Liberals still don’t get the Trump phenomenon. He is not in danger

To judge from the headlines in the liberal press, or liberal commentators on the BBC, you would think Donald Trump's presidency in the US was on its last legs. This follows the conviction yesterday of two of his (formerly) close advisers, and his being implicated by one of them in an illegal pay-off. But these commentators have failed to understand how the Trump phenomenon has rewritten the rules of US politics. Provided he maintains his health, Mr Trump will surely last until the end of his term in 2020. And if his liberal opponents continue to underestimate him, he could well win a second term.

The first point to make is that Mr Trump is utterly shameless. He is not the least bit embarrassed by anything that he has done. Call this narcissism if you like, but he will fight on. The second point is that his base of support both remains solid, and maintains a grip on the Republican party.

To his base, Mr Trump is the man who has delivered. Evangelicals have their conservative judges. Business leaders have their tax cuts and roll-back of tiresome regulations. Conservatives everywhere are enjoying are enjoying the rout of liberal values: it feels like fresh air. And the bad behaviour? That is utterly unsurprising; they knew the sort of man they were taking on. So long as he is doing the job of battering ram, they will forgive everything. Corruption is something that happens to liberals, in their eyes, and not to politicians on their own side. Indeed in they seem to think that corruption is less about illegal payoffs and more about the process of political compromise with people who are not like them.

So neither Mr Trump nor his base will be shaken by recent events. Legally the President looks secure too. There is debate as to whether it is possible to indict a sitting president with a crime - but if that came to be tested the Supreme Court has shown no appetite to challenge Republicans on anything important. It is unlikely that the special prosecutor, Robert Mueller, will even try. Everybody else in Trumpland is either dispensable or Mr Trump can use his powers of pardon. There is pretty much nothing Mr Trump would not do rather than admit defeat.

Which leaves the danger of impeachment, which is essentially a political process. It is looking likely that the Democrats will take control of the House of Representatives in the mid-term elections in November. That would allow impeachment to proceed. If there were grounds to do so against Bill Clinton in the 1990s, there will be more than enough against Mr Trump. But success depends on the votes of two-thirds of the Senate. Which means that half or more Republican Senators will have to turn against him. Given Mr Trump's hold on the party grassroots, and his ability to undermine the credibility of any given opponent by a constant process of smearing, he looks secure. He will paint the impeachment as a politically tainted process, and not without a degree of justice. This is politics, and Mr Trump has proved to be America's most effective politician.

The problem for liberals is that they persist in judging Mr Trump and his supporters by their own standards. Mr Trump's behaviour would kill a liberal politician's career. But Mr Trump does not need liberal votes. Instead he is playing an altogether different game: the politics of emotion, victimhood and identity. It is something liberals really don't get.

But Donald Trump is politically vulnerable. His base is as loyal as ever, but it is a minority. He is making little attempt to win over anybody else: indeed he enjoys antagonising large sections of the US nation. This is one reason why it looks as if he will do badly in the mid-term elections. Another is that there are some cracks in his record for some of the people who had supported him.

To his supporters Mr Trump is a breath of fresh air because, unlike politicians before him, he is delivering on his election promises. That is true in the sense that he is doing things that mainstream politicians have not dared to do: notably the ratcheting up of the trade war, which has widespread public support. There are broken promises aplenty, of course, but these are either on secondary issues, or easy enough to pass off blame onto others. But I think there are two sources of trouble. One is healthcare reform. This is fiercely complicated, and the Trump administration is unable to do anything complicated. His attempts to push through a reform last year collapsed. That itself is not a problem: there are plenty of people to blame it on. And if he had succeeded it might actually be worse for him. The problem is that for many working class Americans, getting decent and affordable health care insurance is becoming impossible. A Republican reform of healthcare would not have helped. But the slow decay of the Obamacare system is making things worse. That is enough to create doubts for a lot of Trump voters, who increasingly realise that the Republicans are not on their side.

A second problem comes with the trade war. The process itself may be popular, but as it progresses it will create more victims. Already many farmers are worried. It may be enough to help the Democrats hold on to Midwestern Senate seats that would otherwise have been near impossible to hold.

