A second Nakba looms for the Palestinians

As 2024 draws to a close I’m not in an optimistic mood. Britain is stuck a low-growth rut, with crumbling public services and with politicians and public unable to face up to the difficult choices needed to climb out. Western support is crumbling for Ukraine, meaning that the war will degenerate into a never-ending frozen conflict until the Putin regime collapses, and probably long after that. Necessary steps to save the world from ecological and climate catastrophe are subject to endless push-back. Western paranoia over China, compounded by China’s own victim mentality, makes things worse. And then there is the Gaza war.

My thoughts on this topic have been crystallised by two recent articles. The first was in The Economist exploring the two-state solution, suggesting that it is the only solution to the conflict, because all the others are impossible. The second was by Janan Ganesh in the Financial Times, in which he suggests that the British prime minister Rishi Sunak’s business background leaves him unprepared to deal with extremists, who don’t compromise and don’t stick to any deal they might appear to accept.

I have commented a few times on the Israel-Palestine conflict here. I have much more sympathy with the Israeli side than many. Indeed I am instinctively closer to liberal Israelis than I am to any other faction in the conflict. But I have always been troubled by the influence of Israeli extremists – to the extent that I have sometimes upset liberal Jewish supporters of Israel. These maintain that the extremists are a minority who will not dictate Israeli policy in the long term. And yet these liberals remind me of the one-nation Conservatives in Britain’s parliament (or “wets” as they are often known), who may be passionate in their defence of decency and international law, but cave in rather than press a confrontation with their party’s extremists – in the hope that they will win through on another day. The trouble with Tory wets, as Guardian columnist Polly Toynbee has said, is that they are wet (or I think it was her – I can’t find the reference). Mr Ganesh makes his point well. Tory wets are often businessmen (and women) who assume that there is always a deal to be done, and can rely on any deal being ultimately enforceable. Political extremists are playing a different game.

The Economist suggests that there are two alternatives to the two-state solution. One is the one-state solution, where the two communities co-habit with full rights in a single state; the other is apartheid and ethnic cleansing. It describes both of these as “non-starters”. They are right about the one-state solution, which has few serious sponsors anywhere. Apartheid and/or ethnic cleansing are simply dismissed as “abhorrent”. And yet this is the approach advocated by the Israeli extremists, and they are working towards it much as Brexiteers worked towards Brexit in Britain against a hostile establishment. This solution is also advocated by Palestinian extremists (“from the river to the sea, Palestine shall be free”) and their supporters on the western political left. These latter extremists have nowhere near enough power to make their wishes come true, but they do help build the conditions in which the Israeli extremists can have a prospect of success.

The Hamas-led attacks of 7 October, and the appalling atrocities they perpetrated, are an excellent example of this. Israelis are united in horror, and quickly agreed that military action was required both in vengeance, and to destroy the perpetrators to prevent future attacks. The government framed the objective of military action as the destruction of Hamas, to make it incapable of holding power in the future. All Israelis could agree on that, and so military operations started. But there the agreement ends. The world has been shocked by the level of violence and the number of civilian casualties resulting from Israeli action. The Israeli government and military have responded with a combination of denial and obfuscation, and constant reference back to the original atrocities. It is true that their tactics are less indiscriminate those used by Russian-sponsored forces in the various Middle Eastern civil wars, which specifically targeted hospitals, for example. But the level of destructive power available to them is much higher. I have followed military matters since boyhood, and I would certainly question whether such destructive tactics are militarily all that effective. It is in fact easier to defend rubble than intact buildings, where defenders suffer a constant risk of being cut off and trapped. Having said that, the Israeli military, which doesn’t seem to controlled by extremists, are leading this, and military men usually have a predilection for blowing things up. What is clear is that the political leadership is not holding them back. The soldiers don’t see it as their job to give serious thought to how to manage the civilian needs.

The result of this is not just high civilian casualties, but a wider disaster beckoning, due lack of food, water and medical faculties, to say nothing of protection from the elements. The Israeli government seem to think it is enough to let a few extra lorry-loads of aid through the controlled border. Meanwhile the Hamas fighters will simply follow their usual tactic of hiding amongst the civilian masses, wherever they might be. The logic seems to be that the population of Gaza, or a substantial proportion of it, will be forced to flee into Egypt, whether the Egyptian government likes it or not. The Israeli government is not offering an alternative Hamas-free civilian infrastructure within the territory as an alternative. What is clear to everybody is if Gazans escape to Egypt, they will not be allowed back.

Because that is what happened after the 1948 Nakba, or catastrophe, when Arab refugees fled their homes into neighbouring territories, for what they thought would be a temporary respite. This is what the Israeli extremists want, and nobody else will stop them. More liberal Israelis may not want to admit this explicitly, but they are worried about their future security. The 7th October attacks fell particularly severely on liberal Israeli families.

Israeli extremists have particular power because they form part of the current government, and the prime minister, Benjamin Netanyahu has made it his life’s mission to covertly ally with them. That’s perhaps a bit too strong – Mr Netanyahu has always undermined anything resembling a long-term solution, and simply let Israel’s control of the territory it occupies expand incrementally, and the rights of their non-Israeli inhabitants to be marginalised. But recently he has been in hoc to extremists because he needs their help to block court cases against him.

Mr Netanyahu’s political career will end eventually, and the extremist parties may be ejected from power – they have never had majority support. But the extremists are armed and very determined to advance their agenda. They are strong in settler communities in the West Bank. If a two-state solution is to be implemented, many of them will have to be forcibly removed. This could spark a civil war. But, if my understanding of the Israeli psychology is right, that is unthinkable. Ultimately the country survives through a strong sense of solidarity. Turning on each other to advance the interests of Arab inhabitants and refugees is beyond imagination. Enforcement of laws against unruly settler communities is at best half-hearted as it is because of this sense of solidarity. It is much easier to blame the Arabs for their difficulties. Especially when they behave as Hamas have done.

Perhaps I’m wrong about the second Nakba. Perhaps the Israeli government will be able to allow a stable civilian infrastructure to support Palestinians resident in the Gaza Strip. But there is no two-state solution, just as there is no one-state solution. There is either catastrophe or a never-ending semi-frozen conflict. And that adds to my depression over political affairs at the end of 2024.

Britain’s politicians are in denial – are the voters?

From the Office of Budget Responsibility: Economic and fiscal outlook November 2023

This week’s Autumn Statement by Britain’s Chancellor of the Exchequer, Jeremy Hunt, was a miserable affair, full of political chicanery with little to effort to tackle the country’s deepening problems. Worse yet, the opposition parties (Labour and the Lib Dems anyway), for all their huffing and puffing, are also unable to face up to these problems.

The Conservatives billed the set of measures as the biggest set of tax cuts since the 1980s. And yet the overall tax burden is rising as the freezing of tax allowances and thresholds will bring ever more people into tax or higher rates of tax, and increase the proportion of income people pay as tax. An even bigger problem is that the government has been using inflation to squeeze public spending, while services across the board – health, education, the police, the courts, and the list goes on – are clearly overstretched and in many cases breaking down – with collapsing buildings and rising waiting lists. The Chancellor offered not a penny to alleviate this crisis, while planning a further squeeze in the years ahead. Labour and the Lib Dems gleefully pointed out the first problem, but failed to address the second. They will stand by the announced tax cuts, while offering only gestures (taxing non-domiciled residents, or private schools, for example) to help fund public services. These tax-raising wheezes are nowhere near enough to match the scale of the crisis. Meanwhile all parties suggest that a bonanza of economic growth is coming to the rescue, without acknowledging the severe headwinds that will limit the country’s long-term growth prospects.

