The Conservative and Labour parties are in trouble

After the general election of 2010, and the Liberal Democrats entering a coalition with the Conservatives, I remember the cognitive dissonance that overwhelmed the party. It was the centre of sustained media attention, for the first time in its history, and with all the trappings of being a significant political force, with MPs and cabinet ministers. But its support amongst the public had died. Many insiders talked themselves into thinking that voters would return in time for the next election, using swathes of statistical evidence from past elections. But the party was as good as finished and was nearly wiped out in the 2015 election. Something of the same dissonance is now being experienced by the Conservative and Labour parties. Opinion polls put each of them at only about 20% of the vote, alongside the new Brexit Party (TBP) and the Liberal Democrats returning from the dead. The duopoly which is so much party of both parties’ raison d’être is facing its most serious challenge ever.

This collapse in support of the two parties that have anchored Britain’s political system for getting on for 100 years follows a global trend, especially here in Europe. It has happened in France and Italy, and is in the process of happening in Germany and Spain, not to mention several other countries. But it is a shock to the British political establishment. The duopoly had its best election in 40 years in 2017, when they Ukip followed the Lib Dems into collapse and they collectively took more than 80% of the vote. They even managed a significant recovery in Scotland, where both had been crushed by the SNP. You could almost hear the sigh of relief, not just from those parties’ luminaries, but amongst the tribe of civil servants, think tankers and journalists who yearned for the old familiar ways of the two-party system. Britain seemed more like the United States or Australia than its “Continental” neighbours.

But in America the political parties are democratic, with processes of open primaries to select candidates, allowing new ideas and people to take hold in alignment with wider popular attitudes. Instead of being replaced, the Republicans and Democrats are being transformed away from the traditional conservative and labour based models to being modern reactionary-nationalist and liberal-green parties – like the parties that are doing well in Europe. The Labour Party flirted with a more democratic and open party structure in 2015, which resulted in the election of Jeremy Corbyn as leader. But it has quickly reverted to the closed, cadre-based organisation as the hard left sought to consolidate its hold on the party machinery. The Tories abandoned their brief flirtation with open primaries long before. Party activists, and to a lesser extent paid-up memberships guard their privileges assiduously. That is the European way. The Lib Dems similarly rejected the injection of democracy earlier this year, amid much scoffing by activists.

The immediate problem for both parties is easy enough to see: Brexit. This issue divides parties formed on traditional lines, but unites nationalist and liberal forces on opposite sides, with greens joining the latter. Whether the issue of the UK’s membership of the EU really should divide liberals, greens and nationalists like this is an interesting question. There are some good liberal and green arguments for being outside the EU. But both loathe the reactionary nationalists with their illiberal and anti-environmentalist beliefs, and this doubtless suppresses any reservations; the conversion of the Greens to EU membership is much more recent than many realise.

For the Tories the problem has been that they have quite reasonably sought a version of Brexit that achieves its main objectives with the minimum of disruption. But this has ignited the anger of the rising tide of nationalists in their ranks, who see this as a sell-out, and have thwarted its attempts to get legislation through. TBP then arose from the ashes of Ukip as a much more disciplined and coherent organisation, having learnt much from Donald Trump’s techniques, and a major threat from the nationalist right. This has tapped the zeitgeist of the party’s bedrock support better than its own party leaders. The European elections showed that TBP posed an existential threat to the Tories, and so both candidates for the party’s leadership are trying to take their party into TBP’s ground, especially with support for a no-deal Brexit. That angers their liberal supporters who are deserting the party for the Lib Dems. By dealing with one threat they are opening up another. This is likely to get worse if the party either delivers a no-deal Brexit, or, indeed, if it fails to deliver Brexit at all.

Conservatives clearly hope to win their liberal supporters back by frightening them with the prospect of Labour coming to power. The problem with that is that Labour support also is in free fall and the party no long poses such a credible threat. A key ingredient of the success of the duopoly is stoking up fear of the other party. But as Times columnist David Aaronovich recently wrote of prospective Tory leader Boris Johnson:

If anything “vote Boris to stop Corbyn” has less resonance than, say, “vote Lib Dem to stop both of them”.

David Aaronovich, The Times 3 July 2019

Labour have reached their sorry state because the leadership is understandably worried by the popularity of Brexit amongst their traditional white working class supporters, especially in many northern towns. They do not see Brexit as the defining issue of the times, but rather they say it is “austerity”, or the struggle of the less well-off against a system rigged against them. They hope to paint a messy Brexit as Tory incompetence and rally a backlash drawing in both supporters and opponents of Brexit. For a long time this looked like a clever strategy, but now it looks like a fatal weakness. As Britain approaches an autumn of political crisis, the party is without a coherent political message on the most important issue of the day. If the party had followed through on its democratic revolution of 2015, it would be leading the struggle to fight Brexit, and suffocating the Lib Dems and Greens in a journey towards being a modern liberal-green movement. To follow through on their strategy they needed the government to get its Brexit deal through parliament so that they could try to change the subject – but when it came to it they were too scared of a backlash from their anti-Brexit supporters.

Doubtless activists in both parties, like Lib Dems during the coalition, think that the ship will right itself by the time the next election comes. Labour supporters remember the surge in their party’s support in 2017. Tories think that Boris Johnson will puncture Nigel Farage’s TBP and generate a surge of support with his charismatic personality. A poll back in June suggested that just this might happen, albeit with a low poll share for the party.

But it is hard to see how events can unfold that will make these wishes come true. If the next election happens before this Autumn’s scheduled Brexit date, the Tories will be undermined by their support for a no-deal Brexit, and Labour will be undermined by their ambiguity on reversing Brexit. If the election happens afterwards, either after a no-deal or a failed Brexit, both parties risk being swept aside in the public backlash. And if a Brexit deal of some sort manages to be concluded, the process is likely to fatally fracture both parties – as a large number of Labour MPs will be required to get it over the line. The situation is becoming so unstable, however, that it is not impossible for one of the parties to still triumph – but this would require a quality of leadership that neither Boris Johnson (certain to be the Tory leader) nor Jeremy Corbyn possess. Strange times indeed.

The two party system takes a blow – but what about a general election?

It is a good moment to be a Liberal Democrat, after the party’s strong showing in last week’s local elections. The party were unequivocal winners, while both the the big parties fell back. After years of being ignored and told that the party was broken forever, it is good to be back.

But it is better than that. What the results show is that the party is rebuilding its grassroots strength, and with it a base in local government. This has been the party’s secret weapon, little understood by the Westminster chatterers – local government was how the party built its strength in the 1990s, before it became a significant parliamentary force in 1997. This is the result of hard work by activists working at local level across the country. It wasn’t just the Lib Dems. What surprised the political commentators even more than the success of the Lib Dems, which was as the upper end of expectations, was the relative success of the Greens and local independents. This too required grassroots activism.

Meanwhile the Conservatives, who had the most to lose this time, did very badly, losing over 1,300 seats, at the top end of expectations. The seats were last fought on a relative high for the party in 2015, so some loss was expected. They did worst in areas with a high Remain vote in 2016. What really surprised commentators was how Labour failed to capitalise on this. The party gained seats in some places, but lost in others, with a small net loss of seats overall. Nobody was expecting a spectacular performance, but if the Tories were doing very badly, they were expected to pick up some of the pieces. Unlike the Conservatives, Labour fared worse in high Leave supporting areas.

The retreat of the main parties comes as a surprise to many politicos. Two party politics had been in decline for since the 1980s, with the rise of first the Lib Dems (and their predecessor parties) and then Ukip. But in the 2017 general election both the Lib Dems and Ukip were crushed. This was a huge relief to both Conservatives and Labour, and to many Westminster journalists too. Two party politics seemed to them the natural way of being, and allowed most politicians to focus on their internal party jockeying, rather than having to talk to voters much. Life became much simpler.

