Tag Archives: EU

Are Eurosceptics suffering from the boiled frog syndrome?

boiling-frog1
By CJ – Juesatta

Within two years the United Kingdom will have a referendum to decide whether or not it stays in the European Union. Despite a fair amount of noise in the media, the serious political campaigning hasn’t started yet. But the Ins seem to have the edge. This is an interesting turn of events.

It helps to put your passions to one side to make any sense of the emerging campaign. I heard one commentator  suggest that the electorate is split into three roughly equal shares: those who are firmly for In, those firmly for Out, and those who are floating between the two. I don’t know how accurate the numbers are (the firm Ins sound a little high), but it’s a good way of looking at it. The campaign will be decided by the floating third, and these voters do not have the emotional investment in the issue that of either the Europhiles like me, or the Eurosceptics. The arguments the committed supporters on either side find convincing will cut little ice them. The In and Out campaigns will have to concentrate on the sort of arguments that will sway these uncommitted voters, and not those that have already made up their minds.

I think that this is giving the Europhiles the edge. Until recently the Eurosceptics have had the field to themselves. They dominated the media with their passionate arguments about sovereignty, over-regulation, and the general incompetence with which the EU is run. Europhiles were in despair; we never heard somebody coming up with a really convincing argument about why we should stay in – just some rather soft stuff about trade and peace and international prestige. We were losing the argument, it seemed. The Outs raced ahead in the polls. But they also became over confident in the strength of their own arguments. The Europhiles, on the other hand, were forced back to a more realistic assessment what they had to do – and they realised that the main thing going for them was sheer bloody inertia. Passion would not win the day for them.

But the Eurosceptics, or too many of them, still think that their passion and argument is what is needed. But this is no good for the cold, hard job ahead. That they can’t agree to form a single umbrella organisation shows that they haven’t understood this – discipline among the passionate is hard. It reminds me a little about the fable of how to boil a live frog. The story is that if you throw a frog into hot water, it will just jump straight out of the pot. But if you put it into cold water and slowly heat it up it will not notice until too late. I hope nobody has tried this out on real frogs, and it almost certainly wouldn’t work if they did. But makes an important point anyway.

The Eurosceptics have been placed in a favourable media environment, like the frog in cold water. But ever so gradually it has become less favourable. The turning point was probably when the Prime Minister, David Cameron, decided to call his bankbenchers’ bluff and hold a referendum. Then it was clear that leaving was no longer a theoretical proposition, and the quiet voice of inertia started to speak. It was certainly no great push by the In camp in the media. The polls slowly but surely turned against the Outs, though in the last month the Ins have dropped back, after Europe struggled with the refugee crisis. Too many Eurosceptics haven’t noticed how the climate has changed, and are failing to adapt.

This is especially evident with attitudes to Mr Cameron’s “renegotiation” of the UK’s membership terms. This clearly an important part of the In strategy. He plans to flourish some impressive achievements to the electorate as a clinching argument to the floating voter group. This could be a decisive move, but only if he manages to exceed expectations. So a subtle Out campaign should be trying to raise those expectations. Instead most of them pouring scorn on the whole exercise. The Europhiles are egging them on by also playing down expectations – but that is in their interests.

To be fair, some of the Outs understand the problem. Lord Bamford, a notorious Eurosceptic, has reserved judgement on Mr Cameron’s renegotiation, and is wisely holding his fire for now. This was flagged by some of the Eurosceptic newspapers yesterday. That is better than slagging off the whole exercise, but still not quite the position they should be taking.

But things are far from hopeless for the Outs. Three things might work for them. The first is if they can focus anti-establishment anger on the EU. The establishment – mainstream politicians and big business leaders – will largely rally behind the Ins. And yet the public is suspicious of these figures. Anti-establishment-ism played well for the SNP in the Scottish referendum, though it still wasn’t enough. But that was a very different situation.

The second thing that could play well for the Outs is panic about immigration. Free movement rights within the EU is one of its great glories, and has been of enormous benefit to Britain – and Britons make use of it themselves with glee. But immigration makes most Britons nervous. If this nervousness is raised to panic proportions, the Ins have no really convincing answer. Unfortunately it makes no difference whether or not the panic is actually relevant to Britain’s membership of the EU. The media storm over migrants at Calais earlier this year had nothing to do with British EU membership (the situation would be just the same, perhaps worse, if Britain was out) – but it still dented people’s confidence in EU membership.

And the third thing is chaos within the EU itself. This might arise from the ongoing refugee crisis, or from another Euro zone crisis. It makes no difference that both these crises show that Britain’s already-negotiated opt-outs allow us to stand on one side. It still reduces the comparative advantage of staying in over leaving.

For all that the Ins need to hold their nerve. The best case for In is an unspectacular one. Britain has prospered by and large in its years as part of the EU (even if you can’t prove it would have been worse off out); EU processes are deeply embedded into our way of life – as the passport controls when travelling to EU countries shows. Leaving the EU would create a colossal mess which would, incidentally, put the Union at risk. It is up to the Outs to make a convincing case that life would be actually better outside. Not that things wouldn’t change much. And in concrete terms that affect daily lives, not in terms of abstract ideas like parliamentary sovereignty. That will be more than hard for the Outs to do.

So that is why I’m not that bothered that the launch of the In campaign this week was a bit anaemic, and is chairman a bit colourless. The task in hand is bit like that of a defence lawyer: not to prove his clients’ innocence, but to make the prosecution stew. in its own contradictions.  Like that boiled frog.

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The European dream slowly unravels

I am one of nature’s political optimists. But 2015 is one of those years where it is all going wrong. The Lib Dem near wipe out in this year’s UK General Election, for one thing. The rise of Islamic State is another – along with the spread of vicious Islamophobia promoted by such outfits as Britain First. Meanwhile state after state in the Middle East and Africa is failing, with vicious dictatorships taking hold in other countries. This gives Israeli hardliners the cover they need advance their own brand of apartheid, and the ghettoisation of Gaza. Any attempt at finding a humane middle way is undermined by extremists of one sort or another, in country after country.

And now, as Gideon Rachman points out in yesterday’s FT, the European dream is dying before our eyes. The idea of ever closer European union was one of the formative ones in my own politics. In 1975 I was a 17-year old that was definitely ready to vote in that year’s British referendum on Europe. I’m not sure why it should have caught my imagination so – I grew up in postwar prosperity, where the World War was just an interesting piece of history. I suppose I found British society so staid and constricting that I wished for its institutions to be subsumed into something much more modern and exciting. I meet many people of my age that feel the same way though.

But apart from opening out British society and commerce, the EU represented a path towards civilised governance and prosperity for the undemocratic countries on its fringes. Greece was the first country to take the path of throwing off dictatorship and coming in to the mothership of Europe. 35 years on and the achievements look hollow. Greece took on the trappings of a well-managed European democracy but did not take it to heart. It remained run by a rich elite which did as it pleased, while bribing the rest of society with generous pensions and meaningless public sector jobs. They became artful in keeping that show on the road by extracting grants and loans from the rest of the union at the same time as disregarding rules they did not like. They even managed to join the Euro, reducing borrowing costs, and allowing the fiction of a properly functioning European state to continue. But sooner or later the music had to stop. And when it did the foundations of the European project looked shallow. There is an absence of trust and solidarity.

