Covid-19 will not make the world a better place

In these strange times I have been thinking a lot about the meaning and consequences of it all. I’m not alone. With so little else to do in lock-down many others are thinking about the effects of Covid-19. Alas this effort is as unproductive as so much else that is going on right now.

For contrasting ideas compare these two pieces. In the New Statesman philosopher John Gray explains Why this crisis is a turning point in history. For him it marks the reverse of globalisation and the return of the nation-state as the dominant idea in political and economic organisation. On the other hand in The Times there is Matthew Parris who explains why We say everything will change but it won’t. For me Mr Parris is much more on the money, but then I have never liked Mr Gray, a very clever man who somehow always seems to miss the point.

The remarkable thing about almost all the predictions of change is that they are expressions of wish fulfilment. Environmentalists say that we will stop travelling by air and learn to value the environment we have so despoiled through largely pointless economic activity. Socialists say the crisis is a vindication of socialist organisation at the expense of markets and capitalism, and that we cannot return to “Neoliberal” ways. Nationalists say that it is all the fault of outsiders and countries will raise borders and expel foreigners. Critics of the European Union say the crisis proves its uselessness and will prove terminal for it. The Economist suggests that the crisis will be good for big companies and herald a period of consolidation and takeover (to be fair that newspaper does not openly advocate such consolidation as a good thing, but its bias in favour of bigness is very evident). Critics of Donald Trump say the crisis means his presidency will end this year. And so on. Perhaps with the crisis having so badly disrupted people’s expectations for how the year would progress, there is some kind subconscious compensation mechanism which leads them to conclude it will hasten what they were always advocating. There must be a silver lining to all those dark clouds.

A lot of these thoughts have merit, but we need to adjust the seasoning. One of the deepest instincts of humankind is conservatism and a desire to recreate better times in the past. When all this is over there will be an overwhelming wish to go back to how things were before, which will be seen as a sort of golden era. This may take a little while to emerge, as a lot of people have been genuinely scared by the idea they could be contaminated by their neighbours. But a lot of infrastructure is simply falling into disuse rather than being destroyed. The planes and airports are still there. Many airlines will go bust, but their assets will be bought up on the cheap by stronger airlines and new ones. Dirt cheap fights will be on offer and, alas for those of us who think it is mainly pointless and destructive , things will get back to something like what they were.

Still, a number questions are worth posing. The first is whether we will treat this affair as a nightmare to be put behind us and forgotten, or whether we will take real steps to make ourselves less vulnerable to future pandemics. Much of history points to the former conclusion, as Mr Parris points out. But one of the interesting things to emerge is how much better East Asian countries have proved to be at handling the pandemic. This applies as much to China’s Communist dictatorship as to Taiwan’s and South Korea’s vibrant democracies. The reason seems to be that they have had major scares before, such as SARS. So perhaps western societies will learn too. Also it may prove very hard to beat this virus. An effective vaccine, the silver bullet we seek, might prove elusive. That would mean that we would have to build longer-lasting systems to fight it, and in particular tighter surveillance of people’s health so that outbreaks can be detected and isolated quickly. This will not be dismantled so quickly.

A second question is how the world’s financial systems will cope with the surge in government spending required to confront the disease and to soften its economic effects. Each of three pillars of the world system is going to be put under immense strain: the US dollar as the world’s principal currency for reserves and international transactions; the Euro and the European financial system; and China’s opaque and highly manipulated system. Here in Britain our financial system looks a lot healthier than it did during the great financial crisis, but it cannot fail to be impacted if these other pillars start to falter.

And then there are things that people should be pondering but are not. The first are lessons about the most effective structure and governance of the state. Here in Britain we are seeing a lot of muddle, and many missed opportunities. A lot of these derive from excessive centralisation, which stops the government from making the most of many smaller organisations that could help unblock the bottlenecks in the supply of tests and personal protective equipment, for example. Instead people will probably conclude that the system was not centralised enough.

There is also a deeper philosophical question about our society. The lockdown shows how little of our economic activity we actually need to keep ourselves alive. Most economic activity is only of marginal worth when set against the big issues of life and death. Perhaps we should rethink our obsessions with economic growth and productivity, and instead try to build a society that is safer, more resilient, more sustainable and happier. But if that thought ever starts to get traction it will soon be crushed in our desire to put the nightmare behind us. I can’t yet see much of a silver lining to this cloud.

Why I have been offline

It’s been one of my longer periods of silence on the blog, and I’m still not ready to post at my old rate. I owe my readers an explanation.

Covid-19 is today’s excuse for everything. It has been an important part of what has been happening to me, but it isn’t the reason that I haven’t had time to devote to my blog. That is because in the New Year my wife and I finally took the plunge to move out of London. We’ve been plotting it for years, to the mounting boredom of our friends and relations. We are frustrated with our life in the big city. We love the countryside and feel trapped in London. We also want more space and less jostling with our neighbours. We weren’t looking for the full rural experience, but to take a big step towards it, to live somewhere with more space and with better access to the countryside: preferably a very short walk.

So in January we took steps to put our terraced house near Clapham Common on the market. I was hoping for a bit of a “Boris bubble”, before relief at the breaking of the political deadlock was overwhelmed by the contradictions in what the new government was trying to do, and an overdue global recession struck. Our plan was to achieve a quick sale if possible, so we promised “no chain”. In other words we were happy to move out to temporary accommodation in the probable event that we were unable to synchronise a purchase.

This proved well-timed. The local property market had been dead, but with quite a few potential buyers. Very few properties were coming onto the market. In a week the house had 40 viewings and we had five offers, though none for the asking price. We picked one of these, with our objective of a quick but secure sale in mind, negotiated a slightly higher offer, and we had exchanged contracts before Valentine’s Day.

This left the other half of our plans to move a bit adrift. We had been doing a bit of surreptitious looking over the previous two years. We initially focused on West Sussex and the Chichester area. But we were unimpressed with what was on the market there, and it was relatively expensive. So we started to investigate East Sussex, in the Battle and Rye area, and lined up several viewings. There were some near misses, but none quite hit the mark. We did find the area just as beautiful as further west, so we made a second visit, just as we were about to exchange contracts.

This time we combined the east of East Sussex with the region where the two parts of Sussex meet, in the area around Lewes and Eastbourne. This part of the world quickly grew on us. Lewes is a lovely and interesting place. The South Downs are nearby. And it is within easier reach of both central London and the west of the country, where most of our relatives live, than Rye. We found two properties we really liked there, and offered on one of them. After a bit to and fro our offer was accepted before my birthday on 21 February, though it was clear that there would be a gap between moving out and completing on the new property.

And so started the process of preparing to move out. We had been living in our house for nearly 24 years, and our entire married life. Although we had done a lot of sorting out last year, the amount that still needed to be done was massive. We set a completion date of 27 March, a bit later than our buyers wanted, but about as quickly as we thought we could manage. As usual I was more optimistic than my wife, but on this occasion she proved correct. Getting ready became overwhelming. Sorting things into boxes to take, or into various categories of throwing out. We made regular trips to the dump and local charity shops. We also needed to work out what we would need for our temporary accommodation and what was to be put into storage, without having any clear idea of how long the temporary interlude was going to be.

