Author: Matthew

The Arab world must find its own way

Two weeks ago I wrote a long essay on Israel, which focused mainly on the Israeli government and its wider network of support. But Israel is simply an actor in a wider drama centred on the Middle East. Today I want to look at this wider drama, and to focus on the Arab world. That is because this drama has drawn in the Western democracies, and we need to see a bigger picture. My main message is that we must find a way of stepping back, and letting events take their course, apart from clear humanitarian interventions.

Who are the Arabs? The narrow definition encompasses the native peoples of the Arabian peninsula, and their descendants, such as the Bedouin tribes that are scattered across a wider area. But I will opt for the wider version, for whom the Arabic language and Islamic religion are the defining characteristics. These are spread across North Africa from Morocco to Egypt, and then through “Greater Syria”, which includes Iraq, Syria, Lebanon, Jordan and Palestine, and then, of course, the Arabian peninsular.

The heyday of these Arabs was an era that I will loosely call the Caliphate, when, in the Middle Ages the Arabs could claim to be the centre of the civilised world. They constituted an empire ruled by people who could trace their succession back to the great Prophet. This empire collapsed, most notably with a Mongol invasion and the sacking of Baghdad in 1258. In due course the Arabs came to be ruled by the Turkish Ottoman empire. This empire weakened progressively through the 19th Century and finally collapsed in the First World War. It was replaced by period of European colonialism of varying degrees (deep in Algeria, largely absent in the central Arabian peninsular). The modern era begins as this colonial rule was shaken off, but succeeded by a series of states whose boundaries were defined by the colonial powers.

Things have not gone particularly well for these countries in this modern era. In spite of their great inheritance, their economic development has lagged. While they do better than the African countries south of the Sahara, Turkey and the European parts of the former Ottoman Empire have mainly done better. They have usually been ruled by strong men in highly paternalistic and corrupt regimes, with or without token references to democracy. Many have been marred by civil war, of which the worst were in Lebanon, Algeria, and, ongoing, in Syria. The western powers have been unable to resist the temptation to meddle, most egregiously with the invasion of Iraq in 2003.

These wars mark a struggle for identity after the Ottoman and colonial eras. This has two aspects in particular. The first is the obvious one that Arab countries want to become strong, prosperous countries, like their European neighbours – but have unable to do so largely through the ineptitude of their rulers. Some Arab countries are very prosperous, of course, courtesy of oil and gas resources. But high average wealth in these countries masks otherwise underdeveloped economies. This underdevelopment has caused frustration and a crisis of confidence.

Enter the second theme: the Islamic faith. The Arab world is not completely Islamic, but Islam is central to their identity. And so, with the failure of secular, nationalist dictatorships, Arab peoples have been drawn to an identity that is more explicitly based on their faith. Fundamentalist interpretations of the faith have been gathering momentum, marked by a return to traditional practices, such as the closeting of women and brutal punishments. Fundamentalism has been promoted by Saudi Arabia, using its oil wealth. This has been based on their highly traditional Wahhabism. But this has spiralled out of their control, as extremist groups, such as al-Qaeda and Isis have taken these ideas to a logical conclusion, but without reference to the Saudi state, which they regard as corrupt and hypocritical. I will call these groups Jihadis. We need to be a little careful here. The Christian equivalent of the Islamic doctrine of Jihad is a crusade. The correspondence between the two terms is rather good – conveying as it does anything from an entirely peaceful campaign to deal with mundane problems like litter, to a full-blown war. Jihad itself is a perfectly functional part of the architecture of Islam that has much positive potential. But not if it translates into eulogising violence, as the Jihadis do.

But the Jihadis are by no means the only form of militant Islam, and Wahhabism by no means the only fundamentalist one. Three other groups are worth mentioning. The first is based on the Muslim Brotherhood, a movement of Egyptian origin which includes Hamas, which rules Gaza and which is propagating war against Israel. This has its origins in the early to mid 20th Century. It has developed highly secretive practices, from generations of evading state suppression. This makes the movement particularly difficult for outsiders to grasp. One of the unfortunate aspects of this is that it impossible to take the statements of their leaders at face value. They have a long record of saying one thing and then apparently changing their minds – something which undermined their credibility when they briefly took power in Egypt under President Morsi. A further Militant movement is based on Shia Islam (all the rest are Sunni); this includes the highly effective Hezbollah in Lebanon. Shias are a minority in the Arab world (though a majority in Iraq), but they draw strength from backing by Shia (but non-Arab) Iran – and this movement is clearly well-led and effective. Finally it is worth mentioning Salafism, a Sunni fundamentalist (but not militant or Wahhabi) movement particularly strong amongst the rural poor cross North Africa. Salafists advocate a return to highly traditional Arab practices, but their methods are peaceful persuasion and politics, not the violence of the Jihadis.

Ranged against this assortment of fundamentalists and militants are the Arab strong men, who seem to be able to rally all those who fear the politicised Islamic movements. They make full use of state structures and institutions, like armies and secret police. By and large they remain in power. But at the cost of corruption, oppression and continued economic underdevelopment.

The problem for us as westerners is that there is almost no room for movements that we find congenial. Ordinary Arabs (to generalise absurdly) seem to see the western powers as part of the problem. Westerners seem both decadent and contemptuous of the Arab Islamic heritage. Their identification with Israel and colonialist days does not help. The fundamentalists see democracy as a means of seizing the reins of power, but not as a thing of value in itself. The strong men see democracy as in a similar but opposite light: a threat to their regimes.

So what are we supposed to do? The strong men are asking us for military support, because they brand the Jihadis as a terrorist threat to the West. They have support within our security services, for whom these militants are seen as the main enemy. And yet the Jihadi threat to the West seems to be diminishing. They gain little from their terrorist assaults in Western countries. They would rather their recruits came to the Middle East where the real war is being waged. Excessive Western involvement simply increases the flow of recruits. Now that our troops are finally pulling out of Afghanistan, the Western effort should mainly focus on propaganda – to show disaffected Muslims that these wars are brutal affairs that are not their business, and to persuade them of the opportunities they have as constructive members of our own societies. We need to move away from the idea of war. Funnily enough, the media savvy of Jihadis like Isis is playing to our advantage. It is easy enough to use their own material against them.

Is there hope? I think there is. As the Western powers withdraw, it is becoming clearer to Arabs that their problems are largely of their own making – and that a culture of victimhood, however much it is apparently justified, is getting them nowhere. Fundamentalist and militant Islam is step in the wrong direction. They need to forge a new understanding of the Islamic religion that is more workable in the modern world, but still confident of its heritage. One that embraces democracy, accepts diversity and celebrates the equality of women. We might call it liberal Islam. But we liberals have to be very careful. The Arab peoples need to feel that these ideas are a natural progression of the Islamic faith – and not an import. We can’t help them with that. Something like this a slowly taking shape in Tunisia, and we have to wish them well. I firmly believe that the tenets of Islam are susceptible to this form of interpretation.

The Western world must stand ready to provide humanitarian support for the inevitable series of disasters that the region faces. We should provide logistical support to any efforts that promote a peaceful resolution of conflicts. But we should back off from military interventions and seeing the Middle East as one front of a “War on Terror”. It will take time, but the Arab peoples really need to work this one out for themselves. And the sooner they understand that their fate is in their own hands, the sooner any resolution will arise.

Rethinking Liberalism 7: what are the liberal blindspots?

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I started this series of essays because I thought liberalism, to say nothing of Liberalism, was at a low ebb and needed some fresh thinking. I started with the easy bits. Big questions, like the future of capitalism, but not ones that make liberals particularly uncomfortable. This is an old strategy to deal with something big and difficult. If you clean up the easy bits first, what remains looks less intimidating. But I have been a bit underwhelmed with the results, which are well within the spectrum of ideas that are regularly discussed by liberals. After a few weeks break, including a refreshing holiday, I think it is time for a change of direction.

