Britain does not need a new conservative party

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In the local elections this month the Conservatives did very badly. Their leader’s attempt to suggest that they pointed to a hung parliament is delusional. I have heard the suggestion that they may do so badly at the next election that the Liberal Democrats will form the official opposition. The example of the Conservatives’ Canadian sister party in 1993 is quoted – they slumped from being governing party to just two parliamentary seats. The vultures are starting to circle, with at least two people (Matt Goodwin and Dominic Cummings) suggesting that a replacement party be built to cater for conservative voters, alongside the rising ambitions of Nigel Farage’s Reform UK. But that is folly.

First of all, I think the Conservatives are heading for a rout in the next general election – and probably their worst ever result. Some people simply can’t believe that such a reversal of the 2019 landslide is feasible; others suggest that the polls always narrow as an election approaches. Party managers at the Labour Party and Liberal Democrats are both (rightly) anxious to suppress complacency amongst their campaigners, and are happy to promote such talk. But this is driving through the rear view mirror, and reminds me of the sort of things some Lib Dems were saying before their polling disaster in 2015. History does help us judge the future, but you should never be slave to it. The Conservatives are in a unique predicament, and show now signs of understanding a way out.

But we can dismiss talk of the Lib Dems getting more seats than the Conservatives. They did manage to win more council seats at the local elections, which was quite a feat when the councils in contention weren’t particularly advantageous to the party (unlike last year). But that’s council seats: as you go higher up the election size, the Lib Dems rapidly disappear. The Conservatives won 19 out of 33 Police and Crime Commissioners in England; Labour won the other 14, and three more in Wales, where Plaid Cymru won one. The Lib Dems were nowhere in sight. Neither was the party in contention in any of the 11 regional mayoral elections (10 to Labour, one to the Tories). This shows that there remains a massive bedrock of Tory support in rural areas, which the Lib Dems (and Greens for that matter) can only tackle in a very localised way; the Labour vote is also very patchy here. Even when the Tories are doing very badly, the anti-Tory vote is very fragmented. In order to win one of the other parties has to convince the voters that the other potential challengers aren’t in serious contention; not only is that a hard case to make in many places, but they don’t have the campaigning strength to get that message across in these often massive constituencies. There will be no electoral pacts involving Labour – and if there is one between Greens and Lib Dems (there is no such talk that I’m aware of – although this did happen in 2019) it will be very limited in scope. The Lib Dems are focusing their campaigning efforts on a relatively small number of constituencies, although exactly how many is always under review. This number is not likely to be more than 40 seats; when they targeted much more than this in 2019, the result was disaster. The polls, and the local results, show that the party has no general groundswell of support, and it will only succeed in places where it has campaigning strength. The Greens may have more of a general groundswell of support, but their campaigning strength is much weaker. If they spread their efforts over more than half a dozen seats they will be seriously wasting resources; they are in serious contention in about three at the most – one of which (Brighton Pavilion – their only existing seat) they might well lose to Labour, after the retirement of the popular Jean Lucas. The insurgent right is at this stage only represented by Reform UK, which has little grassroots organisation, and is unlikely to present a serious threat in the Conservatives’ rural strongholds either – though their presence seems to terrify many Tories. The party should secure at least 100 seats even on a very bad night – and easily enough to surpass the Lib Dems’ practical maximum of 50.

The more interesting question is what happens after the election, and whether one of the right-wing insurgents can supplant the Conservatives, now much reduced in parliament. The obvious challenger is Reform UK, which is regularly polling third in national polls, and can even surpass the Tories in some demographics. But it is hard to take this party seriously as more than a nuisance. It is constituted as a limited company, under the legal control of a tight clique, led by Mr Farage. Unlike other political parties, there is no attempt to give grassroots supporters any kind of serious say. This limits any development of a serious grassroots organisation. This might work if Mr Farage could muster the sort of charisma and wealth that Donald Trump does in America. But he is not in that class, even if he is quite successful in drawing attention so himself: at one point it was hard to keep him off the BBC. And he isn’t a team player – indeed right-wing insurgency is not a team sport.

