was created as a reaction to this. The feeling amongst its founders was that the idea of a nation-state was fundamentally flawed, and that states should be set within a transnational framework that fostered beneficial cooperation. The dilution of national sovereignty was not seen as a regrettable cost, but as the whole point of the exercise. For all its flaws, that remains the founding principle of the EU.

But it is not understood by the English, who have underestimated the European project at every turn. Before the First World War the United Kingdom, the state that the English dominated, was under stress. A highly controversial Home Rule proposition was in progress in Ireland, and the British government was consumed by the growing probability of a civil war there, as the Irish organised themselves into armed camps. So much so that ministers barely notice the emerging crisis in central Europe that was to bring the house down. Home Rule was also proposed for Scotland, and many Welsh were pushing for the disestablishment of the Church. The war seemed to heal these rifts in a common cause, as the nationalities fought side by side. And in Britain that is how things worked out; a Welsh nationalist (David Lloyd-George) became Prime Minister and talk of Scottish Home rule vanished. But in Ireland matters played out in a similar way to the rest of Europe. A civil war broke out, first as Irish nationalists fought for independence, and then within the new Irish Free State. And in Ulster, the Unionists set about imposing their will on the Catholic minority, much as the Czechs had done to the Sudeten Germans. 50 years later this blew up into the Ulster Troubles, in which thousands more were killed. This was brought to an end in the Good Friday Agreement in 1997, in part by using EU institutions to fudge the question of nationality.

The English never understood what was happening in Ireland, which so often upset their plans and their self-image as a democratic, peaceful nation. They just wanted it all to go away. To them the virtues of a nation-state were self-evident. The English had forged their own nation in the Middle Ages as a fusion between the French Normans and the Germanic Anglo-Saxons. The incorporation of Cornish, Welsh and then Scots into the national structure did not pose a serious challenge to their view of nationhood. The English assumed that these nations were assimilating happily enough into a new fusion: the British nation. The EU was looked on as a transaction of convenience, and when it trampled on British sovereign institutions, it rankled. And a so a majority of the English rejected membership.

But by then there was already trouble with this complacent outlook. The Scots increasingly resented how their own sense of nationhood was trampled on by the English. Devolution did not change English attitudes, which was the root cause of the trouble (though the English still think it is about obstreperous Scots). The SNP rose to power and only narrowly lost an independence referendum in 2014. That referendum only enabled the SNP to consolidate its power, as the Labour Party collapsed. The Scots were always more sympathetic to the transnational idea of the EU, and did not see the sovereignty of the British parliament as a sacred gift from God, or the pinacle of democracy, as English conservatives did. No doubt continued membership of the EU was one of the things that persuaded many Scots to vote for the union – and they strongly supported membership in the referendum.

Actually Brexit does not improve the transactional case for Scots independence. It implies separation from critical markets in England without the EU safety net, and at least a transitional period in a distinctly parlous situation. But there’s trouble. The genie of English nationalism is out of the bottle, and it has taken over the Conservative government, whose political future seems assured. This is an us-against-them world view, one of whose dominant concepts is “bargaining position”. Relations with the rest of the EU are seen through this lens; and so is that between the UK and Scottish governments. The English attitude to the Scots is “lump it, you have no choice”; the British government, which contains virtually no Scots MPs, makes no concessions to Scots sensibilities. Even further devolution to the Scots government is probably seen as a way of forcing it to take ownership of austerity. This complacency is not unlike that formerly shown by EU Remainers on membership of the EU.

But at least nobody is killing each other. The worrying thing about Northern Ireland is just how little the politics has moved on since the killing ended. The Unionist First Minister Arlene Foster’s attitude to criticism over some rather dodgy financial goings on is to distract attention by upping the ante on sectarianism; her cohorts are happy to let her do it. The Ulster Protestant working classes are as entrenched in their anti-Catholic attitudes as ever, and this is putting pressure on the Irish Republicans to follow suit. Now the Northern Irish government has fallen – and attitudes are polarising.