I am also highly sceptical of the one measure that seems to be getting widespread support – the full expensing of investment in machinery and systems against corporate profits. It is said that this will boost business investment, which is sorely lacking. It is in a fact the revival of a policy that failed in the 1980s, and was abolished by Nigel Lawson, the Tory tax-cutting Chancellor, who has been about the only holder of that post in memory that had a grasp of how the tax system as a whole worked and could be reformed. Back then it created a tax-avoidance industry and encouraged wasteful investment with fancy kit, rather than the thinking through of business processes which is the real key to improved productivity. That fiasco occurred at the beginning of my professional career as a Chartered Accountant, where I could see the nonsense it was creating up close. Alas the current crop of politicians and their advisers are too young to remember this. And it is of little use to new businesses, where the need is most acute, as these typically do not generate enough profit for this to be of use. What a silly waste!

Meanwhile the fiscal climate is getting a lot worse. Interest rates are rising at time that the size of the national debt is historically very high. If interest rates are higher than the overall rate of growth, and there is a budget deficit, then a debt spiral threatens, which, if it leads to an international loss of confidence in the public finances, could usher in a severe financial crisis. At the moment it is actually quite hard to understand how much of a problem this is. You should be comparing real interest rates to real growth rates – i.e. after inflation. But there are mixed signals on real interest rates. If you compare the nominal rate on government lending, it is if anything less than reported inflation – indicating a negative rate. But yields of index-lined bonds are positive and have risen sharply. Meanwhile the budget deficit is quite high – at 4% of GDP. It wasn’t so long a go when none of this seemed to matter. Interest rates were low, and the Bank of England’s Quantative Easing (QE) programme made large government debt look manageable. But conditions have changed. Inflation has made money much tighter – with interest rates rising, and QE going into reverse. I am starting to suspect a deeper change is afoot in the world’s capital markets. Earlier this century a number of countries ran large trade surpluses – notably China, Japan and Germany. This made trade and budget deficits more stable in countries like the UK and US, as the surplus countries had plenty of spare currency to provide funding. As the world’s trading environment is getting more difficult, this may changing – though it is not yet evident in public statistics. After over-reacting to fiscal risks in 2010, and moving into austerity too quickly, the opposite risk beckons. But the Autumn statement proposes tackling the budget deficit only slowly, leaving the very high level of net debt virtually unchanged. Politicians seem to assume that as inflation comes down things will simply go back to the easy financial environment that pertained before. This is complacent.

More from the OBR report – government plans make little impact on public debt

If that is complacency, the politician’s attitude to economic growth is outright denial, though some economists who should know better seem to be in the same place. It is assumed that the UK’s poor performance has an easily fixable cause. More investment perhaps, or encouraging more people into work, or perhaps lower taxes. Rachel Reeves, Labour’s Shadow Chancellor, blithely talks about sorting out public services through economic growth – even applying the first-person to the process, as if growth was the gift one individual, and not the collective result of many millions of decisions. International comparisons seem to show that Britain’s productivity lags against peers. All that we need to do is fix this, the argument goes, and we will unlock growth. Well it may be that a burst of catch-up growth that is obtainable – but I suspect that these comparisons reflect an irreversible de-industrialisation, when a swathe of high-productivity industries left the country in the 1980s and 1990s and will not return. But stepping back, most or all of the developed world faces a number of headwinds that reduce growth potential, and in some case send it into reverse:

  • Demographics: more people are retiring as lower birth rates take their toll. Immigration can make up some of the difference, but is politically fraught, and stresses housing resources.
  • Trade: as globalisation runs into reverse, gains from trade are turned into losses. The UK is spared the American obsession with “near-shoring” or the reversal of the off-shoring of industries – but we have our own demons unleashed by Brexit.
  • Overdevelopment. The increasing consumption of goods, a critical driver of past growth, is simply a phase in economic evolution that has clearly ended. People move on to improve their quality of life in other ways. Meanwhile massive increases to the productivity of manufacturing industry mean that its impact on the total economy is much reduced. All this means that lower productivity parts of the economy, including many public services, loom larger. Productivity gains are harder to get, and where they happen the result is not so much increased production, but a transfer of resources to low-productivity sectors.
  • The energy transition. The country needs to make big investments to sources and distribution of energy, and its more efficient consumption. While the end result is desirable, in the meantime this will push down consumption. This, in fact, applies to pretty much all forms of investment. The country has become used to high consumption and low savings – reversing this won’t necessarily reduce growth as it usually measured, but to many people it will feel that way.
  • Housing. One way of achieving growth, or at least burst of catching up, is to allow people to move to places where the most productive jobs are. But these areas lack enough housing to accommodate this. Britain’s house builders have growth rich on the skilful management of land portfolios, rather than the actual building of houses, which many are actually very bad at. They have no incentive to increase the pace of building. And if the pace is increased, skill shortages quickly become evident. And I haven’t even mentioned slow and restrictive planning processes. Politicians at least show some awareness of this issue, but action never matches the promises.

The days of steady economic growth over the medium to long term are over, whether we like it or not. The best we can hope for is a short-term spurt. There is plenty of potential for human wellbeing to improve, but this will manifest itself in other ways.

The central problem is the funding of public services and maintenance of social safety-nets. A combination of two things are required here. The first is higher levels of taxation – and mainstream taxes which directly affect demand, and not gimmicks around capital and wealth (the latter may help make debt more manageable, but won’t suppress demand and prevent inflation). The second is a radical reform of public services so that demand for them is reduced – reducing the level of social problems, so that we require fewer police, courts, hospital beds, etc – and managing those problems so that they are solved early rather than passed from agency to agency. Alas we have very little idea how to bring such a change about – though we can see that some countries do this better than us (Japan, Switzerland, Denmark perhaps). A radical reform of government is clearly a part of this, with less centralised control – but it needs much more than this: decentralisation by itself could actually make things worse. With the possible exception of education (which has become more effective rather than cheaper) the reform efforts made by our governments in the last twenty years have taken us in the wrong direction – from Labour’s over-centralisation, to the de-skilling and outsourcing of the Conservative and coalition years. Unfortunately the choice between the two approaches of higher taxes or radical reform is not a binary one. Reform will require substantial investment, and that is likely to mean higher taxes in the short term at least.

If our politicians are in denial about all of this, how about the public? They surely understand that public services are in a dire state – and that fixing this will not come cheap. But they are too wrapped up in their own personal struggles to spend any energy on demands for change. Politicians are in denial for a reason: they don’t just a lack imagination and perception, but they also know a voter-loser when they see it. Still, Labour are clearly presenting a more realistic prospectus than the Conservatives, even if it is based on wishful thinking. Their poll lead at least seems to show some wider awareness by the public at large. And we must grasp at that straw.

Sunak remembers Tunbridge Wells

The Pantiles, Royal Tunbridge Wells – photo Paul Collins

Media commentary on British prime minister Rishi Sunak’s cabinet reshuffle largely misses the point – the exception being the FT’s Stephen Bush, whose newsletter came out after I started drafting this – and who is absolutely on point here. Most reflect on the ironies of the shock appointment ex-prime minister David Cameron to be Foreign Secretary, and the impact this may have on various groups of voters. Many cast it as the desperate act of a failing administration. I would rather see it as a rather brilliant move to the front foot.

First things first. The most important move yesterday was the removal of Suella Braverman as Home Secretary. She was never qualified for the job and, predictably, proved a loose cannon. But she is a darling of the Tory populist wing, who gave her a rapturous reception at the party conference – and her appointment was widely regarded as necessary for Mr Sunak to secure his uncontested nomination to the top job. Last week her attention-seeking criticism of the pro-Palestinian demonstrations and criticism of the police helped take the heat off Labour leader Sir Keir Starmer’s typically leaden response the Gaza crisis. This was an excellent opportunity for the Conservatives to cast doubt on Sir Keir’s ability to take on the job of prime minister. Instead the story was Ms Braverman’s extraordinary conduct – which included direct defiance of Mr Sunak in an article published in The Times. That undermined Mr Sunak’s authority. This exasperated respectable Tory-leaning voters in places like Tunbridge Wells, without doing much to rally disaffected voters in places like the West Midlands, site of a recent spectacular by election loss, which had been critical to the party’s success in 2019.