It is also hard to take Mr Cummings seriously. He masterminded the successful Vote Leave campaign in the EU referendum, one of the outstanding political achievements in recent British political history; one feature of this campaign, incidentally, was the sidelining of Mr Farage. He actually cares about making things work and designing coherent policy, rather than just grandstanding on the latest political fad. But he is tarnished by his association with Boris Johnson, for whom he was a senior adviser, though eventually falling victim to the chaos that afflicted the Johnson regime. His lack of political skill was evident – and especially his combative style of doing business. It is hard to imagine that he could put together a successful political party.

Matt Goodwin, whose name repeatedly comes up on these pages, is altogether more interesting. He is not the damaged goods that both Mr Farage and Mr Cummings are. He also applies an academic’s discipline to his thought and research. He runs regular polls and focus groups to give him a good understanding of potential supporters and resonant messages. This, apparently, has enabled him to find financial backers, and he is increasingly open over his plans to build a new political movement. His organising theme is his anger at political elites, whom he accuses of trying to impose their liberal values onto a majority of people, who don’t share them. In policy terms his main focus is on excessive immigration, but he also turns his ire onto multiculturalism, wokism and Islamic minorities. As an academic, he lives and works amongst these liberal types, and is very familiar with their complacency and limited vision (“luxury beliefs”) – and his academic research shows how much this is at odds with what the public at large thinks. He further points out that support for liberal policies tends to be in metropolitan areas, and concentrated in an electorally inefficient way. He thinks that this adds up to a political opportunity for a new conservative movement – citing Mr Johnson’s landslide in 2019 as proof that conservative voters form a substantial electoral majority. But that government, he says, was taken over by the liberal elites, and betrayed its voters, for example by opening the floodgates to immigration.

But life is hard for insurgent parties in British politics. It is commonplace to condemn the complacency and out-of-touchness of the existing political parties, and to say that there is an opportunity for a new movement – only for the whole thing to fizzle. None has succeeded since the rise of Labour more than a century ago – and that took a world war. There are three big challenges in particular: first is assembling a winning coalition of support; second is campaigning infrastructure; and third is developing a coherent policy programme.

I have talked about electoral coalitions before – with my image of a kaleidoscope. It’s all very well finding majorities to agree to particular polling questions on immigration, say, but political success means holding together disparate groups. It is not nearly enough to find disaffected voters with lower educational qualifications in the ex-industrial heartlands of North England, the Midlands and Wales. Mr Johnson succeeded because he managed to add these to more liberal metropolitan types wanting to end the Brexit chaos and assuaged by his greenery, and to the retired mass-affluent traditional Tories in the wealthier areas, and so on. This required a combination of political skill and charisma. I don’t see any of the putative Tory rivals providing this.

Then there is campaigning infrastructure. It is just about possible for a small but focused organisation to find 600 parliamentary candidates and get them nominated at election time. Rightwing insurgents have an advantage in that there are likely to be plenty of volunteers, but less so in that they are likely to be a fissiparous and ill-disciplined bunch – one reason for reform UK’s highly centralised power structure (which followed the chaos of Ukip, Mr Farage’s previous vehicle). Creating an organisation able to carry out campaigning – such as door-knocking and leafleting – in a wide enough number of seats is daunting. Campaigners imagine that they can make up for grassroots weakness with canny social media and publicity strategies, but that is an uphill fight against established parties who have the local organisation. The nearest any new movement that has come to succeeding here was the SDP in 1981 (which I was part of) – but this allied with an existing party (the Liberals), used many experienced politicians, and attracted higher-skilled liberal types with strong organisational competence. Current conservative insurgents lack these advantages, unless they can secure mass defections from the Tories, and then ally with it. And the SDP ultimately failed in its aim of replacing the Labour Party in spite of impressive polling numbers in its early days.

