Former Director of the Office of Trade and Manufacturing Policy Peter Navarro speaking with attendees at The Believers Summit at the Palm Beach County Convention Center in West Palm Beach, Florida in July 2024. Photo: Gage Skidmore, CC BY-SA 2.0 <https://creativecommons.org/licenses/by-sa/2.0>, via Wikimedia Commons
President Donald Trump plans a radical economic policy that ditches conventional macroeconomics. This week’s Economist refers to three strands of economic thought within the administration: conservative mainstream, America-firsters, and the tech tycoons. The conservative mainstream favours low taxes, deregulation and small government, but favours trade. America-firsters are hostile to international trade and immigration. Tech tycoons have a particular slant towards regulation of the tech industry, favouring some businesses but not, generally, the giants – and like some types of immigration. It is the America-firsters who present the biggest challenge to conventional economics – and lie at the heart of the way Mr Trump himself thinks, and it is likely to be the regime’s guiding philosophy.
Mr Trump himself has shown no grasp of economic thinking. But he is advised by people who are economically literate, and who do promote the America-first stance. Chief among these is Peter Navarro, who is close to Mr Trump. Last weekend the FT published an article about him by Gillian Tett, featuring an interview. I think it is important to understand the thinking of people I disagree with, so this article gave me the basis to try and understand America-first economics, which might also be called MAGA economics.
To get a flavour of Mr Navarro’s thinking, here are some quotes from him, drawn from Ms Tett’s article. Each paragraph is a separate quote:
Ricardo is dead!
America, the piggy bank, will continue to be plundered by a trade deficit that transfers more than half a trillion dollars of American wealth a year into foreign hands . . . [through] industrial espionage, rampant cheating, intellectual property theft, forced technology transfer, state capitalism and currency misalignments… It’s long past time for the ivory tower to reimagine and re-engineer its models of trade!
Net tariffs will lower the US trade deficit and thereby boost real GDP growth while slowing the transfer of US assets into foreign hands, thereby preserving US wealth.
As domestic investment and production increases and supply chains become more stable and resilient, real wages will rise, inflation will fall and our nation will be more secure.
Saying that Ricardo is dead is akin to saying that arithmetic is obsolete. Indeed some commentators think that many MAGA types, including Mr Trump himself, don’t have a grasp of arithmetic. David Ricardo’s theory of comparative advantage, a regular topic on my blog, is cold, hard and irrefutable logic – and there is plenty of evidence of its operation in the global economy. So what do people mean when they say it is “dead”? They mean that this theory has lost its power to guide policy. In the MAGA context I think there are two aspects to this. First is that the USA is a huge and diverse economy in its own right, and should be close to self-sufficient, with a huge variety of comparative advantage within its own borders. And, indeed, the country’s dependence on foreign trade is generally low compared to other developed economies.
But more attention is given to the fact that the US trades with a large deficit to the rest of the world – creating a current account deficit of 3.4% of GDP. This is one of the biggest deficits in the world (according to The Economist’s statistics only Greece and Egypt have larger ones amongst the economies they report on). And this is the focus of Mr Navarro’s second quote. In a well-ordered, one might say “fair”, economic system, deficits and surpluses should be small and temporary, except in situations where there is a strategic intention to transfer resources from one economy to another. A substantial and continuing imbalance, in the absence of such a strategic intent, is evidence of misalignment. Conventional economists talk in terms of currency valuation – but industrial espionage and the other unfair practices doubtless contribute – and there is evidence of all them in the case of China (running a surplus of 2.1%, not counting Hong Kong, which has a 12.2% surplus on its much smaller GDP).
The result of a current account deficit is that it must be funded by the supply of capital by foreigners, or by the running down of the nation’s own assets held abroad. In America’s case, this may be through direct investment in businesses or property on US soil, through to the purchase of US Treasury bonds, funding the US government. US ownership of US domestic assets is being steadily diminished. An aggressive policy of tariffs would encourage more businesses supplying US consumers to be based in the US. This would create more demand for US workers, and so raise their level of pay, as well as creating an economy less exposed to the vagaries of world events. That is the essence of the last two quotes, and it is surely the thinking at the heart of MAGA economics.
That logic has as many holes as a sieve. But the interesting thing is not to pull it apart, but to understand the broader philosophy that makes this weak logic sustainable. The clue is in the name “America First” or “Make America Great Again”. It is the horror at the idea that the US is losing relative ground to other economies, and especially China – and that this is being facilitated by a open approach to trade and investment that seems to say “Walk all over me”, or, in more Christian terms “Turn the other cheek”. Good quality American jobs have been disappearing abroad. A pandemic in China snarls up US supply chains. China is finding the wealth to build up huge armed forces which are pushing against US influence in the Far East and elsewhere. In this view economic policy is as much about political power and social stability as about economic efficiency and wealth. Tariffs policies may not be enough to sort out America’s trade deficit, for example, but they might if combined with other policies – and that is where the debate should be. Liberal economists want to make the world as a whole a better place, and are relaxed about other countries doing well, so long as this is not at anybody else’s expense – and most would argue that is the case for China’s rise, by and large. America gets cheaper products, and it’s easier to run a budget deficit allowing more public spending or lower taxes (because all that foreign funding enables it).
One interesting aspect of this idea of economic policy is that it is very similar to how the Chinese government sees things on its own behalf too. That is illustrated by another article in The Economist, showing how nervous China’s leadership is about Chinese firms investing abroad – with anxieties about exporting jobs and technical knowhow. This is in contrast to how America’s governments used to see things. India’s government has this tendency too. I think comes back to an earlier point of mine: big economies aren’t so dependent of foreign trade in the first place, and can think of being economically self-sufficient. Of the world’s large economies only the European Union (arguably not a single economy) has a liberal outlook to international trade. Smaller countries, like Britain, can’t afford such an outlook – which is making the world a more difficult place now that America is retreating from those ideals.
Happy New Year to my readers! These few days are thick with journalists making predictions for the year ahead. This is probably a good discipline for them – and even better if they revisit them at the end of the year to see how they did. But it makes less attractive reading, and I don’t tend to do it myself. Mostly the fare is gloomy stuff. But one group abounds with optimism: the political populists, and supporters of Donald Trump in particular. I want to reflect on that.
As usual my starting point is Matt Goodwin. I rarely read more than a couple of paragraphs of his Substack – and since I’m not a paid subscriber that is often all I’m offered. The writing is high on rant and low on content. It’s only good reading if you want to be wound up, one way or the other. His New Year post offered a note of optimism: “things are moving our way” he said, with the hated “elites” getting their comeuppance. The main driver for this was that he anticipated that the Trump administration would prove that radical-right solutions would work, contrary to the heaps of scepticism from the liberal elite. And this success would strengthen the growing populist movements around the world.
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This rather captures the zeitgeist of populists. Extreme pessimism about how the world is going to hell in a handcart is combined with excessive optimism about what their favoured leaders and policies can achieve. Optimism from Trump supporters, and corresponding pessimism from their liberal critics, is currently rampant. It is behind the strong performance of US shares (I have just dumped the two funds most exposed to this effect in my pension pot – but the profits have been welcome). The idea behind this is that tax cuts and deregulation will drive up corporate profits, while tariffs are either a negotiating bluff or will favour big American companies.