But by appointing Lord Cameron, as we must now call him, to the cabinet Mr Sunak relegated the Braverman story to the back pages. Instead of outrage by her supporters bringing attention to the fractured state of the Conservative Party, all anybody wanted to talk about was Lord Cameron and Mr Sunak stamping his mark on on the cabinet. Ms Braverman’s sacking was passed off with a shrug as a rather obvious move. She will try to regain the initiative – she is clearly politically ambitious – but it will be hard for her to recover. Her moment has passed. The Tory populists will seek out other standard bearers.

This will do much to reassure those voters of Tunbridge Wells, a short drive from where I live. Here a traditionally safe Tory seat is under attack from the energetic Lib Dem candidate, Mike Martin. These voters, to generalise, never rejected the Cameron brand of politics, as the West Midlands voters had. To them the problem with Ms Braverman wasn’t really her politics, it was the fact that she wasn’t a team player, and showed no particular signs of administrative competency. To people who are professionals themselves, as so many of these voters are, this is a cardinal sin. It is a point that the Brexit-supporting populists simply cannot understand. The professionals have warmed to Mr Sunak, who is well to the right of their normal politics, because he displays this professionalism – unlike his two immediate predecessors – Liz Truss and Boris Johnson. They abhorred former Labour leader Jeremy Corbyn with a passion, as he was the diametrical opposite of professional.

But, alas for Mr Sunak, Sir Keir is a consummate professional too. As is Sir Ed Davey, the Lib Dem leader – and indeed this group of voters rather liked the Lib Dem – Conservative coalition that Lord Cameron led, and probably like the idea of a Lib Dem-Labour one (anathema as that is to Sir Keir). Mr Sunak may have stopped a rout, but he will need to do more to secure a win.

To do that Mr Sunak will need to show that he is getting to grips with the crisis in public services, and the chaotic illegal immigration in small boats across the Channel. Pretty much all public services are in a sorry state, but the most important politically for now are the NHS, the courts and water and sewage (where problems are close to home in Tunbridge Wells). But to seize the initiative here Mr Sunak will need to unlock public spending, to invest in facilities and to restore lagging pay – otherwise he will not be seen as serious. This matters more than the tax cuts beloved of the Tory right. There is talk of cutting Inheritance Tax, as this is a wedge issue with Labour. Inheritance Tax does weigh heavily in the minds of the wealthier people of Tunbridge Wells, with its high property prices – but my guess is these voters would be unimpressed with such shameless politicking. The forthcoming Autumn Statement from the Chancellor of the Exchequer will be a critical test for this government.

But as Stephen Bush says, just as Mr Sunak was unable to capitalise on gestures to the populists because of his lack of follow-through, he will not capitalise on his gesture to voters of Tunbridge Wells for the same reason.

Starmer triumphant

Photo: Petr Kratochvil PubicDomainPictures.net

Recognition of Sir Keir Starmer’s achievement as Labour leader has been grudging. Even as Labour dominates the opinion polls with leads of over 10%, and local elections and by elections confirm it, the response has been “Yes, but…”. Any straw in the wind that might throw doubt on Labour’s dominance is leapt on and magnified. Labour’s victory in two by elections last week, in two ultra-safe Conservative seats, should end that, following as these do a spectacular victory over the SNP in Scotland in a another by election. The party can win almost anywhere it chooses to fight. 

The three October by elections each throw a different light on the stranglehold Sir Keir now has on British politics. The first, in Rutherglen and Hamilton West, on the outskirts of Glasgow, shows that Labour is at last breaking the SNP stranglehold north of the border, which resulted in Labour winning just one seat in Scotland the 2019 general election. The constituency was marginal but the swing was huge. This follows the implosion of both the SNP and the Conservatives, which had been the second party in Scotland. This is important, as Labour failure here under both Ed Miliband and Jeremy Corbyn was a critical aspect of the failure of both of these leaders. This makes winning an overall majority in the country as a whole much easier, both directly and indirectly, as the prospect of the SNP holding the balance of power has been used to scare English voters into voting Conservative.

The second by election was in Tamworth, in the West Midlands. This seat shared characteristics with the “red wall” seats that used to be Labour, but which have been swinging to the Conservatives since 2010, and especially in 2019 – and which voted heavily for Brexit. In this case the Conservatives first won it in 2010 and improved their margin in each of the elections in 2015, 2017 and 2019 (even in 2017 when the national swing was against them). Labour’s success here is a sign that Labour is at last reversing this trend; even if it can’t back to 2010 in a general election, pre-2019 will bring in plenty of seats.

The third seat was Mid-Bedfordshire which is altogether more middle-class, and a classic, largely-rural safe Conservative seat that they have always held. What was particularly interesting this time was that the Liberal Democrats fancied their chances here, after their four spectacular by election victories this parliament, including two from third behind Labour, as in this seat. The argument was that many voters might contemplate voting Lib Dem but would never consider Labour. The Lib Dems put in a massive effort on the ground. But Labour’s success in the safe Tory seat of Selby suggested to them that they could win here, putting the Lib Dems in their place. And so it proved. Apart from the battle with the Tories, this was a trial of strength against the vaunted Lib Dem by election machine. Labour won.

Labour can’t win just by reinstating their red wall losses, even back to 2010, or recovering the seats lost in Scotland in 2015 – they lost in 2010 after all. But progress in Mid-Bedforshire and Selby show that they are making ground everywhere except, perhaps, in a few areas where the Lib Dems are already well-established, and London which they already dominate. By contrast their failure in Uxbridge, on the same day as Selby, and which the Conservatives and their supporting commentariat took to be a sign of hope, is an outlier. It is a London seat and London is the one area where the party had progressed since 2010.

All this brings to mind the build-up to the 1997 general election, and Mr Blair’s landslide victory for Labour, when Labour was similarly winning across a broad front. Then too, the Conservatives clutched at every available straw; they talked of creating “clear blue water” between themselves and Labour, much as they do now, without using those words. The Conservative prime minister was John Major, and his advisers kept saying that “the darkest hour is just before the dawn,” oblivious to actual cycle of light (the darkest hour is midnight). Meanwhile Labour shadowed Conservative fiscal plans in order to head off fears about extra taxes – and generally tempered its radicalism. I recently heard a claim that Labour promoted radical policies before 1997, and so should not fear doing so again. This is nonsense: any radicalism was confined to constitutional policies that were popular amongst key minorities, and few others cared much about. There were no promises on country-wide electoral reform or English devolution, and radical increases in spending on the NHS, for example, did not come until Labour’s next term.

But there are differences between now and 1996, and they are interesting. Then Mr Blair was putting most of his energy into winning over liberals. He had an unwritten pact with the Lib Dem leader Paddy Ashdown, but it was a scary time to be a Lib Dem – what was the point when Labour seemed so interested in liberal ideas – promoting education, Scottish devolution, freedom of information – and even some signs of flexibility on electoral reform? Sir Keir is not interested in any of this – except with the adoption of a green agenda, though he is hedging even on that. The Tories have alienated liberals so thoroughly that he doesn’t have to try to win them over. Instead, he is focusing on Brexit-supporting working class and lower middle-class voters, which Mr Blair did not completely neglect (his law-and-order policies were designed to appeal to them), but treated secondary. Sir Keir dead-bats the endless culture war provocations that the Tories throw at him and drives home his message on chaotic state of public services, important to this group. Sir Keir’s uncharismatic style seems calculated to reassure, compared to Mr Blair’s slippery charisma. 