And then there is a coherent policy programme. In a political culture that seems to value winning elections (or referendums) more than governing or implementing viable political programmes, this might seem superfluous. Mr Johnson did not have it in 2019, and neither did Donald Trump in 2016 – and he still doesn’t. But you can’t succeed in government without it, unless you resort to repression and corruption. If electoral success depends on building a disparate coalition, unless they unite around a viable programme, this coalition cannot hold – and such a programme offers credibility. Mr Goodwin talks of the Tory government of 2019 betraying its voters – but that was always going to happen as it promised so many incompatible things. A central theme was cutting immigration to move towards an economy where lower skilled wages weren’t being undermined, and so creating a more equal society. But higher wages for less skilled people (and this did start to happen in the early days of the government) leads to inflation and puts pressure on public services, major employers of lower-paid people. That puts pressure on interest rates (and hence mortgage costs), and taxes and public services. The government was simply not ready for this dilemma, which meant betraying other parts of the coalition, and quickly buckled on immigration policy. I don’t actually think that Mr Johnson’s idea on low immigration was necessarily a bad one – but it needed to have coherent planning behind it, and answers to the resulting dilemmas. Mr Goodwin’s policy ideas seem to be similarly based on focus groups and polls, and not on any serious understanding of the practical trade-offs.

Even a charismatic and well-funded person such as Donald Trump, with considerable, if unconventional political skills, chose to co-opt the established Republican Party rather than set up in parallel with it. The conservative insurgents have no such leader, and even if a new party has strong initial success, it surely cannot succeed in the longer run in competition with the existing Conservative Party. They would only serve to offer a lifeline to a new Labour government, who might well find themselves struggling rather quickly.

It is much more viable for conservatives to bend the Conservative Party to their liking, and to promote a comeback as spectacular as Labour’s. Mr Goodwin suggests that the rump Tory party left after an electoral rout will be too dominated by Oxbridge types from the old elite. But the grassroots are more radical, and a strong conservative agenda offers a pathway back to power. The next election may over bar the voting – but the election after that is very much in play.

The lightbulb moment is past. Why we must break the growth mindset

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Back in the 1970s there was a persistent story about lightbulbs (then incandescent tungsten ones) that was trotted forth to demonstrate the madness of capitalism. It was that the life of a bulb was kept deliberately short so as to create demand for replacement bulbs. Apparently it was true – but nobody cared. Whinge as we might at the fringes, politicians and the public were happy to keep the economic treadmill going. Longer-lasting lightbulbs would mean fewer jobs. Those days are long gone. Our lightbulbs now are immeasurably more efficient, and they aren’t built to self-destruct. Few jobs are at stake, and even fewer jobs in countries that use the bulbs. This leaves the world materially much better off. But politicians and economists alike hanker after the those old days – hence their obsession with economic growth.

Even serious economic commentators like the Financial Times’s Martin Wolf can’t break this: Mr Wolf started a recent column with the words: “If the UK’s real gross domestic product per head had continued on its 1955-2008 path, it would now be 39 per cent higher.” This implies that the lack of economic growth in the last 15 years is a failure of economic policy, and not due to a change in the way the modern economy works. This is wrong: instead we should think of the second half of the 20th Century as a unique period in economic history – and recognise that we have long since entered a new era, one in which sustained growth of gross domestic product per head is not a feature – nor even really desirable. Life can get better, but not through consuming ever more stuff.

Economists don’t like to look behind their beloved aggregated economic statistics, which they like to treat as classical physicists once did the measurements of pressure, temperature and volume of gases. What the gas molecules were made of didn’t matter. Some economists try to construct historical time series of centuries and more in an attempt to build a narrative of economic policy, as if to say that there are common economic principles that are everlasting. To them the post-war era in the developed world, and parts of the developing one, featuring consistent growth is a model of wise policy. Firstly through good macro-economic management, with Keynesian demand management, and then inflation targeting monetary policy: these smoothed out the dips and troughs that were a feature of previous eras. Then there was a consistent advance of productivity through the use of new technologies and more advanced management. “Productivity is not everything,” said the economist Paul Krugman, “but in the long run it is almost everything.”