There are two big problems with this outlook. The first is that the politics is much trickier than most people seem to realise. The second is that the policies won’t work either. Consider the politics. In spite of Mr Goodwin describing Mr Trump’s victory as a “landslide”, it was actually very close. He secured slightly under half the popular vote, with a margin of about 1.5% over Kamala Harris. This is a big victory by recent Republican standards, and gave him a comfortable majority in the electoral college, but hardly overwhelming. More to the point, the Republican majorities in both houses of Congress are very tight; it even shrank in the House of Representatives. This will not make getting controversial legislation through easy – and especially from an administration whose political negotiating skills are pretty weak (especially compared to Joe Biden, the outgoing president). Some aspects of Mr Trump’s policy don’t require congressional approval – but the tax cuts, such a central part of the business optimism for Trump, do require this. It will be more than hard going. The response of many liberal commentators is “pass the popcorn” as they seek to get some entertainment from the Republican infighting. Meanwhile the flurry of executive orders will doubtless be subject to a blizzard of legal challenges. That is the American way.
And the policies themselves are bound to disappoint. Mr Goodwin confidently expects mass deportations to take place rapidly, as promised by Mr Trump. This will be much harder and slower going than he expects, and will have adverse short-term economic consequences, as it will throw uncertainty into the labour market. Tariffs cannot possibly meet the expectations placed on them by the policy’s supporters. And so it goes on. There is no great pool of untapped economic potential waiting to be unleashed (as there was in the 1930s, say). Just how the economy will play out is very uncertain, however, largely because the politics is so difficult that it is hard to predict which policies will be enacted and when. A common view, which I have put forward myself, is that tax cuts and tariffs will drive inflation up. An alternative is that the economy stagnates as these policies fail to get started, and uncertainty undermines investment.
The Trump administration may achieve some good things. There is bound to be a lot of nonsense going on in the current regime. Funnily enough, I think the prospects for Mr Trump’s foreign policy are better than for domestic policy. His highly transactional approach is easy to grasp, and accords with how many foreign governments like to do business. I am really hoping he can force a peace in Ukraine that does not neutralise that country. Mr Biden seems to have run out of ideas (incidentally it is entirely possible that a President Harris would have accomplished a peace settlement too). My hopes for the Middle East are weaker – it looks as if Mr Trump will give Israel free rein. But that is pretty much what Mr Biden was doing. There is talk of a deal on Iran, but I’m not sure if the leaders of that country have enough to offer to make any deal look good. The Trump administration may simply play a long game for regime change. In the longer term my main fear is that the muddle and confusion of Trump’s Taiwan policy will encourage China to launch a military attack while the window of opportunity persists.
Overall, though, I see that the populist movement be disappointed, and the politics among Republicans will turn toxic. This will take some wind out of the sails for populists elsewhere. But the long term drivers of populism remain. Demographics and the changed working of the global economy are forcing difficult choices on governments, on tax, on spending and on immigration policy. The public as yet shows no sign of facing up to these difficulties – so the populist message that this is all the fault of an out-of-touch elite still has potential. The floundering of Britain’s new Labour government; the political impasse in France; and the prospect of something similar in Germany – these all show that the mainstream political parties have no answers either.
Something has to give. As yet I don’t have a feel for what this will be. But populists don’t have any workable answers and populist-led governments are likely to fail. Or if they don’t fail, it will be because they will adapt to reality and manage to sell it to the public and reduce their expectations to something more realistic. Some governments might succeed (Georgia Meloni; perhaps even Marine Le Pen); but not Donald Trump.
I started my blog, thinking liberal.co.uk, in 2011, when political blogs were quite popular. I used Facebook and Twitter to find interested readers. That was quite popular then. My blog had quite a reasonable impact – people mentioned it to me at party conferences. I interacted with people on both Facebook and Twitter. That was a brief moment of glory – it has since faded into something followed by a few friends and a small band of others whom I have picked up on the way. I don’t know how many, as the statistics seem to be dominated by bots and fakes; even the rather limited mailing list seems to have quite a few dodgy items.
Facebook and Twitter are now well down the path of enshittification, a process first described by Cory Doctorow in 2022. An online service starts by favouring the interests of customers and people to the point of lunacy: everything is free and under your control. Gradually the process of monetisation takes over until customers (and staff) are left with a very weak product, but little alternative because these have been squashed through network effects. Facebook made it harder and harder to use for the distribution of political thought. It was attracting too much controversy (mainly because of its use to promote conspiracy theories and fake news), and the simplest solution was to block all of it, not just the bad stuff. My feed is now full of things I never asked for, driven by sponsorship or an algorithm. Posts from a few friends show up from time to time (to which I need to respond if I am to have any chance of seeing them regularly) – but blink and you miss it. The feed refreshes and the post vanishes. You can find things by searching for the poster, but it’s hard work. For a while I could mitigate some of the problems by creating a Facebook page for my blog, which if people “liked”, they were much more likely to pick up posts on their feed. When I most recently visited this page, however, I was shocked. It was full of junk content put there by algorithm. I had expected to see a sequence of the posts I had made. It has been completely enshittified. To make it work I would need to buy promotion.
Twitter, meanwhile, made it harder for me to post links to my blog long before Elon Musk decided to trash it. Tools that allowed an automatic post ceased to work. I have long since ceased to post, though my account still exists, as some of the notifications are interesting, though even this has tailed off.
Then along came Substack – a blog distribution system. This has proved very popular amongst political bloggers, and so I thought I would give it a try. I’m not entirely sure how it works, or how far along the path of enshittification it has travelled – though the journey has clearly started. One particular feature, though, I will not use: paid subscriptions. I write the blog for my personal pleasure, and because I find that writing helps clarify thought. It is irregular, and I have long since abandoned any idea that it can be seriously influential. I don’t need the money. I suspect that subscriptions are an important part of the Substack business model, though, so this may not be sustainable in the long term. We’ll see.
My plan is to publish all my future posts here. The WordPress website will keep going – this at least is pretty much under my control, and acts as a record of my writing. Email subscription there seems to be costless and easy, so I will keep going with it; Substack will simply been an alternative channel. I may drop the Facebook page – though it does seem to be pretty costless to keep going. I will also keep posting on my main Facebook feed, as I know a few of my friends are picking it up. I will probably stop the silly AI pictures (unless people say they like them). I put these on to improve the chances of the Facebook algorithms favouring them – and to avoid the copyright issues arising from using real pictures.
So let’s see what happens!
You should be able to find my Substack page and subscribe here.
Copilot again. This is too optimistic for the current state of the SNP, but climbing a high mountain in shorts may be an apt metaphor
The last in my post-election survey of Britain’s main political parties concludes with the Scottish National Party. Alongside the Conservatives, it was a big loser in the general election, being reduced from 48 seats to just 9. But they still control the Scottish parliament, with no election until 2026. They are down but definitely not out. But they will need to do some should searching if they are not to sink back further.
Firstly, though, I must offer a health warning. I am not Scottish, and I have few political contacts north of the border. I am not plugged into politics there in the way that I am in England. So this is very much an outsider’s view. Still outsiders’ views can have value – and Scottish politics does impact English politics through our shared nation.