The crisis in the province is not about Brexit. But Brexit is making it a much harder problem to solve. Irish Catholics are finding themselves in a country less tolerant of multiple identities, where community relations are seen in terms of bargaining position and multiculturalism is a dirty word. Could a return to violence improve that bargaining position? Meanwhile, most English people would probably welcome a reunification of Ireland as a solution to the many border issues thrown up by Brexit. That could easily push Protestant Loyalists to violence. It’s a combustible mix.

And what makes me gloomy is that I see no political leader in Westminster or Belfast with the vision, stature and charisma to move the nations of the United Kingdom onto a more constructive path. Especially when that constructive path almost certainly requires that the United Kingdom to remain a member of the European Union. But I hope I’m wrong.

The shape of Brexit is becoming clearer. Don’t write Theresa May off.

I’ve given Brexit it a well-earned rest over the last month. It remains Britain’s leading political issue, but the commentary from all sides is completely unedifying. Remainers are mainly just whingeing, angry that we are were we are. I agree, but where next? This lets the Brexiteers off the hook: instead of being forced to be more specific about how to solve the many problems thrown up by Brexit, they can simply moan about the moaning and promote an unconsidered hard Brexit. And this is what most of them are doing, betraying a complete failure to understand the predicament that country finds itself in. Still, a little reflection shows us how things are likely to shape up.

Not that the government is giving us much clue. The Prime Minister, Theresa May is staying tight-lipped, though she has been offering hard-Brexit mood music. This is partly because that is the type of leader she is: she likes to weigh things up in private before committing herself, a characteristic that she shares with the German Chancellor Angela Merkel. That Mrs Merkel is one of the most successful politicians on our continent shows that many commentators are too quick to dismiss Mrs May. I think she could last.

The fact is that the government’s silence is not just a question of Mrs May’s style. There are sound political reasons for it. The Conservatives command but a narrow majority in the House of Commons, and the party is hopelessly muddled on the issue, as are Conservative voters. Any clear declaration of strategy will create a storm. When that time comes the government needs to be ready. Mrs May became prime minister by picking the right moment to attack after years of patient build-up in which her potential opponents each self-destructed. She no doubt hopes for something similar over Brexit.

The eventual strategy will be the product of an alliance of three critical minsters. Mrs May herself, the Brexit minister David Davis, and the Chancellor of the Exchequer Philip Hammond. The alliance between Mrs May and Mr Hammond goes back a long way; they operate in compatible ways. Mr Hammond is putting the soft Brexit side of the argument – about the need to prevent disruption to the economy and to protect inward investment. Mr Davis is an interesting character. He is an ideological Brexiteer, but he possesses an integrity that few of his fellow politicians can match, while remaining an intelligent man. So far these attributes have not helped his political career; he has been too much trouble, and easily outmanoeuvred by smooth operators like Mrs May’s predecessor, David Cameron. Mrs May showed good judgement in picking him as her minister for Brexit. He doesn’t give much away, but from what I have seen, he is steadily working through the different issues and options and weighing the pros and cons. Meanwhile other senior ministers involved with Brexit, the Foreign Secretary Boris Johnson, and the International Trade minister Liam Fox, are showing themselves up to be political lightweights not suited for these difficult times.

Given this background, we can divine what the government’s strategy is likely to be: a soft Brexit leading probably, but not inevitably, to a hard one. First of all the government will push to activate Article 50 of the Lisbon treaty, giving two years notice to formal exit. This needs to be done by March, because that’s what Mrs May has promised. There are sound political reasons for this: first it means that there will be no awkwardness over the European Parliament elections due in 2019; more substantively the formal exit will be completed in plenty of time for the General Election due in 2020. Incidentally, there is no evidence that Mrs May plans to expend precious political capital on trying to get round the Fixed Term Parliaments Act to hold an early election. The Labour Party is stewing nicely in its own juice and this mitigates much of the government’s problem with a small majority. It is highly unlikely that they will stage a recovery by 2020, rather than being completely hollowed out. An election now would be a distraction from the problem at hand.

