Brexit: Britain will end up in the Customs Union

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This blog has been wrong about a lot of things. Especially the Labour Party. But one area where my record has been very strong, in spite of standing outside the conventional wisdom, is Brexit. This is encouraging me to be recklessly brave in making my next prediction: Britain will stay in the EU Customs Union, even if it will take another two years or more before that becomes apparent.

Before the vote last year, I was always worried that the Leavers would win. I felt that my most persuasive argument for Remain was not that Britain would be better off in the long run outside the Union (though I did think that), but that the process of extraction would dominate British politics for so long that progress on any other of the county’s pressing issues would be halted. And thus it has proved. Poverty is growing, and Alan Milburn, the government’s (Labour) adviser blames it on the Brexit effect. The government may riposte that “absolute” poverty is still on the way down, but that claim looks very doubtful; “relative” poverty is clearly getting worse, after decades of progress. Poverty is a subject I will return to – I am working my way through a very challenging study from the Webb Foundation, which will require a degree of reflection. But Brexit is throwing up urgent problems in almost every area of government policy. And where it doesn’t, there is the indirect issue of distraction.

After the vote my first comment was that a long transitional period would be essential. A further prediction was that Northern Ireland would be the “surprise” issue that could derail the whole process, and it was the most important thing to get sorted out. This is now nearly consensus. , but at the time people were obsessing about whether Brexit would be soft or hard. The answer was in fact clear: soft in the short term, and then we’ll see once we’ve all understood it a bit better.

More recently there seemed to be an impasse between the British position that we should proceed to trade talks with the EU now, and the EU position that the “divorce” questions be settled first. I suggested that the British would win out in the end. And so it is proving. It suits the British commentariat to say that it is the British that are caving in, but in fact it is the EU side that has moved substantively; they are having to settle for some reassuring words. The mystery was why it took Britain so long get there; the answer to that was maybe that a bit of theatre suited both sides. There is a snag, though; just when it all looked settled, the Northern Irish Democratic Unionists (the DUP) torpedoed it. That was my Irish caveat – and, I should add, I understand Irish politics, north and south, even less than the Labour Party. Still, this looks more like a glitch than a full stop – a result from the Prime Minister Theresa May’s debilitating introversion that had left the DUP out rather than talking them to death – which is now what she will have to do. All that is required for the moment is a dose of fudge. The DUP may well create some real trouble later on, but now does not look the right moment.

I had drafted a blog a month ago saying that I thought the talks were on track to succeed in moving to the next step, just when everybody was saying it looked hopeless. I didn’t post it because it was ended in a whimper. So what? Where was it all going? I now think I have the answer.

The firstly, I think Brexit will happen. Many Lib Dem friends hold on to the hope that the seeming chaos of the negotiating process, and the absence of any clear vision of the long term, means that the whole thing will collapse. But the negotiating machinery in Britain and the rest of the EU is in place, and officialdom has got used to the idea. It will happen, it may just not make as much difference, in the short run, as people thought. The way politicians deal with hard problems (I nearly wrote “modern politicians” but this is surely as old as the hills) is to string things out. The expression is “to kick the can down the road”. You decide as little as possible for now, so that reality has more time to sink in, and hardened positions can soften. The consequences of this approach are not well understood by the commentariat. They talk as though you negotiate treaties as if you were buying or selling a house, which is the biggest thing that most of these people have had to negotiate for themselves. We are for ever hearing about this or that strengthening a negotiating position, and in particular how threatening to walk out makes you stronger. But it is nothing like selling a house. It is infinitely more complex; you have to live with, and do more deals with, your counterparty afterwards; and you can’t simply choose to sell your house to somebody else. You have to keep the engine running, to switch the metaphor.

So complete collapse is unlikely, and Brexit nearly inevitable. Reversal would cause more problems (in the short term at least) than it would solve. Besides, the political conditions for it do not exist. There has been no seismic shift in British opinion, even if polling shows Remainers edging ahead. The Conservatives desperately want to hang on to power to keep Labour out, and keeping to the legal form of Brexit is essential to keep the party together. Labour would like to create trouble for the Conservatives, but do not want to be put on the spot. The desertion of Brexit supporting working class voters from Labour could torpedo their hopes of winning the next election. And power, for the Labour leadership, is much more important than Brexit.