The SNP’s fall over the last two years has been dramatic. Until 2023, the party was sweeping all before it in Scotland. Nicola Sturgeon, its leader, was one of the most experienced in British politics, and presented a calm, reasonable face to the party – she was a gifted political communicator. And yet behind this calm exterior, all was clearly not well. The performance of the Scottish government under SNP control was lacklustre, on such basic issues as health, education and law and order (Glasgow having an astonishingly bad record on drugs). Ms Sturgeon presented a much more credible public face during the covid pandemic than England’s Boris Johnson – but Scotland’s results were no better. The SNP seemed too interested in politics and not enough in administration. It preferred to stay close with interest groups, rather than undertake tough reforms – apart from a botched reform of Scotland’s police. The reforms that there were centralised power to the Edinburgh government. Its Green coalition partners proved highly ideological and spent little effort engaging with the public. The Scottish government then took on a reform of gender recognition laws that was aligned with the leftwing-liberal consensus, but poorly aligned with general public opinion. This was heavily promoted by the Greens, but actually drew support from across the political spectrum. Public protests and celebrity opposition (notably from Scottish author J.K. Rowling) seemed to take the Edinburgh elite by surprise. When the UK government (led by the very unpopular and chaotic conservatives) blocked the law, it won rare approval north of the border. Meanwhile the party’s goal of Scottish independence remained a long way off, as the UK government refused a second referendum.
And then the incestuous goings on in the SNP’s internal management were exposed in a police investigation into possible misuse of funds. Ms Sturgeon retired as leader just before the storm broke. The alleged abuse (using funds donated to support an independence referendum for general electioneering) was not necessarily all that serious – and its illegality has yet to be resolved. But the scandal exposed very unhealthy governance. The party’s reputation was in tatters, not helped by the selection of a hapless new leader, Hamza Youssef , who seemed to expose the party’s lack of depth in talent. Was this party really capable of running an independent country? And that led on to the collapse in SNP vote and representation in the UK parliament. Labour surged in Scotland.
But all is not lost. The goings on at the SNP have not had much impact on support for Scottish independence, which runs at about 40%. This is not enough to win a referendum, but it is weighted towards younger voters, promising a majority in future. And the SNP has no serious rival in its leadership of the independence movement. The attempt by former leader (the late) Alec Salmond to establish a rival party was a dismal failure. Meanwhile Labour’s hapless start in government has wounded its main rival for votes north of the border, while the Conservatives remain weak, and Reform UK lacks the punch it has in England or Wales.
But the party must pose deep questions to itself. Politics has changed. The Scottish political elite has converged around a social democratic consensus. A big inspiration seems to have been the social democratic governments in Scandinavia – countries which, after all, are comparable in size to Scotland. While social democrats have been in retreat in England (and Wales), they assumed Scotland was different. The country produced a Remain majority in the EU referendum after all. But the whole world is moving against the social democratic – liberal – left consensus, including in Scandinavia. Immigration has become a top political issue. Gender-critical views, rejecting the extremes represented by Scotland’s self-identification laws, are mainstream. People are becoming wary of minority identity politics. A rising dependency ratio means that people question state benefits. Tax rises are resisted. Scotland can no more escape these trends than Scandinavia, where populist parties have been doing well. And more conservative views within the SNP, represented by leadership challenger Kate Forbes, are becoming more visible. Indeed Ms Forbes is clearly the most dynamic of the party’s senior politicians.
The question for the SNP is how far it follows these trends, and adopts Ireland as its model rather than Denmark or Sweden. Low taxes and a weaker welfare state are core to politics there. So far it has managed to scoop up the anti-establishment vote, by virtue of its support for independence, alongside more mainstream supporters. This could easily fray, with the Conservatives and/or Reform picking up support.
The current leader, John Swinney, is one of the party’s elders, and looks like a stopgap before the party takes its next bold steps. He will doubtless try to pick up disillusioned Labour voters while ignoring the conservative threat. I don’t think this will work, although it could lead to a messy result at the next Scottish election, whereby no majority can be formed without either the SNP or the conservatives.
The SNP would surely be better off if Mr Swinney stepped back, and let Ms Forbes take the reins. The left is in retreat, and the SNP needs to recognise that.
The human brain seems hard-wired to pessimism – often called realism. There is indeed much to gloomy or worried about at the moment. Quite a bit of it is talked up here: don’t get me started on the subject of economic growth! But it is always helpful to challenge oneself, and in this season of good cheer, I thought I would give it a go. So here are five things that give me hope.
1. Solar Power
Solar panels are a truly transformative technology, in ways that we are only slowly starting to appreciate. It is a distributed technology, which requires little infrastructure of itself (though of course to transport its output large distances does require substantial investment). It doesn’t require much maintenance once installed, as there are few moving parts. It reduces marginal costs of energy to very little. And advances in battery technology make its one major drawback – that it only produces when there is sunlight – much more manageable. It is an economic proposition that fossils fuels are finding it harder and harder to compete with. Thanks to these technologies China is already ahead of its decarbonisation goals. It is indeed thanks to China that the technological advance has been so swift. It is the underlying economics of solar power that makes decarbonisation a feasible proposition, and one that is developing its own momentum. Wind power has some of the same features, but many more difficulties. We should not be placing tariffs on Chinese exports of solar panels or batteries, but saying “thank you very much” and importing all that they can produce. Domestic production will catch up in time.
2. The bad guys can’t deliver
Our modern era is sometimes compared to the 1920s and 1930s, which saw the rise of the Nazis, Fascists and Stalinism. The rise of the far-right today is often compared to these movements. But the context is very different. Then there was much unused economic potential, thanks to misguided (as we now see it) conservative economic policies, and industrial technology that provided a ready and highly productive use for relatively unskilled labour – and much untapped demand for that technology’s output. Fascist regimes could readily produce dramatic economic results by unleashing infrastructure investment programmes – and even by building up armed forces. This would come to be called “Keynesian economics”. The results gave these regimes popular legitimacy. This was especially dramatic in Germany and helped Naziism to become an embedded ideology. No such opportunity exists in the 2020s. Advanced technology does not produce lots of new jobs – or not of the right sort. Labour markets are already quite tight, so that expansionary fiscal policies, and excessive military spending, produces inflation, and not lower unemployment. Instead, the policies of today’s near-fascists result in cronyism, corruption, inflation and general underperformance. That undermines their legitimacy.
Playing for the biggest fall is Vladimir Putin’s Russia, however much he manages to achieve in Ukraine. Russia has a massive demographic problem, with a very low birth rate. The war is making that much worse. Mr Putin’s obsession with pollical control is resulting in cronyism and the suppression of initiative: this is not good for economic efficiency – while sanctions arising from the war reduce Russia’s options. Instead, Russia is heavily dependent on hydrocarbons. See 1. above. Events in Syria show how quickly an excessively tyrannical regime can crumble – and shares elements with the fall of the Soviet regime.
I hesitate to call China evil in the same way as Russia. Its leadership is much more able, and recognises the need to keep corruption in check and for economic efficiency. It has some impressive achievements to its name (see 1. above). But it remains an imperialist power, and actively tries to undermine the West. It too has a demographic problem, and it is finding that an obsession with political control comes with increasing costs. It does not present a shining alternative to western ways, as it once thought it did.