The problem with an early invocation of Article 50 is that it leaves a cliff face on eventual exit – the so-called train-wreck Brexit. Actually delaying Article 50 may not help by much – the real problem is negotiating alternative trading arrangements, which formally can’t start until after exit. But there is an obvious solution to this: a transitional period after exit. In this period much of the current trading relationship would be preserved, and the UK would continue to make budget contributions. The spectrum of possible solutions runs from full membership of the EEA (European Economic Area – like Norway, Iceland and Liechtenstein) to simply membership of the customs union (like Turkey). The EEA option would be by some distance the simplest solution, but it would involve continued free movement of labour. That is surely a red line for Mrs May (though, I suspect, not for Mr Hammond). She has always taken a hard line on immigration, and seems immune to the economic arguments made for it. The Turkey solution would leave many markets not integrated, with high potential costs to some parts of the economy. She will aim for EEA market access with Turkey levels of free movement. She won’t get it, but that is what negotiation is about.

How long will the transitional period be? My guess is five years (i.e. up to 2024), though her initial bid might be just two. That puts the ball firmly in the court of the next parliament. The government will paint a picture of full exit from the customs union after 2024 in terms that will warm the heart of ideological Brexiteers. In that way Mrs May will paint herself as a hard Brexiteer. But there will be a general election before then, and if public opinion swings away from Brexit, the transitional deal can be made into something more permanent.

That’s what I think. It will remain formidably complicated – but it gives ground to both sides, and she can claim be implementing the mandate from the referendum, while giving everybody more time to think about how a standalone Britain should work. There will be meat for both factions in the Conservative Party – and Mrs May can present herself as a unifying figure. It might even work.

 

The Labour Party is not dying, but it is in retreat

To judge by the stories coming up in my Facebook feed, you would think that Britain’s Labour Party was in its death throes. The party is further away from winning national power than ever, but it is far from dying. Something more subtle is happening.

The chatter arises from the two most recent parliamentary by-elections, where Labour’s vote has crashed. I have written about Richmond Park already – this was a straightforward squeeze to get the Tory out. A week later came Sleaford and North Hykeham – and this is much harder to explain away. This is a safe Conservative seat in Lincolnshire, which voted heavily for Brexit (unlike Richmond Park).  The Conservatives lost a couple of percent in vote share, but Labour crashed by 7% to 10%, from second to fourth place behind Ukip (whose vote share fell by 2%) and the Lib Dems (who increased by 5% to 11%). Various other candidates scooped up an unusually large 11% (up 5%), including a Lincolnshire Independent who took nearly 9%.

The first thing to say about this result is that it is a remarkable victory for the Conservatives, a year and a half into this parliament. While Whitney and Richmond Park showed that pro Remain voters distrust the party, in pro Brexit seats (which are in a hefty majority in England and Wales) there seems to be no problem. It seems likely that they are picking up votes from Ukip, while losing a few Remainers to the Lib Dems. This seems to explain Ukip’s lacklustre performance in what should be home territory for them. But Ukip and the independents clearly picked up votes from Labour.

And thus come the predictions of Labour’s demise. Their lack of a clear message on Brexit, the main issue in British politics for the foreseeable future means that they are being squeezed by both the Lib Dems and Ukip, and will not be able to hold the line between the two. Voters sceptical of Brexit will be attracted to the Lib Dems; enthusiasts for Brexit will be tempted by Ukip or the Conservatives. Meanwhile Labour members’ attention is being drawn by its internal politics, as far left activists led by Momentum, fresh from their victory of re-electing Jeremy Corbyn as their leader, try to take control at all levels, and dictate the candidate selection process. The spectre of the party repeating the collapse it has already suffered in Scotland in England is raised. Amidst all the chatter, though, it was instructive to read Andrew Rawnsley in the Guardian. He describes how Labour veterans are consolidating their hold on the Labour organisation through solid, grassroots organisation. Momentum, an awkward alliance of veteran hard leftists (many expelled from Labour) and younger idealists freshly recruited to politics, is, in fact, losing momentum. Internal splits within the pressure group have been widely reported.