The Greeks themselves, or at least those that govern them, seem in denial about the sort of reforms that will be needed to get them on the path to prosperity. They claim to be victims, condemned as to doom-spiral of “austerity”, with many Anglo-Saxon economic commentators (Noble Laureates Paul Krugman and Joseph Stiglitz among them) cheering them on. But dig a bit deeper and we find that words such as “austerity” and “reform” have been abused so that a lot of the dialogue is at cross purposes. The Syriza government wants to reform some aspects of the Greek state, but sees no problem with those aspects that I have referred to as “bribery”: maintaining ineffective public sector jobs and unaffordable state benefits, such as pensions.This leads to the suspicion, especially amongst Germans, that all the Greek government want to do is to keep the old, failed way of running the state on the road, lurching from bailout to bailout, using moral blackmail each time.

The Germans, of course, are hardly blameless. Their banks kept the Greek show on the road, in the apparent anticipation that their government would bail them out if things went wrong. That expectation proved sound enough – most of the bailout money went to them, and practically nothing towards providing the investment the Greeks so badly need. The Greek government’s moral case is not entirely hollow – but their combative approach to negotiation is destroying trust. No wonder that British Eurosceptics urge the UK government to emulate such tactics in their dealings with the EU! Even now the Greek Prime Minister, Alexis Tsipras, suggests that a No vote in the forthcoming referendum is just a step in the negotiation, not a real moment of decision. Those European leaders who have been trying to fudge things to get a deal, like Claude Juncker, the President of the EU Commission, feel betrayed.

The prospect of Greece dropping out of the Euro and then the EU is steadily growing. This would be a calamity for Greeks, and raises the prospect of yet another failed state. As more than one commentator has suggested, if the Greek ruling elites had what ti takes to run an independent monetary policy, they would not have got into this mess in the first place. It would mark a big moment for the EU too. Its first major defeat. But it has limited powers; it cannot make an unwilling partner reform itself.

And old Europhiles like me must wake up and acknowledge the truth behind that. Our dream cannot be fulfilled. The EU is a confederation, not a federal state. It cannot bind its members by force of arms, as the United Stares did when some of its members tried to secede over 150 years ago.

The question now is whether the EU can survive a Greek exit, or will it be the start of a general process of disintegration. Greece is not the only country to be a cause for concern. The other bailout cases -Spain, Portugal and Ireland – were always more serious about reform and integration, and I do not see these as being of immediate concern. Cyprus, with its cultural ties to Greece, may be different. But the future integration of Hungary, Romania and Bulgaria are far from secure.  At least they are not members of the Euro.

Greece seems to be the lesson that the EU learns by. After its entry to the Euro, the EU became much stricter about allowing further new members. After its flawed bailout, which let many private sector investors off the hook, it was much stricter with Cyprus.

But what is emerging is a different Europe. One where much less solidarity is expected. And one with an Exit door. It is a system of rules and standards that facilitate free trade, environmental cooperation and good governance – but one where it if you fail you are out. Integration is not necessarily in one direction. The union will no longer be ever closer.

Into this sad situation the British Prime Minister David Cameron enters with his attempt at British renegotiation, leading to a referendum. This may seem to be the last thing that Europe needs. But Mr Cameron’s negotiating skills are far more advanced than Mr Tsipras’s, and he is showing much more application than hitherto. This cloud offers a silver lining. It may define a looser union, but if the British public votes to stay in it will offer a counter-narrative to the slow disintegration that is happening elsewhere. Such is what is left of my European dream.

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Should I apologise for supporting the Euro?

The this week’s FT Janan Ganesh suggests that those who supported Britain’s entry to the Euro back in the late 1990s and early 2000s should own up to to their error and apologise for it. He feels that the arrogance of that generation of Europhiles is undermining the pro EU case as we face a referendum on membership. Well he won’t have me in mind. I am not a prominent politician; I wasn’t even blogging in those days. But I did have an opinion – and that was that that the country should be part of the Euro – though not at the exchange rate then on offer (about 65p per Euro). Should I hang my head in shame?

In fact this also seems to be a rather desperate line of attack by the Eurosceptics, who are at last realising to their horror that they are being out-manoeuvred. They want to discredit the whole pro-Europe cause. In today’s FT , one its other writers, Martin Sandbu, comes out with a robust defence of British entry to the Euro. He suggests that if the UK had been part of the Euro economic disaster would have been averted, because the European approach to fiscal and monetary policy would have been more pragmatically British. I have also heard a that idea suggested by a commentator from within the Euro zone, though I can’t remember who.

I’m not entirely convinced. But it at least raises the big question. It is treated as entirely self evident that the Euro is a disaster, and that British membership would have made things worse for the country. But both these are counterfactuals. We don’t know what would have happened if the Euro had never got off the ground, or if Britain had been a member.

Let’s consider the first of these. When the Euro was being formed the economies of Italy, Greece and Portugal were in real trouble. Their governments were losing the confidence of the markets; stagflation followed by hyperinflation beckoned. The Euro lifted these economies – before joining the governments were forced to bring fiscal policy under control; after joining interest rates fell dramatically. But these countries failed to deal with deeper seated problems, and eventually the chickens had to come home to roost. Membership of the Euro delayed the denouement rather than caused it. Indeed it gave these countries an opportunity to head off disaster which they failed to take. Contrast this, for example, to Belgium, also considered a bit of a basket case before the Euro, whose economy now prospers, relatively speaking at least. And for each of the other members of the  Euro that ran into trouble something similar can be said. Ireland suffered the consequences of a reckless expansion of its financial system not unlike that of Iceland, outside the zone. Iceland’s crash was at least as painful as Ireland’s. Their problems reflect underlying economic weaknesses that governments failed to tackle. The signs were there. Indeed no members inside the zone seem to want to return to life outside it, with the possible exception of Germany (and Finland perhaps).

The ambiguity of Germans is understandable. The interesting thing about that country though is that they were the only, or at least the first, country in the zone to understand the implications of membership for economic management. In the early days they realised they were uncompetitive, and embarked on a programme of “real” devaluation. This was a combination of holding pay rates down and economic reforms to improve productivity. The reluctance of other countries to embrace this style of economic management is the main failure of the Euro project.

And what of the second counterfactual? What if the UK had joined? Well the first thing to be said is that the country did not do so well out of the zone. The financial crash of 2008 was deeper, and the recovery slower, than the major Eurozone economies. Britain suffered a persistent current account deficit, supported by an unsustainable exchange rate. We were in a not dissimilar space to countries like Spain and Ireland, going through a financial boom offering the illusion of wealth while not enough was being done to fix the fundamentals. It is not so self-evident that things would have been worse inside the zone.

Or perhaps not. I would like to think inside the Euro the UK would have been locked into an exchange rate that suited exporting industries (like Germany after its reform/adjustment programme) and not so subject to financial shenanigans. That would have left the economy in a stronger position after the bust. But such an exchange rate wasSterling Euro X ratesnot on offer. The chart above shows the average exchange rate between the Euro and Sterling for each year of the currency (source: stastica.com). My view is (and was at the time) that the rate of 65p was high (or too low in terms of the graph). It was distorted by excessive government spending and a booming financial sector – there was a substantial current account deficit to show that it was unsustainable. It did not drop to a more realistic level until 2007-2008. That was too late. There was no chance that the government would have followed Germany’s example in conducting reforms to improve the real exchange rate – not while everything was rosy on the surface.

So If Britain had joined the Euro at its start or early in its existence, then the exchange rate would have been too high. Which would have made the adjustment period after the crash even more difficult. I’m not going to apologise for this because I understood that at the time (or that’s how I remember it!).