All political philosophies have difficult bits: areas where the principles conflict with each are, or seem inadequate in the rough and tumble of the real world. Socialists want to clamp down on businesses to stop exploitation, and yet crave the tax revenues that will only come if you give businesses some serious rope. Conservatives yearn for a less intrusive government, but are annoyed when they find this gives people the freedom to behave in what they see as antisocial ways – and on which their views tend to be very narrow-minded. Liberalism is no exception. Liberals have blindspots.

I call them blindspots because most liberals behave as if these difficulties aren’t really there. Many have created a sort of alternative reality in which these problems don’t arise. Or they simply change the subject. But this is damaging in two distinct ways. First, it means that we don’t talk about many issues that bother people, and are therefore perceived to be weak or lack credibility. Second, when liberals do get their turn in government, and have to confront these intractable problems, liberal ranks are torn apart. The pragmatists are seen as betrayers of liberal principles; the fundamentalists are seen as people who will not come out of their alternative universe to confront the real world. The British Liberal Democrats in the last four years are a case study in both of these phenomena.

But even identifying what these blindspots are is hard. Because we rarely talk about them in any depth. We seem afraid of what we might find if we do. But this blogger is not running for electoral office, and so should be less frightened of tackling difficult issues. I think my time in this series is most constructively spent identifying and discussing these issues – in the hope that liberals can, in due time, work their way through them to an updated political philosophy. I feel a bit inadequate to the task. I have not read great tracts of John Stuart Mill or even Conrad Russell. But then, maybe spending so much time reading great men can be part of an evasion process.

Anyway, today I will make a start. It is time to move from the abstract. What are the liberal blindspots? Here are few problems to get us going:

  • Dependency. Liberals feel that people should have equal chances. Poverty is usually not a choice, but stems from some form of bad luck. So we offer help to redress the balance: cash handouts, subsidised housing, and so on. But very often this help creates a relationship of dependency between those being helped and the state. This does not worry socialists – but it does worry liberals because dependency is disempowering; it reduces freedom.
  • Free riding. Liberals like rights to be unconditional, since that gives individuals the maximum power. But that creates the opportunity for free riding: people who take but do not give back. Since many rights (health care, education, minimum housing standards, etc.) cost money, the opportunities for free riding are manifold. Progressive taxation, asking the rich to pay more, makes things worse. Free riders not only undermine the financial viability of entitlements, they undermine the sense of community solidarity that underpins unconditional rights.
  • Oppressive communities. Liberals like the idea of strong local communities. These balance the need for a strong central state. They give individuals more weight, and a greater sense of control. Members of strong local communities are generally happier than those of weaker ones. The word “community” even gets into the preamble to the Liberal Democrat constitution – the place that the party’s core values are set out. And yet strong local communities are not liberal, open places. They often  promote uniformity and are hostile to outsiders, especially those from other cultures. For many liberalism is a reaction to the oppressive nature of strong communities.
  • Multiculturalism. This is closely linked. Often immigrants form strong local communities that don’t gel with their neighbours, and challenge liberal values. Conflict often ensues. This is a worldwide problem; neighbouring communities from different cultures may live side by side in peace for a long time, and then there is an explosion. The mechanisms of liberal democracy don’t seem equal to the task. And yet forced integration is illiberal.
  • Fighting crime. There are bad people out there, who have no interest in promoting a prosperous, inclusive society. They want to steel our money, or even kill us as participants in some imaginary war. These people adapt quickly to the modern world. But liberals often seem more interested in theoretical notions of privacy belonging to a different age.
  • Postcode lotteries. Universal rights create expectations that vital state services should be more or less the same everywhere. Strong local democracy suggests that different local communities should be able to make different trade-offs that match their own priorities and preferences. But this creates variations that are derisively referred to as the “postcode lottery” – your actual entitlements to universal rights depending on where you live.
  • Managing businesses. Businesses are at the heart of our society; we don’t just need them, we need them to be prosperous and innovative. This is at the very heart of any strategy to combat poverty. But liberals often see businesses as a threat, to the welfare of their employees, their customers or anybody that gets in the way. Liberals dream of cooperatively owned businesses, grounded in their local communities. And yet, valuable as such businesses may be, they do not provide a credible template for the majority of forward-looking enterprises that society needs.
  • Migration. Migration of people from other countries provides a flashpoint for most of the issues already mentioned. And yet it is undoubtedly a dynamic force, and a vital escape valve.

I’m sure I could go on. The agonising of liberals over events in Iraq and Israel shows liberals in a bit of a post-colonial muddle – though that affliction is hardly unique to liberals. Still we have enough to get started.

Just looking at the list of problems, I think a can see the outlines of a more general one. Liberals paint a picture of an ideal society, based on Goldilocks local communities with just the right amount of cohesion. We want all countries to follow that idea. But we also believe in universal rights; a fundamental equality of all people. And yet many of these people want to use these rights to take themselves and society in a different direction. Perhaps they have an alternative ideal; perhaps they just want to promote themselves in what they see as a rat race. We are getting to two muddled – the society we are trying to create, and the what should apply to everybody in the diverse here-and-now. And we do not address the issue of how a liberal society coexists with others made up of people who have freely chosen something different.

In this light liberals need to rethink their cherished framework of universal rights. That is what I will attempt in future essays. I’m feeling uncomfortable already. Good.

Don’t blame Tony Blair for rise of ISIS

The rampages of the ISIS terrorist group (also known as The Islamic State) have taken the lead in our news, pushing Gaza and Ukraine down the agenda. They present a truly chilling spectre as they murder or push out anybody that does not adhere to their religious doctrines from the territory they control. Many thousands of Yazidis and Christians are at risk. And, faced with the horror, people want somebody to blame. The Left want to trace this back to 2003 war in Iraq, started by President George Bush, with our own Tony Blair as his principal cheerleader. That is muddled and unhelpful.

That war was ill-advised, and usually considered to be against international law, which some value more than others. The premise was that Saddam Hussein was a threat to international security, and a brutal dictator; he should be replaced with something more congenial. But the level of threat posed by Saddam was woefully over-estimated, and the western powers had no well grounded plan to replace him, and chaos resulted. ISIS grew out of that chaos. That much I can agree on.

But it is too much to suggest that Messrs Bush and Blair are the main cause of the rise of ISIS. Consider three arguments:

  1. It would have been only a matter of time before Saddam’s regime collapsed. And that would have led to chaos anyway – as the Shias tried to take over, backed by Iran, and the Sunnis fought back. This is what happened in Syria after all, without any helping hand from the western powers.
  2. Indeed the collapse of Syria is what gave ISIS their head start; they used Syrian territory as a base from which to attack Iraq.
  3. When the US withdraw, they had engineered a sufficient reconciliation between the Sunnis and Shias, so that the former were not open to recruitment by ISIS.

In fact if you are looking for blame there are two factions or powers that come further up the list than the western powers.

First there is the Iraqi Prime Minister Nouri al-Maliki. In a bid to consolidate his personal power, he dismantled the Sunni-Shia settlement, and weakened the Iraqi armed forces. Only his personal power base matters to him. He did this in spite of advice to the contrary from the US.

Second there is Saudi Arabia. They have used oil money to promote their intolerant and traditionalist Wahhabi version of the Islamic faith – in opposition to more tolerant forms that had previously prevailed through much of the world outside Arabia. ISIS have simply taken the logic of Wahhabism a few steps further; they are not backed by the Saudi state, but they do attract money from rich Saudi individuals, and those inspired by Wahhabi teaching. While the left rages about how close the US is to Israel, they seem strangely silent about the relationship with Saudi Arabia, a country whose influence on world peace is highly corrosive.

People in the West, especially the left, seem to indulge in a sort of post-colonial arrogance. They assume that everything that happens in the world is the responsibility of the western powers, and if something bad happens, they look for western politicians to blame. But the rest of the world has a life of its own. The peoples of developing world nations should be taken seriously in their own right, and treated as responsible for their own actions. The colonial days are over.