This may be enough for the Democrats to overcome gerrymandered boundaries and win the House of Representatives, and even the Senate (tricky because the previous contests were six years ago on a Democratic high water mark). But the path to the presidency in 2020 is much trickier. Once Mr Trump is able to concentrate his political skills on undermining a single opponent, all bets are off. A lot of people blame his victory in 2016 on the Democrats choosing a weak candidate in Hillary Clinton. But in many ways Mrs Clinton was a strong candidate. Mr Trump would have successfully undermined any Democrat opponent, just as he did with his Republican opponents in the primaries.

And there is a trap for Democrats. It is tempting to follow the Republicans into the politics of victimhood and identity. There are plenty of people who feel victimised by the Trump regime. But that takes them away from many of Mr Trump's less committed and more sceptical supporters. He may be able to rally them again. The Democrats need to show that they are standing up for these voters too, on healthcare and jobs in particular.

I continue to hope there will be a moment of revelation to Trump supporters, akin to what Hurricane Katrina did for George Bush Jnr. But the man has survived so many knocks, that I doubt this will happen. After that I just hope that the Democrats can choose a candidate with high ethical standards that can convince all working class Americans that she or he is on their side and Donald Trump isn't.

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The method in Donald Trump’s madness

It is two months since my last post. This may be the longest period of silence since I started this blog in 2011. This is mainly because I have been consumed with the process of getting 39 local election candidates nominated for council elections here in Wandsworth, and all the attendent duties of being agent and local party Treasurer, officer and volunteer. Along with other duties as school governor and party officer at regional and, now, even Federal Party level. Plus the occasional bit of time off and some family care issues.

Meanwhile the newsletter section of the blog was subject to over 1,000 fake subscriptions consisting of Russian web addresses. This was only stopped by implementing Captcha, which was somewhat trickier (and more costly) than I expected. In any case, the oncoming election, and my senior role in one borough, has constrained my ability to comment as freely as I like this blog to be. And it isn't over. The election itself happens in a week's time. After that I have to prepare and submit 39 expense returns. All I will say on these elections for now is that I have been involved in local elections in Wandsworth for 32 years, and in that time they have proved a graveyard of predictions. I will comment when it is all over.

Meanwhile there has been plenty else going on. In Britain we have had a kerfuffle in Labour over antisemitism. And there has been the so-called "Windrush Scandal" in which the Home Office has hounded legal immigrants with incomplete paperwork. I want to comment on both in due course. And politics in America continues its sinister course, with the Trump administration subverting institutions of the Republican Party, the US Federal state, and the world's trading and diplomatic architecture.

Which draws me to today's topic. Looking back over the last two years it is striking how liberals and established politicians have consistently underestimated Donald Trump. It has been easy to dismiss him as stupid and immature. And yet he has proved wily and dogged and he has always ended up on top. His critics need to understand him better if they are to devise an effective counter.

The first thing to say about Mr Trump is that his intelligence is of a different type from that we are used to in our leaders. It is very right-brained. We have traditionally adored and respected the left-brained virtues of logic, computation, complicated language and rules. But the right brain handles values, emotions, context and seeing thing as a whole. A healthy mind keeps the two in constant dialogue. We see Mr Trump's left-brain deficiencies as fatal flaws; and yet neglect of right-brained virtues by liberal intellectuals is just as serious a deficiency.

Now let's be more specific. Mr Trump's world consists of competing individuals and groups who win, or lose or strike bargains with each other. It's a world divided between adversaries and trusted insiders. To the former you must be merciless; to the latter you must show and expect unquestioning loyalty. In this way of looking at the world, the liberal system of collaboration and shifting coalitions with its infinite shades of grey is simply weakness. There is an acute sense of victimhood: that honest Americans have been made monkeys of by outsiders who have outmanoeuvred the country's establishment.

Another aspect of the Trump view is that rules are a means to an end, and should not be elevated to an end in themselves, as liberal intellectuals do when they set the rule of law on a pedestal. Liberals say that the rule of law protects the weak; but does it really? The Trump alternative is for people to be part of a group with strong mutual loyalty and leadership that focuses on results.