But time is short. The priority now is to get that transitional deal up and running. Though the idea is to make as little difference as possible to current arrangements, beyond a few bits of carefully chosen and powerful symbolism, it will be hard enough. There will be no time to sort out the ultimate destination. Hard Brexiteers will continue to babble away about complete independence; the more pragmatic people will keep arguing for this or that aspect of the status quo. The truth is that the British governing class, and still less the public, have not understood the options properly, and not decided between them. And that is not surprising, given how big and complex it all is. We have to kick the can down the road. (Alas I had hoped to resist clichés in this blog, but I need to finish this piece).

So the process will drag on. Perhaps even the British people will be allowed a say in the process. Another referendum looks very unlikely – and probably not desirable. Trying to reduce everything down to “yes” or “no” has proved very unsatisfactory. But a general election during the transition process is another matter. An election is not due until 2022, which would be three years into the process, by which time many decisions will have been taken. But once the current government has delivered formal Brexit in 2019, it may find it hard to hang on. Brexiteers seem desperate to avoid any popular participation in the decision-making process, however – a role reversal from before the referendum. But the government’s minority status, and its lacklustre leadership, will make it hard to hang on.

But where will we end up? A divided nation will at some point be desperate for a compromise, and one that makes the Irish border more workable. It is in fact quite clear what that compromise is: membership of the Customs Union. If it is good enough for a prickly and independent Turkey, why can’t it be good enough for a prickly and independent United Kingdom? The government has ruled it out. But the whole process has been one of options being ruled out and then being ruled back in again. Brexiteers have a vision of Britain being a free-trading beacon, showing the rest of the world how it is done – and that would mean standing outside the Customs Union. But the British public are not interested in that vision; and, besides, the rest of the world has moved on. The massive expansion of world trade is coming to an end (except maybe within Asia and between Asia and Africa).

It may take a general election before before the British ruling elite reconciles itself to staying in the EU Customs Union. But I think that day will come.

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Time for another pause for reflection

Arthur Conway Young “Sacrificed to the fallacy that war can end war”

Earlier this year I said I would scale back my twice-weekly postings in order to give me time for reflection. I was profoundly disturbed by the world around me. I used the word “depressed”, and though this sparked worries by friends about my mental health, this was, and remains, a good word to describe my feelings. I am being numbed into a sense of apathy. After that pause a surprise General Election was called. I was swept up in the excitement of it all, and indeed the British political landscape changed profoundly. But as the British situation regresses to stalemate, the excitement has gone. I don’t feel that my thinking is adequate for the situation the world is in. I need time to reflect, and, if need be, to change course. So I will scale back my postings again.

That process has already started, as I haven’t posted for about two weeks. Last week I went on a centenary battlefield tour of the Western Front, from the Somme valley near Albert, and north to Ypres and Arras. That was an experience enough to cause a pause for reflection in itself. It was an example of how political misjudgements can lead to devastating results for millions of individuals. It is hard for us to say what it was all for, even if we accept that many of the changes that the war ushered in were good. These changes were a profound understanding of the futility of war and the brotherhood of man, across class, nation and sex (alas it took another war before entrenched attitudes on race started to change). But, as the remarkable epitaph on the tombstone in my picture, taken in the Commonwealth cemetery at Tyne Cot near Ypres, says, this war did not end war. And indeed, what I find so depressing about now is that in so many ways the lessons humanity learned a century ago are being cast aside.

Look at Myanmar, where the hundreds of thousands of Rohingyas are being ethnically cleansed, with many thousands murdered while others are forced into inadequate refugees camps. This has caused barely a ripple in world affairs. The recent coup in Zimbabwe, which changes little, is causing more fuss. Chinese, Indian and Russian politicians, who these days constitute great powers in the emerging world order, couldn’t care less. The Americans are doing a bit more, but it is not in the new “America First” philosophy to care that much; and, to be fair, their power in the neighbourhood is greatly diminished. Europeans worry a bit more, but they are so far away that closer concerns crowd them out. This is the new normal: people’s lives just don’t matter compared to narrowly defined national interests.