But there is a bigger issue that I will have to own up to. The design and operation of the Euro zone was flawed. There are two sustainable ways of running such a common currency area. One is part of an explicitly federal system of government, which allows substantial fiscal transfers between its members and a robust system of federal political control to match.  In this system members bail each other out if they get into trouble.To judge from most commentary, you would think that this is the only way to run the zone – and that because the European polity is not ready for such a federal system, then it will never work. But there is an alternative, where each member is not so tied to the others. Each country is left to run its affairs as it sees fit, and if it can’t pay its debts, it goes bust. It requires a sovereign insolvency regime. Nobody bails failing states out.

This latter arrangement is what the Germans wanted, and it is what most Britons that supported membership wanted too. But Euro-federalists in Brussels and the southern states saw the currency as a step towards federalism. The Germans didn’t help matters by insisting on  system of fiscal rules for members – the “Stability & Growth Pact” – which is only necessary if you are heading for a federal arrangement. The idea that the system was in fact of the federal type was implied by the fact that government bond rates for the different members were almost identical for much of the Euro’s life before the crisis. This was a bad sign – and yet most European leaders though it was a good one. When crisis approached European leaders were complacent. And when things went wrong, there was muddle and confusion. This problem is still not resolved.

And here I have to own up. While I saw some of the signs, I did not appreciate the full implications of this ambiguity. I thought it was a problem that could be solved by evolution from within.

I still believe that. But the politics of EU membership in Britain are toxic enough as it is. It is better that the country is not part of the tortuous politics of the Eurozone. That is why I accept the consensus that Britain probably never will be be part of  the Euro zone. Or not until firstly the zone finds a new and sustainable equilibrium, and secondly that Britain sinks into an economic mire that destroys its self-confidence as an independent nation. Both are possibilities.

Meanwhile I am not a fan of an independent Sterling. It has a way of distracting the political elite from dealing with deep-seated economic issues, like our current account deficit, our inefficient underlying economy and our over-dependence on volatile financial flows. But, it has to be admitted, that, with the exception of Germany, the Eurozone members were equally blind to the self-same issues. I apologise for not appreciating that enough.

 

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David Cameron pitches for the political centre on immigration and EU. How depressing

The Conservative leader and British Prime Minister David Cameron’s grasp of the dark political arts is not gone. Last Friday he gave a long-awaited speech setting out his proposals on managing immigration from other EU countries better. It received generally favourable coverage. And, before anybody had a chance to think through what he had said, the story was muscled out by a series of announcements about public spending commitments, in advance of tomorrow’s Autumn Statement by the Chancellor of the Exchequer. If this goes according to plan, Mr Cameron has redefined the political centre ground at a stroke. Will he succeed?

In the preceding weeks, not coincidentally while the Conservatives were trying to fight off a by-lection challenge from Ukip, various suggestions had been floated about what the speech might say. The most eye-catching was some sort of quota system for accepting intra-EU migrants. This drew much criticism from other EU leaders. In the event this idea was dropped. Instead Mr Cameron proposed to limit their access to benefits and tax credits, including those for both those in work, and those out of work. Migrants would not be entitled to these benefits unless they had been resident for a full four years.

In terms of pure politics this was astute. More moderate commentators were relieved that the quota idea, and its immediate confrontation with other EU leaders, was buried. Limiting access to benefits, on the other hand, sounds a bit like what the opposition Labour Party, and even the Liberal Democrat coalition partners, were suggesting. But the time limit and scope was much greater than anything these parties proposed – pleasing the more hawkish commentators, especially in the right-wing press, who are the main attack-dogs in British politics. Sensibly he left the matter of access to free health services under the NHS untouched. Many older Britons have retired to Spain, where they get access to that country’s health services for free; indeed Britain seems to be exporting oldsters almost as fast as it importing youngsters – something the government will not wish to discourage.

And so Mr Cameron will try to present himself as the voice of sweet reason and moderation as the General Election approaches. On the one hand we have the liberals and the left, who are ignoring the British public’s anxieties over immigration. On the other we have the swivel-eyed loons of the Ukip, who demand must more drastic measures, including departure from the EU, which would do severe harm to the country’s economic prospects. Mr Cameron does the faintly plaintive, sweet moderation act pretty well. He praised the contribution of immigrants in his speech, and simply suggested that the country had been having a little too much of a good thing.

And the bulk of the British public may well agree. Mr Cameron’s suggestion that we renegotiate our EU treaties and put the result to an in-out referendum sounded similarly sensible and centrist. That the political centre seems to be drifting so far towards muddled populism might alarm liberals like me, but this is reality.

But there are problems. The most immediate is whether his own fractious Conservative Party will buy it. Many party workers, and a lot of MPs, actually agree with Ukip about immigration and the EU. Mr Cameron’s policy may sound like a cop out to them. If they start to get  vocal, the Tories will look divided, and their credibility will fade. There were mutterings over the weekend, but we will have to wait and see on that. His party did allow Mr Cameron a free hand before the 2010 to define it as more moderate than it really was. If they have any sense they will do so this time. If the British public has any sense they won’t fall for it.

The political class are obsessed with the General Election due in May 2015. Any dates after this only matter in terms of manoeuvres designed to secure an advantage at that point. And in that light, divisions within the Tory party are Mr Cameron’s main threat on the issue. It is looking beyond that date that the real un-wisdom of Mr Cameron’s stance starts to emerge.

The first point is that it still leaves a problem with the EU renegotiation. While there is some scope to limit access to benefits under current EU treaties (by moving towards a contributory principle), changes of this nature will apparently need treaty changes. Mr Cameron had calculated that the EU would need treaty changes anyway to secure the struggling Eurozone – so adding in a few goodies for his benefit would not be too onerous. But the EU’s leaders are heading in a different direction. With anti-EU populists on the rise across the continent, leaders want to avoid any treaty change, since these are likely to be held hostage to referendum results. Unfortunately voting No to a treaty change has not proved fatal to any EU country so far – it has simply improved negotiating leverage. Going through this process just to save Mr Cameron’s bacon may well be too much. This takes the country a further step towards the EU exit, something that Mr Cameron seems to want to avoid.

The second point is that this plan does not actually address any major economic stress point. Access to Britain’s benefit system does not seem to be a major draw for intra-EU migrants – though it may be a stronger incentive for migrants from outside the EU. The British public will not notice a diminution of EU migrant numbers. The policy is designed to address tabloid exaggerations, not reality. The tabloids will simply move on to some other nonsense. All that pain for no real gain.

Still practical solutions to the country’s problems count for little in the current political debate. The populist right blame the EU and immigrants for the country’s problems. The left blames some combination of bankers, capitalists, greedy rich people or deluded neoliberals. We may suspect that our problems lie deeper – with demographics, globalisation and the development of technology. We may also suspect that the proffered solutions of left and right will make things worse not better. But no politician, campaign group or tabloid journalist seems to care. That is the real scandal of Britain’s political class.

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Immigration and Britain: there is not one problem and there is not one solution

Immigration is now the top issue in British politics, though laughably some nativists still claim that politicians refuse to talk about it. Polls show that it has been one of the biggest issues of public concern for many years – indeed, some suggest that the level of concern is independent of actual levels of immigration. Now that the economy is dropping as a political issue, in spite of Labour’s attempt to stoke up anxiety, immigration is challenged only by the NHS in public concern. But to what extent is the public worry about immigration a fantasy, a displacement of anxiety about other changes in our society, and how much does it reflect real stress?