ISIS are one dimension of a world that is taking shape outside the control and influence of the western powers. They are a thoroughly modern movement, in spite of their references to medieval practices, such as beheading opponents and marginalising women. The original Caliphate was much more tolerant – and indeed many of the communities now being liquidated are survivals from that time. But they seem to strike a chord with many angry people across the world. In due course ISIS and movements like it will collapse under the weight of their own contradictions. Personally I find the complete inability of mainstream Arab countries to establish decent, effective state structures a much more worrying phenomenon.

 

The unfolding tragedy of Israel/Palestine

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It has been a terrible few weeks in Israel and Gaza. My Facebook account is full of people condemning Israel’s bombardment. A lesser number of commenters try to defend Israel’s actions. I am not planning to join this chorus of condemnation. I want to take a step back and look at what is happening, and ask where it is all heading.

What about me? I am not Jewish. I had a lot of Jewish friends at school in the 1970s, where I was highly sympathetic to Israel. In 1979 I volunteered for a few weeks at a kibbutz on the border with the Gaza strip, and took the opportunity to visit the city. I have friends who are both Jewish and Muslim, and I like to see the best in both traditions. In this drama I have identified more easily with the Israelis, who seem to be people more like us, than with the Palestinians and their tendency towards darker versions of the Islamic faith. And that, more than anything is why this post examines the actions and evolution of the Israeli state rather than its aggressors.

It seems to me that Israeli policy has three foundations: the primacy of force; identity with the West; and permanent ambiguity over resolution. Until now, this has been very successful, whatever one thinks of the morality. But it is looking less and less sustainable over the long term.

Might is right – the legacy of the great betrayal

Let’s start with the primacy of force. In Europe, after generations of appalling wars and murderous dictatorships, we are hardwired to think of the  peaceful resolution of problems, using the rule of an emerging international law. We believe that it is always better to try and build long term relationships based on trust, and respect legal principles in spirit as well as letter. Failed military interventions in Iraq and Afghanistan reinforce this prejudice. It is easy enough to challenge this bias as naïve. When we bump into countries that play to different rules, like Russia, we find ourselves relying on America.  But the feeling runs deep – and we are internally consistent. When the IRA started to bomb London, we did not send assassination squads in to kill Gerry Adams or Martin McGuiness, still less send in the RAF to bomb Sinn Fein premises in Dublin. We did use military force, but we agonised of its propriety, legality and proportionality.

Israelis have never shared this European bias, drawing different conclusions from the same historical events. To them the overwhelming sense from European history is betrayal. Jews trusted the non-Jewish mainstream in the 18th and 19th Centuries, when so many of them integrated into mainstream society, and trusted to the basic principles of a civilised, rules-bound society. They were betrayed. By the Russians, the Germans – and in different degrees by almost everybody else. Jews were dispensable when the going got rough.

And so, after the War and the Holocaust, the Zionists said “Never Again”. To them that meant self-reliance, and a prejudice to use military power when they had it to protect themselves. Legal principles could be used when convenient, and ignored or bent when not. I need to be very careful here; Jews, including Zionists, are as keen as anybody to support societies based on the rule of law, and in Israel non-Jews have effective legal protections which far exceed those of neighbouring societies. But in Israel the primacy of law seems to have been trumped when it comes to what they see as the existential interests of the national as a whole. [The italicised section replaces a piece of sloppy writing which understandably created offence in the original] The Israelis never trusted the international community in the UN partition in  1948, and simply took what they were able to – under attack from the Arab powers. And so it has gone on.

Back in the 1970s this looked plucky, as Israel “created facts” that the ponderous international community had to put up with and negotiate on. But after the country established complete military supremacy, it took on a more sinister aspect. Assassination continued to be part of national policy; reprisals became increasingly disproportionate. The use of force seems to have replaced all other ways of solving security problems. This doesn’t just take the form of occasional violence, but it also means placing physical constraints on Palestinian communities in Gaza and the West Bank – walls, checkpoints, economic restrictions. To Israelis these are simply pragmatic solutions to a security problem. To others it looks much more sinister.

“People like us” – the West’s front line

The second foundation of Israeli policy is relentless propaganda in the Western democracies, in Europe and America. From this they have forged a massively important military alliance with the U.S., which supplies it with weapons and logistical support. The central tenet of this propaganda is that Israel is part of the extended family of Judaeo-Christian peoples (an adjective probably invented for the purpose) – part of a great “Us”. This is placed in contrast to the hostile and foreign Arab states that surround it, who were at first portrayed as allies of the Soviet Union, and then part of the Muslim terrorist threat – but always an alien “Them”. This has some grounding in truth. Israelis, by and large, are much closer to us in values and institutions than the Arab countries. These have never been proper democracies – and as their peoples are increasingly attracted to fundamentalist visions of the Islamic faith, they become even more alien to us. Israel is presented as a “bulwark” against this alien world.

The propaganda machine has been relentless in its efficiency, supported by Jewish communities embedded in European and  American societies. Critics of Israel are accused of anti-Semitism, and are driven to the fringes of mainstream media and political discourse. “What would you do?” Israeli spokesmen ask – presenting their country’s reactions as a proportionate response to a security threat. Over time its targets might feel the messages are bit like those of a spoilt child. Everything is always somebody else’s fault. You believe them the first few times, but the inhuman monotony of the message leads to scepticism. Also the refusal to engage in serious strategic reasoning or any concept of unintended consequences is wearying.

But the proof of the pudding is in the eating – and success of this messaging in America is quite staggering. It helps that many Americans don’t share Europeans’ distaste for the use of force. And while Americans are more attached than most to the rule of law – it is only American law that they really respect. International law is viewed with suspicion.

Permanent ambiguity

It is natural for policy makers to look at Israel’s situation of tension with its Palestinian population, and the world in general, and look for some kind of long term resolution. There are basically only two open to respectable policymakers: the single state and the two state solutions. In the former, the Occupied Territories are incorporated into the Israeli state, and their Arab residents are accepted as full citizens. In the second, the territories are divided, with a Jewish Israel and an Arab Palestine. Neither solution is acceptable to the Israelis. In the first case the status of Israel as a Jewish homeland comes under threat – and besides the legacy of war and mistrust presents an insuperably obstacle. I can’t think of a successful case of two such different but numerically equivalent peoples coming together in a single successful polity. But the two state solution is little better in most Israelis’ eyes. No division will satisfy the Arab hotheads, and the two states would drift into a state of mutual hostility and war. To most Israelis, the withdrawal from Gaza has proved the point – it has made the security situation worse, not better. And we haven’t even mentioned dividing Jerusalem or recognising refugee rights – which could lead to rebellion and armed conflict within Israel itself.

So the solution for the Israeli state is to maintain the current ambiguous status quo, where most Palestinians are effectively stateless, and where Israel remains in effective control of the territory. Peace plans come and go; it is not difficult to play along with them and sabotage them in due course, with the Arabs taking the blame. Meanwhile settlement of the West Bank by Jewish communities slowly but relentlessly continues. This is not good for the Palestinians, but that is simply not a factor that weighs in the calculations.

Israel’s critics often complain that the country has lots of tactics but no strategy – that they win battles but lose the war. But Israel’s leaders are a clever bunch, and they are advised by even cleverer people (including top game theorists) – and they are focusing on an existential problem. (The word “existential” comes up a lot in Israeli discourse – no doubt to distinguish their debates from the dining table discussions of Western liberals). They have simply decided that the best long-term solution is to have no long-term solution.

And things fall apart

Israel’s strategy had seemed to be working fine until quite recently. Israeli citizens continued a normal, suburban life without too much disturbance. The progressive collapse of neighbouring Arab states reduced the threat from that quarter. The security measures against terrorists seemed be doing their job. But now the pressure on Israel’s grand strategy is growing.