But that collective sigh of relief was a huge mistake, as both major parties turned inwards. The Conservatives tore themselves up over Brexit. To be sure this was an important issue, but they assumed that whenever they went to the country they could rally the voters around an anti-Labour message, and get away with it. First they managed to upset their supporters who voted Remain, only to disappoint the Leavers by failing to agree on how to implement Brexit on the target date of 29 March. The indecision is worse than choosing the wrong strategy: now Remainers who had been persuaded to buckle down in the name of democracy are starting to question that logic, as so many Brexiteers try to move the goalposts towards something much more extreme than they advocated in 2016.

Labour, meanwhile tore itself up over an internal power struggle, as the left saw its chance to take a radical left wing programme to the country by consolidating their power within the party. If the Tories cared too much about Brexit, Labour did not care enough. They assumed that the Tories would make such a mess that they would clean up at the next election. That left them with little to say on the big issue of the day. Labour Brexiteers are annoyed at the party’s role in delaying Brexit; meanwhile the party is unable to pick up disillusioned Remainers from the Conservatives.

That meant a poor performance at these English locals for both big parties, which each picked up a 28% vote share, the lowest combined total for many years. There is likely to be an even worse performance at the forthcoming elections for the European parliament, though they should be able to shrug these off, as they have in the past.

The key question is how much this matters at a general election. The electoral system makes it hard for smaller parties to break through. Both the big parties have some reason to hope that it will be business as usual. That would be complacent.

Firstly neither party looks well placed to roll back the threat from the SNP in Scotland, which will be critical to Labour’s chances in particular, but also important to the Tories. Up to 50 seats may be unavailable. The Lib Dems will doubtless hope that they can get a dozen or more additional seats, with the Conservatives looking the most vulnerable. The Greens look stronger than they were, but can only mount a challenge in a handful of seats.

But the big unknown is how well two brand new parties will perform. The most significant is Nigel Farage’s Brexit Party. This has made an impressive start. It looks well organised and well funded. It is sure to do well at the European Parliament elections, which play to its strengths. It is mainly an air war election, and Mr Farage has no difficulty in getting the attention of mainstream media, much to the annoyance of other smaller parties, who are routinely ignored by the BBC among others. The party has also managed to distribute some centrally organised literature. It will doubtless try to make mischief on social media, a successful medium for populist parties not interested in proposing any constructive policy programme. But, though the party attracts interest and volunteers, it has no grassroots organisation. This is not one of Mr Farage’s strengths, and it is a vital ingredient to success at general elections. Mr Farage himself might be a successful spoiler candidate (he is rumoured to be mulling a challenge to Boris Johnson, widely thought to be the the most likely next Conservative leader), but the party may turn out to be no more than a nuisance.

The second new party is the former Independent Group, Change UK. This party appears weak organisationally, and it is unclear what it actually stands for. It is trying its hand at the Euro elections, but even if it does well there (which I am not expecting), it is hard to see where that will lead. Building a grassroots organisation is very hard work, and it is far from clear whether they are up for it. Cannibalising Lib Dem support, a strategy which many in the party clearly wanted to attempt, now looks a lot harder. There are plenty of places where the Lib Dems are weak, though. Will they try to do something there?

So things don’t look so bad for the big parties when it comes to parliamentary elections. But they do have a problem: Brexit. The country could continue to muddle on trying and failing to leave; it could leave with a deal, which will not be unlike the one the government has already negotiated; there could be a crash out with no deal; or there might be a further referendum which halts Brexit altogether, or else leads to exit with or without a deal. Each of these outcomes will cause major problems for both the Conservatives and Labour. Dramatic upsets can happen (for example the rise of the SNP in Scotland in 2015, or the election of Emmanuel Macron in France). It would be foolish to rule such an earthquake out.

What should the progressive smaller parties do? Some kind of an arrangement to stay out of each others’ way looks sensible for the Lib Dems, the Greens and Change UK, whether or not an electoral pact is feasible or desirable. Meanwhile, each of these three needs to think of ways that it can capture the imagination of a public that is fed up with politics as usual. If these parties could agree on a broad programme of political reform, radical action on the environment, and revitalising left-behind parts of the country, perhaps that would do the trick.

Jeremy Corbyn and Hobson’s Imperialism: why it scares me

The latest antisemitism row to engulf Labour concerns Jeremy Corbyn’s foreword to to a modern edition of the writer J A Hobson’s Imperialism: A Study, written in 1901. This is dividing Mr Corbyn’s critics and supporters in a familiar way. But its wider significance is what it reveals about the way Mr Corbyn, and many of his allies, view history and politics.

Before launching into this I need to clear the deck. First, this new edition was published in 2011, long before anybody, including himself, could have viewed Mr Corbyn as a potential Labour leader, whose words would be subject to widespread scrutiny. That makes it more revealing, but it doesn’t say how his understanding of antisemitism might have moved on since. Second: I have read neither Hobson’s book, nor Mr Corbyn’s foreword, which doesn’t seem to be available online (and I don’t have a Kindle). I am having to base my views on two sources: the original article from The Times‘s Daniel Finkelstein that kicked the current episode off. Second a short article by academic Mike Taylor on Hobson’s book in the Guardian, which doesn’t add anything to Mr Finkelstein’s article, but helps give me more assurance about its factual accuracy.

Hobson sought to show that 19th Century Imperialism was driven by financial interests, who succeeded in manipulating the politics of the time to support imperialist policies from which they made financial gain. He further went on to say, unusually for time, that imperialism was exploitative and did not represent an advance to human civilisation. The antisemitism arises because he thought that what I have termed “financial interests” was a predominantly Jewish elite with no fixed national reference point. He doesn’t quite say that it is the Jews in this book, but a couple of references, one to a “single and peculiar race” and another to the Rothschilds, are unmistakable, and other Hobson writings are explicit, not just about high-flying financiers, but also the Jewish working classes of London’s East End. This was a widespread view at the time.

It isn’t too hard to mount a defence of Mr Corbyn. It does appear that Hobson’s antisemitism is worn quite lightly in this particular work: the same two quotes are used again and again. The important bit is not this, but there were (and are) powerful commercial and financial interests controlled by international (and national) elites capable of influencing policy. They don’t have to be Jewish, and probably Mr Corbyn doesn’t think that aspect is very important. The rest of the analysis stands, and it is very striking. The interests of big business and finance was doubtless a factor in the development of imperialism, as they found home markets constricted and European or North American markets hostile to foreign competition. In those days big business was dominated by food, textiles, mining, steel, capital goods (ships and railways especially) and armaments. It is not hard to see how that could lead to imperialism. Furthermore Hobson was clearly ahead of his time in understanding just how destructive imperialism was.

So far, so good. But three criticisms are still valid, and show just how bad a choice Labour members made when selecting Mr Corbyn to be their leader. First is that antisemitism. It runs right through this work, and at the time it was written that would have been understood clearly. It is one aspect of left-wing antisemitism which went on to the persecution of Jews in the Soviet Union and then throughout Soviet-dominated Eastern Europe. Hobson’s work was known to be highly influential to Lenin and it formed part of the narrative that drove this particularly ugly side to the political left. It it clearly hasn’t disappeared; it is rampant and barely challenged outside the developed world, and clearly remains an issue in parts of the modern Labour Party. Mr Corbyn’s foreword to this book was an opportunity to say something about this but instead he said nothing. Through ignorance or bad judgement it clearly wasn’t important to him.

Second, for all its farsightedness, Hobson’s analysis is clearly deeply flawed. Imperialism suited many other people beyond big business leaders. Not least of these were the workers of the imperialist powers, for whom big business generated jobs and income. This was a time (i.e. especially after the 1850s) when living standards for workers advanced steadily and when what people would later call the social democratic consensus started to develop, notably through the work of German socialist politician Eduard Bernstein. This followed the insight that capitalists and workers had a common interest in the health of the industrial economy. How far can workers of the time be allowed to take responsibility for their own political decisions, (i.e. in this case backing imperialism), or are they always being manipulated? This is one of the great divides in the history of socialism, with Lenin and Hobson taking the latter view. If Mr Corbyn is in this camp, which I have suggested before, it means that his commitment to democracy only goes as far as it suits him.