But looking back on it, that golden age was the result of the convergence of four factors, each of which has reached its limit: the post-war baby boom, bringing women into the workforce, the expansion of world trade, and the rising consumption of manufactured goods. The baby boom expanded the proportion of the workforce that was of working age, but by the 1980s the babies were now all of working age while the birth rate had fallen; and as the boomers reached retirement age in the 2000s, the proportion of people of working age shrank. The economist Dietrich Vollrath did the maths and found that this accounted for most of the tail-off of economic growth per head in the 2000s in America – and in Britain the effect would have been greater, if anything. This led to my comment that “Demographics is not everything, but it is almost everything.” The war brought many women into the workforce, but in the 1950s the convention that married women should stay at home remained powerful. But as families wanted to spend more on consumer goods and property (and technology made housework easier), women were steadily brought into the workforce, increasing the overall rate of employment, and thus driving growth. This trend has been slow but steady – the proportion of women at work was still growing through the 2000s – but now there is not a big difference between male and female employment, and in most economies, including Britain’s, the limit has surely been reached.

Freedom of trade has also been an important driver of economic growth, as the laws of comparative advantage and economies of scale came into play – in notable contrast to the pre-war years. First came GATT – the General Agreement on Tariffs and Trade, part of the great post-war settlement. Then, for Britain, there was membership of the European Economic Community – which in turn was given a major lift when this morphed into the European Union with its Single Market. But perhaps even more significant was the steady rise in Asian economies, and the huge increase in trade in manufactured goods – a succession starting with Japan, moving through to the Asian “Tigers” (Taiwan, South Korea and so on) onto China, with India in a supporting role. The rise of this trade, referred to as “globalisation” was transformative. The cost of manufactured consumer goods in the early 2000s tumbled as a result, and was one of the critical underpinnings of economic growth. But this trade is no longer growing – and is probably shrinking, while Britain has left the EU and Single Market. Gains from trade are unravelling. This is partly a product of the rise of protectionist politics, but it is also because economic convergence has reduced the potential gains from comparative advantage. Funnily enough the reversal of globalisation is often celebrated by politicians, almost in the same breath as they call for stronger economic growth.

These three factors are well-known amongst economists, even if they don’t talk about them enough when considering the slowdown of economic growth – compared to familiar targets such as lack of public and private investment, NIMBYism, muddled political policy and so on. In contrast my fourth factor seems to be less well understood. In the post war era there was a massive expansion of consumer goods, from cars to cosmetics. This was made possible by advances in technology during the war, with the development of plastics, for example. Keynesian economic policy helped to pump-prime a virtuous circle of increased supply and demand – the expansion of manufacturing and distribution jobs helping to fuel demand. This cycle became central to the growth of advanced economies, copied by many less developed economies, though, interestingly enough, not so much by China, which is another story (they channeled much more of the extra demand into investment, relying on exports much more for growth). Along the way absurdities like the built-in obsolescence of light bulbs were tolerated. Many view this era, up to the late 1970s in Britain, as something of a golden age: one with a largely stable working-class culture, geographically well-spread, and quite a bit of upward mobility into an expanding middle class – before the destruction of the industrial heartlands that started in the 1980s. This view requires rose-tinted spectacles. Some things were clearly better then: access to social housing, for example; and this, combined with high taxes on the rich meant lower inequality and better social cohesion (so long as you weren’t brown or black skinned). Public services were more generously staffed, though usually terribly managed. But was an era of massive environmental degradation and plenty of social strife; film and television dramas of the era depict people shouting at each other but failing to communicate – which is largely how I remember it as I was growing up.

But this age of expanding consumerism could not be sustained. There are only a certain number of cars, fridges and so on the people can own. There was a limit to the amount of electric light that people could constructively use. And besides, advancing productivity meant that fewer jobs were required to sustain demand, and expanding trade kept up fierce pressure on efficiency. The final blow came when when, for reasons of comparative advantage rather than efficiency, the developing economies of Asia took over a huge share of the production of consumer goods. The 1980s onwards saw massive closures of factories and other infrastructure, such as coal mines.

But the standard rejoinder to this from economists is that these developments shouldn’t really matter. Cheaper consumer goods mean that people have more to spend on other things, and these require people to provide them – and these people can be made more productive. Lightbulbs may have been replaced by cheap LEDs made in China, but the new technology can be arranged into much more complicated and creative arrays, which need people to design and install them. But there have proved to be a number of problems with this idea. Economists will admit that manufactured consumer goods have largely been replaced in the modern economy by services, where productivity is a much trickier thing. They call it “Baumol’s Cost Disease”, teach it in Economics Batchelor degrees, and then forget about it.