And then came Covid-19. Like most people I didn’t see the seriousness of the impact until quite late. It was something happening in China. But as it took hold in Italy it slowly dawned that it could affect our plans to move. So our feelings differed from most people. We were willing the government to slow down on imposing restrictions, while most people thought the government was dithering (and most people were surely right). And while most people were stocking up for the crisis ahead, we were doing the opposite to minimise what we had at movement day. Slowly restrictions started to get in the way. The charity shops stopped taking donations and then closed altogether. Some quite usable things went to the tip instead. And then the tip closed, and more stuff had to go into regular bin collections. And the question nagged: would we be able to move at all on 25 March, when we had booked our removal company?

On Monday 23 March, I honestly thought we’d lost the race. Boris Johnson announced lockdown, and the four reasons that we could go out of the house, and completing a house move wasn’t listed. At this stage a high proportion of our stuff was packed; only the bedroom wasn’t taken over by boxes. Normal life had become impossible: we were camping in our own home. It was worse for the people moving in. The wife was six months pregnant and they had a young child. Their rental contract expired at the end of March. The emergency might be able to stave off eviction; it would not delay a new arrival.

On Tuesday we contacted our removers. They were keen to proceed, though they wanted to telescope a two day move into one. Government restrictions on work were vague, it turned out, and ministers talked of keeping the economy going. That gave our removers the wiggle-room, and we were asking no questions. Our relief was immense. It was only slightly marred by Premier Inn calling us in the evening to tell us that our booking for Wednesday to Friday was cancelled. We realised that staying at home after the removal had started was not a practical proposition and had planned to stay there. We managed to find a local apartment instead, though this proved not nearly as comfortable.

On Wednesday our removers turned up. A first there were five of them, and then eight. They worked hard and cheerfully, and got the job done. They marvelled how just the two of us had managed to accumulate so much stuff; we lamely said that a lot of it was inherited. That gave us Thursday and Friday morning to pack up the stuff we weren’t putting into storage, and to clean the place up a bit. On Friday completion happened and we became technically homeless.

We are now in Broadstairs, Kent, in a holiday apartment. We are then moving into a house nearby that a friend owns as a holiday hone and very generously offered to us for as long as we needed it. Our purchase is frozen, without us being able to exchange contracts. We are one end of a four property chain; nothing can move until restrictions are eased. On the Friday that we completed the government published explicit rules on the property market, effectively freezing it. We had only just made it. The landlady of our current apartment now says that she can let only to key workers; we would not have qualified. While our position is certainly not what we had been hoping for, it could have been a lot worse. Compared to the stresses that so many are now enduring our problems are small beer.

Up to the 27 March we had been focusing on completion to the exclusion of everything else. Since then, we have been recovering from the whole exhausting experience. I have actually been quite busy. There was a backlog of work on my various voluntary duties, and two online meetings last week. That has kept me pretty busy; there will be not let up for another week or two, with an ongoing audit and two important compliance deadlines to meet. And then the lockdown will finally catch up and I will have for reading, thinking and blogging (though most of the backlog of reading is in storage!). Service will resume.

Guest post: YOUNG PEOPLE HAVE PLENTY OF THINGS TO WORRY ABOUT. THE LONG-TERM EFFECTS OF THE CORONAVIRUS SHOULDN’T BE ONE OF THEM

Sorry for the lack of activity. I haven’t succumbed to Covid-19. I have just been exceptionally busy, not least with a house-move. And not just that: my Treasurer duties have been quite intense, and still are: I’m in the middle of an audit. I will recount my tale when things settle down a bit. Meanwhile it is my pleasure to publish this piece from John Medway.

A recent article in the Daily Mail raised the question of whether it might be better to accept a high death toll among the elderly from the coronavirus than to impose a huge financial burden on the younger generations by allowing major short-term disruption of the economy. Stephen Glover wrote (25 March 2020 ): “We have to ask ourselves a rather shocking question. Is it right that, in order to save the lives of mostly elderly people … the future lives of millions should be devastated?”

I must declare an interest here – I am elderly. To be fair to Glover, he doesn’t come down in favour of letting the elderly die off. He accepts an imperative to “throw the kitchen sink at the problem”. In any case, I’m going to leave aside the moral issue of balancing human lives against economic well-being. My view is that his prediction of long-lasting economic devastation from the coronavirus is simply bad economics. I don’t accept that we necessarily face years of austerity because of a generous approach to the temporary economic victims of the coronavirus.

The coronavirus episode will have some significant short- and medium-term economic effects. One is that resources are going to waste because workers are being made idle. This means that for a time, the economy will be smaller than normal and that on average we will be poorer for a short while. If the episode is prolonged and government support for businesses inadequate, there could be some lasting damage to the economy through premature retirements from the workforce, loss of skills and delays in training. These are real, medium-term effects but should be manageable. They should not mean that “the future lives of millions” will be “devastated”.

Glover’s main concern is not with short-term effects on the real economy – its ability to produce the goods and services we need or desire. It is rather with the sudden and huge surge in government expenditure, the loss of government revenue and rapid growth of government debt. “Let’s be in no doubt”, he writes, “that our country faces years of austerity that will almost certainly make the past decade look like a minor irritant.”

That would be true if an unreconstructed George Osborne were to return as Chancellor but I hope this is most unlikely. Thatcherites liked to portray the state and the country as a household whose expenditure was limited by its level of income or by its ability to borrow. This gave some cover for their aim of reducing the size of the state and passing as much of the public sector as possible to markets – an aim no doubt with a strong appeal to the sort of people who donate five- six- and seven-figure sums to the Conservative Party.

But a government does not always need to finance its deficit by borrowing. If, like the UK, it does not belong to a currency union, it can also do it, in co-operation with its central bank, by “printing” money – also known as “quantitative easing” or QE. The limit on the prudent printing of money is set (if not by ideology) by the perceived needs of the economy. If, once the coronavirus is beaten, the economy is held back by the inability of many firms and households to repay or finance their debts, an injection of liquidity through QE could solve the problem. This could be done through a generous welfare system and by offering cheap credit to basically sound firms in temporary financial difficulty.

It is, of course, tempting to think that governments can go on indefinitely financing their deficits through printing money. Some countries have done this, with disastrous results. The volume and speed at which money circulates needs to match the productive capacity of the economy or inflation results. As the economy recovers and nears its short-term limit, there may be a need to reduce rather than increase the money in circulation. This can be done by increasing interest rates, increasing taxes, reducing public expenditure or any combination of these. The important point here is that when printing money is an option, taxes are needed, not to pay for government expenditure, but to help keep the supply of money in the economy in line with productive capacity. In normal times, the notion that taxes are needed to “pay for” public expenditure is a useful approximation to the truth. But these are not normal times.

To a person who thinks in terms of public expenditure invariably needing to be paid for through taxation or other revenue, a sudden and enormous surge in government spending is deeply alarming. Glover’s alarm is perhaps because his perception of the nature of money, spending, borrowing and taxation is fundamentally different from mine.