Of course, Labour’s strength largely reflects the Conservatives’ weakness. And yet there is little they can do to correct that. Their attempts to imitate the US Republicans with nativist and culturally conservative causes, and rowing back on green policies, seem to have little traction with their key audience, while alienating middle-class liberals, who have been a key part of their electoral coalition. Perhaps their best hope is to stoke up fears of tax rises under a Labour government. But the dire state of public services has probably reconciled most people to higher taxes, and the Conservatives have shredded their reputation for competent management. Even those who think the prime minister Rishi Sunak is competent, will not think the same of most of his colleagues, and will have noted how often the party ditches its leaders.

Big swings can happen in a short space of time. A notable case was in 2017 when Theresa May lost a commanding lead over Labour in weeks. But that was a snap election when neither side was prepared, and Mrs May compounded it by trying to capitalise on her lead by putting risky policies in the party manifesto. Most people expect the Conservatives to close the gap a little, leaving Labour with a small majority or just short. But a complete Tory meltdown is also on the cards, such is the party’s weak credibility and penchant for self-destruction.

There are legitimate questions over Sir Keir’s policies. His talk of making public services work better through reform, and not by radically increasing funding, is just not credible. Furthermore, the public finances are looking weak. High inflation means a tight monetary policy. The country still depends on funding from foreigners, and yet the funding environment is getting much more difficult. Promising to fill this gap by growing the economy lacks credibility too, given the headwinds of demography, the retreat on open trade, and the rise of low-productivity services.

But whatever the doubts, Sir Keir Starmer is offering a much more convincing alternative government to the Conservatives, and there seems to be nothing the latter can do about it.

The three narratives of Israel-Palestine offer no prospect of resolution

Flowers in Kibbutz Be’eri By Maqluba2023 – Phot: Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=138887313

I don’t make a point of listening to BBC’s The Today Podcast as I don’t need extra things to listen to. But I caught some it on the radio last night while brushing my teeth. In it Nick Robinson and Amol Rajan talked about the Gaza war – and Nick (as the BBC like to refer to him) explained how there were three incompatible narratives to the history of the Israel-Palestine troubles. It is a very good way of making sense of what is going one here, even if it offers no hope of how it might eventually resolve.

I have had a special interest in Israel since I volunteered on a kibbutz in the summer of 1979 between graduating (it was organised through the university) and starting my training as a Chartered Accountant. It was at Kibbutz Be’eri on the Gaza border. I was there for about six weeks. The kibbutz organisers soon decided that I had limited value as a worker and had me doing duties in the communal kitchen, cleaning floors, etc. – after starting off in agricultural work. Our stay included a tour of Israel organised by the kibbutz. I and one one of the other volunteers then did our own bit of tourism, based in Jerusalem, but including an organised trip to Sinai, then under Israel control. In the course of this I met a wide variety of people: our Israeli hosts, Palestinians both in Gaza and elsewhere, and American Jewish tourists. This was inevitably light on the Palestinian side of things, but a group of us volunteers did walk into Gaza one day, and all the way to the beach, before getting a taxi back. Back in 1979 the Gaza’s were quite open an friendly – they simply wanted the rest of the world to know how things were. To the kibbutzim, though, Gaza was just Other, and they feared to go over the border. Security was ever present. 44 years later Be’eri was overrun by Hamas terrorists, and over 100 people were murdered, with others, I presume, kidnapped. Things had moved on in the intervening period after my stay, but not in a good way.

The first of Mr Robinson’s three narratives is that of Israelis. The establishment of the Israeli homeland in the original land of Zion was a response to many centuries of persecution, where a pattern was repeated. After their dispersal by the Romans in the first century AD, Jewish communities became minority communities spread across the world (reaching as far as China), maintaining their faith and distinctive customs. A pattern was generally repeated: the community would try to fit with their host community, with a greater or lesser level of commercial interaction and with a generally passive approach. This would work fine for a while, but sooner or later the hosts would turn on them, expelling them or massacring them. In the 18th and 19th Century in Europe many Jews integrated with the newly liberal middle class in Europe, even taking up the Christian religion. And yet this simply provoked an even more violent backlash, culminating in the Holocaust. Even outside the Nazi empire, prejudice was rife. In Britain, France and America Jews were still Other. Many were appalled at Nazi policy towards Jews, but in a rather detached sense and they lifted hardly a finger to help. Few refugees were accepted, even as the persecution became more extreme. Zionists decided that they could only be secure in their own community, and so Zionism took off, leading eventually to the foundation of Israel.

How does this narrative deal with the Palestinians? They were a problem because they violently tried to stop the establishment of the Israeli state, leading to the war of independence in 1948. It is central to the idea of Zionism that the Jewish people be able to match violence with force, and they must not compromise on the idea of controlling their own fate. If that meant establishing their state using terrorist tactics against the British, or deleting Arab villages, then so be it. What struck me back in 1979 when visiting Yad Vashem (and also meeting those American Jews) was how much Israelis were treating non-Jews as Other. Gentiles were divided into friends of the Jews and Enemies. You cheered on your friends, and fought your enemies. Since 1948, according to this narrative, Palestinians have been given every opportunity to peacefully coexist with Israeli, but instead have used those opportunities to attack. The Hamas assault on 7 October is only the latest example of using freedoms allowed by Israeli to plot against it.

Next comes the Palestinian narrative. After the dispersal of the Jews the land of Palestine was populated by tribes that were local to the area and shared it with them. We refer to Palestinians as “Arabs” but this is a misnomer – they, or only a few of them, did not originate from Arabia. The Bible provides us with a series of names – notably Canaanites and, of course, Philistines, after whom Palestine is named. They adopted Arabic language following the Muslim invasions, and the Islamic religion, a faith which draws heavily on Jewish traditions, and has adopted Jerusalem as holy site. These peoples have a strong historical right to this land. More so, perhaps, than the Saxon and Norse English have to England. While some Jewish people living in Palestine have deep historical roots there, the influx over the last last century amounts to an alien invasion. Palestinians were violently displaced from their land in 1948, with further displacement taking place ever since. This is a historic wrong that can only be righted through active resistance. Israeli occupation and rule increasingly resembles Apartheid South Africa, with the natives forced to occupy depleted homelands with only nominal sovereignty, if that.

And third there is the Western liberal narrative. If only the Israelis and Palestinians could sit down to talk, and learn to live together peacefully, in two states, or even one! Various opportunities have been presented to do this, but repeatedly thwarted by weak leadership and the influence of hotheads.

Each of these narratives has more than an element of truth to it. The Western liberal one may look very weak, but it is the only one that looks towards a resolution.

When looking at the terrible mess, most commentators respond along the lines of “I wouldn’t start from here”. Various people are blamed for moving the parties to this wrong place, but in the end blaming people doesn’t offer any kind of solution. Each of the two principal narratives has its own strong, grinding logic. History offers no encouraging precedents. India went for partition, which led to mass murder and ethnic cleansing. The German diaspora in east Europe was likewise settled with population transfer, only thinkable after a devastating war. Yugoslavia collapsed in a vicious civil war. It is hard to see Switzerland offering much of an example to follow.

I would like to offer hope in this gloom. I won’t take sides. Israel has suffered an appalling atrocity whose scale it is hard to take on. But the Palestinians have suffered more. 

Why The Economist is wrong about the global economy

The Economist print edition was published before Hamas’s shocking attack from Gaza, and led on one its own stories. I will stick with that story today. This blog isn’t meant for instant reactions and the dust is a long way from settling. All I will say is that I was a volunteer at one of the kibbutzes (Be’eri) attacked on Saturday back in 1979 – long ago but it still adds depth to my reaction.