Unfortunately, a Batchelor Economics degree is as far as my formal economics training went. The theoretical complexities of an economy where increasing productivity comes about through higher quality rather than quantity, and were an increasing amount of consumption goes into access to land, rapidly takes me out of my depth. But the outcome of these complexities is surely that developed economies do not behave as they once did. One problem is that the modern economy is more unequal. Large numbers of people are now extremely well off by past standards, and we have the phenomenon of “mass affluence”. Millionaires are commonplace. But at the other end of the scale many working class jobs are much less secure than the factory and office jobs of the past. The better-off, meanwhile, spend a lot of their money is on status goods and services, rather than basics. (They also save more, which complicates things more – though overall savings rates have gone down rather than up). One of the key ingredients is human content. In olden times this might be the number of servants you employed; nowadays it is the consumption of personal services and use of products whose whole point is that their production processes are inefficient (hand-stitched handbags, etc.). These often require low-paid people to provide. There is surely a danger that this inequality gets entrenched, and that this is a drag on economic development. This is surely one reason that minimum wage policies have not caused the damage that a consensus of economists predicted in the 1990s.

Then you have the problem of leisure. One way for people to exploit the benefits of higher productivity is to work less. This might be more holidays, or (as in my own case) retiring early. Then there is the hobby economy – where people produce things deliberately on a non-commercial basis for the sheer enjoyment of it. All this is perfectly rational economically, but it makes a mess of classical economic assumptions. And here’s the thing: a society were people don’t have to work as hard to achieve a comfortable and fulfilling life is not a failure. But listening to conventional economists you might think it was. Such a society is taking shape through the freely made decisions of economic agents: it is not a failure of policy. We need to understand how much slow growth is the result humanity realising the benefits of greater economic efficiency, and how much is through dysfunction – and I will admit there still quite a bit of dysfunction about.

So what are my conclusions? Firstly it is that most economists are suffering from a fallacy of composition when talking about productivity and growth. They have a mental model of the supply side of an economy being a single business scaled up (“UK plc”) when the reality is much more complicated. Advances in productivity in one place can simply lead to a reduction somewhere else. Secondly we are often confusing the creation of wealth with its realisation. Many people rationally choose to realise wealth by earning less – and the number is growing. Thirdly, the inequalities in our economy aren’t just a bit of untidiness that will resolve itself, but need to be a central focus of economic thought and policy development – as this is likely to do more to advance economic wellbeing that overall economic growth.

Politically this means that both the left and the right are barking up the wrong tree – at least as represented in Britain by the Labour and Conservative parties. Conservatives hanker after a low-tax high-growth society, powered by free-wheeling entrepreneurs. Those days are long gone. Lower taxes simply increase inequality and have nothing to do with growth. Labour assume that better direction from government towards constructive investment will unleash growth that will generate taxes that will fund improvements to public services. This is a lot less wrong-headed than the Conservative narrative. After the years of chaotic Conservative government, it is surely true that a bit of grown up government will unleash a some catch-up growth, enough to generate a bit more tax revenue – and maybe even to lift growth to the top of the G7, as Labour predicts (doubtless thinking that the other six economies are due for a bit of a stall…). But it can’t last – and the party is not ready for the hard choices that lie when it all fizzles out and they are forced to confront various combinations of austerity and higher taxes.

What we need to do is to take a fresh look at society and its dysfunctions and address that dysfunction through slimmer but more effective public services, and intelligent redistribution. Technological advance continues to offer the opportunity to advance human wellbeing – but we will get there faster if break the growth mindset.

Starmer’s five missions give us some idea of Labour’s priorities

The Labour leader, Sir Keir Starmer, is taking a lot of criticism. A minority view, promoted by Matt Goodwin, is that he is about to unleash a wave of woke nonsense on the British public, after Labour win the next election. A more widely publicised view is that he is so desperate to win the election that he has completely hollowed out a potentially radical Labour programme, and so stands for little or nothing. Both critiques miss the mark.