There are big things to worry about in the British economy. One is the age imbalance in the population and the problem of caring for a growing elderly population – ironically, a problem that might be alleviated by a cull of the elderly population by the coronavirus if it gets truly out of control. The age imbalance is a problem in the real economy – the resources devoted to the care of elderly people. The problem is exacerbated by unfunded public-sector pension commitments, to which printing money will not be the answer.

More serious is the climate emergency. It is an emergency because global warming seems likely to prove catastrophic unless action is taken urgently to reduce carbon emissions. Governments generally show no sense of urgency and some (such as the US government) are in actual denial of the problem. The medium-term economic and social effects of dealing effectively with the climate emergency are likely to be far-reaching – for good or ill, depending on the attitude and skill with which governments and societies approach the problem. The price of failure could be one or more future generations of people for whom life is nasty, brutish and short.

Young people have plenty of things to worry about in the economy, society and environment that we oldies are bequeathing them. The long-term effect of the coronavirus should not be one of them.

Strategy and tactics in British politics

In any longer term competitive activity it is useful to distinguish between strategy and tactics. This as true of politics as it is of anything else. It is surprising how few British political activists grasp the difference.

The current usage of the two words derives from the development of military theory in the 19th Century. Strategy focuses on long-term aims and how to achieve them. Tactics focuses on the here and now. Strategy guides your choice of which battles to fight; tactics help you win those battles. In politics strategy is mainly about identifying the coalition of voters you need to win and retain power. You then develop tactics to secure that coalition.

In British politics it is the Conservatives that grasp the usefulness of the distinction best. After 2005, its leader put into action a new strategy, which was to woo liberal-minded middle class voters to join the party’s existing base of conservative suburban and rural middle classes. This allowed it to form a coalition with the Liberal Democrats in 2010, and then to win an outright majority by crushing that party in 2015, completely outmanoeuvring Labour. But to hold this shaky coalition together he had to promise a referendum on EU membership, which he lost, causing the collapse of his strategy. He sensibly bowed out. After Brexit the Conservatives, led by Theresa May, developed a new strategy. This was to bolster the rural and suburban core vote with Brexit-supporting lower middle-class and working class voters in the North, Midlands and Wales. The metropolitan middle classes would then be bullied into voting Tory by fear of Labour. This strategy seemed to be working in 2017, but Mrs May’s lousy tactical handling of the election in 2017 ended in failure. This election was a very good demonstration of the difference between strategy and tactics. Sound strategy was let down by bad tactics. When Boris Johnson took over from Mrs May last year, he retained her political strategy, but added much sharper tactical management to it. Aided by Labour’s strategic ineptitude, he was rewarded with a landslide last December.

Labour’s Tony Blair grasped the need for strategy very well. His strategy for Labour was to appeal to middle class voters while retaining its working class base. When he left the leadership in 2007, this strategy was getting stale, but his successor, Gordon Brown, had no clear alternative. Labour leaked metropolitan middle class votes both to the Tories and Lib Dems and lost. Since then Labour has shown little grasp of strategy and has preferred to focus on tactics instead. Ed Miliband’s strategy, inasmuch as there was one, seems to have been based on the idea of a “progressive majority”. The collapse of the Lib Dem vote, he reasoned, would be enough secure a winning coalition without the need to chase more conservative voters, as Mr Blair had. But the Lib Dem collapse favoured the Tories, not Labour, while in Scotland Labour was helpless facing the rise of the SNP. Under Jeremy Corbyn the party’s strategy was based more on hope than evidence; he assumed most voters were fed up with Tory austerity and angry about the way the rich seemed to be getting away with so much. There was also a hope that the party could bring in people who hadn’t voted before, especially younger voters. Alas for them they interpreted the relatively good result in 2017 as evidence of sound strategy. Labour instead strategised on what they would do if they won power – an area where Mr Blair was weak, as indeed have been most Conservative leaders. Political strategy and government strategy are different things.

Just how bad things are in Labour was illustrated by a remark of leadership candidate Rebecca Long-Bailey. In her defence of Mr Corbyn’s record she said that the loss of the 2019 election was due to poor strategy. That’s a bit like saying that the result was down to weak leadership, and not the leader. Actually it is clear she actually meant “tactics” rather than “strategy”. Party activists, even senior officials, muddle the two up. It doesn’t help that most advisers on political tactics call themselves “strategists”.

The Lib Dems are no better than Labour on this. Nick Clegg, its leader in the 2010 election did seem to have some sort of strategy, which was to appeal to liberal-minded voters, and use coalition government to establish the party’s credentials as a serious political force, and so expand its voter base. This strategy collapsed on contact with reality after 2010, though poor tactical handling of the early coalition government didn’t help. By the 2015 election, the Lib Dems were reduced to fighting 30 seats as if they were by elections, so empty was their strategic appeal. Since then the party has remained consumed by tactical rather than strategic thinking, in particular with its focus on Brexit. But as the third party in a winner-takes-all electoral system, the party starts from a point of strategic weakness, so perhaps this is understandable.

A wider point needs to be made. The way I write about it suggests that political strategy is a matter of clever choices by senior party leaders, allowing them to lead a willing “army” to victory, rather as military strategy is a lot of the time. But political strategy involves compromises and pain. It is about identifying disparate coalitions of voters – but what you promise one part of the coalition will displease other parts. Mr Blair’s strategy so annoyed core metropolitan Labour support that he remains regarded as a traitor within the party. Mr Cameron’s coalition required the EU referendum to satisfy its core supporters, which came at a huge political cost. Tension within the new Tory coalition is obvious, especially over such matters as immigration policy.

The problem for Labour is that it has been, and probably still is, unable to face up to the compromises required to secure a winning coalition. Nothing very clear is coming from the leadership candidates. Lisa Nandy is best at articulating the problems, but is less clear on the painful choices Labour will need to make. Ms Long-Bailey still seems to hope that all Labour needs is sharper tactics. Kier Starmer says as little as he can about what he would actually do.

And the Lib Dems? What they do in large measure depends on the choices that the new Labour leadership does or does not make. Such is the lot of a third party.

The new economics: what does this mean for liberals?

My previous article on the changing world of political economy generated more interest than usual. It was, of course, a small dip into a large and complex topic. Given the interest shown, I feel the need to expand on it a bit.

The first thing to say is that what I am calling “the new economics” is based on standard economic principles, and the ideas aren’t new. The departure from political policy norms may be radical, but the departure from mainstream economic theory is not. This is partly how I have chosen to frame it. The heterodox idea of Modern Monetary Theory (MMT), popular in some parts of the left in the US and UK, is in fact not at all far from my new economics. But MMT advocates have, generally, chosen to frame their arguments as a radical challenge to conventional economics, and have a tendency to be very rude about mainstream economists. They have in turn drawn lots of rude comments from mainstream economists. A lot of this dispute, from both sides, is manufactured and I think that is a pity. Clearly some facts are in dispute, but it would be better to narrow these down and focus on the evidence rather than indulge in slanging.