As an aside I can’t help but repeat a couple of quotes from Hobson’s book:

Does anyone seriously suppose that a great war could be undertaken by any European state, or a great state loan subscribed, if the house of Rothschild and its connections set their face against it?

And in reference to great European finance houses:

There is not a war, a revolution, an anarchist assassination, or any other public shock, which is not gainful to these men; they are harpies who suck their gains from every new forced expenditure and every sudden disturbance of public credit

Anybody who knows anything of the detail of the causes of the Great War in 1914 will understand just how silly this is. The causes were complex, but the forces of international finance were not part of it: instead an overmighty military in the three great empires of Germany, Russia and Austria played a large role, without the restraint of strong political leadership. If anything the forces of finance were part of the cautious inertia of the establishment which came so close to preventing the war from occurring. With reason. The thirty years of destruction unleashed by that war destroyed most of the accumulated wealth in the developed world, along with many millions of lives. It wasn’t rootless internationalism that caused war, but an excess of its opposite.

The third criticism to make about Mr Corbyn’s foreword is what else he says, beyond praising its insight and prescience. According to Mr Finkelstein:

Since the Second World War, the Labour leader argues, “the big imperial force has been the United States on behalf of global capitalism and the biggest, mostly US-based corporations”. This has been supported by propaganda about “freedom”. This propaganda effort was designed to “accompany the military re-occupation [of Europe] under the guise of Nato. Thus the Cold War was followed by American media and cultural values, in an attempt to create an empire of the mind.”

He contrasts this attempt to subjugate people through the “malign influence of the CIA” and pliant governments with the influence of the Soviet Union. “The Soviet influence was always different and its allies often acted quite independently,” writes Mr Corbyn.

Daniel Finkelstein, 30 April 2019, The Times

This is exceptionally revealing. Of course the history of the Cold War is a lot murkier than the version our politicians fed us, and industrial interests played their role – though I would argue that these were at least as powerful and important in the Soviet bloc. But to argue that NATO amounts to a military occupation of Western Europe by US interests is plain silly. What popular uprisings did US-led fores put down? And how independent really were Soviet allies after their interventions in East Germany, Hungary and Czechoslovakia? And should we really see European people as helpless victims of the imposition of US culture, dictated by big US corporations (after their subjugation of their own people?). And did the Soviet authorities not try just as hard to manipulate people’s minds? Again we have the idea that ordinary people cannot be trusted because they are so easily manipulated by the rich.

It is no surprise that this leads to support for the Castro regime in Cuba and the Chavez/Maduro one in Venezuela. It is one thing to take a hard-headed view about the influence of US policy in the world, and to recognise its considerable dark side. It is another to indulge in fantasy. Socialists can be divided into roughly two sorts: the romantics who have faith in a bottom up movement of the masses (think Rosa Luxembourg) and the hard-headed sort who ruthlessly focus on control of power by a select elite (think Lenin or Xi Jinping). The former end up in failure, the latter in oppression. Mr Corbyn is trying to romanticise the ruthless strand of socialism, which is the worst of both worlds. It suggests that while he is not a ruthless operator himself, he is liable to be manipulated by those that are.

All of which leads to the question of what would happen if Jeremy Corbyn became British Prime Minister. It suggests that a government under his leadership would lack the competence to govern effectively, while turning on any British institutions when things go wrong. I think those British institutions are strong enough to survive, and that the Labour Party will eventually reject the hard-left narrative that Mr Corbyn represents. But what this country does not need after years of stasis arising from Brexit (whichever way it eventually goes), is another few years in a muddled and incompetent experiment with socialism.

The Brexit chaos offers Labour an opportunity

Most people who follow British politics are in despair, as neither government nor parliament are able to plot a way forward with sufficient backing to succeed. But perhaps the small band of advisers to Jeremy Corbyn, Labour’s leader, who famously think that Brexit is a subsidiary issue, are sensing opportunity.

When Mr Corbyn was elected as Labour leader in 2015, Conservatives were gleeful, foreseeing a generation of permanent Tory rule. But Brexit and a blinkered leader have undone them. In 2017 they threw away a massive poll lead and lost their parliamentary majority. In recent months they have retained a consistent poll lead over Labour. This is not enough to break the deadlock, but enough to keep Labour out. But that could change.

Consider the possible outcomes of the current impasse over Brexit. A strong possibility is that the country will crash out of the EU on 11 April without a deal. Neither government nor parliament wants this, but neither can they agree on a deal, nor do they have the courage to revoke the Article 50 withdrawal process altogether. So what are the likely consequences?

It is hard to know just how bad things will be in the event of a no-deal Brexit, as most commentators are either pumping up the dangers or dismissing them. But some of the more thoughtful Brexiteers, like Michael Gove, the Environment Secretary, are clearly rattled. Agricultural tariffs seem to be what is spooking him. Agriculture is not a major part of the economy by monetary value, but politicians the world over know that it packs a big political punch. There will be other problems, not all entirely attributable to Brexit, that will add to the misery. The British car industry is flat on its back. This is partly to do with Brexit, and the effect of planning blight on an industry that has to investment for years ahead. But also it is almost entirely foreign-owned and the underlying economics has changed to make repatriation of manufacturing to home countries more advantageous. A no-deal will accelerate its decline and the massive loss of prestige that will go with it. And there will be a hundred other smaller humiliations, that will be felt keenly by the better-educated and more worldly third of the population who never wanted it in the first place.

It gets worse. Britain will still have to deal with the EU and work out new agreements to allow a thousand things that we take for granted to keep going. This will not be easy as Brexiteers promise, and further humiliating climb-downs are in store. The only place where the hard Brexiteers may be proved right is Ireland. The Irish Republic is only now facing up to the consequences of its hard line on the Withdrawal Agreement and finds itself in a very sticky spot, just as the DUP and the Tory supporters predicted.

In the chaos Labour should be able to force a General Election, even if the government tries to struggle on. The Conservatives don’t have a majority, and have been struggling with a stream of defections. The DUP may well decide that the fun of propping it up is over and withdraw its support. The Tory position will be desperate. If Labour are able to launch their strike quickly, they may not even be able to change leader. In that event they stand no chance of presenting a coherent and convincing case to electors. More likely they will manage to find somebody new, but though he (or much less likely, she) might experience a honeymoon, there will not be enough time for them to get a strong grip on the organisation. Meanwhile Labour, and everybody else, will throw back at the Brexiteers that will then be in charge of the party, all their false prospectuses about Brexit and the no-deal.

What happens if Britain manages to avoid a no-deal? One scenario only gives the Tories a chance: if they are able to get Theresa May’s deal through parliament at the fourth attempt, and then leave in a relatively orderly fashion on 23 May. But to do that they will need a substantial block of Labour MPs, and if the Labour leadership resists, that surely will not happen. Ruling that out, what could happen is some sort of long stay of execution to renegotiate the deal and organise a General Election.

What does Labour do then? It needs to promise a new exit deal to be confirmed by a further referendum. To win, Labour must rally the Remain voters who will no longer be able to support the Tories: that means promising a referendum. But they also need to rally at least some Leave supporters. The importance of these to Labour has been exaggerated, but the party will still need all the votes it can get. But the leadership can still say that it is in favour of Brexit, and will campaign in favour of its new deal when that referendum comes. If that looks a little weak, the Tories will be struggling to come up with a coherent alternative. With decent execution (never a given in British politics after Tony Blair) this could be a winner for Labour.

But are still problems for them. The first is Scotland. Labour has always struggled to win without a substantial bank of Scottish seats. But they have been outflanked on Brexit there by the SNP, who remain organisationally strong. It is hard to see what killer arguments they can use against them.