The truth is that in much of the country, Labour does not face a serous political challenge, and in a few places it is mounting a serious challenge to the Conservatives. The threat from from the Lib Dems is grossly exaggerated. The Lib Dems have barely begun to claw back their standing amongst both metropolitan leftists (who will not forgive the coalition with the Conservatives and the breaking of the party’s pledge on tuition fees) and working class voters of all ethnic groups. Richmond Park showed that such voters may once more hold their noses and vote tactically for the Lib Dems, but this logic does not affect areas where Labour is already strong. The Lib Dems seem to be mainly picking up Conservative Remainers – and that may help Labour rather than hinder it. Certainly in the area of London where I live the Lib Dem revival, such as it is, is evident in Tory areas, and there is no evidence of it all in the poorer estates.

Ukip threatens more, with an appeal to white working class voters, an important part of the Labour coalition. Labour seems unable to craft a message that appeals to these voters, or not without upsetting other important parts of the coalition, such as ethnic minority voters and metropolitan liberals. But Ukip is not a well-organised party. It lacks maturity. Furthermore its culture celebrates the awkward squad – the oddballs and angry types – from which it is hard to forge a cooperative team, as can be seen from the farcical attempts to replace Nigel Farage as leader. Liberals have a big advantage here – having a predilection to listen and cooperate. Ukip’s new leader, Paul Nuttall, is rightly focusing on Labour voters, but delivering a credible challenge will be an uphill struggle. They do not remotely present the scale of threat to Labour as the SNP have in Scotland.

And we must remember that Labour remains strong in large parts of the country, particularly London. They have plenty of members, strong local party organisations, and councillors. They have the ability to reach out to voters person to person to establish local bonds of trust. The party was not strong in either Sleaford or Richmond Park, so the results in these seats say little about how the party will perform in its strongholds. Around where I live the party is comfortably winning the local by-elections – and is as strong as I have seen it in 25 years or so.

So Labour is long way from dying. But it does seem to be in retreat in areas where it was not so strong in the first place. The Lib Dems do seem to be picking up here, resuming their role as the main challengers to the Conservatives in rural areas, to judge by a steady record of success in local by-elections (with another good set of results last night). As last week’s Bagehot column in the Economist points out, Britain’s political geography is fragmenting, with the country becoming a patchwork of different political contests. Labour will find it very hard to break out of its strongholds, as Lib Dems, Ukip and the SNP consolidate their hold on other areas.

Can Labour break out of this dynamic and regain a national appeal? It has been done before, in the 1990s by Tony Blair. The party’s current leadership, hopes to do so, with a re-launch promised. It hopes to pick up on an anti-establishment mood, using Mr Corbyn’s  persona and a left-wing policy platform. We will see. Labour’s problem is less its policies than a perceived lack of competence, something that Mr Corbyn’s persona will do nothing to correct. The public may yet be attracted to radical left-wing policies in these strange times – but the platform is being developed in a process of members talking to themselves (which activists optimistically regard as “democracy”) rather than engagement with a sceptical public.

Meanwhile, the Conservatives have little to worry about from Labour. Their main worry is the internal tensions in their party arising from Brexit – a process that will be quite unable to sustain the expectations placed on it. As doubts over Brexit grow, the party’s support is bound to melt. That will be the big political opportunity. The Lib Dems and even Ukip are readying themselves for that moment. There is little evidence that Labour are. But the party is far from dying.

What is the meaning of Richmond Park?

My (many) Liberal Democrat friends are ecstatic. The party has just won the parliamentary by-election in Richmond Park, overturning a massive majority from the sitting MP,  Zac Goldsmith. As the dust slowly settles, what is there to learn about the state of British politics?