Instead I take inspiration from people who are clearly on the mainstream spectrum. The main one is Adair Turner (whom I found going through some of my old papers was a Cambridge contemporary of mine: we were both members of the Conservative Association in 1976-1979). I haven’t read anything more than the Economist review of Dietrich Vollrath’s Fully Grown: Why a Stagnant Economy is a Sign of Success, but he is clearly another mainstream economist developing the same sorts of ideas. Mr Vollrath’s contribution is to bring rigorous numerical analysis to the table, where I have been plying with airy ideas.

Which brings me to my next point. A modern, developed economy will not show much in the way of GDP growth. We have become so conditioned to thinking that growth is a sign of economic health that this takes a lot of getting used to. But it is perfectly consistent with human wellbeing advancing. People may consume less stuff per head, but they can still have increasing levels of physical and mental wellbeing, and live in a nicer, friendlier and healthier environment. Mainstream economists have a tendency to suggest that people are being irrational if they consume less, work less, buy organic vegetables and have a healthier lifestyle, but the irrationality is theirs.

But a “stagnant” economy does bring a problem in its wake, and that problem is taxes and funding the public sector. GDP measures the size of the money economy, and the money economy is central to way governments operate. Indeed you can make a good case that money was invented so that the state could organise armies, build infrastructure and hoard surplus food. While the state could, and did, do this through forced labour and the appropriation of harvests and other goods, a system of taxation and wages is much more flexible. The rival idea that money was invented to facilitate trade is harder to sustain, though it used to feature a lot in economics text books. Of course the two functions of money, taxation and trade, fed off each other in a virtuous circle.

This all matters because there is no sign that the role of the state (in the broadest sense of collective public action) is about to diminish. The expansion of the state is one of the most important developments of the 20th Century, starting in large part with the creation of war economies, and then a dramatic expansion of the state role in education, healthcare and pensions and other welfare payments. To many on the right, this expansion of the state is seen as a hideous intrusion on human freedom that needs to be reversed. In fact it is a response to two important developments. The first is the tendency of capitalism to self-destruction, as noted by Karl Marx. If the capitalists succeed in creating too much profit, which is then hoarded, fewer people will benefit from the possibilities that the economy offers, and the system stagnates and collapses. If the state taxes those profits and hands them out to the less well off, this creates demand for capitalism’s products and the system is saved. (This is not the only way: capitalists being more generous with paying their workers has a similar effect, though it usually it takes organised labour to make this happen).

The second development causing the increased size of the state is the good old Baumol effect, which is the main driver of the new economics. The private sector is becoming so efficient that the relative cost of public goods is rising compared to what gets traded in private markets. Everything is more expensive in defence, law enforcement and healthcare. This issue is getting more acute. Public services are generally overstretched and many of their employees are underpaid. Stinginess on welfare benefits is creating knock-on problems elsewhere in society.

But this creates a political challenge. Public services need to be funded through taxes (it is possible to have a theological debate on this with MMT advocates, but let me duck that for now – without taxation public spending leads to inflation). People are generally willing to pay quite a bit of tax, but this comes at a political cost. Politicians have tried to sidestep this through economic growth. If the money economy is growing, then the state collects more money while keeping the tax rates the same. Those familiar with Baumol thinking will realise that this always was flawed thinking, as productivity in the public sector lags that in the private sector. But now we are in the stagnant phase of our economic evolution, the argument collapses completely.

That points to the raising of taxes, and all the political problems that come with that. But behind this there is a bit of a puzzle. For now state budget deficits look quite sustainable, as do higher levels of state borrowing. The fear is that deficit spending will create inflation, and high levels of public debt create financial instability – and that the risks are higher if the economy isn’t growing. But there is no sign that inflation is close to be awakened in developed economies, while monetary policy can be used to manage high levels of government debt, provided that you are borrowing in your own currency, and inflation is dormant. Meanwhile private sector demand for public debt remains very healthy. So just when do we need those higher taxes?

That is the central problem at the heart of the modern political economy. I don’t have an answer. But longer term there are three important things about a liberal approach to the new economics that I do hold on to:

  1. The government’s extra flexibility on fiscal deficits and debt should be exploited through investment programmes, creating assets that can be separately financed if necessary. These include social housing and renewable energy infrastructure. We need to be more careful with hospitals and transport infrastructure, but there are doubtless opportunities there too.
  2. The day when extra taxes will be needed to fund more public services will arrive. When it does the level of public accountability will need to improve substantially. This points to the need for a profound devolution of power, and especially the power to raise taxes, backed up greatly improved public governance.
  3. Meanwhile public services will need to be more efficient and effective (which is not the same as being more productive in my vocabulary). That means a profound switch to preventing and solving problems rather than service delivery and ticking boxes. That will require specialised services to work in a much more integrated way with much more delegated authority – and that means that services. mainly, need to be more localised. Which, of course, fits neatly with point 2.

I think this could be the basis for a grand bargain between liberals and either the left or, even, the right. The signs that either end of the political spectrum, or indeed liberals, are up for this are mixed. But there are some stirrings. On the other hand unscrupulous forces of the right or left could exploit the extra flexibility on public finances to line their friends’ pockets and consolidate political control while pretending to address the needs of “ordinary people”.

The rules of political economy have changed. Mainstream politicians and commentators haven’t noticed

Before the great financial crash of 2007-2008 there was a solid consensus as to the sorts of economic policies governments should pursue. In fact the underlying realities have been changing for some time. These new realities now dominate in developed economies, and yet the political mainstream hasn’t caught up. It is one of the reasons that populist politicians, not least Donald Trump, are doing relatively well when they defy the old rules.

What were those rules? First is that GDP growth is a critical indicator of economic wellbeing, and that increased productivity is the driver of this. Politicians should push through “supply-side” policies that improve productivity, which will allow income per head to grow, and with it individual incomes and wellbeing. With productivity apparently in the doldrums since the crash, especially here in Britain, there is much shaking of heads. Before the crash economists had thought something they referred to as “trend growth” of about 2% per annum was practically a law of nature. Many still think its disappearance is a failure of policy.

Second, governments must maintain a prudent fiscal policy that does not allow high levels of public debt to pile up. Public spending must be paid for through higher taxes. High levels of public debt can destabilise an economy, it was thought. This went alongside the idea that if public spending was not restrained it would be wasted, and cause low productivity.

Third: free trade is essential to a healthy economy. This follows from basic economics: the principle of comparative advantage. During the years of rapid globalisation of trade from the 1980s to the early 2000s, this idea received a terrific boost as new Asian economies entered the mix, with comparative advantage particularly evident in basic manufacturing. This generated huge gains in trade for both developed and developing economies.

And fourth, interest rate policy is the right way to manage the business cycle to ensure that recessions were smoothed out. This replaced the older post-war idea that fiscal policy was the right way to do this. Interest rate policy (or “monetary policy”) allowed the private sector to expand and contract as required, through an efficient market mechanism, rather than inefficient government direction.