Mr Goodwin is showing how complete is his transition from a sympathetic but objective observer to the rise of the populist right, to being an active s**t stirrer, mixing in populist nonsense with his often trenchant analysis. This particular line of argument has been lifted from the American right but sits awkwardly with the facts of British public life. The American left, with its adoption of identity politics and much other nonsense, can be pretty scary. And they have their admirers in Britain, and these doubtless include many people who would be put in positions of influence by a Labour government. But the political mood is clearly against it, and Mr Starmer will be very sensitive to this once in power. Expect some nonsense around the fringes, hyped up like mad by right-wing media, but little that affects most people’s daily lives.

But what of the idea that Mr Starmer has so hollowed-out Labour’s policy platform that there is little worthwhile left? It is true that he is trying to steer clear of radicalism – but radicalism is something favoured by political activists and not the public at large. Lack of radicalism is a feature, not a fault. Rather what Mr Starmer wants to stand for is calm confidence – something the Conservatives have failed to achieve since Brexit, with some half-hearted resistance from two of their leaders, Rishi Sunak and Theresa May. But is there a deeper policy programme too? The place to start looking is Labour’s five missions – something Mr Starmer pushes relentlessly, but which is largely ignored by journalists.

What are the five missions? This is from the party’s website (though since withdrawn, doubtless because of its reference to the taxing of non-doms):

It is tempting to dismiss this as political guff. Firstly, it is more than five areas of policy focus – because the five missions come on top of the three “foundations” of economic stability, secure borders and strong defence – though to be fair these three areas are points of consensus between them and the Conservatives, at least in theory. Missions 3, 4 and 5 are underwhelming. They are limited by having to tie them to new taxes or waste reduction, where opportunities are limited and gimmicky; the non-dom tax has also been pre-empted by the Conservatives. The headline promises don’t begin to tackle the deep-seated problems with the NHS, law enforcement and education. The second mission is mysterious; a new energy company doesn’t do anything of itself – it’s what that company does that will make a difference. This isn’t much clearer when clicking through to the detail behind it. This promises an ambitious overhaul of the country’s infrastructure towards renewables, but with few specifics and no talk of costs. This makes somewhat more sense when tied to the much publicised £28bn a year investment programme, which was live when the Five Missions were first announced, but which has been scaled back since. Still, this mission does have one of the most senior members of the shadow cabinet behind it – Ed Miliband, the former party leader, who was energy minister in the last Labour government. As an organising principle of the next government this clearly represents progress from the half-hearted approach of the current government – who want to rest on the laurels of their achievements when pushed by the Lib Dems in the coalition years. Still, this is a difference of emphasis rather than overall strategy.

It is the first mission that is the most telling – and especially the promise to change planning rules. It is one of the very few areas where Sir Keir is happy to challenge floating voters – in contrast to the Conservatives, and even the Lib Dems, who seem in thrall to local NIMBYs. This makes a degree of sense, since Labour draws most of its strength from urban areas and people who rent their homes – who generally aren’t NIMBYs. It still looks quite brave, as strategically Labour need to keep pressure up on the “Blue Wall” of commuter seats. Alas there is almost no detail on the Labour website about how the party plans to approach this. If you click through, it is mostly whinging about Tory failure and wittering on about economic growth – pretty much political boilerplate. They talk of building 1.5 million homes (presumably 300,000 a year – the same as the Conservatives promised at the last election), and first time buyers “getting first dibs”. But it looks as if Labour in government could be quite brave here – and if they are, it could make a real difference. But it will only work if they break away from the developer-led model of house building that has dominated the last forty years or so of housing policy. Developers are too interested in realising profits on their land banks to do anything at pace. Labour will also have to work out how to expand the capacity of Britain’s construction industry. The Conservatives have failed in spite of much talk because these things are politically challenging. But if Labour frame their policy in terms of meeting the housing needs of working people and families then I suspect that the political costs will be manageable. I live in an area where NIMBYism is deeply embedded – but even here people admit that more houses need to be built. But it remains very easy to criticise current plans as being the wrong sort of houses in the wrong places – Labour needs to tackle this criticism head-on.