Meanwhile, closer to home in Europe, grand liberal gestures, like Germany’s acceptance of Syrian refugees simply generate a fierce backlash. Polish and Hungarian leaders stoke up Islamophobia; our own politicians mutter about how foolish and “unrealistic” the German policy was. Meanwhile, in Britain we are distracted by the colossal act of self-harm that is Brexit, while the retreat of government services and benefits reeks profound social damage, which most people prefer to ignore. People respond to disturbing changes in the world around them by narrowing their horizons and saying it is all somebody else’s problem.

Still, there is hope. When I visit my local, 90% minority primary school, I don’t see the picture of hopeless and profound division that the conservatives say is inevitable. I see people working across ethnic and social barriers towards a common purpose: living together and promoting the values of tolerance and inclusion. I see the challenges of restricted resources being met imagination and resolve. There is a better way if only we had the courage to take it.

I am an optimist. But right now I need to work out how to channel that optimism more effectively. I plead the need for a little more space to do that.

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The British are bowing out. Now the EU is a battle between the French and German visions.

The European Union dominates British politics at the moment – but in a rather superficial way. It is focused on the short-term implications of the country’s relationship with it, and not on the institution itself. And that is true especially of continuing Remainers. They concentrate so much on stopping or diluting Brexit that they avoid tackling questions about what the Union is, and what it is turning into. More thoughtful Leavers will no doubt suggest that the focus on Brexit is a displacement activity from more uncomfortable questions about the EU. So it is worth taking a step back from the kerfuffle about Brexit to think about the Union itself.

I think it is helpful to view the debate over the EU as a conflict of three visions. I will characterise (or caricature) these as the British, the German and the French visions. The British vision is of the union as a free trade area; its fundamental purpose is economic, and to bring to its members the manifold benefits of free trade. The British are divided on whether this necessarily includes the free movement people, or, rather, labour (as opposed to temporary visitors, which most people are happy with). Many older people (and probably a majority) think emphatically that it doesn’t, and that goods are fundamentally separate from labour. Younger voters tend to say that it does – seeing free movement as a way to expand their personal horizons. Some are muddled – wanting all the benefits of retiring to Spain and using its health service for free, while stopping people from moving into Britain. But all sides treat this as a fundamentally economic question. and think of it individualistically – how does it benefit me?

The Germans feel that the fundamental point of the EU is to create transnational order. This affects trade, so that manufactures and services are based on common rules, and that countries don’t get an unfair trading advantage through lax labour or environmental laws. But it goes deeper; they see nothing wrong with rules that secure fundamental political principles, such as human rights and the democratic order. Britons tend to resent this as an unnecessary intrusion, feeling secure in their own country’s institutions – different histories do much to explain the different attitudes. Britons have learnt to trust domestic institutions; Germans (right up to 1990 in the East) have learnt that trust can be abused. The Germans’ outlook is more collective than the Britons’ – but they share Britons’ distaste for political meddling from EU institutions.

But the French, on the other hand, emphasise the political union. To them it is a joint political project, in which their country must take a leading role. They tend to see the EU as a counter to the giants that stalk the world stage, and in particular to the US – but also to Russia and China. Internally they advocate a greater use of political mechanisms to resolve the problems and conflicts within the Union itself. This is the most collectivist view. If Europe as a whole advances, the logic goes, then we all do as individuals. The British tend to view it the other way round.

It is tempting to suggest that these three visions are all right, and that some form of reconciliation or compromise must be found. But I find it more helpful to see the three visions as varying stages of understanding of what the European project implies. A free trade area cannot reach its potential without transnational rules, including some form of transnational arbitration. And you cannot have such a transnational system of rules in the long run without common political processes to manage them. The North American Free Trade Area (NAFTA) was often held up as an example of what “just” a free trade area might look like – but it first lost momentum and is now in imminent danger of collapse, as it has been unable to handle the  political tensions it has created. The French understand the implications of the EU the best, the British the least – which, of course, is the main reason why Britain is leaving. Most of the British public do not want to accept the political implications of the EU; many of those that voted Remain were in denial, and voted that way to maintain their own short-term economic prospects. The whole Remain campaign last year was based on little more – one reason that the more thoughtful Leavers feel that it is they that hold the high ground.

With Britain on the way out, the driving tension will now between the German and French visions. The British view was shared by other members, especially the Scandinavians (as a matter of principle) and the eastern members (as a matter of political convenience). Brexit not only removes the British view’s biggest advocate, but also it points to the ultimate destination of countries that follow it.