First, living with and containing the threat looks much more difficult than expected. The strength of Hamas is a bit of a shock: not just the sheer quantity of rockets that they managed to build up under the blockade, and keep using under threat – but the discovery of so many tunnels to aid future attacks. Instead of responding to Israel’s punitive tactics by abandoning terrorism, Israeli pressure has made their enemy more resourceful. And the civilians seem to feel they have nothing to lose by giving them tacit support. They do not believe that Israel will ever reward better behaviour. Israel are not the only ones to take on the logic of an existential war, where the ways of violence must take precedence. Israel’s operation may have secured Gaza for the time being – but at a greater cost in Israeli military lives than the threat warranted. Can they really keep on doing this every two or three years? And what if West Bank and Israeli Arabs start to take up the cause? Another problem is that dismantling the Hamas organisation, even if it is possible, only presents the threat of its replacement with more extreme and fragmented versions of it.

Second the propaganda offensive is losing its effectiveness. There are two problems. The first is specific to Europe. Many European countries now have significant Muslim populations, whose political weight is growing, and who the political mainstream are trying to integrate rather than isolate. These Muslims are taking Israel’s actions in Gaza as a rallying point, and uncommitted liberals are joining in, glad find an issue where they can build bridges. Unfortunately for the Israelis, appealing to this Muslim audience is much harder than the mainstream one, and they are making no serious effort. Indeed, victims of their own propaganda, they tend to see these people as part of the great “Them”. Europeans appreciate the threat of Islamic extremism – but Israel looks more and more to be part of the problem and not the solution. Talk of it as a “bulwark” seems nonsensical.

The second problem arises from the freedom of social media, which is increasingly how younger people get their news. It has proved impossible for the Israeli machine to muzzle or counter the sheer volume of unhelpful comment. Worse yet, angry posts by Israelis and their supporters wishing ill to all Palestinians get an airing, undermining the country’s carefully crafted image of injured innocence. Israel is losing the propaganda war amongst the young, even in America. And even Jewish citizens are questioning Israel’s actions. Politicians in Britain are much freer to criticise Israeli policy than at any time I can remember.

Where is this going?

So if Israel will need a new strategy, what might this be? The first thing that we can rule out is a move towards some flavour of peaceful reconciliation, in two or one state flavours, beloved of Western liberals. The opportunity for this has passed. Israel may be losing the propaganda war with the public in the West, but it commands the overwhelming support of its own public. Remember that these are no longer largely made up of European exiles – but of refugees from places with no record of liberal values (Russia, Syria, Iraq and so on), or who have grown up in Israel itself in a state of siege. The first pillar of Israeli strategy, reliance on force, is going to stay firmly in place.

But Israel may look for new allies who have fewer scruples. They are losing European nations; America may start to become more reticent. But there are alternative partners outside the West. The BRICS (Brazil, Russia, India, China, South Africa) are notably pragmatic in their outlook, and surely open to military and technological cooperation. Russia, China and India are also open to “robust” policies to tackle Muslim extremism. Israel’s attack on Gaza is a picnic compared to Russia’s suppression of Chechnya, after all. Israel has to tread carefully, as the quickest way of ending the US alliance would be for Israel to sell its military secrets to these emerging powers. But the opportunity is there. Israel may become less appealing to Western liberals, but they matter less in the new multi-polar world.

And that brings with it the possibility of some kind of final solution to the Arab problem: annexation of the occupied territories and expulsion of the Arabs living there. So far outside commentators have viewed this possibility as unthinkable, even for Israelis. But a growing body of Israeli opinion openly advocates it, and doubtless the rest is persuadable. And who will stop them and how? I can’t see this happening soon, and doubtless it will require further provocation from the Arab side. But if Israel can’t live with the Arabs, it will live without them. As chaos overwhelms Syria and Iraq, and Russia gets away with annexing Crimea and arming Ukrainian rebels, this solution starts to look less outlandish. This does not look like a world where liberal norms apply.

What can we do about it?

We probably cannot do much more about this than to watch and cry. But there is some value in Western liberals saying what we think the way forward should be, even if nobody outside our own societies is listening. We must show our belief in a better way.

The first thing we need to say is the Palestinians should drop their obsession with weapons and armed resistance. This just makes Israel’s final solution possible – and nobody is coming to their aid. They need to develop a line of peaceful, passive resistance and take the moral high ground. This may look hopeless, but so is the attempt to use terrorism to create a negotiating position. Negotiations need trust, and everything Hamas has done has undermined potential trust. If only they had maintained peaceful coexistence after the Israeli withdrawal, the two state solution might have seemed feasible.

We also need to slowly isolate Israel if it continues to use excessive violence to gain its objectives. We need to call for a progressive easing of living conditions for Palestinians, and to urge progress towards a two state solution. But we should reserve complete isolation for the event that Israel starts mass expulsions of Arabs from the Occupied Territories.

But darker forces are driving both Israel and the Arabs, and they are in no mood to listen to Western liberals. I have used the word “tragedy” in my title because events are taking the shape of those great tragic dramas of Shakespeare or Sophocles. Opportunities for reconciliation are missed as human emotions and miscalculations take events through to an outcome that nobody wants. Everybody is right. Everybody is wrong.

In due course, we can only hope that, like the European nations before them, the peoples of the Middle East will tire of endless violence and seek a better way. But things will get worse first.

 

Austria: a social democracy that works

IMG_0311I have been on holiday to St Wolfgang in Austria in the last two weeks, which explains why I have not posted anything recently (NB the picture is of nearby Hallstatt, not St Wolfgang). This holiday was mainly about fresh air and relaxation. Political reflection was not on the agenda – but I just can’t help myself. Austria is a very interesting political case study.

The country is an overlooked success story. The area that we visited, the Salzkammergut, was pristine. Everything was neat and tidy. The state of public infrastructure, from roads to public footpaths, was excellent as well as highly extensive (hot water is supplied communally, for example – not to mention all those well marked and maintained foot and cycle paths)). This was a major tourist region, but no Cornwall, with tourist affluence co-existing alongside poverty. There was plenty of local industry, and quality medium-level jobs, tucked away on the edges of the villages.

Economic statistics bear this success story out. Income per head in 2013 was 11th highest in the world, according to the IMF – behind the USA, but comfortably ahead of Britain. Unemployment is low (4.7%), the trade balance is positive (2.9% of GDP), and there is a reasonable level of growth (1.4%). The government is in deficit, but the level of 2.8% of GDP looks much better than  Britain (4.6%). This is in spite of a high tax take (43% in 2012 according to the Heritage Foundation, compared to 39% in Britain and 27% in the USA). According to the OECD the Gini coefficient, measuring income inequality, was 0.261 after taxes and transfers, one of the lowest (i.e. most equal) in that group (Britain is 0.345, the US 0.378). The really interesting thing about this statistic is that this level of equality has been attained through redistribution. Before tax and transfers Austria’s Gini is 0.472, similar to that of the USA (0.486) and Britain (0.456). Austria taxes the wealthy highly and has a generous level of social security. It is a beacon of social democracy.

This is interesting because we are constantly told by economic liberals that high taxes and high social security is the path to doom and poverty. And, to challenge another piece of received economic wisdom, it does not even have its own currency, being part of the Euro zone. In America, you only have to mention “Europe” to a Republican, and it conjures up an image of economic failure. And yet Austria is no economic failure. It is not like France or Italy, whose economies are struggling. Why is Austria so successful? Well, I don’t know the country that well – but let me make three observations.

The first is that power is highly decentralised. Austria itself is not a large country, with 8.5 million people. It nevertheless has a Federal constitution, with nine states. These are highly visible on the ground (we were staying within a few hundred metres of the boundary between Upper Austria and Salzburg; we also visited Styria), on car number plates, and so forth. Local municipalities levy a payroll tax (about 3%) and as well as property taxes. In Britain, at least, there is a tendency to think that social democracy implies highly centralised governance, as shown by the last Labour governments highly prescriptive diktats on local government.