The answer to that matters, or it should. Let us put to one side the Conservative Prime Minister David Cameron’s reason for wanting to limit freedom of movement in the EU: that the British people are his boss. In other words he doesn’t care whether the fear is based on substance, he just listens to what people tell him. We can imagine Winston Churchill in 1940 consulting opinion polls as to whether to sue for peace with Hitler or fight on alone. Leaders should lead, not follow. If the anxiety over immigration is fantasy, our politicians should publicly challenge it; if it is based on real stress, steps should be taken to manage that stress.

Unfortunately the quality of debate is very poor. The anti camp are more interested in fanning the flames than examining the real issues, for example by stoking fears that the country will be “swamped”. And yet the migration liberals seem to talk past them and stick to generalities: that migration is generally a good thing in a modern society. And even some who attempt to see both sides, like this article from John Harris in the Guardian, are often unsatisfactory. In spite of the article’s encouraging title “Don’t dismiss public fears about migration as mere bigotry” it turns out that it is largely based on the author’s experience in the East Anglian town of Wisbech, which does little to explain feelings elsewhere in the country. And he swallows at face value Labour’s apology over letting in EU migrants from new members in the early 2000s: this is far from a self-evident policy mistake, even in hindsight.

A welcome breath of fresh air is this article from this week’s Economist. This comes from an unmistakably liberal standpoint, but in the best traditions of that newspaper, it is a balanced survey of the evidence – so much better than that paper’s overage of British educational policy. This brings out how much anti-immigration feeling is a sort of displacement of other anxieties, personal and societal, stoked up by the country’s “raucous” press. A telling fact is that anti-immigrant feeling is often highest in communities relatively unaffected by immigration, such as the site of Ukip’s recent landslide by election victory, Clacton.

But there are real pressures too. The starkest are in East Anglian and Lincolnshire agricultural communities (like Wisbech). Here unscrupulous gangmasters ship in thousands of workers form abroad to work in the fields for a pittance. They destroy job prospects for the less-skilled locals; crammed into to houses in ordinary residential areas they overload local services and undermine neighbourliness. They are a lawless other, a truly ugly phenomenon, with the workers themselves as much victims as the blighted communities. Then there are northern and midland towns where Pakistani and other Asian communities have not integrated. In Birmingham conservative Muslims have tried to take over state schools to run them on a decidedly illiberal principles. Confused youngsters may be radicalised and converted to terrorist activities. Such British icons as poppy day, to commemorate the sacrifices of the armed forces, may be viewed with hostility. And there are many other such problems: Somali children failing to take to British education; Albanian and Kosovar crime syndicates; rich foreigners buying up London luxury flats; and so on.

But what is so striking is how diverse these problems are. Each of the solutions advocated by anti-immigrants would only deal with a small part of the problem. Leave the EU? Well that might help with the EU agricultural workers in East Anglia – but there would also be collateral damage to the farming industry. It wouldn’t help with second and third generation Pakistani residents. A points system for immigrants so that only those with needed skills or money can come in? We already have this for non-EU migrants, and it is far from clear that the collateral damage to businesses and universities is worth any benefits. And it doesn’t help with those London flats.

Surely what is needed is not so much these drastic, strategic national solutions, but a number tactical, local solutions – and some international ones too. We need to crack down on the gangmasters and the sort of exploitation that they perpetrate; that does not require EU treaty changes. We need better engagement with and among longer-standing immigrant communities – including better teaching about Islam in our schools. This may mean bypassing the paternalistic “community leaders” in many cases. Serious action is needed to root out prejudice in our police forces. The paternalistic Labour one-party states that predominate in so many of the country’s urban local authorities needs to be replaced by something more pluralist and democratic. And so it goes on.

But liberals must also confront two strategic problems: housing and the welfare state. A common complaint is that the number of immigrants is putting pressure on limited housing resources, which is depriving poorer people (of all races, it might be added) of access to decent housing. Immigration is by no means the only reason why housing is under pressure – but there must be some substance to this. An obvious answer is to build more houses – but that will often mean blotting out nice bits of green countryside, especially in urban greenbelts. My personal view is that the rising population is driven by demographics – younger immigrants are being sucked in as older people leave the workforce to retire. As such limiting numbers of immigrants will create worse pressures elsewhere. So we badly need a decent housing strategy. But I also think that a lot of the pressure on green land comes from our dysfunctional private sector developers, exploiting English fantasies of the sort of home they want to make quick profits. In fact dense, urban housing is much more sustainable in the long-term, even if it is expensive in the short term. Also it would be good to revive local economies that are currently weak, for example in many northern cities, and where housing pressure is much lower. But some loss of greenbelt is inevitable. This isn’t easy, but we need to put more of the political class’s creative energies into this, learning from past failures.

Welfare is more awkward. Unlike most of our European neighbours, Britain does not operate insurance-based welfare. We run according a more socialist ideal based on need. This is exemplified best by the NHS – but similar thinking runs through the whole system. With an insurance system, even if state-run, it is much easier to control access, and reduce access to recent immigrants. We don’t really know how much our open access to welfare encourages poorer migrants. But it is the poorer migrants that create most of the difficult issues. There may be much mythology in the idea of welfare tourism – but there is also plenty of anecdotal evidence that our welfare system attracts migrants to Britain rather than France, say. Should we start to move towards the insurance model? This is what Labour are suggesting by re-establishing a “contributory principle”. I have to say that I worry about this. It’s a neat way to keep new, unskilled migrants away without burdensome immigration systems – but I suspect there would be a lot of collateral damage to longer-term residents. We have taken our welfare state in that direction for a reason – and it is an attractive idea. There may be other reasons to move towards and insurance model (which, after all was the idea of the original Beveridge system) in times when tax revenues do not flow so freely. I don’t have a view on this – but like housing it needs to be a central area of political discourse.

And my conclusion? High levels of immigration are a fact of life for Britain. Crude regulation, or drastic measures like leaving the EU, will create more problems than they solve. But there are some real pressures that our political class should address. And there are many problems, not one.

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Can the European Parliament address the EU’s democratic deficit?

As I have often remarked on this blog, the European Union plays the tortoise in Aesop’s fable to the United States’ hare. The EU’s forward motion is imperceptible and it is easy to make fun of it, compared to the easy strides made by its American counterpart. And yet when reviewed over the long term, progress is dramatic. At the moment we are witnessing an ugly row in the EU about who should be the President of the European Commission. This follows a rather dramatic election to the European Parliament (EP) in which Eurosceptic and populist parties made big advances, not least here in the United Kingdom. But these apparently discouraging could mask a major advance by the parliament.

At the centre of this drama is the problem referred to as the EU’s democratic deficit. A large proportion of the member states’ laws (to say nothing of most European non-members likes Switzerland and Norway) are now derived from the EU’s federal institutions. These are led by the Commission. These laws, and the Commission itself, do not seem to be subject to the same standard of democratic challenge and accountability that people have come to expect in a democratic polity. EU laws are presented as impositions from outside from an unaccountable bureaucracy. Two EU institutions are meant to provide democratic legitimacy. Firstly there is the European Council, consisting of the heads of government of all member states. This works mainly by a system of qualified majority voting, so that laws can only be approved with substantial inter-state coalitions. Some areas require unanimity. There are two problems. First, its attention span is necessarily short, so there is a limit to the extent of any detailed scrutiny – though this is improved by delegation to more junior  ministerial meetings. A bigger problem is that the public perceive their deliberations to be wheeler-dealing: an unseemly process of stitching voters up. Prime Ministers do not have their voting records at the Council examined in the way that US Senators do, and they easily pass decisions off as not being theirs.