A second problem for Labour is that it still lacks traction in rural and suburban England. Mr Blair conquered these areas by promising neoliberalism. Labour can’t do that this time. Also they are broadly pro Brexit, so any referendum promise will get in the way. Some form of “progressive” alliance with the Lib Dems, the Greens and even with TIG might help to unlock these seats. But Labour’s strategy for dealing with these parties is to crush them, not lend them a hand.

Which is related to the third problem: the Tories will try to change the subject, as Labour so successfully did in the last election. They will not talk about Brexit any more than they really have to. Instead they will paint Labour as loopy lefties, who can’t be trusted to run the nation’s finances, the forces of law and order, or to control the borders. Labour might think that the country is fed up with “austerity”, but the voters they need to win over think that being careful with public spending is a good thing.

That makes it hard for Labour, but not impossible. Their shadow chancellor, John McDonnell, understands the need for a disciplined message on economic management, and the party’s campaign managers surely realise that abstract ideas like austerity cut little ice compared to concrete messages on impacts of cuts to education and police funding, for example.

The Labour leadership is reaching its moment of truth. Their strategy of sticking to a narrow, leftist agenda (unlike Mr Blair’s broad centrist one) is inherently risky. But the Tories may be gifting them their chance. Will they be up to the task?

Economics for the Many – voices from the echo chamber

I promised you I would read and review Economics for the Many, a collection of essays edited by John McDonnell, Labour’s Shadow Chancellor. The purpose of the book is to show that Labour is not trying to reheat failed ideas from the past – but it is brimming with new ideas fit for the 21st Century. It doesn’t really succeed in that aim, but it does contain some interesting pointers.

My first idea was to review each article in about 200-300 words and produce a series of posts. That was how I started. But I quickly realised that this wasn’t going to work. Most of the 16 essays are pretty poor, and readers would have been subject to long tracts of rather sarky criticism. And not much of a thread would have emerged. As I waded through essay after essay, I was gaining more idea about Labour’s mythology, but little clarity on what they might do. Even when I could wholeheartedly agree with an essay, such as one supporting political devolution, something seemed missing. It was all too abstract; there should be a passion in ideas. And then, in Chapter 9, the book burst into life, with Democratic Ownership in the New Economy. I could even forgive the cringe-making comments about Jeremy Corbyn and Mr McDonnell, and claims of a  public uprising in the 2017 general election. It had passion, and pointed to practical examples of its ideas working. The central idea was local, grassroots-led action to develop local businesses based on local networks, using cooperatives, anchor institutions (like hospitals) and so on. The following essay, A New Urban Economic System: The UK and the US followed the same ideas and was less gushing but more convincing, again pointing to examples, including Preston in Lancashire. Both had a common thread: based on a think tank called the Democracy Collaborative that gets involved in real world projects, and which co-authored both articles. The book got a bit better after this, but the only essay to match this highlight was the last one: Rentier Capitalism and the Precariat: The Case for A commons Fund by Guy Standing.

This article had much the best overall narrative – developing the idea that capitalism had gone wrong, hoarding monopoly profits and creating a whole class (“the precariat”) of insecure jobs. This made a nice change from banging on about austerity (a Tory word, somebody has pointed out to me, suggesting frugality and discipline). It reads like a Marxist tract, but a good one, and much of it could in fact have been written by The Economist. Even if it was fact free and exaggerated it created a strong narrative based on things that are clearly actually happening. Mr  Standing recognises that Labour is not doing a good job of appealing to the precariat, which is either politically apathetic, or taken in by socially conservative populists. Then he develops the case for building a “Commons Fund”, which would pay a dividend, which would then develop into a universal basic income (UBI). This is the best constructed case I have read for this idea. It is interesting that it is the only place in the book where UBI, such a darling idea on the left, gets traction, and it is a very mild version of it. No hint here of it replacing welfare benefits.

Two other themes are worth mentioning. First is “financialisation”, which was the topic of two essays (by Costas Lapavitsas and Johnna Montgomerie). This awkward abstract noun is taking its place in the left’s lexicon. It covers a disparate variety of things, of which the most important is the expansion private debt. This is all part of the neoliberal villainy. The argument is that a lot of growth in the UK is built on private debt, and an influx of financial investment from abroad (typically in London property). This latter has created a high exchange rate which has helped hollow out productive business. There is clearly something in this. Where the essays break down is trying to work out what to do about it. If the process is to be reversed, and levels of private debt cut, then this will conversely be a drag on the economy. Unless it is simply replaced by public debt – but neither essay makes the case for that. The first essay gets the closest by advocating the creation of public sector institutions to take over lending. There may be something in this, but public sector banks have led to some of the biggest wastes of public resources around the world: the operating models are critical, and the essay says nothing about this. It just falls in with a general prejudice through the book that nationalised institutions are good.

Another theme is the development of online platforms, from Google and Amazon to Uber. This is clearly a worrying development,and it is very well described by Nick Srnicek, including the political difficulties of doing anything about it. A badly-written and excessively abstract article by Francesca Bria, who works for the city of Barcelona, takes this forward with the advocacy of more active management of data networks by city governments. This is something policymakers should talk more about. Some networks, such as Uber or Airbnb, could be replaced by locally managed cooperatives that retain profits locally without being less efficient – this dovetails with the Democracy Collaborative’s ideas. Others are global issues, but here initiatives like the EU’s GDPR can have an important impact.

What of the rest? Prem Sikka puts forwards ideas for improving the tax system. These aren’t particularly new, and I don’t actually think there is much low hanging fruit for extra tax revenues – but some of the perverse incentives of the system could be fixed. He advocates a version of unitary tax for multinationals, which I have favoured for a long time, but which the British political class has always shied a way from.  Ann Pettifor produced a disjointed essay with quite a lot of lazy rhetoric in it. Her main idea of a “Green Deal” might have a worthy objective but looks like an invitation to mismanagement. Barry Gardiner (Labour’s trade spokesman) advocates a middle way on trade policy between protectionism and a free for all, which promotes human rights and helps “vulnerable” economies. Good luck with that. Rob Calvert Jump delivers a flat essay on models of business ownership that people who remember the nationalised industry disasters of the 1970s and the successes of privatisations in the 1980s will be more than a little surprised at. He offers no thoughts on why privately owned companies might be a good ownership model in many contexts. Christopher Proctor has an essay on rethinking economics, with a clear explanation and critique of classical economics (puzzlingly referred to as “neoclassical”), but then fails to develop any ideas about how it is to be replaced, beyond a collection of unexplained initiatives which he says need more work. Ozlem Onaran expands on one these: feminist economics. Actually I don’t disagree with her idea that there should be more public spending on what she calls “social infrastructure”, but a lot her logic was unpersuasive – one suspects a lack of challenge in the development of her ideas.

So what to make of it? Labour’s critics will find their prejudices reinforced. There is no admission that Keynesian stimulus might not be appropriate in many contexts. Low productivity is always down to poor motivation, pay and social conditions, while process design and effective management don’t get mentioned. The concept of creative destruction is alien. Most of the ideas are about the state doing things from the centre, rather than empowering individuals and communities. There is little thought on how effective management can be encouraged and the abuse of power curtailed. Facts are few and far between, and silly factoids make their appearance (the £93bn of “corporate welfare” for example in Guy Standing’s). And all that rage against austerity and neoliberalism, when the politically uncommitted can see that there are some good aspects to both policies. The overwhelming impression is of ideas being developed in a leftist echo chamber without proper external challenge, for circualtion within that echo chamber. Still there is plenty of scope for liberals to share parts of the analysis and many of the solutions. Lib Dems passed something that looked very like Mr Standing’s Commons Fund at its last conference.

For me though, the most important and exciting essays were the Democracy Collaborative’s on building local networks to revive local and regional economies that have been hollowed out by modern economic policies. This involves a radical decentralisation of power and properly faces up to the challenge that modern economies face. If Labour’s leadership really do pick these ideas up and run with them, I’ll be impressed. There is clear scope for a coalition between socialists, greens and liberals here.