3. Information technology
I am thoroughly sick of the hyping of artificial intelligence (AI), and the way it is crowbarred into any topic you care to name. But it is part of an astonishing development of information technology that will transform our lives in ways that we barely understand. I don’t think it translates into increased productivity in the smooth way that some talk of. As with most technologies it will have to change the way we work and think about things before it will have a real impact. But it should improve economic efficiency and human wellbeing in the longer run. My hope is that it will make some of the public service challenges developed countries face more tractable, reducing the pressure on government finances.
4. The developing world
A lot of the progress made by the developed world in the later part of the 20th Century and the first years of the 21st comes down to the opportunities provided by less developed countries in East Asia. As these countries developed their economies, they presented trading opportunities and gains from trade with the developed world. This has run its course, and has actually gone into reverse, as East Asian economies converge with developed world ones (and in some cases have joined that developed world), reducing trade gains (a process which, of course, has been enormously beneficial to those East Asian economies). This has been a regular hobby horse of mine as this piece of basic economics is so widely under-appreciated, even by economists who should know better. And yet there remain two large areas of the less developed world which have yet to advance properly: South Asia (notably India) and Africa. Might not the development of these economies provide further opportunities for mutual benefit?
This is far from straightforward. The East Asian model saw the transfer of workers from subsistence agriculture to manufacturing industry, mass producing consumer products for export, in exchange for a different suite of products and services from the developed world. That model is surely done. Manufacturing technology is so advanced that there are too few jobs at stake, and the developed world’s appetite for “stuff” is surely approaching saturation – although we should remember that potential markets include those East Asian economies, including China, too. To advance, the South Asian and African economies must move the workforce out of agriculture. India has made important strides, but has yet to seriously tackle agricultural reform. But what should surplus agricultural workers do? Here I’m struggling a bit, but I’m sure that 1. and 3. above are part of the solution. It may be that their development will be less dependent on exports. At the moment, their biggest economic impact arises from the export of labour though emigration, affecting Europe and the Middle East in particular (also America, where immigrants also come from Latin America – which is less of a development opportunity). This has mutual benefits but the stresses in host countries are showing, and this is not sustainable in the longer term.
Of course this effort must be led by the developing countries themselves, and not as part of a paternalist relationship with the developed world – as the East Asian progress owed little to the West except in the cold, hard mutual benefits of trade. There is a lot of baggage here but it is in the developed countries’ interests if they are to take their people out of poverty.
5. Liberal values become world values
I’m on fairly safe ground on the first three of my choices; number 4 is a bit shaky. This one is a bit of outrageous optimism. The later 20th Century was a post-colonialist age. Colonialism by the big European powers was pretty much over, though colonialism in Asia by Russia and China lived on. But the pall of colonialism hung over those European powers and still dominated political narratives. Newly independent nations blamed all their ills on their colonial past, and sought compensation in some form or other from the former colonists. They adapted the narrative somewhat to put pressure on the USA too as some sort of “neo-imperialist”. Meanwhile the developed world – the Western powers, consisting largely of those ex-colonisers, espoused liberal values as being universal ones, and criticised others when they fell short. These two narratives got tangled up, and many less developed countries accused developed countries of imposing alien values to their own advantage, and accused them of racism on top.
This all has another narrative: the West remained extremely powerful after decolonisation, and even more so once it had seen off its Communist rival the Soviet Union. Developing countries needed to plead their case to get aid and assistance; the Western powers never let their liberal values get in the way of self-interest, leading to accusations of hypocrisy that were often justified. Then some of these developing nations became more powerful. China worked its way into superpower status (in large part through trade with the West); other countries, like Iran, became more assertive. The anti-liberal movement gained momentum. Liberal values were Western values, and were a new way of promoting a kind of moral colonialism.
The result was ugly. The number of oppressive regimes grew. Medium-sized powers felt free to interfere in regional affairs, allowing a series of awful civil wars to take root. Western liberals feel beleaguered. And they are criticised at home, by conservatives who are fed up with what they see as the trashing of their countries’ history and culture; and by the left who promote anti-colonialist attitudes, and indulge in identity policies among minority communities that would not be tolerated by those minorities if they were in the majority..
And yet the West’s critics still look to the West for leadership in such matters as combatting climate change. “It’s your fault,” they suggest, “so you fix it.” China, by now the biggest contributor to world pollution and climate change sits idly by, though at least they are developing post-carbon technologies – see 1. above. India persists in its victim mentality, apparently unable to see that with a billion people they can’t just complain from the sidelines.
But this is breaking down. The rise of the populists, and especially Donald Trump, means that the West is retreating from its leadership role. And yet the West still looks to be one of the best places to live in the world. Few would say that of China – and especially if you don’t happen to be Han Chinese. And problems such as climate change change and civil wars rage on, with less developed countries as their main victims. This is creating something of a leadership vacuum, which the less developed countries need to fill. And their favoured narratives are losing traction. East Asian countries that have transitioned to developed status did this largely through their own efforts, assisted by free trade with the developed world. They had to move on from the victim mentality and take on proper agency of their own. It is not that African and south Asian countries are necessarily wrong about the damage of colonialism and slavery, but that their obsessing about this is no basis for building a prosperous future.
Meanwhile Western values and the moral high ground don’t look so bad. Capitalism has proved to be the only viable route to prosperity. The cynicism of non-Western powers, like China and Iran, to say nothing of Russia, is very evident, and has hardly promoted world peace. They are not creating great places to live (even if China’s progress must be acknowledged, it compares unfavourably with places like Taiwan). China may be free of Western hypocrisy, but that just leaves its naked self-interest unvarnished – as it develops its very own brand of hypocrisy. Western values really do have a universal application.
This would be good news because if we see a better quality of leadership from non-Western countries, then global problems will become more tractable. They will push forward harder on de-carbonisation, starting at home; they will be less free about arming rebel movements among their neighbours. A bit more humility on the part of Western countries would certainly be appropriate, but people being what they are, that will not be forthcoming.
When reflecting on this I am reminded of one of the courses I studied in my final year at Cambridge, when I was studying history. It was on the philosophy of international relations and led by Professor Harry Hinsley. How do you achieve peaceful international relations? One line of argument suggested that you needed a dominant power to act as a sort of policeman. Another suggested that you needed an empowered supra-national authority. The first is an uninviting prospect, the second is clearly infeasible, and leads to the problem of how that world authority is to be accountable. A more hopeful idea is that if the world was divided into autonomous nations, whose sovereignty ended at agreed borders, then those countries would learn to live with each other out of self-interest. This was in effect the system that Europe developed after the Seven Years War in 1763. Europe didn’t banish war, but the periods of peaceful relations lasted longer than before. The problem was that wars become harder to stop once started. I would like to think that the medium-sized nations of the world – Turkey, Saudi Arabia, United Arab Emirates, Iran, Israel in particular – will start to learn this lesson. Also that the newer great powers – China and India – will realise that they must play a bigger leadership role if world problems are to be tractable. And that neo-imperialist powers, Russia and to a lesser extent China, realise the futility of their enterprise and start to focus on the real needs of their populations. None of this necessarily involves embracing liberalism – but somehow I feel that it leads there.