The Franco-German tension could ultimately destroy the union. The Germans are easily the union’s most powerful member; but the French are ultimately right – the Germans are simply postponing an inevitable reckoning. This tension is most easily seen in the management of the Eurozone. The EU’s treatment of Greece, for example, was brutal and surely misguided – even if I find most of the pleadings by Greek politicians such as Yanis Varoufakis to be self-serving and evasive. To the Germans, the Greeks simply broke the rules. They lied about their economy to get it into the Euro, and then milked the Union for all they could get with no attempt to make their economy more productive or less corrupt. The crisis was a reckoning, and it must be played out according to the rules. That Greek voters approved of gobbling up their neighbours’ resources as an easier alternative to fixing deeper problems at home did not make what they were doing democratic. But this view is also self-serving and evasive. German banks contributed mightily to the Greek bubble, and German businesses where happy to sell things to people who could not afford them. There must be a principle of caveat emptor. Instead the German taxpayer bailed out their banks, and their government is trying to blame the Greeks. It is a political mess that requires a political solution, and that means some of the rules must be changed. It is clear, for example, that much of the Greek government debt must be forgiven. The country also needs financial aid to help its economy to grow on a financially sustainable path. But that implies accountability from the Greek government.

And yet the French view, which is now being vigorously pursued by its new president, Emmanuel Macron, leaves hard questions at its core. It requires stronger and deeper transnational institutions, whether at the EU or Eurozone level. But are the democratic institutions up to the job? And is there democratic consent for them? And how deep must these central institutions go? The type of problem posed by Greece persists: member states trying to take the rest of the union for a ride – to take the money, but without any any serious attempt to develop an open and efficient economy, buttressed by democratic institutions, based on the rule of law applied without corruption. Challenges aren’t just being presented by such countries as Hungary and Poland, but by countries closer to the heart of the picture, like Italy. And France. And even Germany with its destabilising surplus savings. Mr Macron’s strategy is to boost France’s credibility by reforming its economic institutions. But what will make other countries follow this path?

What will happen next will be the usual European muddle and fudge. That muddle and fudge will either lead to disintegration, or to something that looks much more like a federal state. Or both – if more countries leave but a more integrated core remains.

And that poses a challenge to British Remainers, who either want to reverse Brexit, or to rejoin the union at some later stage. If Britons remain wedded to what I have called the British view, this will end badly. Britons must accept that they are signing up to a political project that reduces the sovereignty of the British state. Liberal Democrats, in particular, need to understand when there will be too much European centralisation, and when they would say no. After all their other rallying cry is the decentralisation of political power.

And me? Fundamentally I am a Frenchman on this. Proud though I am of my British and English identity, I also have a strong sense of European history and identity. I long to be part of a joint European political project. But not even I have thought through the full implications – and I am in what looks like a small minority. For that minority to grow, more persuasive arguments must be made.

 

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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.

 

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Liberal protestors are not the elite; they are ordinary, frightened people

Last week I wrote about my fears that liberals are being too moral and ideological in their protests over President Trump’s regime. This will simply alienate voters who might otherwise be persuaded – and distracts attention from the regime’s weakest spot – incompetence. But at the same time the populist narrative must be fought – or else untruths are in danger of being accepted as facts.

This message came home to me after reading this article in the Guardian (a British liberal newspaper): Trump is no fascist. He is a champion for the forgotten millions. It is by John Daniel Davidson, a writer for The Federalist, a conservative US online journal. For once the article’s title is a fair summary of its content. In it he develops the pro-Trump narrative. He says that Mr Trump is a voice for many not-so-well-off Americans who feel completely let down by the presidencies of both Barack Obama and George W Bush.  He says:

America is deeply divided, but it’s not divided between fascists and Democrats. It’s more accurate to say that America is divided between the elites and everybody else, and Trump’s election was a rejection of the elites.

Now most of this article is a worthwhile read. It explains why so many Americans, perhaps even a majority, think that Mr Trump is onto something, and are unmoved by the protests. We do not need to invoke racism and misogyny to explain support for Mr Trump, however much we think these forces are lurking in the background. But two important points are lost in this, and each is central to the anti-Trump narrative.