The second observation is that civic society is clearly very strong. You don’t achieve Austrian levels of order by government diktat and regulations alone. This requires active civic engagement – a bit like David Cameron’s “Big Society”. But what Mr Cameron failed to grasp is that big government (if highly localised) and high civic engagement work well together. Indeed, Austria’s political system looks like a bit of a stitch-up (two dull establishment parties, challenged by right-wing mavericks) – I am sure that it is high civic engagement that holds government services and public infrastructure to account, rather than the electoral process by itself. Again, Britain’s social democrats tend to view civic society as interfering busybodies with a NIMBYist agenda.

So far, this picture reinforces Liberal Democrats conventional wisdom: strong local government, linked to a high level of community engagement. The catch is my third observation: Austrian political culture is not liberal. In fact we would regard it as distinctly nasty. Ukip supporters would feel comfortable here (if you exclude the small government types). Unlike Germany, there is no public angst about Austria’s Nazi episode – though the country was highly complicit (Hitler was an Austrian after all). Immigrants face hostility. Austrians are very hospitable to visitors (more so, in my direct experience, than the Swiss, for example); but visitors go home and do not challenge for jobs and political influence. We did not see much sign of foreign staff in the restaurants and hotels – you meet more Poles in Cornwall. The EU is regarded with suspicion, if not hostility – even if it is accepted as an inevitability. Social attitudes tend to be conservative. In the hotels, the men tended to have the more authoritative jobs, with women running around as skivvies – though the shops tended to be run by highly capable women.

Perhaps the biggest question for British liberals is this. A fairer distribution of wealth and jobs seems to flow from strong local government, based on strong local communities; but is this compatible with more fluid liberal, human-rights based values? Or must strong liberal social values lead to economic liberalism, and the unequal, hollowed out society that seems to be taking root in the US, for example. Can you be both social democratic and liberal at the same time? To that critical question Austria does not provide an answer.

We need a UK Constitutional Convention and a Federal government

What happens when your normal existence comes under threat? We seem to alternate between two extremes. One is paranoia. We see this now with Jihadi extremists, where many Britons see the threat of terrorism everywhere, and are happy to vastly expand the surveillance powers of the state so that any plot can be intercepted before execution. I remember a similar paranoia over Soviet Communism in my youth, in the 1970s. But the more common response is denial. We keep going with our ordinary daily lives without thinking about it, dismissing the threat with half-baked arguments that don’t stand up to scrutiny. We see that with the threat posed by rampant global carbon emissions.

Perhaps to the  English the possibility that the United Kingdom breaks up, with Scotland ploughing its own furrow, does not have the sort of existential quality of global meltdown, communist takeover or even terrorist attack. That may be so, but we underestimate its significance at our peril. If nothing else, if the Scots vote Yes in their referendum in September, the negotiations over separation will dominate the political agenda for at least four years. The Union is so deeply embedded into our governance that separating the countries will have a host of unforeseen complications. And the complications that are clearly visible are bad enough: membership of the EU and NATO; Britain’s nuclear weapons; managing the currency; spitting the national debt; splitting oil revenues; and so on. Our governing classes will scarcely have time to do anything else, while the publics on both sides of the border will be inflamed by populists claiming that their country is getting the rough end of the deal. And at the end of it all England will be dominate nonsense of a country that can’t convincingly even lay claim to its traditional names of “United Kingdom” or “Great Britain”. It will be left with a tangle of Imperial era commitments, from membership of the UN Security Council, to responsibility for the Falkland Islands, without the joint enterprise of Scotland and the other British nations that brought these about. The loss of international prestige would be incalculable. It is often said that the loss of Ireland was the first step in the break up of Britain’s empire – the point at which Britain’s sense of confidence and authority fatally started to ebb away. The departure of Scotland would end aspirations to be even a second-rank world power, and no doubt poison the country’s politics for generations to come.

And yet the British establishment is taking this threat very calmly. People talk about the referendum here in England, but with little sense of its implications. And when conversation moves to next year’s General Election, the impact of the referendum on our politics is quickly forgotten. The half-baked argument used to dismiss such thoughts is that a Yes vote looks unlikely. But the Yes campaign has all the momentum. The No campaign depends on narrow, conservative arguments, put forward by second-rank politicians. Even if the Noes win, the threat of breakup remains. Supporters of the Union, on both sides of the border, need to recover the initiative. There is no more important issue in British politics.

Let us try to understand were the threat is coming from. It started in the 1970s as North Sea oil was discovered, and gave the Scots a sense that their country could be economically prosperous, even as industrial decline blighted it, along the rest of the UK outside the southern counties of England. The establishment response was Devolution: the setting up of a separate Scots parliament, to which progressively more power has been given. This may have delayed the crisis, but it has not solved it. In devolved Scottish politics the Nationalists field their best politicians against those of the unionist parties of second and third rank. An ambitious Scots politician who belongs to the Labour, Liberal Democrat or Conservative parties seeks to get elected to the Westminster parliament to make his or (less commonly) her career there. Here they happily take a hand in running England’s affairs. Gradually the Nationalists have come to dominate local politics in Scotland.  Meanwhile at Westminster one of two situations occurs: a Conservative led government is elected that the Scots did not vote for, or a Labour government which does not have a majority of English MPs. This inflames politics, especially north of the border when there is a Conservative government.

At the heart of the problem is the way in which the ruling Westminster elite sees itself. The British Parliament, with especial reference to the House of Commons, is sovereign. It secures the consent of the people at General Elections, but in between times its authority should be unchallenged. It is an evolution of the medieval and Renaissance idea that kings should be absolute rulers. Our elite becomes troubled when authority seeps away to institutions such as the European Union under treaty obligations. But it would rather not think about the idea that Parliament itself lacks the popular consent that its sovereign status implies. The Scots challenge this legitimacy openly, but increasing other British people feel it too, even if they articulate it less well.

There is an obvious solution: federalism. In a federal structure sovereignty is shared between the different levels of government. The higher levels are not self-evidently more “sovereign” than lower ones. The best known example is, of course, the United States of America. There the states are not the artificial creations of the national government, only allowed to do what the national government says. In theory it is the opposite, though in practice it is a jockeying match, arbitrated by a written constitution and the Supreme Court.

In Britain this means that you would have a federal, UK government, with a number of state governments below it. What would those states be? Scotland, Wales and Northern Ireland, obviously. But what about England? Many people, when first considering the problem, want to establish a series of new regional states in England, of approximately the same size as Scotland, in population terms. But this really doesn’t fly. That is not how the English view themselves; such localised identities could emerge in time. The great conurbations of London, Manchester, Birmingham, Leeds, Liverpool, Newcastle, Sheffield and Bristol show some signs of developing such identities. But what of the rest? Cornwall, though rather small in size, has a sharp (and non-English) identity and has a strong claim for statehood. But elsewhere it means drawing arbitrary boundaries which, even if they follow ancient identities like Wessex, Mercia or Northumbria, really won’t work. That is not how modern England is.

The English state would have to be England itself, with maybe only Cornwall separate. That presents some big problems of its own, of course, but I think these are more soluble than muddling on as we currently are. I will only say that the critical thing is for the seats Federal and English parliaments should be located in different cities. Only then will the separation between the two be properly credible.

There are two main ways in which such a system might be implemented. The best is for the current British Parliament to become the new English Parliament, with a new Federal Assembly located outside London, operating within a new, written Federal Constitution. But such a step is too revolutionary for our country, that likes to evolve its constitution in small steps. I suspect the number of minor legal complications that would follow would be almost as bad as those that would flow from a Scottish breakaway. I would still vote for it if offered the chance – but grumpy as the British electorate is, I don’t think they are in such a revolutionary mood.

So the other way forward is for the British Parliament to downsize and become the new Federal legislature. The House of Lords might be replaced by a Senate with members appointed by the state legislatures (which would need to incorporate sub-state governments in the case of England, perhaps). A new English parliament and English First Minister would be established, located outside London. The whole thing would be constitutionally protected by a British Bill of Rights, which might, for good measure, establish the limits of European authority, in the way that Germany’s Basic Law does. That is revolutionary enough. But I can’t see any middle way between this and the current muddle.