The second institution meant to provide democratic legitimacy is, of course, the EP. European federalists see this institution to be the forerunner of an active federal parliament, like the US House of Representatives. So far it has been a disappointment. Elections have drawn a low turnout; there is little awareness among voters about what it does; voting is dominated by national politics. There is no “European polity” that forms the basis of its legitimacy, where there plainly is an American one for the House of Representatives.

European federalists have sought to address this problem by making the EP matter more. First it was given greater legislative power; its importance has risen to such an extent that its members are now subject to extensive lobbying by commercial and other interest groups – but the public has barely noticed. Who cares about the finer points of intellectual property or bank regulation, after all? Their next idea was to give it a bigger say in the selection of the President of the Commission – the nearest thing the EU has to a Prime Minister. Their idea was that each of the transnational political groups into which MEPs are organised would select a leading candidate, referred to by the German word Spitzenkandidat. The Spitzenkandidat of the largest party would be nominated to be President. This is the way Germany picks its Chancellor, and also the way Britain picks its Prime Minister. The winner of this process turned out to be Jean-Claude Juncker, the former Prime Minister of Luxembourg.

Here in Britain this process has been observed with a mixture of contempt and disdain by the political elite. It is nonsense to suggest that voters were picking one the Spitzenkandidaten when they were voting, they say. Mr Juncker’s nomination has no democratic foundation. And besides we don’t like him. One British journalist claims that this is no better a way of running the Commission, than monetary union was for running Europe’s economy, following the British elite’s view that the Euro has been a disaster (gently skating over their own country’s own troubles outside the Euro zone). David Cameron has led the charge to dismiss this process and pick somebody else, who would be more “reform-minded”. He has at least tacit support from other party leaders here, and in a few other EU countries. But this stand is looking increasingly costly, expending Mr Cameron’s diminishing stock of political capital within the EU. He has been out-manoeuvred, and it is likely that Mr Juncker will get the job.

Much of the criticism emerging from British commentators is true. Mr Juncker does not inspire confidence as the man to take the EU forward to something that will function better. The EP does not represent the will of a European polity. The battle of the Spitzenkandidaten never took off in the election debates. But they have missed two important points.

The first is that this years’ EP elections were a major political event, right across the union. Turnout remained low, but it was actually up on the previous election in 2009. The combination of it being seen as an election whose consequences are relatively weightless, and the use of proportional representation, have made the outcome unpredictable and dramatic. The rise of populist political parties has enlivened the election, and have given electors a voice that they would have been otherwise denied. This invites a crisis of confidence in the EU, but, paradoxically, it gives the EP a greater degree of legitimacy. The election results in the UK were described as a political earthquake. No longer are the elections a sleep-inducing irrelevance, but they have become an important test of the political temperature. Some of the consequences are ugly; mainstream politicians are pandering to the populists, allowing racism to make a comeback. But it puts the EP on the political map.

The second point that British critics miss is that the argument over Spitzenkandidaten is not about the present; it is about the future. The current candidate may have no democratic legitimacy, but in order for future ones acquire that legitimacy it is necessary for us to behave as if they did. This is not about the election in 2014, but the one in 2019. The tortoise beats the hare because he focuses relentlessly on the ultimate goal, while the hare is distracted by the issues of the moment.

Should we applaud this turn of events? The EP has taken a great step forward. There may be no sign of a European polity yet, but each of the national delegations has greater democratic legitimacy with their own national polities. That is a clear step along the path. Does the EP provide the answer to Europe’s democratic deficit? Or should it be abolished? Abolition is not an option for now. And the EP may provide part of the answer.

But we should remember one thing. In order to judge the success of the EU and its institutions we must look over the long term. While currency union has endured almost unbearable stress, it is much too early to write it off as a failure. As the EU stumbles forward into unmapped ground, the same must be said for the European Parliament.

 

 

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Why you should vote Liberal Democrat on 22 May

Britain, along with the rest of the EU, faces a very interesting set of elections this week, for the European Parliament. Our polling day is Thursday 22 May, when there are also local elections in many parts of the country, including London, where I live. I am not an impartial observer of these elections, but I do try to express my views dispassionately, and set aside the pure propaganda. Here is what I think of the various contenders.

Let’s clear the decks a bit. I am thinking mainly about England; my knowledge of the politics of other parts of the UK is better than that of most English people, but that is a low bar indeed. In Northern Ireland I have a strong inclination towards the Alliance Party, because of its non-sectarian ethos. I dislike the Scottish Nationalist Party (SNP) mainly because I am a unionist. But I will say for its politicians that they put Scottish politics above Westminster politics; SNP politicians do not aspire to a place in the British cabinet. Still, this is less relevant to the European Parliament than elsewhere. I have rather more sympathy with Welsh Plaid Cymru, who tend to set out a clear social democratic, reformist agenda. But Welsh politics is messy, and I don’t feel confident talking about it.

And neither will I talk about the local elections. These should be determined by local issue and the local politicians’ records – and not the subject of a sweeping blog post like this one.

In England there are five contenders for your vote: the Conservatives, Labour, Ukip, the Greens and the Liberal Democrats. Voting for any other party is a wasted vote, even under our proportional system – since there is no system of transferable votes outside Northern Ireland. There are many other parties contesting these elections, but they simply don’t have enough traction to get up to the level needed win a seat. This is to be welcomed in the case of the BNP, who did manage to win a couple of seats last time, in 2009.

The party everybody is talking about is Ukip. The main reason offered by people for voting for them is that they are political outsiders, and that supporting them will give Britain’s established political elite a well deserved black eye. This is about the only good reason for voting for the party. They are chaotic and ill-disciplined, and they don’t take the work of the European Parliament seriously, and so their presence will damages the national interest. Inasmuch as you can detect clear views, they tend to be illiberal. If you are a Eurosceptic, there are other parties you can vote for who will do a better job of representing you and the country in this forum, which has significant political power, whether or not you accept that is a good thing.

But do our political elite deserve such a kicking? Many of the voters I have met on the streets think so; they feel let down. This is not just our newspapers stoking things up, with the rest of our media in tow. Politics has become too professional, and not enough politicians genuinely engage with voters. Focus groups and polling might be quite useful for informing politicians about what people are thinking, but they don’t help people feel involved. But will the shock of voters defecting to Ukip, or not voting at all, make them change their behaviour? There is little sign of this. I am not sure the problem is entirely soluble in a modern, developed society. But to make things better we need political reforms, not protests. These reforms need to make politicians more responsive to voters. This means changing our electoral system, and it means devolving more power to local levels where it is much easier to involve people in decisions.

The trouble is that Ukip stands for a sort of conservatism. They want political reforms, but focusing on the European level, not at the national level, where they are most needed. This sort of conservatism tends to reject useful reforms, as we saw in the debate on the Alternative Vote system (which would have been a small step in the right direction), and the soft spot so many people seem to have for our appointed House of Lords. It’s not the right kind of kicking, and it is the wrong election to do the kicking at.