Hope springs eternal
Good news tends to happen slowly and it isn’t newsworthy. But there is no denying that the world is entering a rough patch. Economic growth has run out of road in the developed world – as at last even the FT’s Martin Wolf is starting to appreciate. He says that this is causing the current political dysfunction, but it’s worse than that. The US is widely admired for delivering the best growth story, and yet the dysfunction is as bad there as anywhere. Actually the changes required to generate growth are as painful as trying to live without it. But the march of technology and scientific understanding goes on – and we don’t need conventionally understood economic growth for the world to become a better place. Think of a place where people don’t consume any more on average in developed countries (though with a more equal distribution), but who live longer, healthier lives, and where there is much less crime. A world where greenhouse gases in the atmosphere are steadily being reduced, where extreme poverty is being pushed back, and which is not so blighted by armed conflict. Apart from the beating back of poverty, none of these things needs economic growth – and the growth required to combat poverty is required only in less developed countries. This advance can be ecologically sustainable. I have not lost hope that the world can get much closer to such a vision.
Another clichéd but copyright free image from Copilot
My survey of the British political parties moves on to the Green Party. The Greens had their most successful general election by far in July, winning four seats – they have had only one since 2005. And given the fragile nature of British politics, where small percentage shifts can change election results dramatically, the party is at its most influential on political events. Let’s look at them through the traditional SWOT framework, much beloved of professional facilitators.
Strengths
The Greens’ biggest strength is that they have a strong political brand. Everybody thinks they know what the party in general stands for: protection of the environment, sustainability and action against greenhouse gases. As a Liberal Democrat activist, I know this well: my party’s brand is much weaker. In local elections where neither party did much work, the Greens would regularly beat us. The Greens could put out dense, unreadable literature and it didn’t matter. People got the message that the Greens were active locally: they already knew what they were for. The party now regularly beats the Lib Dems in London Assembly elections, fought on proportional representation, where brand is critical, as it is so hard to communicate directly with so many voters. Meanwhile, environmental threats, and especially climate change, are so palpable that the brand has the power to resonate with the public.
A second strength is that the party has built up a bit of a local base of activists in swathes of the country. This has allowed them to succeed in Brighton, win a council in Suffolk, and parliamentary seats in both these places and in Bristol and Herefordshire too. This base seems to have two main sources: rural environmental campaigners (Suffolk and Herefordshire), and metropolitan left-wingers (Brighton and Bristol). All successful political parties are coalitions, so the fact that these groups are quite different is not a bad sign of itself.
Weaknesses
Alas both these strengths have a flip side. The brand is strong, but it also has a negative aspect, which currently restricts the party’s strength. Not everybody is comfortable with their environmentalism, and they can get associated with ideological extremism – which puts a lot of people off.
Likewise, though the party has areas of geographical strength, these are quite localised. It is not a mass movement represented in all of the country. Four seats is a good result for them, but they are along way from dozens of seats – much further than their rival lesser parties – the Lib Dems (who are already there) and Reform UK.
A third weakness is that their culture militates against disciplined, effective organisation. They insist on having two co-leaders, for example. While their strong brand allows them to pick up a proportion of voters easily, organising themselves to run campaigns to do more than this has been a struggle for them – more so than for the Lib Dems who make this transition much more easily.
Opportunities
The party’s biggest opportunity is that the Labour Party lacks challengers to its left, while angering left-inclined supporters. This feels not unlike the Liberal Democrats during the last Labour government (1997 to 2010), a period when they had a high vote share and won over 50 seats in three successive elections. They had a similar mix of rural and metropolitan support. Nowadays the Lib Dems are more focused on challenging the Conservatives than Labour, as they are their rivals in all but a handful of their seats (and the SNP most of the rest).
There is a rural opportunity too. The government has shown it is happy to face down rural opposition to its plans. To be clear, Labour doesn’t dislike rural communities, but it is happy to see a degree of collateral damage in their pursuit housing targets, green infrastructure and rich tax avoiders. This is a more competitive market though: Conservatives, Lib Dems and Reform all have a case to make too. But where the Greens are already strong in rural areas, they have the opportunity to advance further.
Threats
One threat to the Greens is the Lib Dems. The overlap between the parties is striking – in the priority given to the environment, and in generally socially liberal attitudes. Prior to this year’s election, though, they conspired to largely keep out of each other’s way – though there were no formal deals. There was just a mutual understanding that if they fought each other too hard, then the benefit would be to the Tories. But the Lib Dems parliamentary success has given them renewed confidence to challenge the Greens, especially in rural areas (like where I live in Sussex). Where the Lib Dems have established themselves they are generally better organised and better disciplined, and the momentum given to their party by success in July will also give them public credibility. The Greens should be able to handle this easily enough where they are already strong, but expanding this base will be harder. The Greens are probably less threatened in metropolitan areas, though, even where the Lib Dems used to be strong.
Perhaps a bigger threat is the party’s attachment to far-left politics. This is great for picking off disillusioned Labour supporters, but it runs against the political zeitgeist, where younger, ethnic minority and working class voters are increasingly put off by leftwing identity politics. These voters are starting to feel that the left doesn’t really care about the mundane issues of jobs and cost of living. Three areas stand out. The first is leftwing protests over Gaza, which the Greens have been strongly supportive of – actively seeking votes from Muslim communities. A second is the Just Stop Oil protests, which have periodically disrupted traffic or damaged works of art. These are separate from the Green Party, but that might not be so clear to voters. A third is the clash between “gender critical” activists and supporters of trans rights.
This last may not bother ordinary voters so much, but it poses a threat of a different sort. Under an employment tribunal case in 2021 it was established that gender critical views (i.e. people who say that birth is fixed from birth and cannot be re-assigned) are protected under the Equality Act. This is a very dangerous ruling for parties where the prevailing attitude that is gender critical views are not far off in kind to white supremicist ones. The Greens, along with Labour the Lib Dems and the SNP are struggling with this. But the pragmatic streak in each of the other parties makes it easier for them to make adjustments. Not making adjustments exposes parties to legal cases and substantial costs as both the Greens (being fined £90,000 in September) and the Lib Dems (who recently conceded a court case and may attract a similar fine, never mind legal costs) have already found. I don’t know how close the Greens are to making the necessary adjustments, but Trans supporters can be very militant, so this will be a struggle.
Conclusion
Green parties elsewhere in Europe have seen a struggle between “realists” and “fundamentalists”. It is the latter that give these parties so much of their energy and drive, but political advancement, and especially participation in government, requires a more pragmatic approach. Indeed environmental action will only succeed when it becomes quotidian – so widely accepted that people automatically assume that it is in their self-interest. Greens must either become more quotidian themselves or be left on the political margins. Such is the choice facing the Green parties in Britain.
In my last post on the US election, I forecast victory for Donald Trump. That was just before Joe Biden stood down – which happened within hours. In a postscript I suggested that the economy and immigration would still swing the election for Mr Trump. So it proved, though as I watched Mr Trump melt down in the first months of Kamala Harris’s candidacy, I thought she might do it – even comfortably. But then Mr Trump’s campaign stabilised, and returned to consistently hammering the points that would swing voters, and he won comfortably. I thought Ms Harris fought a good campaign in the circumstances, but she had no answer on those two critical themes.
And so an earthquake has hit US politics. Mr Trump is much better organised than he was in 2016, and his personnel changes in the American state will be more sweeping. Meanwhile the complacency of the Democrats after beating him in 2020 has been badly exposed: there will surely be something of a clearout on their side. I don’t go along with the idea that this is the most consequential election of our times (which could be applied to 2016, 2020 or 2028 with equal merit) – but the changes will be drastic. To me it evokes nothing more than that what we experienced in Britain after the Brexit referendum in 2016.