And how to implement such a radical proposal? The first step must be to call a Constitutional Convention in the wake of the Scottish referendum result if there is the expected No result. And perhaps even if there is a Yes and a backlash as the difficulties emerge (although if that happens, only the first of my two solutions would be viable). That is what English politicians should be calling for.

Rethinking Liberalism 6: reinventing the state

So far in my series of essays my conclusions have been quite conventional, if a little left of centre. We need to keep capitalism in a mixed economy; the state will need to get bigger to cope with the demographic challenge; we will have to tax the rich more as middle incomes are squeezed. There’s nothing here that would upset the denizens of Whitehall unduly, notwithstanding the economic liberal tendencies of some. But I think we are badly let down by our system of government. It will have to change radically – and yet the complacency of the Westminster elite is overwhelming. Liberals must rally to challenge it.

Unfortunately one of the best examples of this establishment complacency comes from our own Liberal Democrats. Back in the 1990s I was inspired by anti-establishment rhetoric from our then leader, Paddy Ashdown. The whole system was rotten, he said; we were the outsiders and only we could change it. Then, in 1997 the party arrived as a serious force in Westminster politics.  But, somehow, under the leaderships of Charles Kennedy and Nick Clegg (or the brief leadership of Ming Campbell, come to that) this radicalism came to be toned down. In spite of some radical language from both of these leaders, policy was more about trimming the Westminster policy agenda here and there without counting too much controversy. Ideas, such as a local income tax, which might have meant a decisive break from the Westminster-centred way of the world, were quietly buried. By the time Lib Dems took up cabinet jobs in the current coalition, they looked very comfortable in their new Westminster ministries, with the possible exception of Vince cable, the industry minister.

And the public could sense this. My heating engineer, classic old-school lower middle-class, told me that the Lib Dems had sacrificed their principles to get their hands on the prestige of power. Mr Clegg looked as if he was enjoying themselves too much. This feels very unfair, of course. There was a national crisis in 2010, and the compromises of coalition were needed for the country’s sake. And the Liberal Democrats have stopped the Conservatives doing a lot of silly things, like cutting Inheritance Tax. But there’s a grain of truth in the accusation; what about the promise to really shake-up British politics? It’s not clear that senior Lib Dems ever wanted to do more than change the standard Westminster priorities a bit, by pushing education and redistribution up the agenda and making the odd stand on behalf of civil liberties, unless real heat got applied. If there has been any reinventing of government, it is mainly Tory ideas that are driving it. And they are about keeping the basic Westminster architecture in place, but diversifying the delivery (more private contractors and Quangos in place of top-down state hierarchies). The attempt to devolve more power to democratically accountable local bodies has been a particular disappointment. Each step forward is accompanied by at least one step back. The malign orthodoxy of the Treasury, with its insistence on a highly centralised model of power, remains unchallenged by key Liberal Democrats – or so it appears.

Why does this matter? Firstly because the pressures caused by the demographic shift have only started. I have already written about pensions. Health costs will rise too as the ratio of older people increases. And then economic growth will continue to stagnate, for a variety of reasons, including the increasing number of people entering retirement, but for other reasons too. Meanwhile the twin (and related) economic deficits of government finances and trade are unsustainable in the long run. The government has to tax more and spend less. It has to become much more efficient and effective.

The country’s direction of travel is not encouraging. Government cuts have been very painful, and the public is tiring of them. Endless privatisations are affecting the quality of service. The fiscal deficit creeps down, but it is still very large, and he trade deficit is getting worse. This shows that the underlying economy remains weak, and that growth is hardly more sustainable than it was under the last Labour government. No sooner does the economy grow, than does Sterling appreciate to undermine all the rebalancing. Meanwhile the country is sleepwalking into the breakup of the United Kingdom (even if Scotland votes No in September) and exit from the European Union, as political dissatisfaction with the status quo grows. Pulling all the usual levers of power in Westminster seems to be doing not much good.

What have liberals to say about this advancing gloom? The first point is that we want people to have as much power as possible over their own lives. That means we dislike people being dependent on the state. It is here that we differ from the socialist left, who don’t mind if the public has a permanent client relationship to state agencies, as this creates a political constituency both amongst the dependents and the employees who serve them. Liberals should recognise that in a modern society the state must play a very big role – but we also need to push back on dependency. The state should fix problems so that demand for state services reduces.

The second point is that we believe that as far as possible state structures should be fully and democratically accountable to the people they serve. The state does not devolve power to citizens, but citizens delegate power to the various levels of government. This too is difficult in the modern world. Many problems are complex and must be solved at a national and international level – and the further up power is delegated, the weaker accountability becomes.

Have we delegated too much power to transnational bodies like the European Union and the World Trade Organisation – with the threat of more as part of a transatlantic trade deal? I don’t think so – these structures merely recognise the transnational nature of problems and the need to agree international standards and laws. Countries that opt out of these structures don’t seem conspicuously better off as a result. Is Australia, for example, really a better and happier place than Britain? Its recent economic success is as much down to the luck of geography and natural resources as anything else. Does having to dig up vast amounts of prime farmland to get at the coal beneath, while poisoning the great natural wonder of the Barrier Reef, really look like freedom?

No. I think the main problem is that we have delegated too much power to Westminster, and that the Westminster elite is protecting itself rather than solving the countries’ problems. It has created a series of administrative silos that perpetuate problems rather than solving them. To tackle this we need to do three things.

  1. Establish a federal system for United Kingdom, by creating a new English parliament and English government, based outside London, and taking to itself the same set of administrative responsibilities as the Scottish government has.
  2. Radically reform the way public services are commissioned to ensure that solving problems for their clients becomes their prime driving force. This will entail a radically increased role for locally accountable agencies.
  3. Reform the country’s tax system to follow this radical redistribution of responsibilities so that every level of government controls more of its own revenues – alongside a system of transfers to ensure a fair distribution of resources.

Each of these three depends on the others. Federalism is required to break up Westminster complacency; public services will only be properly remodelled if it is not controlled from Westminster; power cannot be decentralised unless tax is decentralised too. I will pick up each of these themes in future essays.

 

 

Rethinking Liberalism 5: pensions and the state

In my previous essay I concluded that we had no choice but to tax the wealthy more, and this was the most divisive issue in current British politics. The reason for this is that state commitments on pensions and the health service, and potential commitments on social care, would force the state to expand, and for taxes to rise. The hollowing out of the economic middle meant that the wealthy would have to take up an increased share of the burden. But what are liberals to think about these state commitments? It is easy to see why socialists favour them, but less clear for liberals.

At the recent CentreForum seminar on the Orange Book, more than one speaker referred to the coalition government’s commitment to a “triple lock” on the state pension as being disastrous and illiberal. This guarantees that the state pension will rise by the higher of consumer prices, earnings or 2.5%. So as the proportion of older people grows the cost of this promise will mount. The same demographic trend means that we cannot look to economic growth to camouflage the policy’s generosity. And yet pensions are something that people should be able to sort out for themselves through saving over their lifetimes. Relying on the state just fosters dependency – and it can only be funded by increasing the tax burden, largely on people who will not directly benefit. If liberalism is about fostering self-sufficiency and independence, this is surely a step in the wrong direction?

A similar logic applies to health care for the elderly. In Britain it is widely assumed that this will remain free and funded by the taxpayer. As the population ages the overall cost rises. Greater efficiency in the state spend can only get you so far. Social care for the elderly is a similar issue, except that this is only a universal benefit in Scotland – though there it was enthusiastically supported by the Liberal Democrats.

The answer to this puzzle comes in two familiar guises: the need for a safety net, and market failure. A safety net allows people who succumb to bad luck to get back on their feet. I am sure that highly sophisticated arguments can be made in their defence, but to most people it is simply being part of a civilised society. Once families and social solidarity could have taken most of the strain, but the demands of economic efficiency have broken these institutions down; so economic efficiency, and the taxes they can generate, should provide the solution.