The first point is this: who says that fascists have to be unpopular? Successful fascists (like Mussolini and Hitler) are expert at exploiting the anxieties of the “forgotten millions”, and presenting themselves as the alternative to a complacent elite. That is precisely why they are such a threat. They then use this sense of legitimacy to destroy the rule of law and constitutional checks; they turn on minorities; they try to subvert fair or truthful reporting; they have a penchant for violence and the suppression of opposition. How much Mr Trump really is all these things in his heart is an interesting question; but it is clear that his chief adviser, Steve Bannon, fits the fascist description quite closely, and he seems to be making the running. That does not make all Mr Trump’s supporters and allies fascists, or even most them. But the fear that they are being taken down a slippery slope is legitimate. That Trump supporters have genuine grievances is beside the point.

The second point is that the anti-Trumpers are people too. They haven’t necessarily done any better out of the system than the pro-Trumpers (whatever the latter think). Worse, many people feel as if they are being singled out as targets for discrimination, and even violence. We should not dismiss them, as this article does, as mere cyphers or dupes of a shadowy elite. There is real, genuine fear behind those protests, as well as quite genuine moral outrage. And these anti-Trumpers are not an insignificant minority, as implied by the term “elite”. Hillary Clinton polled more votes than Mr Trump (though this not quite the knock-down argument it might seem at first – if the election had been based on popular vote, Mr Trump’s strategy would have been different – he might have polled better in California, for example). This is not the forgotten millions versus the elite. It is a clash between two groups of forgotten millions, each of which feel marginalised for different reasons. The elites themselves, meanwhile, are mostly keeping their heads down; many are even making overtures to the Trump regime.

So two pillars of the liberal position should be this: first is that we are people too, and we have legitimate fears; second: undermining the rule of law, the constitution and the voice of opposition is attacking democracy itself. Add to this a third pillar: the Trump regime is not helping the people it is claiming to represent; it is simply creating a new set of fat cats.

But is there a crucial fourth pillar? Will liberals find have an alternative set of new policies that will do a better job of addressing the marginalised, and unravelling the coalition that brought Mr Trump to power? Alas I see no signs of that. And without that fourth pillar, the situation remains very dangerous.

So liberals must search for that policy platform that will present a real challenge to the populists. Meanwhile, though, we must not let the conservatives hijack the narrative by suggesting that liberals are a tiny elite, and that subversion of legal and constitutional processes, and journalistic objectivity, is somehow a legitimate part of the democratic process.

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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.

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The US Republican company tax reform might be a good idea

I like to see the bright side. With the accession of Donald Trump as US President, alongside the Republicans controlling both houses of Congress, that is hard. Mostly, I simply hope that the process of challenge will make liberals stronger and harder. There is too much complacency in liberal thinking. And there is more cosying up to vested interests than we might like to think.

And among the flood of bad ideas coming out ot the new administration, there may be the odd good one. Reforming company tax might be one of them.

What I am thinking of are the plans proposed by Paul Ryan, the Speaker of the House of Representatives.  Liberals should support it, though alas many won’t because of who is proposing it, rather than its merits.  One part of the plan is to cut the rate of company tax to 20%, but reduce the number of deductions. This is an old debate. I am sympathetic to lower marginal rates and fewer deductions, though 20% is aggressive. I do not share the view that company profits should not be taxed, and that the burden of taxation should entirely be on distribution of profit instead.

There’s another old idea in the mix too: 100% write off of capital investments in the year the money is spent. Older British accountants like me will remember that we had that system here in the 1980s – called 100% capital allowances. It was the basis of many a tax avoidance scheme, and perhaps tilted the balance too much in favour of investing in plant rather than people. But there is some merit to it.

But the really interesting idea is the so-called “border adjustment”. This exempts from tax sales outside the US, and disallows as deductions spending on imports. This can be painted in different ways. To nativists this sounds like encouraging exports and discouraging imports. Alternatively it can be presented as a sort of value-added tax, which is well-established here in Europe. Neither presentation does it justice. It is not VAT, not least because the costs paying people is within its scope. And its effect on corporate incentives can be beneficial to the world economy rather than detrimental. It amounts to a constructive proposal to deal with a major problem: the taxation of transnational businesses.