Richmond Park is quite close to where I live. I have been visiting it since the 1980s, helping out the local Liberals and then Liberal Democrats, including a few visits this time. It consists of the suburb of Richmond, together with a slice of Kingston, near Richmond Park, nearly up to Kingston town centre, and including the local hospital. The seat, and its predecessors, has been the scene of epic battles between Conservatives and Liberal Democrats. After a series of close results, the Lib Dems won it in the Tory collapse of 1997, with the rather eccentric Jenny Tonge as their MP (she kept testing the boundaries of what respectable politicians it could say about the Israel-Palestine conflict, transgressing on occasion – she has now left the party). She held the seat in 2001, but then stepped down. In the high water mark election of 2005 for the Lib Dems, which gave the party the illusion that seats that could be readily handed on from one candidate to another, the Lib Dems held the seat with Susan Kramer.

But in 2010 Zac Goldsmith, a local boy and inheritor of a substantial fortune, took the seat back for the Conservatives. He held it with a crushing majority (with 58% of the vote) in the Lib Dem meltdown of 2015, though the Lib Dem candidate, Robin Meltzer, managed to hang on to second place with 18% – a feat that could by no means be taken for granted. Many Lib Dem activists sighed and suggested that the influx of rich voters meant that the seat was gone for good.

But Mr Goldsmith was an independent minded MP, who had campaigned hard against the expansion of nearby Heathrow airport – which blights an area that otherwise offers sites of outstanding beauty. This is necessary for anybody that aspires to be an MP there. When the Conservative government under the new prime minister, Theresa May, finally opted to expand the airport, Mr Goldsmith fulfilled a campaign promise by resigning and standing as an independent. But the Conservatives did not put up a candidate against him, undermining his claim of independence.

Notwithstanding the mountain that the Lib Dems had to climb, expectations on the party were high. They had surged in the Witney by election, and a similar surge might take the seat for them. The Lib Dems had been doing well in local by elections (as well as Witney) over the summer, though their national poll rating remained dismal. To prove that that this improved electoral performance had substance, many commentators suggested that it was an election they had to win. All Liberal and Liberal Democrat revivals since 1945 had been led by spectacular parliamentary by election wins. If not here, where was that boost going to come from?

But Mr Goldsmith had clout on the issue that triggered the election: Heathrow. The Lib Dems had campaigned just as hard on the issue, and the government’s decision had proved the party’s contention that the best way to prevent the government from pressing ahead was for a strong Lib Dem party in coalition. Five years of coalition had held off the considerable political pressure for expansion. (Though Lib Dems might want to ask themselves why the party showed backbone on Heathrow, but not student fees). Barely a year of even a small Conservative majority and the resistance to expansion folded. But that’s a subtle argument, and the Lib Dems needed something bigger to shift enough votes their way. And so they campaigned on Brexit. Mr Goldsmith is a prominent supporter of hard Brexit, while the constituency voted 69% to remain in the EU. That did the trick.

What does this mean? Let’s start with the red herrings. First it says nothing about the state of play in Britain’s battle over Brexit. One of the strongest Remain  constituencies voted for an anti Brexit MP. That does not change the calculations for a large majority of MPs, whose constituents voted to leave. What would change the nature of the debate is a large number of Brexit voters changing their mind. With 45% of the electorate still voting for Mr Goldsmith, there was no sign of that.

A second red herring is that the collapse of the Labour vote (they lost their deposit, polling less than their party’s membership in the constituency). This is what happens in this sort of by election, and says nothing about the party’s chances in a future general election. A resurgent Lib Dem party could be a worry, but Labour still holds the aces, and this should not be a problem for a half-way competent leadership. Indeed if the Lib Dems draw off Remain voters from the Tories, it could help Labour. That Labour voters can be persuaded to vote Lib Dem tactically does not hurt Labour at all. The reversal of this trend in 2015 was a disaster for Labour.