Most Eurosceptics would be better served by the Conservative Party. The Conservatives have a clear view on Europe: renegotiation and a referendum. This is surely the most sensible way forward if you believe that being part if the EU is bad for the country. The European Parliament cannot deliver on this agenda – but Conservative MEPs will be taken much more seriously in Brussels than Ukip ones, and will thus do a better job of representing the country – though they would have had much more influence if they had not left the parliament’s Christian Democrat grouping.

But is a referendum right for the country? Like many supporters of the European project I dither on this. I don’t think it is a good idea for the UK to leave the EU. This is mainly because emotionally I feel a strong European identity (maybe because I have lived a short while outside Europe). But more practically, our obligations within the Union are forced on us by our economic circumstances, and leaving it would make little difference. It would be a colossal waste of political effort that should be devoted to other issues. Meanwhile the uncertainty it would create, as so many things of commercial importance are renegotiated, would blight the country exactly where it can least afford it. Many of the same arguments apply to just having a referendum on the issue – never mind actually leaving. The main argument for a referendum is that it would lance the boil and let the country move forward. I would sooner wait until the EU is forced to undertake more significant structural reform that anything the UK can force on its own.

And so to the Labour Party. Their campaign for the European Parliament is focused on the “cost of living crisis”. Regardless of the merits of this, it is exactly the sort of irrelevant focus-group based politics that has given politicians such a bad name. Their election literature mentions practically nothing about Europe or the European Parliament. This kind of cynical campaigning should be rejected. Politicians should be courageous; currently Labour only want to play safe. I can respect David Cameron for his referendum strategy on Europe, which required quite a bit of courage. Labour are running from the fight.

And the Greens? They deserve respect: their literature (at least here in London) at least talks about what they would do in the European Parliament. They don’t talk about Britain in Europe, but about the sort of Europe they want. That is what these elections should be about. I am just less than convinced about their vision. For me it is too anti-business. Good intent is no substitute for knowhow. We should be pushing Europe towards an environmentally sustainable future – but we have to take the public with us. We have to challenge big business vested interests – but also allow big business to keep people in jobs, and provide that element of economic stability people crave. I don’t think the Greens have a clear idea of how to get that balance right.

Which leaves the Liberal Democrats. The Lib Dems are the most Europhile of the parties (though quite a few Europhiles inhabit the Labour Party and the Greens). This has one particular advantage: it means that they part in the European Parliament’s processes with more enthusiasm, and so are much more influential than they would be otherwise. Liberal Democrats have held some very influential positions (such as Sharon Bowles’s chairing of the Economic & Monetary Affairs Committee). In this work they do a good job of standing up for British interests – and can actually talk about their track record in the Parliament with pride. They have also shown a lot more courage in standing up for a pro EU position – unlike the Labour Party – and unlike the party has done in previous elections to the European Parliament. You may not think all of their pro EU arguments are convincing (though the same can be said of most of the anti EU arguments), but they have done the campaign a service by talking about it.

Right through the country’s history Britain, and England before it, has never been sure about the role it should take in Europe. There have been times when the country has successfully pursued a global agenda while retaining minimal involvement in European affairs, such as in the mid to later 18th and 19th Centuries. At other times the country has been a fully fledged player, such as Waterloo in 1815 and the First and Second World Wars in the 20th Century. Right now the country’s dependence on trade leaves it no option but to be heavily involved in its European connections, whether or not the country stays in the EU. I believe that means that the country’s leaders should try to shape the EU from within. Others feel that by leaving the EU, it will be easier for the country to find the best path in the world. If you share my view, then the Liberal Democrats are the party for you. If you don’t, then you might still consider voting for the party as highly effective operators in the parliament. Otherwise think of voting Conservative or Green. Don’t vote for Labour or Ukip, whose campaigns are taking British politics in entirely opposite but wrong directions.

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Brexit: an own goal for the Eurosceptics

brexit20winnerIt must have seemed like a good idea at the time. A while back a right-wing think tank, the Institute for Economic Affairs (IEA), launched a EUR 100,000 prize for a blueprint for Britain’s exit from the EU, the “Brexit”. The winner was announced last week, to not very much fanfare. You can read it here: Brexit Entry 170_final_bio_web. It is not surprising that our mainly Eurosceptic media have given it a low profile. It exposes flaws that go deep into heart of the Eurosceptic case. Better to stick with Nigel Farage’s meaningless soundbites. No doubt the Europhiles ignored it as its thesis is still Eurosceptic. That is a pity. This piece of work deserves to be taken seriously by both sides of the debate.

First, though: credit where it is due. This piece of work is a breath of fresh air compared to most of what comes out of both sides of the debate. It is calm, factual and objectively reasoned. It reflects well both on its author, 30-year old diplomat Iain Mansfield and the IEA. Bar one or two articles in The Economist, it is about the best reasoned thing I have read on Britain’s possible exit from the EU.

The essay answers the question of what would happen if Britain voted to leave the EU. It considers the various negotiations that would need to be made, and what these should aim to achieve. It has a stab at assessing what the economic consequences would be. Along the way it explains a lot of the facts that impinge on this (such as what is the difference between the EEA and EFTA?). This is a welcome change from the airy hopes and assertions usually made by Eurosceptics – and the equally airy scorn poured on them by Europhiles.

Its central idea is quite a sound one. Britain would not bring up the drawbridge and retreat into “Little England”, as no doubt some older Ukip supporters would like. The UK would establish itself as an open nation, promoting free trade. This reflects the economic liberalism of most modern Conservatives. They feel that membership of the EU gets in the way of the country promoting a economically liberal policy agenda.

There is one big gap in this work as a review of Britain’s options. There is no sense of industrial strategy. British business would flourish in a less regulated environment; we would trade more with emerging economies. That’s about it. Where are Britain’s comparative advantages? Which industrial sectors would we rely on – and how would these be promoted after Brexit? And the gorilla in the room: what happens to international wholesale financial services (aka the City) in the brave new world? It is easy to see both positives and negatives for the City – but how would these balance out? If there is one thing that makes other European nations exercised about Britain, it is the financial industry. Surely they wouldn’t hesitate to use a Brexit to make mischief?

There is also a quibble. He says that Britain should gain a net £10bn per annum in net contributions – though not straightaway. He says some of this will have to be spent on building capabilities that we have delegated to Brussels, such as trade negotiation and antitrust, but mostly it would be a gain. And yet he freely suggests the need for agricultural subsidies, and a host of inducements to entice in foreign direct investment (FDI). That £10bn is unlikely to last very long.

But that’s a detail. Three big problems stand out from this study. Has the British public signed up to economic liberalism and deregulation? Is the Brexit strategy trying to have its cake and eat it? And is it worth all that effort?

There is common belief on the right that Britons are a nation of freewheelers, and that the inveterate regulators in most other European countries are anathema. We are more like the Americans. Leaving aside whether Americans really are such freewheelers (you need a licence to be a hairdresser in many states), this is not well founded. Britons love to whinge about excessive regulation, to the extent that “Health & Safety” has negative connotations, but attempts at deregulation usually fail. Mr Mansfield wants a “Great Repeal Bill” to roll back and replace a host of product and labour regulations. That promises to be the mother of all political battles, and its outcome is bound to disappoint. Britons have as much affinity with Scandinavia as America – and you can’t move for regulations there, not least in Norway, which is not even in the EU. Indeed the sort of new Britain that many Tory Eurosceptics seek is a kind of right wing dystopia so far as most Britons are concerned.