But I remain sceptical. Mr McDonnell’s big idea at the last conference was the expropriation of shares in public companies to put in employee trusts to pay dividends to workers up to a point. This has little to do with any of the ideas in this book and looks like a gimmick. But we should welcome much of the new thinking nevertheless. These ideas need to be brought out of the left’s echo chamber for the discipline of wider public debate.

Economics for the Many: Labour’s challenge to the orthodoxy part 1

In my last post I referred to a new book, Economics for the Many, a collection of essays edited by Labour’s Shadow Chancellor John McDonnell. I am very interested in any new thinking coming from the left because I spy the possibility of a coalition between liberals and socialists – whether inside Labour or between Labour and another party or parties – since the right  seem to have run out of ideas and started allying themselves with toxic nostalgists. So I bought the book. My first idea was to read it all and produce a single review article. No doubt I would have come up with something along the lines of this rather dismissive review by the FT’s Chris Giles. But the interest is likely to come from some of the details rather than the general thrust, so my plan is write a series of articles as I read it, a few chapters at a time. This is the first.

Introduction – John McDonnell

In my last post I was somewhat dismissive of Mr McDonnell as a Leninist more interested in candyfloss policies than promoting serious policy debate. Be that as it may, Mr McDonnell is keen to portray a picture of a ferment of new thinking on the left, which will produce a radical new orthodoxy, much as Margaret Thatcher ushered in 40 years ago. This collection of essays is part of the evidence, and his introduction sets out an overview..

As such it doesn’t tell us very much. Some of the familiar left wing narrative pops up. Those two abstract nouns, neoliberalism and austerity, play star roles as the villains. The first as a process of alienation of economic management from human values, the second being ideologically motivated cuts that have left tragic consequences. These let to the “social murder” of Grenfell Tower, for example.

But is it candyfloss? Is it designed to give the impression of intellectual movement just to provide cover for a power grab? I have two concerns. Are they coherent? And in particular, do they point to a radical decentralisation of power, or in fact the a Chinese style centralisation, guided by a political commissariat? And secondly, are they actually workable? Do they form a credible basis for reforms in our economic management?

1.    Democratising Economics in a Post-truth World – Antonia Jennings

This isn’t a promising start. The basic thesis is sound enough. There is widespread ignorance about economics, and bafflement at the way it is talked about. I think it is a bit worse than Antonia Jennings, a member of the political think tank/charity ecosystem, suggests. Many of that minority who think they have a strong grasp of the subject actually don’t. This allows politicians to build up myths not based on sound economics. The austerity policies of the 2010 government is, of course, used as the primary example. The Brexit campaign of 2016 is used as another.

Her solutions, though, don’t measure up to the task. She suggests a number of nice ideas: improve education at schools and universities, bring more women into the profession, change the way economics is presented. But these feel hopelessly inadequate.

The first problem is that economics rests on a number of insights that are profoundly counter-intuitive. One is that an economy as a whole has to be managed quite differently from a household budget – the idea of living within your means works out in a very different way. Another is the idea of comparative advantage – which means that trade should benefit everybody. Alas these ideas are not only counter-intuitive, they have layers of understanding, which even trained economists argue over. Many, for example, have not got beyond the basic idea of “trade is good” to understand how a changing world might affect the benefits of trade. This will take much more than a bit extra schooling and more user-friendly language to fix, surely?

The second is the sheer political imperative to frame an easily digestible narrative. Austerity illustrates this. There is a perfectly economically literate case to be made for this policy – many economically literate politicians and civil servants, amongst others, supported it. The government did not attempt to make that case in public because the level of political debate did not permit it. The counter-narrative from the left that austerity was unnecessary and therefore an ideological attack on public servants and poor people is just as illiterate, and framed from the same political necessity. In fact there is a very challenging debate to be had on the subject with well-made arguments on both sides. What is rather depressing about the whole episode is that so few people are or were interested in having that argument out. It is too politically important for that.

Political polarisation is no doubt a strong factor here. It is much more effective to shout down and demonise your opponent than start a reasoned debate. Labour is part of the problem, or, more generously, a victim. What is the answer? I am tempted to say that it is greater political pluralism based on electoral reform – though that has brought its own problems elsewhere in the world.

So yes to reforming the economics discipline. But expectations on the political impact of this need to be moderated. The problem is more deep-seated.

In fact I suspect this chapter is more about maintaining that sense of outrage at neoliberalism and austerity, with the suggestion that both are founded on economic ignorance. A rather bitter piece of candyfloss.

2.    Labour’s Fiscal Credibility Rule in Context – Simon Wren-Lewis

Simon Wren-Lewis is an academic macroeconomist, who has advised the Labour leadership on its economic policies. He writes lucidly and is perhaps an example of what Ms Jennings is looking for in clearer economic discourse. His topic is the Fiscal Credibility Rule (FCR), an operating principle for tax and spending policy that was adopted by the Labour leadership before the 2017 general election to show that it could be trusted with the government finances.

He starts with an elegant description of macroeconomic policy before the crash. He then moves into criticism of the 2010 coalition government’s austerity policy, which he says strangled economic growth. This story is central to Labour’s narrative, and you cannot expect a balanced discussion of this in a book like this, published on the party’s behalf. Mr Wren-Lewis, anyway, has taken sides, in an example of something that Ms Jennings might have commented on but didn’t: academic economists take sides in policy debates rather than trying to tease out the disputed issues and resolve them. I’m not sure how much this tendency is due to the politically charged nature of the discipline, and how much this goes on generally in academia. It is tempting to rise to the challenge, but this is the wrong place to do it. His is a perfectly respectable academic argument that I happen to disagree with. But it matters more in understanding the past than in working out what to do in the future.

The feature of the FCR that Mr Wren-Lewis thinks is most innovative is the idea that when interest rates are near zero, the government should use fiscal policy to help restore aggregate demand back to the point when interest rates start to rise again. The article then takes a rather puzzling turn. He talks about Modern Monetary Theory (MMT – SW-L shows a real weakness for TLAs). This is an idea that has growing currency on the left, which suggests that the regulation of demand should principally carried out by fiscal policy, and not the manipulation of interest rates by a central bank. If that is the case then the FCR is a bit of a miserable compromise. He leaves it unclear as what he really thinks.

Another interesting point is thrown in as an aside: Labour’s fiscal rule does not include borrowing for investment. This would be a radical departure for the British Treasury, who like to manage government borrowing as a whole, whether it is driven by investment or not. Many academic economists, such as Joe Stiglitz, a Nobel Laureate often quoted by writers on the left, think that this is critical. If you read their critique of the 2010 coalition government closely, you will see that they don’t particularly criticise the aspects of austerity that made Labour supporters most angry – benefit cuts and reductions to the government payroll – but focus on the slashing of investment. An interesting debate is glossed over here: if fiscal policy is to be the main instrument for managing the business cycle, what balance should be taken by capital spending, and what by revenue deficits? I can see arguments on both sides, but it isn’t talked about enough.

For what it is worth, I agree with the central premise of MMT (which Mr Wren-Lewis points out is old-fashioned Keynesianism) – which is that fiscal policy should take up a full role in managing the business cycle, relegating central banks to support. But that invites a whole series of difficult questions, of which the role of capital spending is just one. A more important one is how do you tell when the economy is overheating, and so fiscal policy should be tightened? Mr Wren-Lewis simply suggests inflation – but in the modern economy inflation is no longer a reliable signal: dangerous imbalances in the financial system can build up instead. And there is an even bigger question: MMT in its simplest form implies a massive concentration of political power at the centre. For Leninists that is a good thing; liberals worry that this simply leads to incompetence and corruption.

But Labour aren’t going there yet. The FCR is actually rather a modest proposal, and sensible enough as far as it goes. But there is a much bigger debate to be had about how to manage the macroeconomy.