The safety net idea isn’t entirely satisfactory when providing for old age, however. The capacity to earn at this stage in our lives is limited, so it is rather more than a just a temporary helping hand. However, it still means that your life can’t be entirely ruined by bad luck. But everybody is entitled to the state pension, not just those down on their luck. The triple lock may be required to keep the state pension for the destitute at an acceptable level, but should it apply to everybody?

What lies at the heart of the problem is a market failure. Start with an obvious problem. If pensions are means tested, then the incentive to save is destroyed until you get past an amount that gives you a reasonable pension. Let’s use some numbers to get this into perspective. The new basic state pension will be about £7,500 per annum in today’s money. To get an annuity of this amount, indexed to RPI (admittedly a mathematically flawed measure of inflation that tends to distort upwards) would cost in the region of £220,000 for somebody of 65, the current pension age. For a forty year working life, with zero real investment returns (I’m coming to that), that £220,000 takes a saving of £5,500 per year, which is over 20% of the average rate of pay (£26,500) before tax. Average savings rates are, of course, much less than that (typically 5-10% of household income).

But surely people can earn more than o% real return on their assets? Actually most people can’t. There are two problems. First is that investment returns are very low at the moment. Central bank interest rates are less than inflation (negative in real terms). All other returns take their cue from that. The prospects for higher interest rates are bleak; that’s they way the world economy is. There are too many savings chasing too few investment opportunities. To break this stranglehold you need a combination of three things: low transaction costs of investment, an ability to take greater investment risk by spreading it, and access what economists call economic rents – income that is not earned through adding wealth to society, but by exploiting an “unfair” advantage. These advantages are usually only available to the better off. For the first two you need a decent sized starting portfolio (over £1 million, say). For the last you need some kind of economic privilege. While the economy was expanding, and before the demographic crunch, you could, in fact achieve these ends by owning your own house. Rising house prices are a form of economic rent, earned by the ownership of land, which is in limited supply. That covers an awful lot of people, but these are now a privileged elite: it is getting harder to join them.

Can’t people band together to get a better return? That is what an old-fashion final salary pension scheme used to do. Administrative costs were low (because you the calculation of entitlements is simple), and investment costs and average risk was low because there was single, large investment pot. Unfortunately such collective schemes are another victim of the drive to ever greater economic efficiency, which destroys the large and relatively stable employers who are needed to sponsor such schemes. Collective action means the state.

The state is the only institution that can take effective collective action. And, with private sector investment opportunities in such short supply, increasingly the state has access to the best investment opportunities too (consider much infrastructure investment). And they have the chance to tax those economic rents. That is the central logic behind the new triple locked state pension. A basic minimum, which the public has every incentive to improve through private saving, which will, unfortunately, rarely add up to a great deal more.

Meanwhile, the various distortions of tax and regulation that inhibit private savings can be gradually dismantled. The government has started by dismantling the rules compelling people with pension plans having to buy annuities. Personally I would start to dismantle income tax relief on pension contributions, increasingly of benefit only to a wealthy elite, and which comes with a dense thicket of rules to prevent abuse. That is a formidable political challenge, though, and can only be achieved in small stages.

Because efficient long-term savings are not accessible to the vast majority of people, especially those without access to property assets, the state must intervene to fill the gap. That makes the economic liberal dream of a low-tax society an impossibility – the alternative is mass destitution, or a needs based system that will be economically less efficient. And if you add health costs and social care into the picture, the problem gets bigger.

The state must get bigger. The question is how to do this in the most liberal way?

Britian’s police: unprofessional conduct

Carol HowardFor once the BBC News’s editorial priority seemed to be spot on. Top story on the 7am Radio 4 news was an astonishing case of discrimination involving a black police officer, Carol Howard. Amongst other things, it showed that the Metropolitan Police were systematically manipulating evidence. Alas by 1pm the story had dropped right out of the bulletin. Instead the channel carried a story about a potential paedophilia scandal in the 1980s, based on some very thin evidence. But this story should not be allowed to drop from our attention. Indeed it raises many questions that should be very worrying both for Londoners and the whole country.

Ms Howard joined the Met’s elite Diplomatic Protection Group in 2012. She was quickly victimised by her boss, Acting Inspector Dave Kelly. Mr Kelly appears to have assumed that Ms Howard’s behaviour was dishonest, and instead of handling this in a professional manner, he is accused of hounding her with unreasonable complaints, and he then become “hostile and aggressive” when she invoked a grievance complaint. Ms Howard then went on to bring a complaint of sex and race discrimination. The tribunal hearing this complaint asked to see a report on the original grievance complaint – but the Met’s management edited out all references to discrimination, saying that they were not relevant to the tribunal. They then claimed such deletions were a matter of policy to protect the Force.

The tribunal found in favour of Ms Howard, and was understandably very critical of the Met. All the Met has done so far is to offer this very weak statement:

We are aware of the decision of the tribunal. We are disappointed at the tribunal’s finding in favour of PC Howard.

The tribunal’s decision will now to be given full and careful consideration. We will review the findings, take legal advice and take forward any learning or actions as appropriate.

In other words: zero leadership, but we’ll ask our lawyers how to fiddle with our procedures. They are clearly hoping the story will go away. To judge by the speed with which the BBC has dropped the story, their hopes appear to be well-founded. It is now up to our politicians to on their case. This is one area were the London Assembly can really show its worth. Here’s hoping.

But evidently no major politician has seen fit to take the case on so far – perhaps the reluctance has something to do with the rise of Ukip, and the backlash against political correctness, by older white males in particular. If so our politicians will be letting the majority of people in London down – of all ethnic groups.

Here are the questions I would like to ask:

  1. How is it, 30 years after Lord Scarman first identified problems in the police, that this kind of behaviour seems to be tolerated by middle management in the police force?
  2. There seems pretty good evidence that Mr Kelly’s conduct was unprofessional as well as discriminatory. He has brought the service into disrepute. Has any action been taken by the Met against this officer?
  3. How was it that an attempt was made to manipulate the evidence from the grievance complaint. Is it legal? Is any disciplinary action warranted against any officer? Or should a more senior officer take responsibility for unethical conduct?
  4. Have such deletions affected other complaints? Have they affected statistics produced to the public about the number and resolution of complaints of discrimination?

And then there are the wider issues. The Police are a public service, funded by us as taxpayers. A quid pro quo is that they should be accountable, with a culture of public disclosure and truthfulness. Instead they seem to have a defensive culture, where the public seem to be treated as the enemy, and openness as a threat. Furthermore, proper professional standards seem to be lacking, and the application of discipline highly selective. If officers are unprofessional, they should fear the reaction of their own superiors; instead these superiors seem to rally round. After each scandal, I hear that police morale has been hit, and I hope that this is at last evidence that they have got past of the denial stage of the grieving process for their old ways. But I may be underestimating their resilience.

I am going to leave the last word to Ruwan Uderwerage-Perera, a former policeman and now a Liberal Democrat councillor. Here is what he said in a Facebook post earlier today (quoted with his permission) (and please allow for the informality of that medium):

“The ‘Canteen Culture'” states Prof PAJ Waddington (himself a former police officer) “is often portrayed as a pervasive, malign and potent influence on the behaviour of officers. The grounds for this portrayal are, however, insubstantial and appear to rely more upon the condemnatory potential of the concept than its explanatory power.”

As a former officer myself I believe this aggressive and macho sub-culture that further stamps the belief of ‘them & us’ between the police and the policed is not only still very much alive and well, but has proven resilient to the three plus decades of criticism since is existence was acknowledged by the police service following the Scarman Report of 1981.

The ‘Canteen Culture’ as a result of its very existence is exclusionary and as such Women, BME and Gay (sworn) Officers (for support staff and PCSOs and the like are never fully accepted) either have to acquiesce to the egotistical, male dominated, heavy drinking, womanising and otherwise hedonistic culture which is supported by the ‘work hard, play hard’ mythology or they are cast aside and will be subjected to further abuse.