More serious is the strategy for European trade that lies behind the Eurosceptic economic case. For all his thoughtful detail and realistic attitudes, this looks like a strategic flaw in Mr Mansfield’s strategy. The idea is that Britain gets free access to most European markets (he rightly suggests this would be unrealistic for agriculture, though); but that our industry will be more competitive because it can avoid large areas of regulation, especially for labour. And he takes this a step further, by suggesting that, with the help of some extra incentives like low tax rates, the country can retain its popularity as one of the top European countries for FDI – so that these incomers can export to the EU. This is known as having your cake and eating it. This strategy requires the cooperation of the county’s EU trading partners, who have a name for it: social dumping. And the fact that Britain imports more from Europe than it exports to it does not, in fact, give the country a strong negotiating position, as many Eurosceptics suggest. To his credit Mr Mansfield does not mention this last argument, and describes the British negotiating position as weak.

Which leads to the next problem. When you get into the detail of what has to be negotiated, Britain will end up giving concession after concession. Mr Mansfield suggests that half or even two thirds of the aquis communitaire (the body of EU laws and regulations) would have to be retained by Britain. The scope is massive. The overwhelming impression I get from reading this essay is the sheer size of what would have to be dealt with in a series of extremely tricky negotiations. All for what? Mr Mansfield estimates a range of impacts on the economy from -2.6% to +1.1%, with +0.1% as “most likely”. He observes that the case is more political than economic.

In only one area might the general public, as opposed to right-wing politicians, think that this might be worth it: ending the free movement of people, and especially labour. We would still need quite a free flow, but it would be easier to manage – and it would be easy to establish inferior rights for European immigrants. I suspect that the whole case for or against the EU will turn on this – and Europhiles badly need to sharpen up on the subject.

At the end Mr Mansfield refers to the examples of Canada and New Zealand as being successful countries in spite of being separate from nearby behemoths (the USA and Australia respectively). Interestingly another study on the benefits of EU membership, reviewed in this week’s Economist, uses a comparison with New Zealand to suggest that British incomes are 25% higher for having joined the EU in 1973. New Zealand’s economic record, in spite of (because of?) being a bit of test bed for economic liberalism, has been pretty underwhelming. It has recently being doing better courtesy of massive exports of agricultural products to China. Well New Zealand is a small country far away from anywhere – so comparing it with the UK is a stretch. But at least it has a decent export engine based on its natural resources (as does Canada with its mineral wealth). Britain’s oil is fading (and mostly Scottish anyway); it has been in agricultural deficit for a century; it is not an option to despoil swathes of countryside to dig out minerals for the Chinese market. We have the City, and lots of management consultants. Is this enough to build big export industry with the developing world?

In recent article, Vagueness is a danger for eurosceptic demagogues FT columnist Janan Ganesh pointed out that the Eurosceptic case tends to fall apart when Euroscpetics try to spell out exactly what they think exit it all means. Mr Mansfield’s interesting and refreshing essay cannot hide this truth.

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Why Labour are losing the election in 2015

According to press chatter, there is mounting worry amongst those that surround Ed Miliband, the leader of Britain’s Labour Party. I don’t know anybody in this elite circle, and I can’t offer an opinion on whether this is true. What I can say is that it should be. After ducking hard choices when the going was good, he is now in real trouble.

The immediate cause of the Labour wobble, if that is what it was, was the poll bounce for the Conservatives after the recent Budget by the Chancellor, George Osborne. The previously secure Labour lead simply vanished. This poll bounce disappeared as quickly as it came. Clever charts showing that it was part of a longer-term trend look premature. But it did show that Labour support is not solid, and that the Tories are not quite as terminally unpopular as many suggested.

But what really convinces me that Labour are in deep trouble is this exclusive piece in yesterday’s Independent, highlighting an article Mr Miliband had written for the paper. Here’s the first paragraph:

Ed Miliband has promised to rescue Britain’s struggling middle classes by boosting their living standards as he warns that the “cost-of-living crisis” will last for at least another five years.

This seems to be part of a bid by Mr Miliband to rebuild his electoral standing; today he is launching a policy about devolving more power to “super-City” regions, building on a policy developed by the Liberal Democrat leader Nick Clegg, as he will not say.

This political drive builds on two themes that Mr Miliband has been developing. The first is “the squeezed middle” – a deliberately vague reference to people who feel they are neither favoured by government handouts, nor part of the rich elite. It is interesting that this seems to have migrated to “the struggling middle classes”, when it might just as easily refer to working classes (if you get beyond the bureaucrats’ tendency to use the term “working class” to refer to people who are not working, and entitled to state support, as an alternative to the word “poor”). The second idea is “the cost of living crisis”, referring to the fact that for most people incomes have not increased as fast as prices over the course of the last government.

No doubt Labour’s polling shows that these ideas cover a large swathe of generally unhappy people, who might therefore be sceptical of the government’s record. The problem is how to appeal to them. Almost by definition, these people are out of the scope of state benefits. In fact they tend to resent the size of the state benefits bill, apart from the old age pension, whose cost they tend to underestimate. They are not employees of the state, a separate and distinct constituency, even if they share some of the same problems). So how to address their standard of living? There are two ways: tax cuts and a stronger private sector economy. On both counts Labour’s credibility is behind that of the Coalition.

The best sort of tax cut to reach the squeezed middle is a cut to personal allowances, i.e. the point at which people start to pay tax (including its National Insurance equivalent, something all parties seem happy to ignore). But the Coalition has already been increasing this quite aggressively, mainly at the expense of higher rate tax payers, some of whom are now claiming to be part of the squeezed middle too. Worse, it is one of the few policies that is closely identified by the public with the Liberal Democrat part of the coalition, which Labour is extremely keen to denigrate – they have picked up a lot of ex Lib Dem voters. They have floated the idea of a 10% tax band, which is just a less efficient way of delivering the same policy – and has uncomfortable echoes with one of the last Labour government’s policy mistakes.

There is an even bigger problem with taxes. Labour has to convince voters that it will not put taxes up to pay for an expanded state. That means signing up to a series of things, like a cap on benefits expenditure, that will be unpopular with core Labour voters, and not even particularly sensible from the point of view of economic management.

But tax cuts are a fairly minor palliative. What would really cheer voters up is the prospect of incomes rising in the private sector. The trouble is that Labour has done nothing to dispel its reputation for being anti-business. Quite the opposite. Mr Miliband’s view is that there are good businesses (“producers”) and bad ones (“predators”). Wages are being squeezed by the predators to benefit their top managers and shareholders. So his anti-business policies are directed at these predators (banks and energy companies to the fore), while helping the producers. This argument is not entirely without merit, but it is a tough sell. And in practice it is pretty much impossible to create policies that discriminate successfully between the two classes of business, and all those that inhabit the grey zones in between. The result is that Labour’s policies designed to address this problem, such as the devolution to the cities, don’t look as if they will deliver much of a boost to wages in the short term – even if they are perfectly sensible. And sensible policies are liable to get matched or pinched by the coalition parties anyway.

The Conservative counterattack to Labour will point to the fragility of the current economic recovery, and say “Don’t put all this at risk”. Of course one thing that could put the fragile recovery at risk is the Conservative plan for a referendum on the EU. But does Labour want to go out with all guns blazing on that issue? Perhaps I underestimate Mr Miliband, and that is his plan. But so far he is happy for Mr Clegg to take the lead on the issue. In fact you could not  inaccurately describe Labour’s emerging strategy as “I agree with Nick”. A liberal, centre-ground stance that wants more devolution from Westminster, but with a strong attachment to the EU.