What changed? First of all, the conventional wisdom on monetary policy, which evolved after the old system of fixed exchange rates and capital controls, known as Bretton Woods, collapsed in the early 1970s, led to an explosion of private debt. While policy makers liked to think that the policy was sustainable, there was a clear trend towards higher private debt and lower interest rates. This contributed to the great financial crash. Now interest levels can’t go lower, and people worry more about financial stability. This means that monetary policy is pretty much done for as means of regulating the cycle, with fiscal policy coming back into the picture, sometimes disguised as monetary policy with such ideas as “quantitative easing”.

Perhaps the most important change, though, was that productivity in manufactured and other tradable goods has advanced so far that they have ceased to have such an important role in the economy as a whole. This is known as the Baumol effect, and it is something I have been banging on about for ages. The modern economy is in fact dominated by things like health care, social care, and services, with status goods and land also playing a larger overall role. The old conventional wisdom around productivity doesn’t really work here.

On top of this environmental degradation, and especially climate change is posing a question that was always there. Is producing and consuming more and more stuff actually advancing human wellbeing? We all need to eat and wear clothes, but do we need to get through quite so much as we do? And yet an economic mindset in which consuming stuff is central to the way we measure wellbeing refuses to die.

A couple of other factors are worth mentioning. First is that the Asian economies are developing fast and converging with the western developed ones. This means that there are fewer gains from trade available, and that the globalisation boom is over; indeed many of those gains will actually reverse as the two worlds converge and comparative advantage diminishes. Second modern industry is not as hungry for capital investment as it used to be. This is partly to do with the Baumol effect, as the relative size of capital intensive industry shrinks, but also to do with the nature of modern technology, which uses more human capital. There are fewer opportunities in the private sector for savings to invest in, at any rate for things that aren’t outright speculative. The main cause of the great crash was an excess of private sector speculation as the relative scale of productive investment diminished.

So what does all this mean? First that it is OK to play fast and loose with fiscal policy. High levels of public debt are quite sustainable because the availability of private investment is diminished. Public debt is safer than private speculation. This is clearly evident in the USA and Japan. In Britain it is a little less clear because the country has a high current account deficit, meaning that is more vulnerable to international changes of mood – but surely there is much more scope than the government is currently using. Second, it is much less damaging than before to play fast and loose with trade policy. Once again Donald Trump is taking full advantage of this. His trade policy is mostly economic nonsense, but he can get away with it. Likewise Brexit is likely to be less dire for Britain than many predict – though the potential upside for “global Britain” is very slim. Trade just doesn’t matter so much, and the opportunities in Asia are disappearing.

All this is good news for populists. Mainstream policy needs to catch up. Policymakers need to drop their obsession with GDP and productivity, and start looking at wider quality of life instead. This includes the prevalence of poverty (I prefer not to focus on inequality, though that is clearly part of the picture), mental health problems and the environment. There needs to be a bigger drive on public investment, but not so much on roads, railways and airports, but on hospitals and healthcare therapies, social housing, and sustainable energy. There is scope for increased private investment here too, but the public element is vital.

There are other ideas, such as universal basic income, though I personally don’t favour this. But a rethink of state benefits is surely important. My instinct is for stronger set of social interventions to reduce poverty and its malign effects, rather than trying to make the problem go away by spraying money everywhere.

How does this work politically? It should be an opportunity for the left. And indeed Britain’s Labour manifesto in last election wasn’t quite as daft as it looked – in theory anyway. Bernie Sanders is making headway in the US in spite of defying conventional wisdom. But politics isn’t just about economics, and the left don’t really seem to grasp the demand for increasing personal autonomy. Besides so much of leftwing activism seems to be a rage against efficiency. Productivity may be an overrated issue, but the need for efficient and effective services remains as vital as ever.

Liberals, meanwhile, are badly compromised by their attachment to the old conventional wisdom. They have not yet found a new vision. Personally I think there is an opportunity for a grand bargain between the left and liberals, but there is no clear sign of this emerging. Meanwhile the political right has a clear opportunity. In the US they seem to be wasting it by failing to recognise that an efficient and effective state is critical to the future. They are failing to face up to the challenge on healthcare and the environment. In the UK the picture is different. The Conservatives are interested in courting more liberal-minded voters, and have not abandoned the idea of reducing carbon emissions, for example, or investing more in healthcare.

But at the moment the new rules of economics are providing more opportunities for the unscrupulous than they are to those genuinely want to make the world a better place. it is no wonder that the political centre is in such a mess.

So farewell then EU

On Friday Britain leaves the European Union. This will not be marked in any very big or public way, any more than the country’s entry into the European Economic Community was in 1973. That reflects the country’s ambiguity towards the institution, but I for one will will be sad.

I was not old enough to vote in the 1976 referendum on staying in, held on the day of my Physics A Level practical, but I was a passionate supporter of the idea then. Most of my generation was (with less passion in most cases…), though many changed their mind since. Back in the 1970s we younger Britons were tired our country: its strikes, its badly-run public services, which included utilities such as gas and telephones. Unemployment and inflation were high, and the country had suffered a steady decline in its prestige since the glory days of the War, not just relative to the USA, but to France, Germany and even Italy. Modernisation meant tasteless sliced bread, soul-destroying motorway flyovers, and tower blocks that were already falling down. The country needed a good shaking, and most of our European neighbours seemed to be doing a better job. We rejected the prejudices of our parents’ generation and its complaints about greasy food and garlic.

Our hopes were mainly fulfilled. In many ways the country mended itself from the 1980s onwards. National prestige was largely restored; first inflation then unemployment came down; public services became better managed. Strikes vanished. Modernisation was the internet and the mobile phone: things that were of demonstrable value. How much of this was down to being a member of the EEC/EU can’t be said, of course. And the picture wasn’t all good. Many industries, such as steel and coal, continued their precipitous decline. Middle level jobs, in offices and factories, were hollowed out. These were replaced by both better jobs (managerial and computing) and worse (call-centre operators).

So why did so many of my generation turn against “Europe”? At this point it is very easy to repeat standard tropes. We have a picture of white working-class people in “left-behind” towns in the north and on the coast being the drivers of Brexit. But the pro-Brexit feeling went much further and wider than this. It went right across the class spectrum, and swept in swathes of respectable middle-class suburbia, and lots of working class people who were far from being “left-behind”. It was a complex business, but mainly seems to be a reaction against the metropolitanism that had come to dominate the political class. Metropolitans shrugged at the agents of change, such as the influx of immigrants and an increasing body of restrictive regulations with which the country had to conform, or, indeed, the lack of them, for example border controls. Many people felt that something important had been lost, and that the politicians didn’t care.

I did not share these misgivings: I am a metropolitan. I am only tangentially part of the political class and certainly no part of a ruling elite, but I am much closer to them than most. I understand what the political class is trying to do and have largely supported it. I like change. Leaving the EU I do not feel any sense of regaining anything meaningful, but I do feel that I have had rights taken away from me.