The problem for liberals is that the Trump view is very widely shared, especially amongst less-educated people, but, clearly, not just them. Liberals tend to worship institutions that favour educated people through an unseeing meritocracy. They then try to compensate for this by offering handouts to the less fortunate, which creates a patron-supplicant relationship that undermines human dignity. Many on the left, who rail against "austerity", just don't understand why so many poorer people hate state benefits.

A further problem for liberals is that Mr Trump's methods will produce enough results to justify the faith his supporters are putting in him. The tax reforms in 2017 were a huge coup, whatever we my think of them objectively. The pressure he is putting on China, North Korea and Iran may well yield some short-term results. His approval ratings may not be good in comparison to other presidents a year into office, but they are not particularly bad in absolute terms; they may not suffer the sort of middle-term decay that those predecessors were subject to. And he knows how to rally the sceptical floating voters when he needs them, not least by casting doubt on his opponents.

So what could stop him? The pundits predict that the Republicans could lose their control of the House of Representatives in November, though the Senate looks more secure. That would limit his ability to pass legislation. And yet it will also give Mr Trump a scapegoat on which to blame his failures. Nobody knows how to milk victimhood like Mr Trump. It may even give him a chance to reshape the Republican Party into his instrument in time for the next round of elections in 2020.

A further problem for Mr Trump is a declining base. This base is core to the Trump phenomenon: it is the loyalty group that is central to his identity. It is white, working class and ageing. It will be impossible for Mr Trump to form such a strong bond with other voter groups, and these are growing faster than his base. But in the medium term Mr Trump can keep this threat at bay by suppressing it, through promoting scepticism and apathy, plus changing electoral rules through things such as voter ID. In the longer term Mr Trump bumps into term limits and old age. But he can do a lot of damage before then.

I think there are two more important threats to Mr Trump, because these concern his base. The first is trade policy. Mr Trump's narrative on trade is very appealing, but if he follows through by starting trade wars it will threaten the working class jobs of exporters. In the Trump narrative, of course, many more workers will benefit. But in the short term these benefits will be much harder to see. Midwestern farmers, who have been strong supporters, are already starting to wonder. Still, Mr Trump loves brinkmanship, and he may well feel he can strike bargains and claim victories before any serious damage is done.

The second problem is health insurance. One of the driving themes of Mr Trump's presidency is to dismantle anything his predecessor, Barack Obama, put in place. Mr Obama's crowning achievement was his health insurance system, and Mr Trump is desperate to dismantle it. And yet Obamacare tackles a genuine working-class problem of basic healthcare becoming unaffordable. Abolishing it would cause anger and hardship. Replacing it is the sort of massively complex enterprise that the Trump White House is incapable of. And, unlike tax reform, there is nothing like a Republican consensus on what any replacement regime should look like. Mr Trump will try to blame the Democrats as Obamacare gradually breaks down through neglect - but for once this line of attack will be hard to sustain.

So Mr Trump's revolution may fail. But liberals, and not just in the US, would do well to ponder how to broaden their appeal so that they are not so vulnerable to right-brained populists like Mr Trump.

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Can liberals ever match the emotional appeal of populists? Should they?

Boris Johnson, Britain's Foreign Secretary, understands the new politics. This week he put it about that he wanted to provide the British public with a dividend from Brexit by increasing funding to the NHS to the tune of £100M a week (or £5Bn a year). If the facts don't suit you, you create new ones; emotion beats dispassionate analysis every time. This is the policy of U.S. President Donald Trump, and it is working very well for him. Is there anything sensible politicians can do about such behaviour?

There are plenty of good reasons to increase funding for the NHS, but a Brexit dividend is not among them. Such a dividend, famously estimated at £350M a week, was one of the most effective slogans of the Leave campaign in the EU referendum in 2016. It had only a slender basis in fact. Britain's gross contributions to the EU are in that order, but most of the money comes back to Britain, including an unconditional rebate. So even if EU funding to poorer regions like Cornwall and Wales was cut off, along with farming subsidies and other goodies, there would still not be £350M a week of extra funding to go round. And that assumes that the economy, and the taxes funded by it, would not be adversely affected by Brexit. These criticisms were made during the referendum campaign, but the objections only served to publicise the original claim. People believed what they wanted to believe. For many this was the extra £350M a week for the NHS, starting on the day after the referendum result. Most were no doubt more realistic, and simply took the wrangling to mean that something was up, and there would be some kind of dividend.