The Economist‘s lead is a challenge to “homeland economics” – the rejection of globalisation in developed economies, with the rise of protectionism and massive state subsidies to locate manufacturing in home country. The case is made by an extended essay (“special report”) on the world economy by Callum Williams, senior economics writer. This in turn is fronted by a leading article, Are free markets history?, which frames the issue as a challenge by politicians to the ideas of free market economics, which will lead to bad things. “Governments are jettisoning the principles that made the world rich,” it says. Having free market instincts myself, I find much to agree with in this critique. Most of the justifications offered for the increase in protectionism and extended government programmes don’t add up. But the newspaper’s writers are making three mistakes. They are taking the political narrative at face value without trying to understand the forces that shape it. They underestimate how much free markets themselves are driving the changes to the economic system. And they don’t know what they want. “The task for classical liberals is to prepare…a new consensus that adapts their ideas to a more dangerous, inter connected and fractious world.” Yes, but what on earth does that look like? It may turn out to be surprisingly close to what the world is doing now, but in slightly different clothes.

I see things differently – while at the same time using classical liberal economics as my basis. The expansion of global trade has been one of the most critical aspects of the development of the world economy since the Second World War. At first the main beneficiaries were the Western European and American economies – but this started to run out of steam in the 1960s – as the war-damaged economies of Europe recovered. Then Asia burst onto the scene, in three distinct phases – first Japan, then the “tiger economies” of South Korea, Taiwan, Hong Kong and Singapore – and finally and most dramatically with China – with India, Vietnam, Thailand, Indonesia, Malaysia and Bangladesh playing a significant role too. This last phase, from the mid 1990s up to the financial crash of 2007-09, was the most dramatic of them all and was given the monicker of “Globalisation”. The impact was dramatic – many scores of millions were lifted out of poverty; China rose to be a superpower; and living standards in the developed world (now including Japan) steadily advanced as falling prices of manufactured goods fed through. These advances had three critical ingredients: free trade, technology and comparative advantage. The weakness of The Economist‘s argument is that it concentrates on the first part of this holy trinity without appreciating the impact of the other two.

Let’s consider technology. The first critical development was the rise of manufactured consumer goods. Technological developments from the Second World War – from manufacturing technology to the use of plastics – saw a massive rise in the production of cheap goods from cars to washing-up liquid which came to occupy a dominant position in the economy. Advancing agricultural technology also led to huge agricultural surpluses in some countries. These goods are readily tradable and thus gave rise to a huge opportunity for trade. The second critical development was the advance of information technology in 1980s and onward, which allowed the development of long, global supply chains and the relocation of manufacturing and other economic activity, sometimes to the other side of the world. This again greatly expanded the scope for increased trade.

Then there is comparative advantage. This classical piece of economics has been well understood for two centuries and more. It gets taught in basic economics courses (“Economics 101”) as a wonderful illustration of the power of counterintuitive thinking. Then, after Economics 101, it quietly gets forgotten by trained economists. While its strategic impact is obvious, it is very hard to incorporate it into the mathematical and computer models that are at the heart of professional economics. That is unfortunate, because its dynamics are critical to understanding patterns of trade. It suggests that benefits from trade exist when two economies have structural differences that lead to different opportunity costs for different economic goods and services – for illustration the amount of wheat production that must be foregone by redeploying resources (typically labour) to make a car, say, or vice versa. In an undeveloped economy, like China in 1990, agricultural productivity is very low and you don’t have to forego much wheat to make a car. In America, agricultural productivity is sky-high, and the amount of wheat forgone to make that extra car is much higher, even allowing for much higher manufacturing productivity. So China is said to have a comparative advantage in car production, and America in wheat production – even if America is much more efficient at car production. So if China redeployed labour from the farms to factories and imported wheat from America to make up the shortfall, it could make more cars than the Americans would forego to redeploy labour to produce the extra wheat. Of course, that specific example is flawed: America can’t simply send workers to the countryside and expect that to raise agricultural production. But the general principle stands: export where you have comparative advantage; import where you don’t – and everybody should be better off. Exchange rates gravitate to levels that make the exchange beneficial to both sides, allowing for the differences in absolute productivity. This is one of the main reasons that exchange rates do not follow purchasing power parity.

Now the point that isn’t made in most Economics 101 courses, and fails to be fully appreciated by even trained economists, is that these gains from trade arise from differences in the structure of economies. If two national economies are identical, there will be no gain. And, in principle the more economies differ, the bigger the potential gains. Sometimes these differences arise from geography – if one country can drill oil in its jurisdiction it will certainly have a comparative advantage in oil over one that doesn’t – and production of oil will tend to drive out production of other goods (one reason why British de-industrialisation was particularly acute when North Sea oil was plentiful). But other differences are less rooted. The main difference that drove globalisation was the state of development – and in particular a vast, unproductive agricultural workforce compared in developing countries compared to a fully mechanised one in advanced ones. This did not necessarily drive agricultural trade, which is often subject to heavy protectionism, but led to low manufacturing wages, and thus an advantage in lower-tech manufacturing. But as these economies developed, starting with Japan, and moving on to China, they converged with the developed world. Manufacturing wages rose and the exchange rate of the developing nations appreciated. The gains from trade were based on much more subtle differences, and there were generally less of them. Outsourcing manufacturing from America to China is a much more nuanced economic proposition now, even without all the political baggage.

The role of technology in trade has changed too. Manufacturing technology has advanced to the point of being so productive that its role in the overall economy is much less dominant than it was. Indeed The Economist points out that one of the issues with relocating it “back home’ is that it doesn’t bring many jobs with it – it will not be recreating the good old days of plentiful mid-level jobs in the 1970s. Technology itself continues to evolve at a rapid pace, but it is far from clear that it is doing so in a way that opens opportunities for trade. It may even be doing the reverse by making it easier for economies to be self-sufficient after paying due homage to the technological giants that control so much of it. And the tech giants do not employ all that many people.

So it’s not at all surprising that the bottom is falling out of globalisation. There are just fewer opportunities to make profits. And with this tightness comes political sensitivity. It is much more likely that government policies will affect trade patterns because it takes less effort to turn the tables. And other issues such as resilience and security weigh more heavily. In particular China’s unsubtle effort to tilt economic advantage its ways in particular economic sectors, and use economic leverage to bully (countering, no doubt they would suggest, the American propensity to do the same) is drawing an understandable political reaction.

Where The Economist is right is to suggest that the new developments in structure of the world economy will yield disappointing results, especially in the developed world. The loss of gains from trade as a result of convergence adversely impacts the world economy. By and large they result from increased productivity in developing nations, who are able to offset the loss of trade gains by banking the extra productivity. The developed world can’t offset the loss in the same way. The costs of imported goods rise relative to domestic goods and this amounts to a headwind against living standards. A tailwind turns into a headwind for economic growth, to be added to other headwinds such as adverse demographic changes.

These are, funnily enough, the problems of success. Globalisation has done a huge amount to advance human development, but we’ve reached the top of the escalator (leaving aside, for now, the issue of what happens to the remaining less developed economies, in Africa for example). Much the same can be said of developments to manufacturing technology. We must look in a different direction to make future advances.

That different direction may include market economics, and surely it includes a trade in ideas – but physical trade will play a lesser role. Restoration of the environment, a better appreciation of human psychological needs, and a rethink of public services will be the critical elements. We can’t look to the recent past as our guide.