So Sir Keir is clearly signalling that tackling the housing shortage and transforming the country’s energy infrastructure will be points of focus. He is a managerial sort of person – so if he defines these objectives clearly he will follow them. This is in stark contrast to Boris Johnson, the prime minister in 2019, who was all bluff and not a serious programme manager. He set targets but wasted little thought on how they might be achieved. If Sir Keir’s government makes headway on overhauling the country’s energy infrastructure and addressing housing shortages, then it will be very consequential.

But the real problem for any objective assessment of Labour’s programme is that we have little idea about how it will tackle the quad of challenges of taxes, inflation, public services and immigration. These four issues will surely dominate the next government’s agenda, as they have for this one. Progress on each one of these four will undermine the other three. For example, if the government takes a strict line on immigration, in line with public opinion, and to help ease the housing crisis (provided that workers can be found in construction), then inflationary pressure will rise as lower skilled workers are paid more – after all that is one of the reasons given for lower immigration levels. Inflation leads to cost of living pressures and higher nominal interest rates – which raises the cost of mortgages which are already stretching people. To damp this down would require higher taxes and/or reduced spending on public services. Of course these dilemmas would ease if productivity-led economic growth increased the economy’s capacity – but productivity gains are liable to be lost in the headwinds of demographic change, the de-globalisation of trade and the increasing weight of the service economy.

But the Conservatives don’t have any answers to this quad either – so they will not place Labour under any serious pressure until they are in opposition, when magical thinking becomes a possibility again. The political parties are not being held to account. M

Meanwhile Sir Keir’s five missions give us a hint about the other priorities of a Labour government.

Britain’s electoral kaleidoscope makes its politics very unpredictable

Kaleidoscope by Rudolf Altmann published under Creative Commons licence

The kaleidoscope is an old-fashioned toy that I remember from my youth, which has long since been superseded by digital effects that don’t reproduce its magic. It was a cardboard tube that you looked down, with mirrors inside creating a symmetrical pattern. The magic came from small bits of coloured glass; as you twisted the end of the tube, gravity would force a realignment of these into an ever-changing series of patterns. I could not find an animation of this that did not involve an expensive subscription. You might be able to see this video (which is the real thing, not an animation) by Yuri Pomonev published by Adobe from this link. Digital kaleidoscope animations are plentiful, and they reproduce the mirror effect well enough, but they don’t attempt to replicate the effect of bits of coloured glass and gravity. And that is what my metaphor draws on.

Society is made up of a collection of individuals. We each have a point of view that is unique, shaped by our experiences and our own inner make-up. That applies to our politics, as it does to everything else. But we are social animals, and we like to line up with our fellow humans to feel a sense of togetherness and belonging. This creates political movements and collective alignments. But they are much more fragile than people suppose. As circumstances change, alignments break up and new ones are formed. Like the glass bits in a kaleidoscope.

Politicians often struggle with this. They try to simplify the complex world around them by investing in these temporary alignments, with themselves to at the centre, and imagining that they homogenous blocks that will endure. History is littered with examples. The British left thought this was happening in 2017, when Labour under Jeremy Corbyn did unexpectedly well in the general election, after tacking to the left, and raising turnout among younger voters, among others. They imagined themselves to be one step short winning outright – and many on the left retain this illusion. But instead there was a devastating realignment and in 2019 many of their former voters stayed at home, or voted for other parties, while other voters who had stayed at home in 2017 turned out in droves to vote Conservative. Labour crashed to a huge defeat. The kaleidoscope had turned.

We are now witnessing a similar delusion on the political right. The Conservative landslide in 2019 was interpreted as a popular, majority movement in favour of a suite of far-right policies, often referred to by people like me as “populism”. This was evidenced recently by the extraordinary launch of a new political faction called “Popular Conservativism”, who also want to be known “PopCons”. That this movement was led by Britain’s most unpopular leader of a major political party ever, Liz Truss, just goes to show that Ms Truss is a gift to political satire that just keeps on giving. The remarkable thing about this event was the attention it drew; the launch venue was packed, with many disappointed that there was no room for them. These Tory politicians feel that they are with touching distance of rebuilding a political movement which can give them a strong parliamentary majority.