So Labour is embarking on an impossible task to convince the electorate that it can out-do the coalition parties at their own policies. This won’t work. But what it will do is to de-motivate their core constituencies of public sector workers and the squeezed bottom, as I might call the voters suffering from benefits cuts.

The trouble is that Labour hoped to get the best of both worlds after Mr Miliband was elected. That they could adopt a “Blair-lite” strategy that allowed an appeal to the centre ground, while at the same time harnessing the wave of anger from their core voters at the government’s austerity policies, which, incidentally, allowed them to harvest a lot of Lib Dem voters. But Blair-lite lacked credibility as soon as the economy started to revive. There was a choice to be made for either Blair II, an unashamed dash for the middle ground, including an apology for the record of the last government’s economic policies (though that would have been too much for Mr Blair himself). Or they could have gone for unashamed social democracy, making a case for higher taxes, a bigger state, and less aggression on cutting the deficit (isn’t going for a balanced budget just willy-waving after all?).  The first of these two choices might well have destroyed the party, given the depth of anger over “The Cuts” – but the second choice was never properly debated or confronted. It would have been perfectly respectable and courageous – even if expanding the state back to the size it was in 2008, or even 2010, would have taken a very long time.

The Conservative General Election campaign has not got started yet. They will allow Ukip their moment of glory in this year’s Euro elections, then quietly mug their voters by stoking up fears of Labour. Labour’s credibility will fall apart, and they will have increasing trouble fending off Tory attacks and keeping their core supporters loyal.

If I was advising Ed Miliband, I would be worried.

 

 

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Us, them and Europe

Britain’s membership of the European Union used to command almost universal assent from the country’s intellectuals. Just how far this has changed was made clear to me by a recent BBC Point of View talk by the philosopher Roger Scruton. He concluded a thoughtful series of talks on the nature of democracy with what amounted to a diatribe against the European Union as an “unaccountable empire”. Mr Scruton is a serious man, and his criticism of the EU needs to taken seriously by supporters of Britain’s membership like me. .

The essence of Mr Scruton’s talks is that democracy is based on a series of institutions that allow opposition and argument. He criticises Egypt’s Muslim Brotherhood for claiming that its attempted imposition of a theocratic regime was democratic, when they were undermining the very institutions on which any democracy has to be based. Mr Scruton goes on to say that these institutions can only be sustained where a country has a sense of “us”, of identity that tolerates opposition with a sense of it being all in the family. But “there is no first person plural of which the European institutions are the expression”. He goes on to suggest that this because the EU is based on an international treaty that supersedes elected legislatures, and becomes incapable of being modified. He uses the EU’s free movement of peoples as his prime example, as many Britons are unhappy with so many people from other EU countries taking up residence here. He goes on to say that “democracies need boundaries, and boundaries need the nation state”, painting a picture of nation states coming together from a bottom up sense of togetherness and neighbourliness, shaped by shared language and culture – which the EU lacks.

I have two immediate reactions to this. Firstly I am very uncomfortable with the suggestion that our feeing of “us” and “them” are simply matters of historical and geographical fact that we should adapt to – and the all Britons are “us”, while Brussels bureaucrats are “them”. To me this has a rather scary overtone of the 19th Century idealisation of the nation state, based on language and culture. This movement led to the unification of Germany and Italy, and myriad calls for self-determination which led to the breakup of the Austro-Hungarian and Ottoman Empires. It helped usher in, from 1870 to 1945, 75 of the most disastrous years of war, conflict, forced migration and genocide in our continent’s history. Unscrupulous politicians played up on peoples’ sense of “us” against “them”, and tried to impose this on the continent’s tangled patchwork of languages, cultures and nationalities.

And if we think that Britain is exempt from all these continental complexities, I wonder if a Northern Irish person of Catholic heritage really thinks that government from Westminster is by “us” rather than “them”. And Scotland’s most successful political movement is based on the idea that Westminster is not “us”, and poses a threat to the country’s coherence. The first person plural is not a matter of received fact, but has to be built patiently out of liberal principle. And in the modern, highly interconnected world we must be inclusive. It is not as if Britain’s history is that of being an isolated island nation: we have been a hub of European and world politics; the country used by a the pinnacle of an empire that covered a quarter of the world’s surface, and for two millennia it been part of a highly interconnected European history. Britain is a trading nation and an international hub; we have to accept the responsibilities that go along with that or we will not appreciate its benefits.

As it happens, since being a teenager I have felt a strong affinity with the European project, and have ever since felt that the European institutions have been a political expression of my first person plural. And neither is it true that the European treaties have been fixed and unchanging; they have been subject to democratic pressures from below.

My second reflection is that the European Union is something of a lightning conductor of political discontent – and that removing it will not actually remove the discontent. When I look at technically fully independent countries like Australia, I don’t see places at are any more at peace with themselves and the world around them than we are. True, Australia has recently benefited from a good run of economic prosperity – but at the cost of big mining corporations running riot across the countryside (for people worried about wind turbines, just look at the open-cast mines marching across the Hunter Valley in New South Wales),and  who have such political clout that they are able to overturn tax proposals that they don’t like. And the politics of immigration are just as toxic.  Australia (and I could also use those other Anglo-Saxon bastions of New Zealand or Canada) finds itself at the mercy of an interconnected world, and it is by no means clear that they are better off outside an international federation like the EU. Britain’s problems would not go away, or become any more tractable, if it left the EU.

But having got all that off my chest, I have to admit that Mr Scruton has put his finger on a real problem, which is that EU institutions have lost popularity, and often seem beyond political accountability. His use of the free movement of people as an example is very telling. This idea lies at the beating heart of the European Union, but it creates a lot of tension. And unlike many supposed EU generated problems, like over-regulation, it’s for real. In Lincolnshire, where Mr Scruton was born and where support for the anti-EU Ukip is high, there have been real impacts from the influx of east European migrants in search of work. And yet freedom of movement has had real economic and personal benefits. And it is not just in Britain that anti-EU feeling, in large part directed at free migration, has been building up. This is all hobbling areas like energy policy where EU level action is increasingly warranted.

In the long run the answer is for Europe to develop a stronger sense of “us”. This may already be better developed than Mr Scruton allows, but it remains very patchy. I believe that there is enough of a sense of common values and history to provide a basis for this. One of the best ways for a Briton to feel European is to travel to a country like U.S. or, for slightly different reasons, Australia. But it needs to be promoted by liberal politicians, and is the work of generations.

A referendum on EU membership, the policy of our Prime Minister David Cameron, remains an enticing idea. The consequences of a “no” vote would be disastrous, but the pro-EU forces need to be rallied, and the institution’s legitimacy must be reaffirmed. I am also coming round to the idea of another of Mr Cameron’s ideas: a British Bill of Rights. This would mainly give a British label to core European principles, but it could also set clear British constitutional limits to European power, much as Germany’s Basic Law does.

But the bigger truth is that we must move on from the 19th century idea of an all-powerful sovereign nation state. We have to develop the legitimacy of multinational bodies like the EU; we also need to devolve power to more localised levels, especially in bigger states like Britain. This requires fresh thinking on the institutions of democracy. Roger Scruton is right to remind us that democracy is about more than voting, and requires a sense of common identity, but in the end he is not helping us to adapt the world where humanity now finds itself.

 

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