But, a year and a half on, it is clear that any Brexit dividend will be a long time a-coming, if it ever does. It is not so easy to escape many of those payment obligations (e.g. to fund the pensions of British members of the European Parliament, such as the former Ukip leader Nigel Farage). There will be at least two years of transition in which not much will change, and certainly not the money the UK is paying out to the EU. And then even most Brexit supporters accept that there will be some economic dislocation, even if it does not turn out to harm the economy overall in the longer term.

Mr Johnson is well aware of all this; he is a clever man and very much part of the political class where such discussion is common currency. But the recent success of populist politics means that facts don't matter any more. So why not just claim a dividend even if one does not exist? And so what if the government overspends a bit? It isn't clear what adverse consequences would flow, after all. It would also show a government taking the initiative, rather than being trapped by events. A bigger political problem is that the government could announce the extra funding and then nobody actually notice any difference to the NHS. Its problems run deeper than money - such as its loss of EU national staff, and the reduced ability to recruit immigrants. The government already claims it has increased funding by a similar amount, and and the NHS winter crisis seems more dire than for many years. The NHS is an organisational monster than can quite happily eat money to no effect: it would takes greater management skills than Mr Johnson's to achieve anything noticeable.

You don't have to be much of a cynic, though, to think that Mr Johnson has no intention that the policy actually be implemented, knowing full well that the government will stamp on it, as it duly has. The whole thing is got up to improve his own chances of taking the top job, before a supposed generation of Tory bright young things pushes his generation out of leadership contention. MPs are rumoured to organising a putsch on Theresa May quite soon. There is a snag to that theory, of course: it might work. If Mr Johnson does indeed become Prime Minister, he would be left with the responsibility of managing the NHS.

Which is where the example of Donald Trump is instructive. Mr Trump was elected on a series of unachievable promises, based on a deep emotional appeal. That he has failed to implement many of these does not seem to bother him: he either pretends that he has, or blames some popular scapegoat group for any lack of progress. And it works. His approval ratings may be dismal by the standards of earlier holders of the office in the first year, but support amongst his base looks rock-solid. Few seem prepared to bet against him making it to the end of his term in 2020 and then being re-elected. He does the new politics of emotional manipulation too well.

Is there anything liberal political types can do? Mostly their attacks on populist politicians backfire.They either make dry intellectual arguments using facts, which are then ignored, or express emotional outrage, which tends to simply wind up the populist supporters even more. Trump supporters doubtless think that calling African and Middle Eastern countries "s**t-holes" is merely talking truth to the liberal elite.

People suggest that liberals should follow either or both of two strategies: to meet the populists half-way to undermine them, or to counter emotional appeals with emotional arguments of their own. The former is happening quite a bit already: it is becoming the centre-right mainstream in Europe. That is what the British Conservatives are trying to do, along with similar parties in other European countries - including Germany's liberal Free Democrats. And it seems to guide the practice of Emmanuel Macron's French government. While I would like to say that such strategies are doomed, it looks more like a response to political reality. The problem is that it is impossible to back it up with an emotional appeal that will beat the populists. That appeal is based on closet racism and an attachment to old values that contain the seeds of their own destruction: it is an attack on an important part of liberals' own base.

Having said that there are two emotional strategies that might work: fear and backlash. For the former it is necessary to find a weakness in the populist position that will make people fear for their security and savings. But that is actually quite quite hard: the Remain campaign in the British referendum conspicuously failed, perhaps because the Conservatives in the campaign pulled their punches for the sake of party unity. Mr Macron did succeed in the final round of the French presidential election, however, when Marine le Pen's ambiguity towards the Euro suddenly frightened a lot of her potential supporters.

The backlash idea takes the emotional appeal of the populists as the starting point, and stokes up outrage amongst those it attacks. But it is quite hard to appeal beyond a minority - populism's targets are often chosen with care. Not always: the #MeToo campaign against sexual harassment has real power, feeding off the misogynist attitudes of Mr Trump - that is surely the reason why this campaign is succeeding now where its predecessors over the years have fizzled. Women are not a minority, and you don't have to be liberal to think that sexual harassment is disgusting.