The Liberal Democrats prepare for the next election

Bournemouth – site of the 2023 Lib Dem Autumn Conference

I haven’t posted for a month. I’ve been on holiday, and then last weekend I went to the Liberal Democrats conference in Bournemouth. This is the first in-person Autumn conference the party has had this parliament, since September 2019 in fact – and my first conference of any kind since then. It was lovely to catch up with friends and acquaintances, people-watch and sample some of the internal debates the party is having. But what did the event say about the health of the party?

Overall the party was in good heart after a series of spectacular by election wins and good local election results. This was widely expected to be the last Autumn conference before the next general election (a shorter Spring conference in March in York should go ahead) – which is expected next year in May or in September or October. It showed. Much passion was on display on the conference floor, and many excellent speeches – but little actual debate: few speaker’s cards were placed against motions or even amendments. It resembled the managed affairs of the Labour and Conservative parties. There was one notable exception, on housing, which I will come to.

The party leadership’s electoral strategy is clear: it is to increase the party’s representation in parliament to thirty or more seats (it is now 11 plus four by-election wins), almost entirely by winning seats currently held by the Conservatives (one or two SNP seats are in the sights, and perhaps the odd Labour one). The unspoken hope is that this will be enough to overtake the SNP as the third party in parliament, with a substantial increase in the party’s ability to influence the agenda there. It may also be enough to hold the balance of power, should Labour fail to secure a majority, and thus influence government policy in one way or another.

The contrast with 2019 could hardly be greater. The party then had momentum as a rallying point for those hoping to reverse the result of the Brexit referendum – and it talked of forming the largest party in parliament with its leader as prime minister. A lot of political capital was spent on the proposition that the party would not rerun the referendum if it won an overall majority. But the party was out-manoeuvred by Labour’s support for a second referendum (much good that it did them) and the bubble was burst in the December 2019. Following this debacle the party commissioned a post-election review by Baroness Thornhill, who, as mayor of Watford, was one of the party’s most successful politicians. Unlike most such reviews, which are generally discarded by the party managers before the next election arrives, this review has been taken to heart. Ambition has been lowered; the communications agenda is led by public opinion rather than activists’ priorities; efforts have been made to professionalise the party’s core workers and reduce staff turnover.

This gives a great deal of credibility to the party’s strategy. Early in the conference many activists were a bit glum after seeing a presentation by psephologist John Curtice that showed that the collapse in support for the Conservatives was benefiting Labour and not the Lib Dems. But what matters is what is happening in about fifty seats out of the 650, and national polls will not show this clearly. Another pollster, Rob Ford, showed that the party was doing well among better-off graduate voters, and that the numbers of these voters was increasing in the seats likely to be Lib Dem targets. The Tories’ courting of “petty bourgeois” voters by ditching green policies, and ratcheting up nasty rhetoric on immigrants, plays into Lib Dem hands here. In 2019, the Tory leader Boris Johnson was careful to nod to these voters; the current leadership knows no such subtlety. The Lib Dems should benefit from the collateral damage of the Labour-Tory contest for the petty bourgeois – rather as the Tories benefited from the collateral damage of the Labour-Lib Dem battle for the professional classes in 2019. The party’s prospects thus look good in a decent number of seats in the South-East commuter belt around London, and equivalent seats further north, such as Hazel Grove outside Manchester. The prospects are murkier in the party’s former heartlands in the west county, however, where the professional classes are much less in evidence – though with Labour relatively weak there, there must be some opportunities.

However this strategy is creating a lot of tension in the party. Listening to the electors and letting them set the agenda may be good for curbing arrogance and winning parliamentary seats, but party activists want something more ideological and radical. But the radicalism is being suppressed. The party will not explicitly campaign to rejoin the European Union, as many activists wish – a goodly proportion having joined the party in the first place because of support for EU membership. Rather like Labour, the leadership are sticking to a much vaguer line about better relations. A flirtation with Universal Basic Income (UBI) has been firmly squashed – though in general the party remains stronger on ideas for spending more public money that raising it or saving it. This conservatism led to the only serious, open conflict of the conference: on housing.

Housing developments are not generally popular in the rural and semi-rural areas that comprise the party’s best prospects. City-dwellers fume that this is “nimbyism”, but living in one such area (bordering decent Lib Dem prospect seats, though not actually in one) I can say that this is oversimplifying things bit. Many developments comprise mediocre-quality houses in environmentally sensitive areas, with inadequate plans for supporting infrastructure – because these are more profitable for developers. The Conservatives are in full retreat on their commitment to building more homes, and are attacking the Lib Dem national target of building over 300,000 houses a year (even if this commitment was in their 2019 manifesto too) – though this did not do the Tories any good in local elections here in Sussex. The Lib Dem leadership were worried enough about this to propose dropping this target in a new housing policy, while at the same time still committing to building roughly this number of homes, by increasing social housing, developing garden cities, and so on. But the Young Liberals organised a counter-attack. Younger voters feel as if they are the centre of a housing crisis, with increased rents and vanishing prospects of buying their own homes. The housing target has important symbolic value to them, and the policy looked like a retreat. The leadership tried to win by deploying heavyweight speakers, but their arguments were thin gruel. Former leader Tim Farron delivered a “barnstorming” speech in defence of the leadership position by shouting increasingly loudly that housing targets wee “Thatcherism” without explaining why. “Has he lost the plot?” my wife, next to me, asked. “Yes,” I said, and we both voted for the Young Liberal amendment, which was carried. That was the only act of defiance by the membership, however.

In the conference fringe, things were a lot more interesting. My especial interest was rural policy: how to turn around farming policy so that it helps restore wildlife and absorb carbon – without too much damage to productivity. For me this is a critical area: carbon policy will fail unless the land is made into an efficient carbon sink, and we end extractive farming practices – never mind ending the destruction of wildlife. I was encouraged by the party’s support for this, which is winning converts among many farmers. But hard choices beckon, as it is hard to see how this can work without a substantial reduction in the consumption of meat. I was also interested by the arguments made in favour of UBI at a couple of fringes. There is something deeply flawed in the conventional thinking about tax, benefits and public services – and UBI might be part of the solution. But if it is, it feels like only one leg of a three-legged stool and it will not work by itself. More on that on this blog later, as I gather my thoughts.

In his closing speech, the party leader, Ed Davey, harped on the familiar themes: outrage at water companies for dumping sewage into rivers and the sea, supporting Net Zero policies, and a new policy about health care and cancer treatment. What party activists were more interested in were his mentions of closer relations with Europe, advocacy of electoral and political reform and an attack on Labour for lacking ambition and caving in to Tory policies. He said about the minimum here, in comments that were not picked up by the media coverage. The attitude to Labour is interesting. There is no love lost between Labour and the Lib Dems. The two parties are battling against each other to win the Conservative held seat of Mid Bedfordshire in a by-election, in an interesting trial of strength. Activists were repeatedly called on the help there. The party needs Labour voters to come over to it in its key seats, and so is careful not to antagonise.

I think Ed is right in his overall approach. The next election will clear a lot of air, and hopefully the party can develop its more radical instincts afterwards. If Labour win, as seems likely, then the party will need to define itself clearly against it – and that will be a lot more interesting.

Tax reform must be properly thought through before going to the country

Oh dear! The New Statesman magazine is returning from its summer break with what it obviously hopes to be a major piece by Harry Lambert, its editor, to challenge Labour Party policy. Mr Lambert shows his credentials as a journalist with extensive reportage. But there is nothing here that anybody who wants to seriously understand tax and the economy to get their teeth into – it is the intellectual equivalent of ultra-processed food. Your taste buds might be excited but it is not nutritious fare. To be fair, it’s not immediately apparent that either the Labour leader, Sir Keir Starmer, or the Shadow Chancellor, Rachel Reeves, are seriously interested in economics – and these are the people the article sees to influence. But the pair are very much interested in hard politics, and the article fares no better in that department.