Of course 2016 was when Mr Trump was first elected, and we thought that was a Brexit moment too. But his first administration descended into muddle and was reversed in 2020. The equivalent of the first phase of Brexit happened – the chaos after the referendum result as the country turned rudderless, but not the second – which started with Boris Johnson’s landslide election victory in December 2019. It is the equivalent of that second phase that is starting now in America. At first Mr Johnson’s election victory overawed everybody. His supporters projected their favoured outcomes onto the result, and there was much hubris, as his opponents retreated to lick their wounds.
The similarities between Mr Johnson and Mr Trump are striking. Both won by making a series of impossible promises and relying on humour and bluster to persuade voters to give them the benefit of the doubt. Both are personally quite transparent – what you see is what you get – giving a feeling of authenticity compared to other politicians. Both favour loyalty among their choices for political office over competence. They even both have brought in highly intelligent mavericks to spice up their administrations (Dominic Cummings in Britain, Elon Musk in America). It did not go well for Mr Johnson: his chaotic regime collapsed in not much over two years, getting himself replaced by an ideologue who destroyed what was left of his party’s reputation (Liz Truss) – a mess that his eventual successor, the lightweight Rishi Sunak could do nothing to reverse. It was the most spectacular reversal of political fortunes in British history. Will this history repeat? A chaotic regime which results in Mr Trump bowing out prematurely, followed by an even more disastrous lightweight ideologue (JD Vance)?
Maybe. But we need to think about the differences between the two situations. Firstly the two men. Mr Johnson is by far Mr Trump’s intellectual superior, but he had little organisational experience. He couldn’t run a whelk stall, in the British expression. Mr Trump is an experienced businessman, who certainly could run a whelk stall (“the best whelk stall in all the world”), even if his track record is nothing like as good as he says it is. He may not be particularly intelligent in the normally accepted (left-brained) sense, but he has drive, stamina, confidence and intuition that make him very effective in his own way. His management style is chaotic, but there is more method to his chaos than with Mr Johnson, and he is more adept at blaming others if anything goes wrong (Mr Johnson did this too, but without the same chutzpah). And America’s president is far more entrenched constitutionally than Britain’s prime minister, who is at the mercy of parliament. Mr Trump thrives on attention and status, which the job of US president delivers more than any other – it is hard to see him voluntarily letting go. This would take some sort of physical health issue – though this is a clear risk at his age.
But there are going to be problems. His administration will be peopled by chancers and mavericks, who will under-deliver. That happened last time, though in a different way to what is likely to happen this. In the short term I see this as doing little political damage to him though. There will be ethical issues galore – but (unlike for Mr Johnson) these have little capacity to damage him. Failure to deliver on practically anything doomed Mr Johnson and his successors (even Brexit had a big flaw in Northern Ireland); Mr Trump’s downfall is likely to be over-delivery. Mr Trump has made three major policy promises: the mass deportation of irregular immigrants; the raising of tariffs; and reducing taxes. Even partial delivery on these promises will make America worse off. They might have longer term economic benefits (though I’m a sceptic) but these will not come through in time.
It is very hard to see how Mr Trump’s deportation strategy will unfold – it is so unprecedented. But he has laid huge store on it. At a minimum it will create huge uncertainty in the country’s labour markets, and surely many labour shortages. He may try to releive the shortages by relaxing legal immigration, though this looks politically suicidal, but that won’t happen without massive disruption. This disruption will lead to inflation – with the highly sensitive area of food prices looking especially vulnerable. Inflation was the economic event that did most damage to Mr Biden’s reputation, and it will upset many of those that voted for him on the basis of his supposed economic competence.
Something similar will happen on tariffs. These are so obviously harmful that many of Mr Trump’s business backers assume that his policy is simply a negotiating tactic. Nothing, it seems, will dampen their wild optimism, reflected in a stock market rally. But tariffs are central to Mr Trump’s economic outlook. He appears to think that they will be costless to consumers, and raise revenue with which he can cut income taxes. Besides, it is surely hard to negotiate the kind of change to the terms in trade that he so wants. High tariffs will raise the prices of imported products and so inflation. This may not be as disastrous for America as it would be for some others, like Britain, who depend more on trade. But if prices are already going up because his migrant policy has disrupted labour markets, it doesn’t look good.
And then there are tax cuts. Many of Mr Trump’s business supporters set huge store on these, but there is a real problem with the country’s already-huge budget deficit. Adding to this deficit will be inflationary – one of the things that undid Mr Biden. His regime may want to balance this through drastic cuts to public spending (though not to defence), but there is not enough beureaucratics waste, wokery and foreign aid to deliver anything like enough – which would find him cutting into entitlements such as pensions (social security) and medical schemes. That won’t be an easy sell.
All three of Mr Trump’s main economic policy ideas point to inflation and administrative chaos. This will create stormy seas quite unlike his first administration. This is another difference from Brexit, which has proved to be a slow bleed rather than the big dislocation that some predicted. With his regime’s reputation for economic competence shattered there is liable to be a big backlash.
That should be an opportunity for the Democrats – just as Mr Johnson’s collapse was an opportunity for Labour in Britain. It is also possible that a different strand of populist radicalism emerges from the Republican side to take over. Meanwhile in the wider world, the retreat of America from its leadership position will force others to step up. There will be too much collateral damage for this to be a nice thing to watch – but it will be fascinating if you can see beyond that.
Another AI image from Copilot. Rather pleased with this one
My survey of the British political parties reaches Reform UK, the third most important party in terms of vote share. It is hard to understate the influence of this party, the creature of veteran British politician Nigel Farage. In the recent election it made more inroads into the Conservative vote than any other, allowing Labour to win by a landslide on a modest share of the vote; it also helped the rise of the Liberal Democrats, though to a smaller extent. It won only five seats itself, but even this was a bit of a breakthrough in Britain’s electoral system. One of the biggest questions in British politics is whether it can sustain its influence, or whether it will wither, as most third party challenges do in Britain.
Reform’s strategy is to channel the populist backlash that can be seen across most of the western world, from Donald Trump in America to the AfD in Germany. It rages against liberal “elites” and their woke policies, and most of all it rages against high levels of immigration. By and large the established parties handle this criticism badly, accusing it of being racist, amongst other things – even as more and more people from ethnic minorities subscribe to populist politics. The Conservatives are less inclined to do this, but they are badly split between those that want to hop onto the populist bandwagon, and the more establishment types who think that populist politics lead to bad policies. This strand of politics allows Reform to win 15-20% of the national vote, with an effective ceiling of probably about 30%. This invites three questions. What happens if the party reaches this ceiling? Can that ceiling be extended? And does the party have the leadership and organisational capacity to do this?