 

So a rather disappointing start, but many of the more interesting chapters were always going to be later on.

 

 

 

Will Labour’s Leninists thwart its liberals? Electoral reform is the test

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The leader of the British Labour Party, Jeremy Corbyn, closed a successful party conference last Wednesday. The reshaping of the party in the last three years under his leadership is second only to Brexit in transforming the British political landscape, and may even come to overshadow it. This achievement stands in stark contrast to the fate of mainstream socialist and social democratic parties elsewhere in Europe. Mr Corbyn has repeatedly been underestimated by his critics, including me. And the conference seemed to put behind the party the bitter conflicts that arose during this transformation, in order to take on tired neoliberal orthodoxy that still dominates British government. Will it work?

The first challenge to this is whether the party can break through scepticism among the public at large, fuelled by unsympathetic coverage in the media, and stoked up by their Conservative opponents. A lot of wealthy people are worried by the thought of a Labour government, and so there will be plenty of money behind such schemes to derail the party. As the Brexit referendum campaign (to say nothing of Donald Trump in the US) shows, political campaigning is not restrained by thoughts of truth or fairness. But I want to consider a second challenge: which is whether Labour will actually come up with a convincing package of policies that will transform the country for the better, or whether hopeful signs will be stymied by Labour’s internal politics.

I was put in mind of this by an article in the Guardian by John Harris. He welcomes the radicalism of ideas coming out of the Labour movement, which include such liberal ideas as the decentralisation of power, including local government and worker cooperatives. I have ordered a recently published book, Economics for the Many, a series of essays edited by Labour shadow chancellor John McDonnell, to get a better understanding of this new thinking, and I will report back on that when I have read it. But Mr Harris is worried that this radicalism will by stymied by nostalgic conservatives that want to turn the clock back to the 1970s. There are plenty of these in the Labour movement (such as former deputy Prime Minister John Prescott), but I don’t think these are much of an organised threat. And neither are the centrists associated with the now dated New Labour project of the 1990s, still strong in the parliamentary party. Instead I see the key battle as being between two groups that I will call “liberals” and “Leninists”. These groups don’t self-identify as such; instead I am using my own labels, much as the left uses the term “neoliberal” for critics on the right, though I aim for more precision.

Firstly, it is worth remembering what unites these groups. They both want to make society economically fairer, with a better distribution of wealth and the eradication of poverty. There is no reason to doubt their honesty about this, but there is a fundamental divide as to how to go about it. The liberals have a deep-seated belief in democracy and persuasion, and a distrust of dictatorship; they also think that centralisation of power is part of the problem. They think that the party should develop a policy programme based on radical devolution through a process of internal consultation within the party, and then persuading the electorate as a whole. The detail and content of the policies are everything, and they want to engage as many people as possible in the debate.

For Leninists it is the seizure of power itself that is the key thing, first within the party, and then in the country. And once that power has been seized, they want as few restraints on executive power as possible, so that radical policies can be enacted from the top down. Centralised power is the solution, stupid, not the problem. Leninists don’t care much for the content of particular policies, beyond as a means to rally supporters. They are supremely pragmatic in their bid for power, forming alliances with liberals and others on the journey, only to ditch them when not required. The model, of course, is Vladimir Lenin in revolutionary Russia a century ago. His ruthless focus on power meant that he easily outlasted more romantic socialists, who expected power to emanate from the workers upwards. A more modern hero is Hugo Chavez of Venezuela, who accepted a democratic veneer only so far as necessary to keep his Bolivarian socialist project on the rails. Labour’s Leninists are not openly undemocratic, but they have some worrying heroes.

An example of what I mean is Mr McDonnell, the leading Leninist, and his suggestion that large companies put aside 10% of their shares for the benefit of workers. This sounds all very good and liberal, until you look at it a little more closely. In fact control of the shares would rest with central government; after that the details melt away. The party’s shadow business secretary, Rebecca Long Bailey, sometimes talked of as a future leader, was easily skewered by a BBC journalist when pressed to explain the policy on Radio 4 the morning after. The policy is candy floss: designed to give a sweet sensation on contact, but which quickly melts to nothing.

In this picture the Leninists are slowly consolidating their control over the party machinery. Mr Corbyn, while lacking the ruthless streak that characterises Leninists, seems happy to go along with this. By instinct, however, most Labour members are liberals. The Leninists need the liberals as allies, but they also want to stymie any policies that might dilute their hold on power. Am I imagining all this? Well it is a huge over-simplification, but it may have some value in predicting what happens next. Let’s consider how this dynamic might play out on a couple of defining issues.

The first is Brexit. The liberals hate Brexit and want to mobilise the party to stop it. They therefore threw their weight behind the idea of a new referendum, with the possibility of stopping the process. The Leninists don’t like this idea. They don’t care that much about the issue itself, though they instinctively bridle against the restraints that the EU places on member states, for example over state aid to businesses. But they worry that taking such a clear stand against Brexit will cut them off from a working class vote that would otherwise be quite easy to mobilise against the Conservatives. I personally have a great deal of sympathy with this position. Brexit exposed a fault line in British society and real political leadership will be needed to heal it. The Leninists successfully stopped a motion going to conference that explicitly commits Labour to a further referendum. But enough movement was made in that direction, especially with statements from the (liberal) Keir Starmer, for liberals to declare victory (take this remarkable piece from the Guardian’s Zoe Williams). That seems very naive, though Theresa May’s government may yet give them an opening if she persists in pushing her Chequers or bust strategy. The Leninists must find a working alternative to no-deal to fall back on, at least in principle – even if they think that no-deal would give them a political opportunity – or they are in danger of presenting the public with a choice between no-deal and no-Brexit, which is the liberal game plan.

The second issue is electoral reform: and in particular the greater use of proportional representation. This is popular with liberals, and stands well with their ideal of a pluralistic democracy – in place of the take-it-or-leave it politics of the current system, where political elites have too much say. But it is anathema to Leninists. Their political ideal is a one-party state (preferably because electors persistently back the party in a free choice, rather than actually banning the opposition). They like the idea of large, broad church political parties, united by a tribal hatred of each other. It offers them the best chance of seizing power. And they love control by elites, as long they are the elite. It’s not that Leninists are anti-democratic: they crave the affirmation that winning elections gives them: but they are inclined to see opponents as cheats, class enemies and fundamentally illegitimate. They will not be encouraged by the fate of traditional socialist parties in proportional systems elsewhere in Europe. If the Leninists hold sway, Labour will make no serious commitment to electoral reform. Somehow it will never work its way up the priority list.

In my view the Leninists hold the upper hand. And I think that is bad because their solutions, involving highly concentrated political power, are doomed to failure. They are trying to take a short cut to solve problems that can only be solved through a tough democratic process, with the substantial devolution of political power. Perhaps I will be proved wrong, and the Leninists will find the party turning against them, and the Labour Party adopting genuinely liberal policies. I will know that day has arrived when party adopts serious electoral reform, at least to local government, in their party platform. Don’t bet on it.

Labour’s antisemitism row – what are the messages for the wider world?

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I haven’t commented yet on the struggles of the British Labour Party with antisemitism. It is a battle between two tribes: Labour’s left and the mainstream Jewish community, and it is very hard for outsiders like me to make much sense of it. And yet it is an important issue and there are implications for us all.

Of the two tribes my sympathies are much more with the Jewish community. Their case was nicely put by Guardian columnist Jonathan Freedland. The Holocaust remains historically recent, and it followed a creeping growth in antisemitism in European and American society that was widely tolerated, just as some Jews worry is happening now. Sensitivity is understandable.