The first lesson I would draw is that the Lib Dems have nailed their colours to the pro-EU mast. That seems to cover about a quarter of the electorate, a big enough pool for the party to fish in in its current state. It answers the question “what is the point of the Lib Dems?”, as the Tories adopt Brexit as their own, and Labour collapse into muddle. Those Lib Dems, like me, who are inching towards some form of reconciliation will have to bite their tongues. We need to understand that this is the best way of that the party can demonstrate its open, liberal values and present itself as a bastion against the rise of nativism and intolerance. It does not quite answer the question of whether the party is going for a core vote strategy, though. If the party gets the by election bug they will be tempted to water the message down in pro Brexit constituencies.

The next lesson is that organisation matters in British politics, and that the Lib Dems still have it. It was possible to feel sorry for the Zac supporters, overwhelmed by a blitz of Lib Dem literature and canvassing, while not having adequate data themselves. Many of them felt shell-shocked, and the graceless Mr Goldsmith whinged about being crushed by a machine. This delighted Lib Dem activists. Having been written off in 2015, after being crushed by a ruthless Tory machine, to be accused of being a ruthless machine themselves is a compliment indeed. The party pulled together, mobilising old members and new, in an optimistic, cheerful campaign, led by their candidate, Sarah Olney, who only joined the party in 2015. Both Labour and the Conservatives, with their bigger and better party machines, will take note, and will not be too upset. Breakaway parties, such as some Labour members were contemplating earlier in the year, look as hopeless an enterprise as ever. Lesser parties, including the Greens and Ukip, are presented with a big challenge.

A further point of interest comes from the fact that Ukip and the Greens did not put up candidates, and instead deferred to Mr Goldsmith and the Lib Dems respectively. The former reflects Ukip’s current  turmoil, and the party is weak locally – it has created no debt on the Conservatives. The Greens’ move is more significant. They too were in a weak position, and faced being crushed by the Lib Dem juggernaut, as Labour were.  By pulling out they made a virtue out of this weakness and will have softened the attitude of Lib Dems to do electoral deals with party in future, as part of a “progressive alliance”. Under Britain’s first past the post electoral system this kind of dealing is a logical response that may well take hold. Labour came under quite a bit of pressure from many of its members to do the same. There was never much chance of this from the still very tribal Labour party with its weak leadership – and Lib Dems will be relieved. They do not want to be under any kind of obligation to Labour under its current leadership.

What we don’t yet know about this election is whether it will boost the Lib Dems national standing amongst the public. The media is starting to take the party more seriously, but it will be some time before we have enough polling evidence to tell. What is clear is that the party is in fighting form, and has a much greater political weight. That is good news for supporters of liberal values, for which it is the clearest upholder on the British political scene. If Labour and the Conservatives can take their reluctant liberal supporters less for granted as they face the challenge of the populists, it will make all those efforts by the party’s volunteers worthwhile.

Competence, cosmopolitanism and change. And fewer experts needed forthe liberal fightback

Liberals are traumatised by the Brexit vote in Britain and Donald Trump’s victory in the USA. The margins were very fine in both cases, but that is little comfort. Things weren’t meant to be that close. And more shocks could be to come. It isn’t too late to fight back. But how?

And here there is a lot of confusion. Some want to coopt the tactics of the populists and fight dirtier (like the Guardian’s Jonathan Freedland); others say that we should stick to the issues and avoid personal attacks (take this piece from Luigi Zingales, building on experience with Silvio Berlusconi); others again suggest that we follow a populist left agenda in the manner of Bernie Sanders; or perhaps stick with the centre right (such as France’s Francois Fillon or Britain’s Tony Blair). Or meet the populists half-way by conceding immigration controls and restrictions on trade.

All of these ideas are flawed. One striking feature of both the British and American situations is just how divided the public has become. Accommodating one side of the argument means creating resentment on the other. Bernie Sanders would surely have lost more votes from Hillary supporters than he would have picked up from Trump ones. Recent polling on Brexit voters show that very few on either side have changed their minds.