Still, stepping back it is hard not to think that the political class deserved the kicking that was administered to it by the Brexit episode. Politics became dominated by professional politicians who never experienced much life outside politics and its hangers on in PR, lobbying, think tanks, journalism, the charity sector and so on.They had little empathy with many voters, and simply assumed they would come round to the various changes imposed on them in time, as they were good for them. The MPs expenses scandal, which overwhelmed the later years of the Labour government of 1997 to 2010 was revealing. MPs were drawn from young, upwardly mobile professionals (or yuppies as they used to be called) and were envious of their contemporaries who were making fortunes in finance, consultancy and other better-paid fields. So they indulged in a little bit of creative catching up. They paid almost no thought as to how this might look to the people they represented.

So what happens now? Politicians start the long, slow business of reconnecting with the voters. The Conservatives are further ahead with this than the other parties. Their parliamentary party look and sound very different from the old-style sharp political professionals. It may take Labour a bit longer. They were in process of replacing one sort of disconnected political professional (the smooth Blairites) with another (hard-left activists) when the election struck. The scale of their defeat has left them all over the place, but the only way back for them is get back out onto the doorsteps and reconnect; they will learn that eventually. Similar comments can be made about the Lib Dems, who tend to think of themselves as establishment rebels, but have been all to eager to seek establishment respectability. Its former leader, Jo Swinson, exemplified the metropolitan political class as well as anybody.

Just how this will work itself out is anybody’s guess. For all their faults, the metropolitans were mainly right (I would say that wouldn’t I…); they just made almost no attempt to engage with and communicate with people who were unsympathetic. The country will not necessarily stay on an inward-looking anti-progressive path.

And what of Brexit? Clearly it’s going to get messy, as the country still has not settled on a clear vision of what it wants to be. It would be nice to think that the country will come to a resolution of these issues in time – but the blame game is likely to keep going. Brexiteers will heap opprobrium on the EU and our European neighbours as things turn sour; Remainers will indulge in “told-you-so”, blaming everything on Brexit, fairly or otherwise.

But boredom will win out in the end. I would like it, of course, if the country could find some way to rejoin the EU in due course, but not until public support reaches the two-thirds level; we have had enough of one small majority imposing its will on the rest.Meanwhile the EU itself will change and the journey back may become harder. I am unlikely to regain my lost freedoms and lost pride in my country in my lifetime. And that makes me sad.

Why is the left losing the argument in the country at large?

Nothing illustrates Labour leader Jeremy Corbyn’s failings more than his assertion that, at the last general election, his party “won the argument”. The party’s vote went down by 2.6 million. Any sense in which the party won an argument is so abstract as to be worse than useless. But not enough people on the left realise just how much trouble they are in.

While some on the left show shocking complacency, others exhibit a level of despair similar to that in 1992, after the Conservatives won their fourth successive victory (and proper victories, unlike 2010 and 2017) when voters fled from Labour and the Lib Dems at the last minute. If the Tories could win then, in such an unpromising election for them, it seemed to presage them winning forever. The journalist Will Hutton caught the mood with a political bestseller The State We’re In. In it he suggested that the Tories had so deeply penetrated civil society that they were unbeatable. He also decried Tory (and American) economic policies, while praising those of Germany and Japan. Only a few years later Labour won their biggest ever election victory and the Tories were knocked so far away from power that people dared to think they would never regain it. Meanwhile Germany and Japan plunged into an economic crisis from which, seemingly, only Anglo-Saxon economic policies could lift them. It is surprising that Mr Hutton dared to show his face in public again, but newspaper comment by him still pops up quite regularly.

The Labour and Lib Dem revival was evident in the elections of 1997, 2001 and 2005. This led to complacency on the centre-left, and the idea of a “progressive majority” that was floated back in 1992. It was observed that if you added the Labour and Lib Dem votes (and perhaps the Greens too) there was a clear majority of the popular vote: 55-60%. This was advanced as a reason to embrace proportional representation, which would confine the Tories to a prison. But as politics poisoned after the MPs expenses scandals, and the financial crash, the weakness in this line of argument became plain. Ukip rose as a fourth, emphatically non-progressive force. The Tories revived in the 2010 election, and Labour and the Lib Dems were unable to form a parliamentary majority, though they had 52% of the vote between them. The Lib Dems entered coalition with the Conservatives instead.

The Lib Dem vote promptly collapsed, but the idea of a progressive majority persisted. Labour reckoned they could win on their own simply by picking up disillusioned Lib Dem voters, without trying to convert any Tories. This suited the Labour left, and its increasingly vocal socialist element, which had been marginalised in Labour’s government years, and which was energised by opposition to the coalition’s austerity policies. But, alas, this simply drove more Lib Dem supporters into the arms of the Conservatives, who formed an outright majority in 2015 (with a combined Labour and Lib Dem vote of just 38%), mainly by picking up Lib Dem seats. By now the “progressive majority” was shown to be a clear fiction: adding Ukip and Conservative vote share took you to more than 50%. Proportional representation would not have saved the “progressives”. And that is more or less where things have stuck since. In 2019 Labour and the Lib Dems mustered just 44% between them, down from 47% in 2017. That leaves the left with an uncomfortable truth: they will not win majority support unless they win over substantial numbers of Conservative voters: that they “win the argument”, in other words. And they haven’t done that since the great financial crisis of 2007/08, unless you count that narrow majority of votes in 2010.

Much has been written about this, but most of the thinking has been done by people on the right of politics. Their analysis focuses on values, and the way many voters crave a sense of belonging, undermined by a rootless liberal elite, or left-wingers impassioned by foreign causes. This is fine as far as it goes, but thinkers on the left have a long tradition (starting with Marx and Engels) of looking at economic interests, which they assume lie behind people’s values. This has often been taken too far, but right now there is not enough of it. The narrative of the left is that it is on the side of the “many”, often quantified as 95% or even 99% of the population, against an economy “rigged” by “the few”. This clearly isn’t working.

There are two things to observe about the strength of the right. First is that it is based on older people, as it wins over increasing numbers of the baby-boomer generation. The second, heavily overlapping, point is that they appeal to people who own property, or who have an inheritable interest in property. They are especially making progress in “left-behind” areas where property values are sinking, creating a sense of grievance.

For the most part Conservatives have been very sensitive to the needs of these groups. I remember seeing an analysis by the Institute for Fiscal Studies showing that austerity policies after 2010 largely bypassed older voters, whose lot improved overall. Old age pensions were improved and tax allowances raised. Interestingly these policies were driven forward enthusiastically by the Conservatives’ coalition partners, the Lib Dems, for whom the “triple lock” on state pensions was a cornerstone policy. A Lib Dem minister, Steve Webb, skilfully piloted pension reform that postponed pensions for many with minimal political damage. It is no accident that the left’s biggest moment of opportunity since 2010, the 2017 election which saw a surge in Labour support, came when the Conservatives dropped the ball on looking after older voters, with their proposals on social care. There was no chance of them repeating that mistake.

Property ownership, meanwhile, is becoming the critical economic dividing line in British society. Ownership is steadily sinking as housing becomes less affordable, but it still remains high, at over 60%. This does not fit the narrative of “the many” versus “the few”. By and large, property owners and older voters are not so exercised about austerity policies, and are less concerned about changing working practices, such as zero hours contracts. They are distrustful of the radicalism that the left trumpets so loudly. This may not be wholly rational. If austerity has caused economic growth to sag, then this affects the property market. But the left is more comfortable stoking up a sense of outrage amongst people who rent their homes, or have a dependency on the types of benefits that have been cut, than they are in making more nuanced claims for the benefit of Britain’s top three quintiles of income.