But both types of emotional appeal suffer a problem in the political sphere. You have to pick up the pieces afterwards. Fighting emotion with emotion leads to either prolonged conflict or depression. In the end society must be healed somehow, and that healing takes place through putting emotions to one side, and understanding what people have in common and using a gradual process of persuasion and confidence building. That is one reason that populists will ultimately fail - and it helps that so many of them, Mr Trump and Mr Johnson included, do not value hard work or competence.

So what is the liberal strategy? They must let the populists burn out and collapse under their own contradictions. And then they must be ready with new ideas that will help society to cohere.

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Donald Trump’s security policy represents the revenge of the right-brainers

I am currently working my way through Iain McGilchrist's The Master and his Emissary. The theme of this book is the battle between the right and left parts of our brain. Mr McGilchrist thinks that in western civilisation left-brain thinking has become predominant, to the detriment of humanity. And yet, looking at the current state of politics, and Donald Trump's recent announcement of United States security policy in particular, I am thinking that this a case of being careful what you wish for.

I am somewhat short of halfway through this book. It is an engaging read, but not a fast one. I may not doing him justice in the comments that follow - and when I finish, I will review it properly here. The big idea is this: the human brain, in common with all vertebrates, is split between two hemispheres. The right covers awareness of the world around us; the left focuses on completing tasks. Much of our conscious life amounts to a conversation between these two hemispheres. Mr McGilchrist sees the two hemispheres as rivals competing for domination in our own selves, and in the societies we create. He feels that the right side should dominate, as it is this side that puts things into perspective. But he sees everywhere the dominance of left-brain thinking, and that this is very destructive of what is of real value.

He has a point. The two-hemisphere system is an evolutionary success. That is because management is the marriage of two incompatible skills - those that require general awareness, and those that require detailed attention. The need for this duality is not well understood. The book produces some remarkable quotes from early research into the hemispheres, describing the right hemisphere as weak and nearly useless, which reveals much about prevailing thought. My professional life has been in business management. Almost all the advice and literature on this is a variation on left-brained thinking - the need for focus on key priorities, "SMART" objectives, and general discipline. There is some awareness that success depends on other things: values, creativity and managing risk. And yet there is little realisation that these skills require a different type of approach. Trying to reduce them to the terms of SMART objectives and the like will destroy them. This was dramatically illustrated by the banking industry in the great financial crash ten years ago. Risk management was treated as a technical task, and confined to strait-jacket of mathematical models, with results that were absolutely disastrous. To this day I don't think this is properly understood by many managers and commentators. There has also been a similar misconception in artificial intelligence, which started off by thinking that left-brain thinking was all that the brain did, and all that needed to be done. Whether AI designers have got the implications of the duality fully on board I don't know - but they have been making headway.

And yet. In common with most (all?) intellectuals who try to grapple with their emotional and intuitive side, including me, there is something very left-brained about Mr McGilchrist's presentation. He reasons too much, and he does not question enough. As a result I think he's missed something big. For all his distinctly partisan advocacy of the right-brain, he is firm that we need both sides of the brain. He is clear about what an excess of left-brain thinking means, but he has not thought enough about what happens with an excess of right brain-thinking. He equates it with a loss of effectiveness, but not much more. But left-brain thought is needed to bond societies together. Without it bad things start to happen.

This should be apparent from the dominant role the left brain plays in language. It should also be apparent from other disciplines where left-brain thinking predominates of necessity: science and the law. Both of these are about finding common ground and agreeing on things. Science is not so much about trying to find the truth about the world around us, but about developing a common body of understanding. That is what an obsession with objective evidence is about. It is trying to find something diverse people can agree on.

The right brain, on the other hand, is very much about subjective, personal experience. It helps form strong bonds between people who are already strongly linked, by place or experience, but generally does the opposite when those links are weak. Indeed nothing bonds, and defines self, like conflict.

Western liberalism is undoubtedly very left-brained, which means it is often bone dry. Think of Barack Obama, once he has stepped beyond his dreamy rhetoric; or the British campaign to Remain in the EU. Liberals are charged with a lack of emotional appeal. But that is almost its central point. Liberals want to bring diverse people together to live in harmony - and that means emphasising the dry and the dull: reason, rules and common ground.