The hard left, from which the Labour leadership is now drawn, does not seem to understand that sensitivity. They can’t utter the word “antisemitism” without quickly adding “all forms of racism”. I am reminded of Tony Blair and Jack Straw, who couldn’t say “human rights” without tagging on the word “responsibilities”. The corrosiveness of that practice is easy to see – it suggested that even basic rights are conditional. The whole idea of the post war notion of human rights is that they are unconditional, and therefore harder for the powerful to undermine. But what’s wrong with the “and all forms of racism” tag when placed alongside “antisemitism”? One issue (to the ultra-sensitive) is that it suggests that those making the accusations of antisemitism may be themselves racist. It also suggests that there is nothing different or special about antisemitism to other forms of racism.

But that isn’t true on at least two counts. The first is that most racism in the developed world is directed by the politically strong against groups that are physically and culturally distinct. But Jewish people are present in all levels of society, including what Labour call “the few”, and many, if not most, Jews are highly assimilated into British society. Antisemitism thus depends on making distinctions that are even more arbitrary than other forms of racism, and the invention of conspiracy theories. Directing hatred against a group who are very much part of the mainstream is particularly insidious. It promotes the idea that institutions have been infiltrated and therefore cannot be trusted. And that encourages people to undermine those institutions, such as the rule of law, designed to protect the weak against the powerful. This may not make it worse than other forms of racism, but it makes it particularly difficult to fight.

The second difference is the state of Israel, a Jewish homeland that most mainstream Jews defend on some or other level. Much of the feeling on the hard left is based on a vehement hatred of that country. That has complex roots; it starts with anti-Americanism, and draws strength from pro-Palestine Arab and Muslim activists, who ally with the hard left, and who see no reason to hide their antisemitism. This has become part of the hard left counterculture, along with support for the socialist regimes in Venezuela and Cuba, and apologism for Russia.

It doesn’t help is that defenders of the Israeli government often charge critics with antisemitism unfairly. There is much that it is fair to criticise the Israeli government for, especially now that the current regime is happy to push on the boundaries of racism itself. This is at the heart of the recent controversy in the Labour Party, when the party adopted an internationally recognised definition of antisemitism, but could not accept some of the examples given in the protocol in relation to criticism of Israel. As Mr Freedland says, though, the problem isn’t in the precise detail of this, but in the lack of engagement with Jewish groups before they adopted the policy. Some kind of open discussion on how to criticise the Israeli government without tripping into antisemitism would have been wise. But openness is not something the hard left values.

What are the wider lessons? Firstly it shows a lack of political judgement on the part of the Labour leadership, and the party leader, Jeremy Corbyn, in particular. He likes to say that he is for dialogue with groups with unsavoury views (such as the IRA or Hamas) in the name of promoting peace. And yet he seems very selective in the sort of groups that he actually engages with, and it is very hard to see how the cause of peace is being helped. This does pose questions about his fitness to be Prime Minister.

The second wider issue is that the rest of us, who are neither Jews, nor of the hard left, need to redouble our guard against antisemitism. Jews are being made to feel uncomfortable in our midst. The hard left is only part of the problem; unfortunately many Muslims from Africa and the Middle East are importing antisemitism along with other racial stereotypes. They haven’t understood the implications. People from other minority racial and cultural groups should aspire to what Jewish people have achieved. But if antisemitism persists they will never be safe, even after they have achieved recognition and assimilation. So we must engage with all of society to help stamp out the conspiracy theories and prejudices that lie behind antisemitism, and in this way help the battle against Islamophobia and other insidious forms of racism that on the rise again.

And how do we react to Israel? With a great deal of care. My worry is that the current government of Israel is playing a dangerous game. It is supporting populist regimes in places like Hungary, and promoting an Islamophobic agenda.  Still, there are plenty of worse things going on in the world. Consider the Syrian civil war and the actions of Iran and Russia. Look at China’s oppression of the Uighur and other non-Han peoples in Xingjiang. And the attack on Rohingya people in Myanmar. And the threats against Israel from neighbours and elsewhere are real enough too. It isn’t hard to why many Jewish people feel that criticising Israel often tips over into antisemitism, even if I think that too many of them are too uncritical.

The deeper message is this: antisemitism is like the gas that kills the canary in a coal mine. It is a warning of worse to come. But fight it on the basis of tolerance and inclusion (and not on the basis of Jewish exceptionalism), and we will be fighting the whole evil of racism.

Do not underestimate the Labour Party

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Britain’s Labour Party is neck-and-neck with the Conservatives in opinion polls. Surely, many claim, this means that Labour are in trouble, and its leadership is woefully complacent? The Tories are in an utter mess, the argument goes, so if Labour aren’t streets ahead now they never will be. I’m not so sure.

The first part of that argument is surely correct. The Conservatives are caught in a conflict between Brexit fundamentalism and reality. Such conflicts, when you are the governing party, bode ill. Government pronouncements are almost comic. Today, for example, David Davis, the Brexit Secretary, raised the prospect of a Mad Max dystopia after Brexit, which we can happily avoid, he suggests, by staying in the EU in all but name. Well that’s how it sounds. But worse, Theresa May is a lacklustre leader, neither able to present an inspiring vision, nor to handle the everyday give and take of networking and negotiation the role requires. The party is shrinking, and it is failing to capture the interest of younger voters, by which I mean under-50s. Its chosen core support base is literally dying. The party is being hollowed out in a way reminiscent of the not dissimilar situation it faced in the mid-1990s under John Major.

But then a relaunched Labour Party under Tony Blair established a massive poll lead and then crushed the Conservatives in the election of 1997. So why isn’t today’s Labour Party doing much better than it is? It is reported that the Labour leadership feel confident that they can repeat their performance in last year’s election of a poll surge during the campaign itself. And yet surely the Tories will not run such a dire campaign? They may be running out of activists but they have no shortage of donors. A halfway decent manifesto should mobilise the oldies better, and in a second attempt they can surely create doubts about Labour under Jeremy Corbyn’s leadership. And the voting system is tilted in their favour.

What the Conservatives have to play with is Labour’s lurch to the left under Mr Corbyn, and the rapidly growing hold of his supporters, organised by the Momentum movement, over the party. This has awoken traditional fears of Labour – and this seems to be propping up the party’s poll rating, as well as motivating wealthy donors. In the 1990s Mr Blair tacked his party to the centre and wooed Tory backers. He left his opponents with no oxygen; how different is Labour’s strategy now.

But I have underestimated Labour’s leadership once (last year), and I don’t want to do it again. Labour retains some key strengths, and the Tories some concealed weaknesses. This will not guarantee Labour victory in the next election, but it will give them a base from which to make a serious challenge.

Labour’s first strength is that they are building a solid political coalition of core support. Last week I described an idea that I called “Brixton liberalism”, and how it gave me hope about the future of liberal values. Labour has a stranglehold on Brixton liberals, notwithstanding the party’s distinctly un-liberal instincts. They have seen off two challenges: from the Liberal Democrats, following the period of coalition in 2010 to 2015, and the Greens. The Lib Dems, my party, seem to have retreated to the professional middle classes; they are hoping to win liberal voters from Labour through anti-Brexit feeling. This shows no sign of making headway. The Greens have been almost completely crushed; Labour’s intent to maintain their stranglehold was recently shown by their airing of policies on animal welfare. They are presenting themselves as the Green Party by other means.

The Brixton liberal coalition comprises many younger professionals, especially those linked to the public sector, and the new working classes, who are often members of ethnic minorities. A common theme is that these people have been priced out of owning their own property, and have no prospect of secure social housing. It is particularly strong in London. To these can be added trade unionists, who see real hope of extending their influence, through job protection, nationalisation and subsidies for declining industries. How will Labour fare amongst traditional, white working classes, especially outside the cities? These are the Labour heartlands that Mrs May hoped to capture last year, and came closer than many credit to succeeding. But the Tory appeal to this group may have peaked. It is very conservative, and Mrs May was a good standard bearer for that type of conservatism – she might have succeeded if she had offered more to older voters. But her reputation for competence has taken a knock, and any successor is likely to a sharper, more liberal type who will be distrusted by working class voters. We can expect Labour to continue their studied ambiguity on Brexit and immigration, so as not to scare off this group.