We should be careful about accepting the populist narrative: that they represent a rebellion by the public against an elite. Most of the people I meet are on the establishment side of the argument, and are passionately opposed to Brexit and Mr Trump. But they are very far from any elite establishment; we are as ordinary in our way as the rebels. And all any political process does is to exchange one elite for another. As Brexit and the Republicans take over, there are going to be just as many angry and resentful people as before – but they will be different people.

Two ironies strike me here. First is that Mrs Clinton was right when she accused half of Mr Trump’s supporters of being a “basket of deplorables”. Saying so was one of the biggest mistakes of her campaign, and it showed a complete lack of political judgement  because it reinforced the idea of a sneering elite. And yet it is hard to see that there will be any reconciliation with people who have convinced themselves that the problem with the US (and Britain) is that an essentially white heritage is being polluted by incomers, and that the country needs to return to the values of the past. But there is the other half of Mr Trump’s supporters, who simply lost confidence in the establishment and just want to shake things up.

The second irony comes from  a seminal moment in the Brexit campaign when leading Brexiteer Michael Gove said that people had had enough of experts – because so many experts were advising against change. And yet the liberal side of the argument was badly let down by experts – or those that were advising their campaigns.  In America those experts has parsed the 2008 and 2012 election campaigns in minute detail and thought they had cracked it. Poll analyst Nate Silver made his reputation by predicting the result with precision in 2012 long before polling day. And yet the expert strategies in 2016 amounted to picking up pennies from in front of a steamroller. They lost the wood for the trees.

What are the experts saying now? They are very quiet, but I think can I guess what they will be saying. Don’t panic. Use the confusion and resentment emanating from the new ruling elites to build up a protest vote. Normal service will be resumed.

Well the Trump administration and the Brexit-supporting Conservative government will offer plenty of ammunition to opponents. But it isn’t enough. The British Labour Party thought it had the Conservative-Lib Dem coalition on the ropes in the years up to 2015 – such was the popular anger against austerity policies. And yet they lacked a convincing alternative, and all they succeeded in doing was pushing Lib Dem voters into the arms of the Conservatives, while being unable to contain the popular backlash in Scotland. Labour are trying something different now, with a lurch to far left – and the signs are that this will be even less successful. The populists are absolute masters of blaming anybody and everybody else for their problems, and they know how to stir up their supporters and create doubts among the uncommitted.

So what to do? I think that three things need to be at the heart of any fightback: competence; cosmopolitanism and change. Competence because that is what people will soon be yearning for, especially in America as the Trump regime takes control. People like the idea of somebody that creates chaos more than the fact. So any alternative must look like a cool, safe pair of hands. And, I would add, because this goes alongside it, somebody that cares about truth, and can admit awkward facts.

Cosmopolitanism because that really is the only way forwards. The genie is out of the bottle. We are going have to get along with people of different nationalities, races and cultures. There is no future in harking back to cultural distinctiveness. We must grow more confident in our own cultures and learn more from others. Ironically even the populists are doing this amongst themselves. If there is anything that unites the half of the population that is resisting the populists, it is a belief, at some level, in cosmopolitanism. Rallying this group is critical.

Well, Hillary was competent (except at campaigning) and cosmopolitan; and that was not enough. We also need to show that we believe in change. We must accept that the establishment orthodoxy of the 2000s was wrong in many respects. The relentless quest for a narrow vision of economic growth and the crushing of human control in the name of productivity and modernisation must end. All they do is enrich a few lucky people. We need a new vision of modernisation that takes to heart that most successful of Brexit slogans: “take back control.” And our experts won’t be much help here: we need new vision.

So we need new leaders that stand for competence, continuity and change, and are able to see beyond the myopia of experts. Justin Trudeau has done it in Canada. Who will do it in Britain and America? Oh how I wish I knew the answer to that!