At the moment companies are taxed by the location of profits, apportioned “fairly” using general accounting principles. This falls foul of manipulation through transfer pricing – what country-level subsidiaries within a transnational business charge each other. Thus when a multinational sells you something in Britain, it may treat as part of its costs the use of intellectual property based in a low tax regime, such as the Netherlands or Luxembourg. National tax authorities have been fighting a losing battle against abuse. The G20 recently adopted some new rules to reduce abuse, but this is sticking plaster to repair a fracture. It is best seen as an attempt by corporate lobbyists to stave off more radical approaches.

One such radical approach to reform corporate tax is unitary taxation. This method means that tax authorities assess a business’s global profit, and then allocate it to country based on the location of some combination of sales, employment or property. This is how US states tax the profits of US businesses, mostly allocating them using the Massachusetts formula. I have been advocating this for years internationally, but I have unable to persuade even the Liberal Democrats to pursue the idea.

Mr Ryan’s border adjustments are an alternative idea, and look simpler. In essence corporate taxes would be based on the location of revenues – something that would not be easy to distort. So, applied in the UK, Amazon or Starbucks would not be able to use spurious intellectual property charges to relocate profits to tax havens. Overall the scheme favours countries that have trade deficits (like the UK or US) rather than surpluses (like Germany or China), but that is no bad thing.

And probably unilateral action by the US is the only way much is going to happen. Multinational forums like the G20, and even the European Union, have completely failed to deal with this problem. Only the US has the power for unilateral implementation. Where it leads, others will be forced to follow. And post-Brexit Britain should be able to follow quickly.

Alas the power of corporate lobbyists in our democracies remains massive. They are masters of quietly undermining radical ideas and promoting “compromises” that have only superficial effects. Mr Trump is a sceptic, and that’s a very bad start. The hope must be that Mr Ryan will get his way in the inevitable horse-trading between the presidency and congress. Mr Trump may be sceptical, but he is not strongly against it either.

But even if this reform attempt fails, I hope that liberals everywhere will take on the challenge of corporate tax evasion with a radical approach, such as border adjustment or unitary tax. Alas I am not optimistic.

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Back to realpolitik: only the promise of prosperity will ensure the return of liberal diplomacy

Yet another ceasefire has been arranged in Syria’s civil war, although this morning it looks close to collapse. The difference with this one is that the US and the EU have not been involved in its negotiation. And, not coincidentally, it does not include the Kurdish forces. It is the result of a rapprochement between Russia, Iran and Turkey. It looks as if this is the shape of things to come: a world where there is only the faintest pretence that countries should look out for the needs of people outside their own borders.

It looks like the death of an idea: liberal diplomacy. For liberal diplomacy, and its cousin the ethical foreign policy, the object of diplomacy, and the use of military power, should be to create a better world. A world of peaceful relations and prosperous trade, where human suffering is the responsibility of all. In its place we are left with the idea that countries should pursue their interests, and seek whatever advantage they can. There is an old name for this approach: realpolitik. It was the way most countries ran their affairs before the First World War, with only a few prominent dissenters, such as the British Liberal leader William Gladstone.

How it resolved in that era was that countries were ordered into a small number of great powers, able to conduct independent foreign policy, and project their power over a sphere of influence. Then came minor powers, nominally independent, who did the best they could in the spaces left behind, and finally subject nations – colonies, protectorates and such, managed by great powers, and sometimes minor ones. It was a system established at the Congress of Vienna in 1815, after the fall of Napoleon. It was taken for granted that major powers would use force to pursue their interests – and that their only constraint was avoiding wars between themselves. This did not always work. From 1853 (the Crimean War) to 1870 (the Franco-Prussian War) there were a series of short wars between European powers. But, compared to previous periods of 99 years, the years from 1815 to 1914 were remarkably peaceful for Europe. But it had its dark side. The great powers exercised their might with little restraint within their spheres of influence. It was a century of colonial oppression. The weakness of the Chinese empire was cynically exploited: amongst other things the British used force to maintain the opium trade there; the death and destruction wrought in Belgian Congo is probably the biggest blot on a cynical century. And in the end the prevailing matter-of-factness about the use of warfare led to the European powers to drift into a catastrophic war in 1914.