Which brings me to Donald Trump. He stands for a reaction against dry liberalism, and the triumph of right-brain thinking. He is only interested in evidence and logic inasmuch as it supports his prejudices. Everything else is dismissed as "fake". He relishes conflict with those that are different or who disagree. And this helps him form strong emotional bonds with his own tribe.

Mr Trump's National Security Policy, announced yesterday, shows us some of what this means. Gone is the common enterprise to make the world a better place. China is not a partner with whom America can forge such a better world, but a rival who seeks to diminish America 's share of world resources. Free trade is not way that makes everybody better off, but a potential threat - a way that other countries can rob naive American policymakers. Of course, all of these ideas contain more than a germ of truth. Perhaps it is just another half-full or half-empty proposition. Indeed the BBC describes the policy as "pragmatic". But right-brained thinking promotes conflict and conflict is sure to make the world a poorer place. For everybody.

The dialogue between the right and left parts of our brains is full of paradox. Left-brained thinking is very self-centred, but it is essential for harmonious living with our neighbours. The right brain sees the world as a whole, but it is one that is dominated by a single viewpoint. It is the tension that these paradoxes produce that makes the duality of our brains so powerful. Which leaves us with a final irony. The left-brained liberals are discovering their right-brained selves. Mr Trump and his ilk are producing a highly emotional reaction. And that reaction will in due course defeat him, allowing a more patient, constructive path to be resumed. The brain only works effectively as a partnership between its two conflicting sides. That should be the moral for our world.

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

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

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

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

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

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

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

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

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

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

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Moral outrage against Trump is distracting people from his incompetence

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

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

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

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

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

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

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

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

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

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

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

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

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The US Republican company tax reform might be a good idea

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

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

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

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

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

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

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

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

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

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

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

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Why did the dollar rise with Trump but the pound fall with Brexit?

If you are part of the conventional liberal "elite" like me, 2016 has been marked by two colossal acts of democratic self-harm: Brexit and the election of Donald Trump. It is easy to understand why the pound sunk after Brexit. By why has the US dollar being doing so well after the election of Donald Trump as president? It is a useful lesson in macroeconomics.

The first thing to say, though, is that the way most of the media cover such market movements is unhelpful. They talk of sentiment and emotional judgements made by anthropomorphised "markets". These may provide a satisfactory story line for a journalist, but they yield no real insight and no predictive power. They are simply projections onto past events. But very often, and this is no exception, far more satisfactory explanations are available, based on the way money flows through economies and financial markets.

Take Brexit. The obvious explanation is that markets (sticking with the anthropomorphism for now) take a dim view of Britain's prospects amid the confusion and uncertainty thrown up by Brexit. But by itself that explanation is inadequate. The fall in Sterling was not matched by falls in stock markets (after an initial wobble) and other markets which also depend on future economic prospects. In fact there seems to be much more of a wait-and-see approach by the people and institutions who set market prices.

But wait-and-see is not so neutral. The UK runs a substantial current account deficit (5.7% of GDP according to the Economist, the highest of the 43 countries in its data table - and the second largest in money terms, at nearly $150bn in the last year). That means that the country is consuming much more than it is producing, which in turn means that the country is spending more pounds than it is getting back from exports, etc (or spending more foreign currency on imports than it is getting from exports). This deficit must be made up from the capital account - by investors buying UK assets of one sort or another (or Britons selling off foreign assets). Wait-and-see means that foreigners are more likely to defer making investments, which reduces the demand for Sterling on capital markets, causing its price to fall. This makes UK assets more attractive, UK exports more competitive and imports less attractive. All perfectly textbook.

So, what about the US? This country has a current account deficit too (2.6% of GDP which is $488bn in money terms, the largest current account balance in any direction by some margin, in the Economist table). Surely there is a lot of waiting and seeing to be done here, as Mr Trump's policies, shall we say, lack clarity? But there are a number of differences with the UK. The first of these is that the US is an economic superpower, which dominates global financial markets, with the dollar used as the top reserve currency. It is much easier for the country to draw in investment that the aging middle-ranking country that is the UK. It has much more secure access to liquid, short-term funding. And with a huge domestic market the outlook for its businesses look less precarious than that for British ones.