Supporters of Reform UK, including Matt Goodwin, often cited here, think they represent a forgotten majority. But polling consistently shows that support for their agenda is in the 20-30% region. The rest of the electorate diverges sharply in their views on most issues, and the party has very negative favourability ratings in the population at large. But 20-30% is still an awful lot of people, and if the party could find a way into winning the bulk of them, that would have a big impact. For a start, the Conservatives would be unlikely to survive. Reform’s achievement of about 14% vote share in July proved disastrous for the Tories. No credible route back to power exists for them without pushing Reform back to substantially less than this. Such a Tory collapse would then put Reform in contention to win many seats from Labour, especially in the old “Red Wall”, a swathe of constituencies from Wales to the Midlands to Northern England, based on towns with people who feel left out and left behind. These seats turned to the Conservatives under Boris Johnson in 2019. But how many could they win? I haven’t tried any psephological modelling – but it is surely unlikely that they could even challenge the Liberal Democrats for third place in parliament. They are stuck in the same place as the Lib dems used be in their years of relative success in 1997 to 2010. Lots of votes, but hard to turn these into seats – the Lib Dem vote is now a lot more concentrated, hence its substantial parliamentary presence. Labour would continue to do well in this environment, unless the Lib Dems started to find ways to break out their current geographical containment.
To move into true contention as a challenger to Labour requires Reform to seek an extra 10-15% of the vote, from people who currently disapprove of the party. This is what Donald Trump has successfully done in America, but which European parties in the same space are finding much harder. But our electoral system more closely resembles America’s than it does even France’s, still less those of German and Italy (although there the populists have found a path to power through alliances). Unlike America, Britain does not have a substantial body of active Christians who are appalled by the liberal values prevailing in the governing class. Neither are the liberal left quite as out of control as they have been in America, to stir up those resentments. But what America does show is that economic grievances, and the unsettling effects of mass immigration, can be stoked up among groups, such as younger voters and ethnic minorities, that used be reliable supporters of the left. Wokery played a role in the American realignment in supporting a “there’s madness on both sides” narrative – but it was economic grievance that clinched it for Mr Trump. It is possible for a winning coalition of voters to be built by Reform, or, indeed, by the Conservatives.
But can Reform pull it off? They first have to destroy the Tory challenge, in local elections, and the Welsh Senedd could play a role here. They then need to carry out the second part of the two-step I described in my previous post about the Conservatives. This means drawing support from a number of formerly Conservative politicians and businessmen to give the party some sort of aura of respectability. Reform starts with two advantages. Its leader, Nigel Farage, is an immensely experienced politician and a gifted communicator (the BBC can’t get enough of him). He (unlike the former academic Mr Goodwin) would understand the analysis I have just written, and clearly knows what he has to do. The second advantage is that the Conservatives have a toxic legacy from their years in government after 2019, when they showed themselves to be chaotic and incompetent. The party’s new leadership is clearly struggling to put distance between them and this legacy.
But the Tories have a huge advantage: they have political infrastructure – organisation, networks, administrative competencies. Here Reform are weak: they are way behind the Lib Dems, never mind the Tories. Uniquely amongst Britain’s main political parties, the party has a corporate structure, which makes it easy for the leadership to control, but much harder to build the networks the party needs to sustain a successful political movement. Mr Farage clearly recognises this, and building this infrastructure was a central theme at the party’s recent conference. But it doesn’t help that populist politics tends to attract event more cranks and argumentative types than other forms of politics, and fewer of the steady organisational types. Rapid expansion risks collapse into chaos.
But the potential remains. Reform’s poll share is holding up well after the election. There looks to be plenty of scope for stirring up economic grievance and resentment. Reform UK is very much the party to watch at the moment.
Copilot’s idea of a two-step. Copilot has become very chatty all of a sudden, but much slower at generating images. Is this a portent for the development of AI?
I’m not a dancer. I have no idea whether the two-step really is the appropriate metaphor for what I want to describe – and a quick online search doesn’t really help. But in my survey of the state of Britain’s political parties I have come to the Conservatives. What they need to achieve requires two distinct steps. The question is whether their leadership has the skill to do this, or whether it will tumble in the process of trying.
The Conservatives suffered an unmitigated electoral disaster in July: both in terms of share of vote and in seats won it was their worst performance in living memory… and considerably beyond that. They lost votes in three directions, to Labour, to the Liberal Democrats and to Reform UK. This is all the more remarkable because in 2019 they achieved a landslide victory and it was widely assumed that they would stay in power for the foreseeable future. But this dramatic reversal contains the seeds of hope: politics has become so volatile that even a disaster on this scale can surely be reversed in less than five years? The party now has a new leader, Kemi Badenoch, who is bringing a fresh approach to the leadership. For reasons that I have explained in my earlier post on Labour, incumbency is a tough gig in a world where economic growth has suddenly become much harder to achieve. And Labour’s vote share makes it look vulnerable. Recent opinion polls already show the Conservatives with a small lead, albeit with a still dismal share of the vote.
With rather touching naivety the Financial Times political columnist Stephen Bush suggested a short while ago that what the party needed to next was to grapple with the new economic reality (though he does not frame that reality in quite the same way as I do) and come up with a policy framework that addresses it. Oh dear! Success in current politics comes with magical thinking. Look at the impossible policy programme put forward by Boris Johnson to allow the Conservatives to win big in 2019. Look at Donald Trump’s winning formula in this year’s US election. There is no reward for presenting voters with tough choices, and especially not in a very competitive political market. The party has no need to grapple with the awkward realities of public policy. But that is not as easy as it sounds. Any old magical thinking will not do. After all Labour under Jeremy Corbyn also indulged in magical thinking in 2019, and that was disastrous. The party has to create a narrative which resonates across a wide audience.
Successful politics is about coalition-building: aligning support from disparate groups of voters. Mr Johnson successfully built one that embraced working class voters in Northern, Midland and Welsh constituencies, alongside professional voters in prosperous suburbs, and traditionally conservative rural voters. Mr Trump has done something very similar. This is not easy. Matt Goodwin, the radical-right political commentator, correctly identifies that just such a coalition ensured the Conservative victory in 2019, and the party’s betrayal of the working-class element sealed its defeat. But he then goes on to excoriate those suburban and metropolitan voters (“elites”) that were part of the coalition as being the scum of the earth. How do you rebuild the coalition then? Political activists like Mr Goodwin actually aren’t that interested. They want to promote the interests of one part of a winning coalition, and are uninterested in any compromises that might be needed to bring about ultimate success.
That sounds unhelpful to a Conservative leader, but he isn’t entirely wrong. That seems to be the lesson from America. Mr Trump, while building his successful campaigns (as opposed to what he actually did in office) never compromised with his “base”. This consisted of two distinct, though overlapping groups. These were working class voters with lower educational attainment, who are often looked down on by governing elites, and conservative religious communities, who have their own policy agenda, and dislike of irreligious liberals. Once these groups were secure and enthusiastic, he could work on less committed groups, and persuade them to suspend judgement on issues that they were less comfortable with, and indulge in magical thinking in others. These people were persuaded that it was time for a shake-up, and that the Republicans would surely not be as bad as they sounded. This is what I am describing as the two-step. Secure the radicals first, then move onto the moderates.
It is not the only possible two-step. The more traditional one is to make a strong bid for the “centre ground”, and then turn to the radicals to say that “this is the best you are going to get”. This is the Tony Blair version of the two-step, which secured him three electoral victories for Labour. It is also what Sir Keir Starmer is doing for Labour currently. The radicals-first two-step does seem to be easier to do from the political right. Mr Corbyn did make a valiant attempt with this strategy for Labour, and it came much closer to success in 2017 that most people expected. But he did not understand how to keep the more sceptical voters on board. He was no match for Mr Johnson.