Won’t time shift these factors in the left’s favour? The older voters are dying, while more younger ones enter the electorate. We often heard that argument in the context of the Brexit referendum. But people’s political perspective changes as they age, and the left seems to be losing its grip on voters in the middle of the age range. The proportion of older voters is likely to go up, demographers tell us. Things are more promising from that perspective on property ownership, which has been falling steadily. But the change is slow and the Conservatives are acutely sensitive to this, doing what they can to make sure new homes are built, and that people can get themselves onto the property ladder.

So what should the left do? It can hardly ditch its core support among younger voters and those renting homes in order to win over Conservatives and Brexit Party supporters. Some of the policies needed to address the needs poorer and more disadvantaged voters will hurt property owners (e.g. more social housing undermining property prices) and older people (e.g. higher taxes on investments). In my previous post on Labour I suggested three things; radicalism (less of it), pluralism (more) and competence (also more).

The one party that has made some headway in attracting former Conservative voters is the Lib Dems. It has done this by being only marginally on the left (many Lib Dems, myself included, hesitate to call ourselves of the left at all). But it still signs up to many signature left wing priorities: better public services and stronger action on the environment in particular. The party is still vilified by many on the far left, who call them “Yellow Tories”. In the last election Labour sent its activists into seats like Carshalton, Wimbledon and Finchley because they preferred the Conservatives to win these than let the Lib Dems gain traction. But unless the Lib Dems are allowed to gather up Conservative votes, even as they gather Labour ones too, the left as a whole will not succeed.

There is another way forward, as suggested by the coalition of 2010. That is for parts of the left to team up with Conservatives in order to make headway on critical priorities. This has happened in Germany with its grand coalition, and now a Green-Christian Democrat alliance being mooted. The Greens and the conservatives have formed a coalition in Austria. The Lib Dems experience in the 2010 coalition was unhappy, in that its support collapsed, though it can point to achievements. The German SPD’s experience is hardly better. The Lib Dems will not be tempted to go down that route again. But if Labour continues on the road mapped out by Mr Corbyn, that may be the only option for the left to have a serious influence on government.

Radicalism, pluralism and competence: 3 things Labour needs to rethink

The left loves its abstract nouns. So, as Labour ponders what it needs to do to come back from its disastrous showing in last month’s general election, I have three more abstract nouns for its members to contemplate: radicalism, pluralism and competence.

Abstract nouns may be how many political activists like me think about things, but they can be dangerous. They are not good for communicating ideas to the public at large, and they are often used to paper over tricky choices. It is important when thinking through these ideas that we move onto more concrete territory about what actually needs to be done. We don’t want to just invent some more abstract phrases which over-promise and under-deliver: “progressive patriotism” anybody?

So let’s start with radicalism. Leftist politicians talk far too much about it as if it was self-evidently a good thing. We are interested in politics because we want to change things; we have a low opinion of most current public institutions; we see unfairness and injustice everywhere. So it seems natural to advocate radical change. But radicalism has a dark side: it means change and change means insecurity. It also invites scepticism. Many people are fed up with politicians promising to change everything, and then either not delivering, or delivering things that make things worse. And these attitudes prevail amongst the voters that Labour lost to the Conservatives (or so I believe). Telling them that you are going to shake everything up with transformative change for a fairer society cuts little ice. Labour politicians need to tone it down, and present a more reassuring face to the public.

A lot of this is purely about presentation. Brexit is a radical policy after all, but retains a strong appeal amongst conservative voters. That is because it is being presented as a step backwards, to undo the unwanted radicalism that has been inflicted over the last generation. It was a critical step in the Leave campaign in 2016 to include the word “back” in their slogan “Take back control”. A lot of Labour’s radical policies can be re-presented in this way. Nationalisation of the railways, and perhaps other utilities, can be seen as going back to a time before these services were messed up. Whether people will be convinced that a return to secondary picketing and collective wage bargaining as a positive is open to question, but they are certainly steps backwards. The abolition of student fees is easier, even though the scale of the fiscal cost is much greater than in the gold old days. Indeed it is a valid line of criticism of Labour’s policy platform that it owes more to nostalgia than genuinely radical thinking.

But a bit of slick re-presentation will fool nobody. Labour needs to reverse some of its radical promises as well as its rhetoric. This is a competency issue too (I’m coming to that). Some signature policies, like free broadband, are obvious choices. But to convince the public that they really have changed, Labour needs to roll back something that will create a bit of a stink within its own ranks: if it ain’t hurting, it ain’t working. Dropping free student tuition would do that job, but would probably hurt too much. A substantial roll-back of nationalisation plans might be better though it would have less impact. Funnily enough the first election manifesto under Jeremy Corbyn’s leadership, in 2017, was much better than its 2019 one on this front, though incomplete (no attention was paid as to how its abolition of tuition fees would work in practice, for example).

Pluralism means accepting that a variety of political viewpoints should be tolerated and allowed to be expressed within the political process. Most Labour people say that the party should be a “broad church” accommodating a wide range of views. Fewer accept that other political parties have any useful role to play on the left or “progressive” side of politics. (I put “progressive” in quotation marks in deference to the English language: many “progressives” are not progressive at all; not all progressives are “progressive”). And many seem to think that Conservatives and others on the political right have no moral legitimacy, and that people only support them because they have some evil purpose in mind, or have been duped by some or other conspiracy of misinformation. While pluralism within the party, within “progressive” politics and within politics at large might seem to be three separate issues, it is critical to understand that they are linked. If you think Tories are evil, and that Labour’s essential purpose is to oppose them, then it is a short step to thinking that other non-Tory parties are a distraction or worse. And it is a short step from this to viewing politics as a battle between good and evil, in which you should be on your guard against evil influences in your own party, and vigorously oppose them.

At best Labour has an image problem. Where the Conservatives successfully promoted their slogan of “Get Brexit Done”, the nearest Labour came to an equivalent signature phrase was “Why don’t you f**k off and join the Tories”, applied by their activists to anybody who dared oppose their views from other parties such as the Lib Dems (“Yellow Tories”) and within their own party. Far too many people followed that advice. The most visible sign of trouble is the party’s problems with antisemitism. A party that conducted its internal discussions in a more civilised way would not have allowed the sort of abuse that some Jewish members faced to get anything like as far, or to see some of the abusers get off so lightly. This intolerance is damaging the party’s image with the public, and it gives other parties, especially the Lib Dems, a reason for existing.