After 30 years of war and an unstable interwar period, in 1945 the world moved into a different order: the Cold War. The Cold War resurrected the idea of realpolitik, but between just two great powers: the United States and the Soviet Union. And these powers projected their power within their respective spheres with an ideological slant: promising to promote peace and prosperity amongst their allies through their political philosophies. But the failure of the Soviet system to deliver its promises became so obvious that it collapsed from within in 1990. This ushered in the period of liberal diplomacy that now seems to be coming to an end. It was not without its success. Perhaps no period of 30 years in human history has seen so many people lifted from abject poverty – as the countries left behind in earlier phases of development took advantage of a peaceful, trade-friendly world (and ,some might say, the enlightenment of neoliberal economics).

What caused it to fail? I think there were two main problems. The first was that the United States, which emerged as a hegemonic power, became tempted to abuse its position. Many Americans felt that their country should use its massive military power impose its will in a manner more explicitly to favour its narrow interests. These were led by the Neo-Conservatives who gained influence in the presidency of George Bush from 2001 to 2008, and reached its apogee with the US invasion of Iraq in 2003. The Neocon strategy was dressed up in the language of spreading peace and democracy – but this convinced nobody. The feeding frenzy of US businesses following the invasion of Iraq was shocking. Other countries, especially Russia and China, resented what they saw as an abuse of raw power, and drew the lesson that they too should advance their interests by building military power.

But the election as US president in 2008 of Barack Obama might have saved the day. No US leader has been as faithful to the idea of liberal diplomacy. But by then it was too late. The financial crash of 2007-2008 had fatally undermined the authority of liberalism. The winning idea of liberalism was that it was the surest route to prosperity. That was how the US won the Cold War, after all. But after the crash, people lost confidence in it. The economies of the developed world stagnated. Amongst those who lost confidence were many American people themselves: Donald Trump won the presidential election by promising to go back to realpolitik. But authoritarians from Vladimir Putin to Recep Tayyip Erdogan, to say nothing of the Chinese Communist Party, saw that they had nothing to lose by pursuing an authoritarian path. And liberal diplomacy without the promise of economic prosperity simply looks like weakness.

So what happens next? The objective of the nascent Russian-led Syrian peace process looks to be first to persuade the Syrian Kurds to submit to the authority of the Syrian government. Russia no doubt also wants to wind down its presence. They also hope that the Sunni rebel groups will either submit or be crushed, except those allied to Turkey, who can expect some form of autonomy. That leaves the question of Islamic State, but the US will help with that. This way forward may bring an end to the civil war, but at a terrible cost. We had hoped for a less oppressive government – instead we will no doubt have to confer status onto one of the most vicious regimes in post-1945 history.

The main uncertainty in this new world of realpolitik is how the new US government will interpret its national interest. The main ideas that are emerging are: the identification of US interests with those of Israel, including a vigorous pursuit of Iran; renegotiation of trade deals to reduce access to US markets; the finishing off of Islamic State’s control of territory in Iraq and Syria; and some kind of engagement with Russia. This does not look particularly coherent, and neither does it look particularly rigorous in following the US national interest – so how it will play out in practice is anybody’s guess.

Meanwhile China will proceed to consolidate its influence in Asia as America reteats. Russia’s main aim for now is to weaken and lift the economic sanctions imposed on it. Russian leaders probably want to establish all the countries of the former Soviet Union in its sphere of influence – but just how far it will be prepared to go in that aim is moot.

But there is one key problem behind all this. The authoritarians taking over leadership of the world powers understand realpolitik and the consolidation of power. But they do not have an answer to economic prosperity. Each country, including Russia, Turkey and even China, is threatened by economic stagnation or worse. That fate also awaits the United States if Mr Trump prevails on protectionism and the Republican deficit hawks prevail on budget policy. That will undermine their authority in the long run, though no doubt the ruling elites will still prosper.

If liberalism, ethics and humanity is to return to world affairs, then its advocates need to show that it is the surest route to economic prosperity. Absent that, the world faces a grim prospect.