Both versions of the two-step are open to Mrs Badenoch. In the radicals-first version, she would move her tanks onto Reform UK’s lawn, and use the party’s superior resources and organisation to crush it. She needs to lean in to the sort rabid ranting indulged by Mr Goodwin, and weather the criticism from her own side. And then, in about 2027, she needs to start promoting scepticism for Labour, and getting more moderate Conservatives to suggest that she isn’t so bad, and that Labour are truly awful – in the way that so many less extreme Republicans have done for Mr Trump. The centre-first option would involve crafting an appeal to more professional voters first, and then crushing Reform. To be honest, this does sound much harder. Professional voters are much harder to woo with magical thinking, and that would indeed mean confronting some of the policy dilemmas that Stephen Bush was suggesting. Sir Keir understands this well, and would challenge her at every step.
Either way, it requires both political guile and forcefulness. There is no way through the middle with the two-step. Is Mrs Badenoch up to it? It is very early days, and it is hard to tell. The early signs are not encouraging (for her party – more encouraging for those who do not wish her well). It does indeed look as if she is trying to thread a middle way, a bit like the ill-fated Ed Miliband tried for Labour in 2010 to 2015. She enthusiastically attacks wokeness, but she is also trying to give her approach a bit of intellectual rigour, so as to dress it up for more professional types. That gets her into trouble. Is she, or is she not, in favour of maternity pay? She may find these early days bruising, but she may learn from them – much as Sir Keir did in his early days as Leader of the Opposition.
The jury is out. She is already attracting a heavy weight of sneering and criticism. If she does try to carry the battle to Reform as her first step, then a lot more of this is to be expected, and her ratings will dip in the population at large. But if the Reform ratings start to come under pressure we will know if she is winning. I don’t wish her well, but it will be interesting to watch.
Copilot again. If I had asked it to make the knight look like sir Keir Starmer I don’t think it would have allowed me
A while a go I promised to offer my thoughts on each of Britain’s six main political parties. I started with the Liberal Democrats, the party I know best. Today I move on to Labour.
Labour won an exceptional majority in this year’s general election – and unprecedented in the scale of its advantage over the Conservatives. But this is based on under 35% of the popular vote, on a relatively low turnout. A big victory was widely forecast, so perhaps many of the party’s voters stayed at home. That’s hardly a ringing endorsement, though; the Conservatives surely suffered more from the stay-at-home effect. There is, therefore, a sense that Labour’s advantage is fragile, and could be lost after a single term. To be fair, Labour’s leadership seem very aware of this. Perhaps that is one reason why their first months in office seem to be plagued by a strange hesitancy. The Conservatives, under a new leader, sense there may be an opportunity – especially since Donald Trump’s victory in America shows that the electorate’s anti-incumbency mood works even more easily for the right than it does for the left.
This uncertainty is because we are in a transitional period in global politics. This is the onset of the low-growth era. Until now politics has been based on the assumption that steady economic growth would improve living standards across the population, and drive increased tax revenues that can be spent by expanding benefits or increased public services. There are other ways of looking at this problem. Advocates of Modern Monetary Theory produce strong arguments to suggest that governments don’t spend money raised by taxes – they simply need to manage the balance of income and expenditure so as not to let inflation loose. In an innocent age of just a few years ago, when inflation seemed to be yesterday’s problem, it seemed that governments could run up big budget deficits without any problem. But inflation in America is one of the reasons for the anti-incumbency mood, alongside the not unrelated issue of immigration. Liberals can be quite dismissive of inflation – but it is politically toxic. Most people regard it as a breach of the trust they place in state institutions.
By and large, politicians are in denial about the arrival of the no-growth era, and so are most political commentators. They suggest that growth is a matter of finding the right policy mix, with the right political drive behind it. Growth is a political choice, they say. But it isn’t. Low growth results from a convergence of economic circumstances (a less favourable trading environment; adverse demographics; the state of technology; climate change), and the revealed preferences of the public from their consumer and political choices alike. Practically until the US polling day, The Economist suggested that the Democrats’ political fortunes would be changed once the US public started to appreciate the country’s excellent growth record over recent years. It doesn’t seem to have dawned on them that the American public is protesting at the costs of that growth. So far all I hear is the very lame argument that voters think their pay-rises are due to their own achievements, but that rising costs are due to political failure. Meanwhile the Republicans have won comfortably with an anti-growth agenda, although, of course, they and their voters seem to think that its is the opposite.
The problem for Labour is that they are dug into the old growth assumptions. Their plans don’t add up without it. They may be lucky – as there are some specific opportunities for Britain. They might even reach their objective of achieving the highest growth in the G7 – though mainly because the other six countries will perform so poorly. Having said that, Donald Trump’s concerted attack on world trade is bad news for Britain. Another problem is that their pre-election promises on taxes have forced tax rises on business that look distinctly unhelpful for private sector growth – though the overall fiscal effect of the recent Budget was positive.
Meanwhile the public’s anti-growth mood remains. They are sensitive to inflation – the risk of which is heightened by using fiscal policy to drive growth. They don’t like immigration, which is essential to manage the skills shortages that growth throws up – even if not all immigration actually eases growth. Most infrastructure development, including housing, throws up vociferous protests, which causes delay and cost overruns. The problem, though, is that the public remains subject to severe cognitive dissonance. They still think that they are pro-growth policy and have the possibility of stable or lower taxes, a strong social safety net, including state pensions and the NHS, and robust public services. Alas it is in no politician’s interest to bring this dissonance to the point of resolution. With the possible exception of the Greens, no political party is remotely close to tackling it.
What is the answer? That really is the topic for another post, as I’ve digressed far enough from the state of the Labour Party. But there are opportunities out there, and it should be possible to promote improved wellbeing even in a world where conventionally measured growth remains low. But it requires a whole new approach to managing our society.
Meanwhile the Labour government is left with little choice but to try and muddle through, and hope for some economic and political good luck. If they want to make a drastic change in course, they will have to do so by presenting a new manifesto at the next election. It is too early for them to start preparing for that, at least in the open. It is possible that they will start to understand the economic reality in three years time or so and rethink their strategy. But their chances of reaching a second term, which they will desperately want, mainly depend on what happens to the opposition. Here things look much more promising.
The populist backlash is likely to grow. Labour is unlikely to be quite as inept as the Democrats were in fending it off. They are cautious to point on immigration, though unlikely to stem the flow by enough to assuage the public; they will probably keep their woke tendencies at bay. But popular frustration with slow progress will grow, and much of their agenda on infrastructure and clean energy will draw criticism. And yet the populist mantle is being fought over tooth and nail by the Conservatives and Reform. Neither looks strong enough to prevail over the other, leaving the opposition to Labour divided. The Liberal Democrats, meanwhile, will try to consolidate their grip on the Tory left flank. Four years is a very long time in politics, but this dynamic, which won Labour its outsized majority, is their best chance of victory next time.
Meanwhile Sir Keir Starmer, the party’s leader, will start to find his party gets unruly. He has too many MPs to keep quiet with government jobs or the prospect of them. Leftwing causes will come along to challenge is plodding centrist cause. But the growing threat from the populist right may well be enough to keep these in check. Having won power, his party really doesn’t want to lose it.
That is lucky for Sir Keir. The central premise of his party’s programme – that it can restore economic growth to about 2% per annum – is unattainable for more than a couple of years. His is the last stand of the old politics. The new has yet to fully take shape.