The second thing going for Labour is that they are doing careful work on their policies. Their critics dismiss Labour’s policies as a throwback to the failed policies of the 1970s. Public ownership of utilities, the roll-back of public-private partnerships of all kinds, free university education, and so on all seem to play to that narrative. But Labour are quietly giving a modern gloss to these policies. They will argue that they developing new models of managing the public sector, and not going back to the bad old days. No doubt they plan to have it both ways – invoking nostalgia for the old days alongside enthusing newer voters. Besides, some of those old ideas don’t look that bad in hindsight: council housing for example. By contrast any new ideas the Conservatives come up with are likely to be more neoliberal fare that will themselves look dated. While South America shows that we should not write off neoliberalsim, it is only likely to make a comeback after voters have experienced a long period of badly implemented socialist policy.

And the third thing in Labour’s favour is the diminishing hold of traditional media, which have acted as the Conservatives’ attack dogs for generations. Last year’s election was something of a watershed there. Jeremy Corbyn was their dream target, but they could make no traction. Their current campaign that Mr Corbyn was a cold war spy show that they still haven’t got it. Who cares?

And the Conservatives hidden weakness? They are not preparing for the next election in the way that Labour is, or the way that David Cameron did before 2015. Last year’s snap election showed how important such preparation is. Mrs May turned out to be flying blind, without any of the usual preparatory groundwork. Two things are spoiling the outlook for the Conservatives. First is Brexit – it so hard to see how it will play out over the next few years, and therefore what message will work best for the government. Could it be a big anticlimax, defying the Remoaner critics? Could there even be some quick wins, allowing a pro-Brexit counterattack?Or will there be early victims, forcing the Tories to find appropriate scapegoats? And an even bigger problem is the leadership. Mrs May showed herself up as inept in national campaigning, and if anything she has deteriorated since. And yet her party dare not replace her, as each of her rivals shows even deeper flaws. If a new, more dynamic leader should emerge later in the parliament, as many Tories hope, he or she will not have long to pull together an effective campaign, which can take years.

And so if the Labour leadership look quietly confident, they have every right to be.

 

2018: Trouble is brewing between Germany and Italy and between China and the US

Prediction is a mug’s game; you are more likely to miss something important than demonstrate insight. And yet it is the only good way to put your insights to the test. Science may be mostly about gathering and reviewing evidence, but the true test of its worth is prediction. And so, in line with tradition for this time of year, I feel I must have a go.

When I started to think about it, my feelings about 2018 were anticlimactic. The British political deadlock will continue: there will be no election and no change of PM. The Brexit negotiations will somehow manage to put off the more difficult problems yet again, probably through a transition deal that will look very like staying in the Single Market. The investigation into the Trump’s campaign’s connections to Russia may snare members of his team but not the man himself; he will stay in office. The Democrats may take the House of Representatives, but they won’t manage to retake the Senate. And so on. Things will limp on much as they are now.

But none of that is very brave. It just guessable, keep-your-head-down fare that does not put my understanding of the world under any real stress. And yet proposing something more exciting is a matter of luck, especially if I am confining my predictions to a twelve month period. I need to look at things another way. Where do I see trouble brewing, even if the chances of something breaking in 2018 is less than 50%?

Let’s start with the world financial system. There is something unstable about it, even if it does not look as dangerous as it did in 2007 – it is more like the tech bubble of 2001. Asset prices look too high, largely because there is more saving than than the system is able or willing to convert into productive investment. This applies to the West, where too many assets are piling up in the hands of businesses and rich individuals, while many forms of investment are commercially unattractive to most people. And it applies to China, where there is something not right about the volume of money invested, especially through state owned businesses; a lot of useless assets don’t seem to have been written off.  But what will be the proximate cause of a financial crisis? A Chinese banking breakdown? Inflation breaking out in the US? A panic in the property markets? And when will the crisis strike? Personally I feel that government bonds are a better bet than other asset classes in the medium term, though that would not be the case if inflation got going. But that is more of a threat in America than it is in Europe or Japan.

And there is something not right with the capitalist system. Technology has changed the way it works, and our political systems have not caught up – rather like the mid 19th Century world in which Marx wrote Das Kapital. Most conventional economists really haven’t grasped this or it implications. The answer will be political change, but what? Without answers, political pressures will build up, and not just in the developed world. It is fashionable to suggest that liberal democracy is in danger, but the situation in the autocracies of China, Russia and Turkey, to name but three, don’t actually look any less tractable. But where will the political system crack? Governments have become better at repression. And there is no convincing alternative to sell. Yet.

What of Britain? The Conservatives look to be in deep disarray, but they have a lot of strengths – especially the widespread fear of the alternative, and the substantial funding that could unlock. We need to remember how close Theresa May came to a triumph, with the coherent ideology of Nick Timothy behind her – she might have destroyed Labour’s working class base. Their introversion did for them in the end. Can a new leadership revive their fortunes? I see similar strengths and weaknesses in Labour. Are they peddling new or old wine in their old bottles? I suspect more new than their critics give them credit for, which will make them a much stronger proposition. But there is an introversion too. The leadership is not sharing its thinking about what to do with this country; it just wants disparate people to project their hopes onto their vague pronouncements, so that they can gain power; only then might they share their real thinking with us. Meanwhile, the tensions within British society – the stagnation of the left-behind places, the squeezed funding for public services and benefits – will serve to increase frustration. Something spectacular could break the deadlock. But what and when?

And Europe? This looks like another deadlock. The populist xenophobes may have stalled a bit in 2017, but they are alive and well. It is striking that Poland’s ruling party remains very much in control, in spite of the fact that many Poles do not share their paranoia – their economic policies, which involve widespread cash handouts, are popular, and may not be as disastrous for the economy as many critics suggest. Economics is at the heart of politics – and politics is at the heart of economics. But the biggest threat to European stability comes from Italy, where elections are to be held in 2018. We might well get a strong pushback from that country against the way the Eurozone is run, at a time when German politics is being pushed in the direction of more conservatism on the Euro, and not putting Germany’s savings surplus to constructive work across the zone. That conflict could cause the system to break. But maybe the French can intermediate to give the Italians what they want while making the Germans feel they have won?

In America I see a strange mix of euphoria and anger. The tax reforms passed before Christmas were a big win for the Republicans, and it will give them real momentum. While the Administration, and the tax reforms, are generally unpopular, relentless propaganda from the many rich winners may baffle floating voters for a bit. That could be good for the Republicans in the congressional elections. It is a tall order for the Democrats to take either house, especially the Senate, where Republicans have plenty of opportunity to win back seats lost at Barack Obama’s high point. But the Administration’s malign neglect of the healthcare system could bite back.

Perhaps more significant for the world as a whole is the thought that China and the USA are on a collision course. Donald Trump is itching to start a trade war with China, to reverse what he sees as America being ripped off. China’s ambitions are increasingly global. At the moment the two have come to an uneasy accommodation, with North Korea a joint focus of attention. But this looks unsustainable; China will not stop North Korea from developing nuclear weapons, as only a military intervention of some kind will achieve that, and China surely does not have the appetite for that. But a trade war between China and the USA would be an attack on one of the central economic and political pillars of the early 21st Century world. It would be extremely destabilising economically and politically. China still needs exports to the US to sustain its economy; the US still requires to be bankrolled by Chinese money. This is surely the most likely source of a financial crisis.

And then there is the risk of war. North Korea is determined to develop a genuine nuclear threat to America, and this is a huge provocation. It’s not a happy situation when we seem to be relying on military men to provide the restraint on the President.

So to summarise: the two critical developments to watch are a clash between Germany and Italy over the economic management of the Eurozone, and a clash between the US and China over trade. Either or both could precipitate a global financial crisis resulting in a substantial reduction in asset values and the banking woes that would follow from that. I am cautiously optimistic that the problems of the first of these will be contained; I am not at all optimistic on the second.