The article reinforces my suspicion of anything in a journal billed as a “long read”. I’ve noticed a propensity to do this both in The Guardian and the Financial Times. I take this as a warning to stay clear, to avoid articles that aren’t properly edited and waste a lot of reading time*. Mr Lambert’s article was not billed as a long read, but it should have been – there is a mass of verbiage, which you have to wade through before you come to his three policy proposals, and even these aren’t stated succinctly. These proposals are: to replace Council Tax with a 0.5% tax on property values (covering just domestic property, as far as I can see); applying National Insurance to property rental income; and raising the rate of Capital Gains Tax. These, he estimates would raise £28 billion a year (though the property tax reform would be revenue-neutral): not coincidentally the amount of Labour’s proposal for spending on the green energy transition, which they are now backtracking from. More sensibly he suggests that the extra revenue is used to reduce tax on work (income tax, or better still, National Insurance).

I will start by reflecting on the overview, which is summarised by this statement:

In order to spend money in government the party will need to raise it. There is a very good way to do that. It is to shift the tax burden away from labour and on to capital, away from work and on to wealth. 

Harry Lambert, New Statesman 30 August 2023

There are two words of warning on this. The first is that the words “wealth” and “capital” are treated as synonyms (as are “labour” and “work” more justifiably). They can be, but when talking about economics they are different things. Capital refers to the assets tied up by businesses in order to be able to operate: premises, machinery, working capital and so on. By and large it isn’t a good idea to tax this directly, as it would reduce investment. Taxes on profits generated by the capital before it is distributed to owners – such as corporation tax – is another matter. This is in effect a tax on capital, but a very efficient one. It is one of the few things that the Prime Minister and Chancellor Rishi Sunak has insisted on raising, in contrast to his predecessor as Chancellor, George Osborne. Wealth, on the other hand, is owned by individuals for their disposal. The proposed property tax is a tax on wealth, not capital, unless it is applied to businesses too. That applies to Capital Gains Tax too (demonstrating that the word “capital” has yet another nuance when applied to taxes). Where the proposed extra tax on property rent sits is ambiguous.

The second word of caution comes from Modern Monetary Theory (MMT). This way of looking at things seems to be currently out of fashion, but I think that it captures many economic realties quite well. Supporters of MMT suggest that the main purpose of taxes is to manage demand in the economy, to prevent excess demand leading to inflation. It isn’t to manage the national debt, which can be paid off by creating money – if that is under national control, as it is in the UK. MMT was popular on the left once because it was suggested that the country could expand public spending without raising taxes, because inflation was dormant. Alas the excess spending across the Covid pandemic has led to inflation, showing that the inflation constraint is a real one, even if the national debt wasn’t – though to be fair that is also because the pandemic and other factors, such as the Ukraine war, constrained supply. The problem is that taxes on “work” (or spending, such as Value Added Tax) are much more effective at this demand management job than are taxes on wealth, as the wealthy spend a much lower proportion of their assets on consumption. So taxing more on wealth to tax less on incomes is in practice a much trickier exercise than it might first appear. Which is not to say that there aren’t good reasons to tax wealth, of course. It is good for managing the national debt (which is harder some supporters of MMT appear to think) , but much less so for funding increases in public spending.

But the main problem with Mr Lambert’s proposals is that they clearly haven’t been thought through. The country is surely sick of half-baked policies that turn out to be nightmares (Brexit, NHS reform – don’t even mention Liz Truss). The new property tax and the tax on rental income are radical changes which raise a lot of important questions of detail. Council Tax may be awful, but it contains a warning. There has not been a revaluation of the tax since it was introduced 30 years ago because of the political and logistical difficulties. How are property valuations to be determined and maintained? Then there are other questions: how would business assets be treated? Wouldn’t it be better to tax land values instead (there is a long history of advocacy of Land Value Tax)? And tax on rental income? What about properties owned by companies? And what would be the impact on rents and the availability of property to let? Mr Lambert can point to no major piece of research that tackles the details.

The fuzziness of such details would make the policies very easy to attack should Labour try to adopt them – and in fact they would take years to design and implement. The best way for the Labour leadership to take them forward is to propose them after they take power, as part of a comprehensive review of taxes to make the system fairer, and use the full resources of government to design them – and then put them to the country in the election after next. Meanwhile they wouldn’t need to even put the idea into their manifesto. Raising tax on capital gains is another matter – this has gone up and down periodically, and could be done relatively easily. And it would be not at all surprising if Labour did this in government. But there’s no need to highlight it now.

Which brings us to the high politics. Alas opinion polling on subjects like this that are not a matter of intense national debate are nearly useless. I can draw a parallel with electoral reform. In polls most people supported the idea: until a referendum in 2011 made it politically contested, when it was crushed. The political problems is as ever, is what people are now starting to once again call the petty bourgeoisie (or petit bourgeoisie if you prefer). These are self-employed people, or others who aren’t tied to major businesses or government agencies, who have the idea that they have made their own way in life with little help from government. They are electorally decisive but sceptical of big government and taxes of any sort. The political right are absolute masters of presenting taxes on the very wealthy as attacks on this group. This is why the Labour leadership are treading so carefully on tax. They think they are going far enough already by proposing changes to the taxation of private schools and non-domiciled taxpayers.

Harry Lambert’s ideas just aren’t ready to present to the electorate. That is the reason that the Labour leadership will ignore them – and wait until they have the resources of government to develop them.

*Readers might consider this cheeky as my own articles aren’t short by journalistic standards – but I don’t like things very short either!

Understanding the genius of Donald Trump

Everybody is talking about him. How the New Yorker is covering THAT mugshot

It’s unwise to bet against Donald Trump. Last autumn he hit a low point when candidates he backed performed badly in the US mid-term elections. But to see how effortlessly he is leaving his Republican rivals for the presidency in his wake leaves me gasping in a sort of admiration. He does this by breaking every piece of advice and common sense that crowds my feed on LinkedIn. Any person who seeks to be effective in politics, or management, needs to understand why Mr Trump is so effective at self-promotion – even as he is so ineffective at pretty much anything else.

As I was pondering this, I read an article on “The truth behind emotional intelligence”, by FT columnist Janan Ganesh. A lot of what clogs my LinkedIn feed is promotion of emotional intelligence. Mr Ganesh complains that people are muddling emotional intelligence with niceness. In fact many nice people have little understanding of the emotional dynamics of the situations they are in and are consequently ineffective – while many nasty people are extremely good at manipulation, which is founded on strong emotional intelligence. He uses as his example Shakespeare’s villain Iago in Othello.

I agree. I first encountered the idea of emotional intelligence on a residential management course in about the year 2000. It was profoundly influential for me. Our trainers were about promoting management effectiveness, not niceness. On the one hand I found the course very reassuring. I proved extremely good at understanding emotional dynamics at work. I was a good listener. As Mr Ganesh points out, emotional intelligence requires listening, and quiet people are usually better at it than the noisy ones who trumpet their emotional understanding. And I was, and I still am, a quiet person – often painfully so. But, and my trainer was clear about this, that quietness got in the way of my effectiveness as a manager. It held me back from being as assertive as I sometimes needed to be. This summed up my professional career very well. While my quietness somewhat typecast me as being very clever in an introverted, geekish way – a large part of my effectiveness actually derived from listening skills and ability to navigate the emotional chess of office politics. But on the other hand I lacked something big and important, and that held my career back. I flourished best when I worked among a small (ish) team of people who worked well together. After we were taken over by a large multi-national bank I quickly started to fade, and took voluntary redundancy.