The funny thing is that Mr Corbyn is the model of politeness in person, and a keen advocate of a “kinder, gentler” politics in general. This shows how difficult it will be for Labour to change its culture. One way in which a new leader might show how things have changed is to work with rival “progressive” parties more readily. I think this needs to go as far as entering into limited electoral pacts. Others suggest that the way forward is to promote electoral reform and proportional representation. As a good liberal I should support this, but I am not sure that this is actually in Labour’s interests. It would be an attack on traditional British ways that might well upset the conservative voters it needs to attract. And anyway I am not sure Labour should give up on the idea of being a broad, pluralistic and democratic movement along the lines of the US Democrats. There is a paradox here: in order to show that there is no need for rival parties on the left it needs to embrace those parties rather than reject them. An electoral pact of some sort would be a powerful signal of that; and pushing such an idea through with a controversial conference motion would show that the new leader means business, rather than mouthing sweet nothings about a “pluralist Labour family”, as leadership candidate Rebecca Long-Bailey has put it.

Which brings me to competence: even Ms Long-Bailey admits that Labour has a credibility problem. The problem is not just to embody competence, but to project it to the public at large. To do this the party needs to overcome some archetypes that many in the public have of liberals and leftists. One is the woolly liberal, who spends too much time listening to nonsense and avoiding hard choices. Another is the permanent whinger, who will never be satisfied, and never take responsibility. People come across these archetypes in their daily lives, and know that they make terrible leaders, even if they often like them or agree with them. Mr Corbyn seemed to alternate between both of these archetypes. He couldn’t make up his mind about Brexit. He protested about everything. And Labour’s election manifesto embodied the problem. The policies may have been individually popular but they were collectively incredible. Life is about choices, and Labour were promising everything now, with a team with little experience of government.

These three abstract nouns work together. A competent Labour shadow government is one where people are chosen on ability, not on loyalty to the leader or ideological soundness. A competent manifesto is one that balances its radicalism with leaving some ideas for later.

Labour’s next big decision is to elect its new leader. How do the candidates shape up on this agenda? It’s hard to tell because candidates tend to say what it takes to get elected, and so it is hard to know what they would actually do. It is also not clear who those candidates will be as the number will get thinned down by the obstacle course of the nomination process. I will comment when the field has been whittled down.

Donald Trump’s message to Iran: get nukes fast

US President Donald Trump doesn’t do quiet confidence. If he had, then he might have ended 2019 displaying it. Which makes his actions in Iran in early 2020 baffling.

As Autumn approached Mr Trump might have been worried about his reelection and his legacy. He came into office promising to show his vaunted business skills, in contrast to his inept predecessors. He was the arch deal maker, he claimed. And yet he had practically nothing to show for it. His attempts to negotiate with North Korea had run into the sand. His dramatic ripping up of the “worst deal ever” to limit Iran’s nuclear ambitions had not restrained that country’s foreign adventures, and seemed to be hastening the day when it would become nuclear. There were almost no trade deals: even the replacement for NAFTA was stuck in Congress. On other issues, his attempt to negotiate a fabulous new deal for Americans on healthcare had long since collapsed. It was painfully slow to find funding for his border wall. He had aggressively slapped tariffs on Chinese trade, but he seemed unable to close any kind of deal with China, while America’s trade deficit roared ahead. His one significant achievement in his term to date was corporate tax cuts, which probably left most Americans unimpressed.

It got worse. He allowed Turkey’s President Erdogan to talk him into winding down the American presence in Syria, abandoning his Kurdish ally. Whatever strategic sense this made, it was tactically inept. It angered many of his Republican allies.

But this blew over, and things started to look up. As the race to be his Democratic opponent in 2020 started to heat up, it became clear that each of the candidates had weaknesses that he could exploit. There is nobody he can be truly scared of. The House of Representatives also cracked after revelations on Mr Trump’s attempts to pressurise Ukraine, and set impeachment proceedings in motion. This largely works in Mr Trump’s favour; ordinary voters will not be able to fully understand his wrongdoing and its implications, especially after these are buried by the barrage of nonsense supplied by him and his many allies. The whole episode will just serve to distract attention from his weak record in office. Meanwhile he managed to close a deal with the Democrats in Congress for the NAFTA replacement, and some kind of interim deal with China looks close. The wall is being built. Even in the Middle East, Iran was under increasing pressure from its own people, and those fed up with its meddling in Iraq and Lebanon. Thin pickings, perhaps, and North Korea is going from bad to worse, but enough for Mr Trump to suggest things were going his way at last. His core support was holding up. If opinion polls still seemed against him, he might reflect that they were probably good enough: all he needs to do in November is hold the states that voted for him last time; he needs no majority in the popular vote. Enough for some quiet confidence.

But then came the Iran/Iraq episode. He firstly overreacted to a militia attack on a US base in Iraq, and then, after those Iranian-backed militias made a not-all-that-serious attack on the US embassy, he launched his assassination of Qasem Soleimani and his associates. This is a dramatic escalation, to which Iran has “no choice”, in the oft-repeated phrase, to respond. The Iranian government is playing the episode for all it is worth to distract attention from its other troubles.

What makes this very striking is that it goes against the general restraint Mr Trump has shown in the Middle East. He is much criticised for this, and has shown no tactical acumen, but he is not wrong in principle. Not, at any rate, in his wish to disengage the US military involvement, and treat Russian adventurism with a shrug. We need to get beyond the post-colonialist thinking that everything that happens in the region is somehow the result of US and western government actions, while denying multiple local actors agency and responsibility themselves. Mr Trump is, though, wrong in principle to think that ripping up the Iranian nuclear deal and applying sanctions to that country will make it more amenable, rather than making the whole region a lot messier. This is the logic of the bully, who assumes their own actions are principled and everybody else simply responds to the exercise of menace.

The defence put up by Mr Trump’s supporters are really hard to fathom. Soleimani was a bad man and his removal will make peace more likely, they say. Soleimani, and his like in the Iranian regime, are indeed bad people. They use innocent human lives as pawns in their games, and have no compunction in perpetrating murder. But he was also a senior state actor, and acting against him is like declaring war on the Iranian state. Assassination is a very dubious instrument of state policy. Israel has long used it, but its conflicts with neighbours and people within its borders have just dragged on regardless. The Iranians are no worse than the Russians, but would the US attack senior Russian officials in this way?

Which brings me to the central point. The US under Mr Trump treats nuclear armed powers with respect, even such mavericks as North Korea. Mr Trump seems to think that the rational response to his behaviour is to come to the negotiating table to make serious concessions. Iranian leaders are just as likely to think that the only rational course for them is to acquire nuclear weapons as fast as they can.

As I write the Iranian response has begun with some missile strikes at US bases in Iraq. They are suggesting that this is the limit of their response, though it is hard to know whether to take that seriously. Mr Trump seems to be shrugging it off. If that is all that happens, then Mr Trump will have got off lightly, and he and his supporters will claim victory.

But earlier the Iranian regime abandoned its vestigial adherence to the nuclear deal. Their thinking may be to deliver this rather underwhelming response and then go as hard and fast as they can for nuclear weapons. In their eyes that is probably the most rational approach: if Mr Trump wants to scale down US action in the Middle East, there will be little they can do to stop Iran, if that country does not present too many easy targets for air strikes.

The US public is unlikely to understand that this is what is happening, and look on Mr Trump’s actions favourably. If so Mr Trump’s faith in his own genius will be affirmed. At some point this has to unravel. Doesn’t it?