I add ‘further abuse’, for even perceived membership of the group means that if one is different e.g not white male and straight then one will be the butt of the so called humour anyway, but at least the victim is ‘one of us’ for the time being.

In my opinion the continuance of this sub-culture holds back the service from becoming a professional body, and means that the service will remain believing that it is not part of society, but somehow is on some ‘crusade’ to save society from itself.

Update: 3 July 10.40am

As I hoped, some traction is being made by London Assembly members on this issue, pressing London’s Mayor, Boris Johnson. Mr Johnson, to his credit, does seem to be taking the matter a bit more seriously than the Met’s senior management. He has said he will review 34 other cases.

According to yesterday’s Standard, the Met have denied that the deletions were a matter of policy. That always did sound like a bit of a middle management excuse to me. Also Ms Howard’s lawyers have called for a public enquiry. I don’t agree with that. What is needed is proper accountability, up to the Chief Constable. A public enquiry will merely drape the matter in more evasion, obfuscation over evidence, legalese, and lost time. The answer starts with leadership, and if no leadership is forthcoming from the incumbents, we need new leaders. Quickly.

And just to be clear. This story is about London’s Metropolitan Police. But the problems uncovered are typical other British police forces.

 

Rethinking Liberalism 4: taxing the wealthy

There is a growing view that”inequality is one of the main problems confronting the modern world. This is quite a change. Distribution of income or wealth (or indeed the difference between the two) was not a major concern in the previously dominant neoclassical economic world view. But now that the benefits of growth in the developed world go almost exclusively to a tiny elite, while median incomes stagnate, this view has become complacent. And the work of the French economist Thomas Piketty has drawn attention to the potential power of the very wealthy. This presents a major challenge for liberals.

The problem is that liberals should have no particular problem with inequality of income and wealth in their own right. We believe in individual responsibility and free choices. We have unequal economic outcomes because people want and choose different things. So what? In fact inequality is cover for a series of issues which liberals should care about. Today I am writing about one of them: the wealthy elite.

The problem is known colloquially as the “1%”, because a disproportionate share of developed world income is going to the top 1% (or 10%; or 0.1% depending on how you want to present the figures). Rather than providing evidence for this assertion, and how it specifically might apply to Britain (perhaps less than in some countries), I will take it as a given, and look at some of the issues of principle that it uncovers.

Why does it matter? To some it is a simple matter of social justice. Inequality is one thing, but the justification for these extremes is another. There is more than a suspicion that the lucky few are winning because of unfair advantages, rather than just ordinary luck and talent. But regardless of this is a further problem. This wealthy elite has the chance to consolidate its advantages with political influence, so as to rig the economy in its favour. The growing influence of big money in politics, and the enormous lobby industry in places like Washington DC, points in this direction. There is an economic problem too: excess wealth is deadweight. The wealthy do not consume as high a proportion of their income as poorer people. And only a small proportion of their savings get channelled into constructive investment  (paying people to build things) rather than various forms of speculation in pre-existing assets.

Why is the problem growing? It seems to be a case of a weakening middle. In other words it is not a question of rising poverty, but a hollowing out of the middle class. It is easy to see the culprits: technologies that automate medium-skilled jobs, and globalisation that weakens local bargaining power. Thus we have the problem: the economy becomes more productive, but the benefits do not go to most workers. Can this trend be reversed? That is a central challenge for progressive policymakers, and it is a question I will return to.

But if we take the trend as a given, which I fear we must, then what can be done about it? The answer is clear: redistribution via taxation, public services and transfers. This issue divides politics like no other. On the right, we have “economic liberals”, who think that lower taxes and smaller government will unleash economic growth that will benefit all of society. On the right we have what I will call progressives (not all liberal), who appreciate that with today’s skewed power structures such growth will only benefit an elite, and will in any case be undermined by the deadweight effect of excessive wealth. Like most Liberals, I am in the progressive camp here.

Apart from the deep flaws in the economic liberal logic, progressive thinkers can see something else. The state has no choice but to grow. We have signed up to a society which seeks to (more or less) guarantee minimum levels of access to health care and old-age pensions.  The aging of developed world populations will increase the burden of these. And much of the investment needed to keep a modern economy growing, from education to roads and bridges, requires some level of state support. Meanwhile the ability of the middle classes to fund their own needs through savings is under pressure – both because their own incomes are not keeping pace with inflation, and because returns on saving are diminishing, a little appreciated aspect of the “hollowing out” process – with the exception of those able to own property in prosperous parts of the country.

So this comes back a stark truth. Taxes on the rich must rise. This serves to recycle wealth that would otherwise drop out of productive economic flows, and it helps fund the basics the state has to provide. So how to do this? There are broadly three directions: income, assets and capital gains.

Until now, most of the argument has been over income taxes, and in particular the best top rate of tax. When I started my first accountancy job in 1976, the top rate of tax was 83%, which rose to 98% for investment income. Conventional wisdom turned against the wisdom of such high rates. They dropped to 60% and then to 40% in the UK, before rising to 50% in 2010, and then being clipped to 45%. Economists are less sure about the wisdom of cutting such high rates. They did think that cutting tax rates would mean that rates of pay (for the elite) would fall, as it was cheaper to provide the same net salary. In fact the opposite has happened. This seems to point to senior salaries being more about power politics than market forces. Companies paid their executives more because they could; they did not do so when tax rates were high, because they did not like to see so much of the extra money disappearing in tax.

I can see no harm in reinstituting the 50% top rate of tax, though experience suggests that this won’t bring in a huge amount of extra revenue. Such high rates create a tax avoidance industry. There is a problem with very high rates of income tax though: they tend to entrench a wealthy elite, because they make it more difficult for outsiders to join them. The way to become wealthy becomes to to inherit rather than earn. This was the rather interesting conclusion of a quite wonderful contemporary study of the British tax system of the 1970s by Mervyn King and John Kay – which was recommended as a model piece of economic writing 30 years later by the UCL Economics department.

So should we not look at taxing wealth? This is the recommendation of Mr Piketty, who worries that the rate of return on the elite’s assets is too high, and entrenches their dominance. Such a tax would probably be about 1 or 2% per annum – which may not sound much, but is enough to dent annual returns significantly. Such a tax exists in the Netherlands, hardly as basket-case economy. A variation on this general idea is just to tax land – an idea (Land Value Tax) that has an ancient history in the Liberal movement. I personally have a difficulty with taxing a theoretical value of an asset, rather than a realised one – given that the reliability of asset valuations is weakening. But I have to admit the idea is growing on me, especially the land-only version.

A further way of taxing assets is at death. This is theoretically very sound, but too easy to avoid in practice. The rates here can be very high. In order to make this more watertight such taxes should no doubt be applied to large gifts as well. This used to be the case in the UK. But taxing legacies and gifts seems to attract a particular political opprobrium, and we have to tread carefully.

Finally we should mention capital gains: where assets and incomes meet. These are the commonest loopholes in tax systems. Aligning such taxes with income tax seems the best way of dealing with this. But this may undermine the case for an asset tax: the Netherlands does not tax capital gains.

But in discussing such details we must not miss two big and interrelated issues. The first is that our elites tend to be globally mobile. Taxing them will require growing levels of transnational cooperation. And indeed the need to tax such mobile elites puts greater importance on such transnational cooperation. The EU’s tax dimension should grow. Such bodies as the G20 need to focus on the matter too. It is not particularly surprising that so many rich businessmen are in favour of the UK leaving the European Union.

Which brings me to the second issue: politics. The rich seem to be of an economically liberal mindset (which is actually a recent development, as this article in the New Yorker observes). They increasing fund political movements with an economically liberal agenda. This is already poisoning the politics of the USA. It will make taxing the wealthy harder. But not impossible. If the public understands that the alternative is to cut basic pension and health systems the economic liberals will lose. But whereas we used to think that politics in the developed world was getting dull, this growing clash of economic interests will inject real conflict into it. Class war is back.