But what has that got to do with Donald Trump? Well the first point is that Mr Trump is pretty much everything that I am not. That assertiveness that I lacked is overwhelming in him. He is not good at empathy. And yet Mr Trump succeeds like no other politician in forging an emotional connection with his supporters. A recent poll suggested that 71% said that what Mr Trump told them was likely to be true, compared to 63% for friends and family, and just 43% for religious leaders. That, presumably, is because Mr Trump understands what they think the truth is, and feeds it back to them. Those ratings would collapse if he got up and said that, for example, warnings about carbon emissions were well-founded and that all coal mining in the US should cease. But what gives Mr Trump that understanding? Clearly listening of some sort is happening. In the past I have called this right-brained genius – building on the idea that the left side of our brain is our rationale side, and the right our intuitive side. Advocates of this idea suggest that in the West we overdo left-brain thinking, and we should be more in touch with our right brains. But the right brain has its dark side – Mr Trump is very in touch with his.

But that explanation only takes you so far. His Republican rivals listen to the same people and pick up the same messages. Mr Trump builds on his understanding in his public presentation. This is rambling and incoherent (to an extent you would not appreciate if all you heard was edited sound bites), but delivered with a sly sense of humour. This comes over as authentic – no speechwriter could deliver the the same effect – and he makes his audience feel that they are insiders. All the attacks on him, he says, are attacks on you. The more he is attacked, the more his supporters like him. He uses his recent legal troubles to boost a collective sense of victimhood – most recently in his recent use of his Georgia mugshot. He is able to channel all his audience’s frustrations with the world. It is, once again, very right-brained. Even the best paid political consultants cannot coach their clients into achieving something similar – anyway he got there first, which adds to the authenticity. And the more outrageous he is, the more newsworthy – and the more people are talking about him and only him. Meanwhile others who entered politics to achieve serious things, and spend time trying to understand the world, are most unlikely to have the right head-space for that type of behaviour.

There is an evil to Mr Trump’s evil. It is entirely about self-promotion. Naturally he thinks that the world would be a much better place with him in charge, because nobody understands the world like he does. But he is fundamentally un-serious about government and his ego undermines any attempt to implement serious policy. In power he might do some good things, but overall it would be a major step back for the world.

Will he win the presidency? His campaign is better organised and more savvy than in 2016 when he first won. He is running rings around his Republican rivals, even those who are much more capable and qualified than he is. But his challenge will be to reach out to beyond those who worship him – to those who have a better grasp of his weaknesses. That will be hard but it isn’t hopeless. Many have little faith in the Democrats, and their likely candidate, President Biden, has weaknesses of his own. If Mr Trump wins his party’s nomination he will have momentum. His odds of success are better than they should be.

What is the message for the rest of us? Understanding of the emotional side of life is critical to success, whether or not you call it emotional intelligence. But those who possess it are often less effective in other ways, because listening is demanding work and can come at the cost of assertiveness. For some people intuitive emotional connection can substitute for this. But that brings its own dangers.

The Tories don’t need more humanity: they need competence

Last weekend The Observer reported that a senior Conservative had suggested that the Tories were in danger of being the “nasty party” again. They needed to show more humanity, he said. This followed some provocative language on the subject of asylum seekers from the Home Secretary and the party’s deputy chairman. The nasty party epithet resonates because it was attributed to the party during the long period of its doldrums while Tony Blair was prime minister, and and the party suffered three crushing defeats to Labour in general elections. It took a conscious rebranding effort by David Cameron to break free of the tainted Tory brand.

The Tory brand is undoubtedly deeply tainted once more. Their poll ratings are dire. Even in traditional heartlands, like where I live in rural Sussex, the party is being rejected in local elections by spectacular margins. Nice middle class people treat the party with disdain. The party’s main electoral strategy, though, is not to woo these voters but lower middle class and older working class voters who were part of the anti-establishment coalition that supported Brexit, and flocked to the party in 2019 in the “Get Brexit Done” election. It now seems that appealing to these voters is one of the driving principles of government policy, casting aside all considerations of national or wider interest. These voters are thought to like the “nasty party” image.

The problem of small boat crossings across the Channel illustrates the government predicament well. It is this flow of illegal immigrants that provoked those nasty comments. The government promotes a series of “tough” but token policies – such as trying to transport migrants to Rwanda, and housing them on a barge that looks distinctly like a prison ship. Ministers then attack “leftie lawyers” for slowing down (or even stymieing) these ideas, in the hope that mud will stick to Labour, led by lawyer Sir Keir Starmer. Certainly the flow of migrants across the Channel irritates Brexit-supporting voters, who are no sticklers for the rule of law.

But the flow of boats goes on. There is apparently a slight dip in numbers in 2023 compared to 2022, but this may just reflect weather conditions. The people traffickers are getting better organised, and are easily able to outwit government efforts to impede them. For some rather puzzling reason government ministers have been claiming that their policies are designed to “break the business model” of the traffickers. Perhaps they think this form of words sounds clever. But their policies are not directed at this goal at all. The business model depends on the absence of legal routes of migration, or even alternative illegal means – this forces migrants into the traffickers’ arms, allowing them to extract high prices and therefore invest significant money and effort in beating the government efforts efforts to make their lives difficult. Of course the government does not feel it can offer alternative routes, because that means letting more in legally, and their whole aim is to reduce flows overall.

And the longer the flows persist, the more the government has to confront difficult questions. The first of these is why all this is blowing up now, after Brexit, when Brexit was meant to enable Britain to “control its borders”. The business of managing borders is clearly a lot harder than most Brexit advocates had said. Then there is the the rather pathetic scale of the Rwanda and barge policies compared to the volume of incoming people: hundreds compared to tens of thousands. Worst of all is the effect of painfully slow processing of asylum claims, which has left tens of thousands in limbo, many having to be put up at state expense. What the government has not quite admitted was that this backlog arises from deliberate incompetence, as the former Home Secretary Priti Patel seems to have though that processing claims more slowly would reduce the incentives for people to come over and make claims. That hasn’t worked: instead state agencies and their political masters are made to look chronically ineffective.

Polls now show that few people think that the government will fail to stem the flow of boats. In the short term it might work for the Conservatives to deflect the anger towards the liberal “elites”, personified by leftie lawyers. But we probably have more than a year to wait before the next election. It is hardly worth suggesting that the opposition would do no better, when it doesn’t look as if things could get much worse.

If it is to turn the tide of opinion, the Conservatives needs to demonstrate competence above all else. Those nice middle class voters will forgive a lot of nastiness for that. Angry Brexiteers are not so dissimilar. And as for international standing, foreigners have their nasty side too – it is competence that inspires their respect. The problem for the party is that it has turned incompetence into something of a feature since they chose Boris Johnson as their leader. Both he and his successor, Liz Truss, openly selected cabinet ministers on the basis of loyalty rather than ability. Political posturing mattered above all.

Since then there have been an endless succession of ministers evidently not up to the job. Mr Sunak seemed to break from that idea. His stock (and the government’s) was never higher than when he reached a deal with the European Union over Northern Ireland – allowing competence to trump political posturing. But then again, his appointment of the inexperienced but ideological Suella Braverman as Home Secretary always pointed in a different way. Now political messaging is once again the priority, as the government stumbles from one mishap to another.

This recalls the government of John Major in the 1990s, with the party exhausted and fractious after the Thatcher years. It is true that this government managed to pull off an election win against the odds in 1992 – but at that point the government was being given the benefit of the doubt on its economic strategy, while doubts over Labour leader Neil Kinnock persisted. By 1997 the government’s haplessness was exposed to all, while his Labour opponent, Tony Blair, was the very picture of slick competence. Sir Keir can’t aspire to Mr Blair’s heights, but he looks competent enough. Mr Sunak’s supporters may keep clutching at straws (as did Mr Major’s “the darkest hour is just before the dawn”, they said, inaccurately) but it is heading for humiliation all the same.