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Syria is the biggest blot on an awful year

2016 is not over yet. And one of my bugbears is people reviewing the year before it is finished. Sometimes life delivers a finale in the last week. Who can forget the Boxing Day tsunami? Older readers may remember the Soviet invasion of Afghanistan in the last days of 1978 – an event which changed everything. But surely there is nothing that can possibly happen in the last few days of 2016 that can redeem it – though things could happen to make it even worse. If Jesus Christ was to make his second coming, and call out Nigel Farage and Donald Trump for the evil that they have perpetrated, nobody would believe it was the real Christ, and nothing would change.

Brexit is, of course, the event that most colours my view of 2016, as it is has the most direct impact on me. It has plunged my country into years of bad-tempered, divisive politics and an administrative quagmire for no obviously good purpose, and given has licence to the intolerant to deliver their bile in the name of free speech and democracy. And the election of Donald Trump as US President does similar things – a campaign built almost entirely on untruth and false promise.

But rumbling behind this is Syria. This is not a new story, but one that took an evil turn in 2016. And unlike Brexit or Trump, it has been killing and maiming many thousands of people, and displacing millions. Its effects ripple through to Europe and the rest of the world. The fall of Aleppo to the Assad regime shows the collapse of liberal intervention, led by President Barack Obama, and the triumph of the evil methods of Bashar Assad, supported by Vladimir Putin’s Russia and Iran’s hardliners. It seems that there is nothing we can do to stop the spread of evil without crossing the red lines that liberals have drawn – about the ethical use of force, and intervention on purely humanitarian grounds. We must kill innocent people and ruthlessly pursue national interests in order to achieve anything, it seems.

2016 (so far) has been an excellent year for Vladimir Putin. Earlier in the year I drafted a post comparing him to Napoleon, and urging the rest of the world to emulate his Nemeses of the Russian Prince Kutuzov and the Austrian Prince Schwartzenberg in undermining him and destroying him. (I do not rate Waterloo as the decisive event in the fall of Napoleon – had he won that battle he would have been beaten soon after). For some reason I never posted it; I would have looked foolish if I had.  Russia has not become bogged down in Syria, as I was forecasting. Mr Putin proved too clever for that. The Russian military has developed tactics for dealing with insurgencies that are economical and effective. They include the indiscriminate bombing of civilians and the targeting of schools, hospitals and anybody who seeks to aid the suffering. These are tactics that liberal democracies find unethical – but we will not intervene to stop their use. Our doctrines of non-intervention make our actions predictable, and that has been exploited by the chess-playing Russian regime. The political left, so critical of much milder tactics when used by the US, stay silent. The right try to divert people’s attention to the lesser evil of the Islamic State terrorist network, pretending that it is an existential threat, and that we should ally ourselves with Assad, the Russians and Iran to suppress it – not caring about any innocent lives destroyed by this pursuit of national interest.

The worst of Syria is that all approaches look hopeless. I have been advocating non-intervention by the West, leaving it to regional actors to sort the problem out. But that simply leaves the door open for other actors, like Russia, to intervene on the side of evil, while the interminable suffering continues. Humanitarian intervention? This is treated as a political act and prevented or attacked by the Assad regime and the Russians so that those interventions tilt the balance in their favour. And yet military intervention would have led to a quagmire that would not have made things obviously better. Our allies would quite likely have turned out to be just as nasty as everybody else. We can, with some justice, shrug and blame others for the problem -there are no shortage of culpable suspects) – but that won’t stop the suffering.

So there seems to be not much more that we can do that watch, helping refugees where we can. Russia will no doubt seek an exit – though its campaign looks to have been quite economical, it will still cause stress to that country for no obvious tangible benefit. The new Trump regime will be left with the puzzle of how it continues the campaign against IS without goving succour to Iranian hardliners, whom it loathes. Maybe some kind of political settlement will be achieved which leaves Assan in place, but allows other factions space.

But the outlook is dismal. The era of liberal intervention, which started in the 1990s with Tony Blair in the van, is well and truly over. The Middle East has proved too big a task for it. But the policy’s virulent left wing critics cannot claim victory – they have been exposed as vacuous complainers with no interest in any alternative strategy for alleviating suffering. The western liberal democracies are diminished. That may not be a bad thing of itself, but we must hope that other powers come forward, able to look beyond narrow self-interest. They must understand that creating a stable and prosperous world is in everybody’s interest, but that it cannot be delegated to just the US and its allies. That is slim hope indeed.

Syria represents the worst of an awful year.

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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!

 

 

 

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