But the most important difference is that, for all Mr Trump's lack of clarity, what is known about him, and the Republicans who control Congress, points to a loosening of fiscal policy. This mainly takes the form of tax cuts. This increases the demand for dollars, because it will increase spending in the US domestic economy. Exactly how remains to be seen. On one version US corporations will repatriate foreign profits and invest in infrastructure. This is all uncertain - but Mr Trump and the Republicans in Congress certainly agree on tax cuts, especially for the wealthiest. And this happens at a time when most people are convinced that the US is running at close to capacity - so there is no question of fiscal laxity being complemented by monetary laxity, which would allow the increased demand for dollars to be met by extra supply. Indeed the Federal Reserve is in the process of tightening policy, and increased interest rates this month.

This economic dynamic is often not appreciated - that in a world of freely floating currencies and open capital markets, loose fiscal policy leads to an appreciation of the currency. But there are plenty of examples if you look for them. When Germany unified in the early 1990s, it involved a considerable relaxation of fiscal policy - which caused the Mark to appreciate, and a crisis in the European Exchange Rate Mechanism in 1992 that forced Sterling to leave, shredding the credibility of John Major's Conservative Government. My Economics lecturer at UCL used the British government of the mid-noughties as another example - the government ran a larger budget deficit than was warranted at that point in the economic cycle, at a time when banking laxity had already led to excess demand in the economy.

The effect of fiscal policy on a floating currency is part of what is known by economists as the Mundell-Fleming model, proposed independently by economists Robert Mundell and Marcus Fleming, leading theorists of floating currencies. It is one of the reasons that floating currencies are not quite the free lunch suggested by many Anglo-Saxon commentators. It means that a floating rate tends to neutralise fiscal policy (just as a fixed rate neutralises monetary policy). As a currency appreciates, the current account reduces (or deficit gets larger), and any increase in aggregate demand is lost across the world economy. Unless monetary policy operates in the same direction (including "printing money" to monetise the budget deficit), in which case you are in effect operating a managed exchange rate policy. This often ends in inflation or default.

This points to one of the tensions in Mr Trump's economic policy. Fiscal laxity will lead to a widening trade deficit - exactly the opposite to what he promised on campaign. That will tend to force him into protectionist policies, which in turn could create a doom-loop of global proportions. Many believe that we have the makings of another global financial crisis, especially given developments in the Chinese economy - for example read this from Yanis Varoufakis.

But another tension could be that Mr Trump's fiscal stimulus proves ineffective. The rich people and corporations that benefit from the tax cuts save most of their winnings; planned infrastructure spending is lost to political friction; and Congress insists on dismantling the social safety net, especially Medicare, sucking demand out of the system by hitting the less well-off. That would mean that growth is disappointing, breaching another Trump campaign promise.

But that's in the future. For now participants in the financial markets are readying themselves for more demand for dollars, and weaker demand for pounds. They aren't taking a view on the wisdom or otherwise of either Brexit or the new US regime.

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

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

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

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

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

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

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

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

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

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

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

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

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

 

 

 

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Making America small again. Trump’s victory marks the decline of the USA

"Make America Great Again." That was the slogan of Donald Trump's insurgent campaign to take the US presidency. It resonated with many Americans. They felt that the US had been subject to serial humiliations in its international dealings, and that Mr Trump's more robust and confrontational leadership would help to reverse it.

But politics is full of paradox. To exercise power is to diminish it. Power accumulates to those who understand restraint. In Britain English and Welsh voters took to heart the slogan of "Take Back Control" and voted for Brexit. The country is now basking in the thrill of exercising direct power in its relations with its fellow European neighbours. And yet the result will be a medium-sized power adrift in a friendless world, seeking to trade freely when everybody else is becoming more protectionist It will be more rather than less subject to the whims of foreign powers. Britons may prefer it that way, but they will come to understand that the keys to "taking back control" actually lie in Westminster and their local council chambers, rather than in Brussels.

So it is in America. Mr Trump's supporters will revel in the assertion their country's direct power. And yet he will exercise this assertiveness in order to carry out a retreat. The result can only be diminishment, relegating the US to the middle part of a medium-sized continent.

Let's look at some specifics. Consider the Trans Pacific Partnership (TPP): the multinational trade deal put together by President Obama. This was a central element of his Asian diplomatic strategy, designed to collect a number of Asian countries into America's orbit in trading terms, conspicuously excluding China. Mr Trump (along with many Democrats) denounces this as a bad deal and will scrap it. That leaves a vacuum into which China is ready to pounce. It plans its own version of a free trade area, involving most of the same countries. Mr Trump has also questioned the value of America's military alliances in the region. The clear message to countries there is that they must acquiesce with China's increasingly imperial ambitions. The Philippines' President Duterte looks a little less eccentric in his pivot to China. The USA is suddenly a much less important country.

Mr Trump's promised assertiveness in trade relations with China makes little sense either. It comes at an important moment in the evolution of China as a nation. It has built its economy on international integration, especially with the US, and developed a large trade surplus in the process. But there is nothing particularly beneficial in a trade surplus - it implies that a country's citizens are consuming less than they could - an act of self-denial. A trade surplus has political advantages - it makes you less beholden to foreign creditors - but China is already powerful enough for this not to matter much. So it is in the process of carrying out an economic pivot to  develop its consumer economy, and away from integration with developed economies - though the scope for integration with less developed economies remains. An economic model where it exports less to America and integrates more with other Asian countries, and even African ones, suits it just fine strategically. Mr Trump means to hurry it along, but it will disrupt the US economy more than the Chinese one.

In Europe the issue is not so much trade. The proposed trade deal between the US and the European Union, TTIP, looks dead in the water without any help from Mr Trump. The main issue for Europeans is military and diplomatic support for the European countries against Russia in particular. Mr Trump has said that the current balance involves America in a disproportionate level of commitment. He has a point. If America steps back from its military commitments, and caves in to pressure from Vladimir Putin to create and extend a Russian sphere of influence, then it will put European countries in a very tough position. It is not very clear where this will lead - but one thing is very clear: America will be less important to Europe. This is not necessarily a bad thing for Europe, but it will be very uncomfortable.

And then there is economics. We are still guessing what will emerge from Mr Trump's presidency - but there could well be a short-term lift for America. Some form of fiscal stimulus is in the offing. Mr Trump and his advisers hope to lure in US corporate profits that are stacked offshore for tax reasons, and to use the proceeds to fund infrastructure investment. Unlike many of his Republican colleagues, Mr Trump will be reluctant to cut state handouts, like pensions or healthcare - though health insurance is under threat. This could give a short term lift to the US economy . And, as this week's Economist points out, much of this gain will be at the cost of other world economies.

That should please Mr Trump's supporters. But the problems will start quickly. The stimulus is badly timed. In many aspects the US economy is running at close to potential output. All the stimulus might do is suck in imports and push up prices. But there may well be a lot of hidden potential in the US economy - more workers could be drawn into the workforce, and other workers could be made to work more productively. But if Mr Trump is serious about rolling back free trade and driving out foreign workers, then he will cut the capacity of the US economy when it needs to be increased. A financial crisis is in the offing.

The truth about the American economy is that, far from being taken for a ride and funding lavish lifestyles of foreigners, American consumption is being supported from abroad. This is what a trade deficit means. A transition to a more self-sufficient economy, as wished for by Mr Trump's supporters, will entail economic shrinkage. Americans may rail at the loss of jobs in many industries, but they exchanged these for cheaper products, made abroad or with automated technologies, or both. Reversing that means reducing living standards.

Except that most Americans could still end up better off. If the country can share out income more evenly, with lower profits and higher wages, and more of those wages paid to middle and lower level employees and less to the top layer, then this shrinkage need not be painful to the majority. But what chance is there of a Republican administration, run by senior businessmen, achieving that? To Mr Trump exploitation is simply good business practice, and profits are reward for enterprise. There is no sign of a mindset that wants a different distribution of the fruits of economic success.

America and the world is in for a rough ride. But strategically it has been clear for a long time that American power, relative to the rest of the world, is in decline. That is not such a bad thing  - it results from a fairer distribution of the world's wealth. After the diminishment of Europe, it is now America's turn. Mr Trump's victory marks a big step along that journey. But it should surprise no follower of politics that he is claiming to do the opposite.

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