What drives this view? The answer can be seen from the writings of Matt Godwin, the populist commentator who seems to provide the intellectual fuel for the modern political right. He produces plentiful polling evidence that disillusionment with politics is widespread, and especially evidenced by anger at high levels of immigration. His narrative is that these people are angry at a liberal minority that effectively controls state institutions, and is imposing its often delusional “luxury beliefs” on the rest of the nation. He suggests that support for anti-liberal policies is not just in the majority, but efficiently distributed in Britain’s electoral system, with liberal voters concentrated in a relatively small number of seats.

This narrative has weaknesses, but it is far from nonsense. Mr Goodwin is an academic and knows how to talk about evidence. That is one reason that he is required reading for the whole political spectrum. I have not yet mustered the courage to move beyond my free subscription to his Substack, he tends to talk of his paying subscribers as “supporters” of a political movement, and I think that, for all his useful insights, he is a malign force, acting to make the country’s difficult problems even harder to solve. His demonisation of the liberal elite is especially egregious, and is, in fact, another example of the kaleidoscope delusion. But my views count for little. The more important thing is that he has created a trap that Conservative politicians like Ms Truss have fallen into.

The trap is to think that the popular majority that Mr Goodwin identifies supports the full suite of nationalist-libertarian beliefs that these Tories espouse. These include not just lower migration and a rejection of multiculturalism, but the need for a low-tax, low-spending state, and a minimum of laws to restrain personal freedom. They were outraged by the application of a strict lockdown to combat the Covid-19 pandemic. They also espouse a powerful commercial sector, driving high levels of economic growth and the accumulation of wealth by a lucky minority. In fact the polling evidence points to strong support for regulation of behaviour deemed as antisocial (including the spreading of the covid virus); for strong state services, especially health and a relatively intrusive police force; and for welfare spending, as long as it for universal state pensions to people that have lived in the country most of their lives. Lower taxes are popular, but to the extent that there are trade-offs between taxes and critical public services, or inflation, this cannot be taken for granted. The majority are decidedly indifferent to such abstract ideas as economic growth, and have reservations about rampant commercialism, and the already wealthy getting wealthier still, especially if they are paying less taxes than poorer people. Green policies are ambiguous; Tory populist politicians tend to think that anti-carbon policies are the result of an alarmist conspiracy. A significant proportion of the public probably believe this too – but many more are worried about global warming; David Attenborough’s popularity goes well beyond the liberal 30% that Mr Goodwin demonises. But well-meaning regulations that impinge on people’s daily lives are a tough sell, and the populists may be onto something there.

The PopCons show little sign that they are really in touch with people at large, or that they are able to craft a programme that will allow them to recover their support anything like enough. Their competitors on the right, Reform UK, show even less sign they understand this, though that could change if their President, Nigel Farage, steps back into day-to-day control. But once the current government is consigned to history, there is certainly a chance that a populist coalition is reformed as the kaleidoscope turns again. Out of power, they will not be under such pressure to develop coherent policies, and in particular they will not need to choose between the holy trinity of low immigration, low taxes and low inflation – unless the public twigs that having all three is impossible. But they should give thought to how to appeal to younger voters without overly alienating older ones, as right-wing populists have managed to do in other countries. They might emphasise how high immigration is screwing up the housing market. They should probably talk less about Brexit. It might also help if they downplayed their nativism and criticism of multiculturalism – although these are themes that play well to younger voters in other countries.

But it is not just the political right that needs to worry about the kaleidoscope. Sir Keir Starmer’s Labour Party is polling very well but support is unenthusiastic. Once in power another twist could see its support collapse. If the political right fluff their opportunity, could a challenge emerge from the left? Mr Corbyn’s success in 2017 is perhaps a precedent – but his coalition included mainstream Labour, a lot of whom would stay loyal to a Labour government. Perhaps the rise of Syriza in Greece offers a better example; another case is Jean-Luc Mélenchon’s La France Insoumise movement, although this has failed to win power. Both left-wing movements were alliances of socialist and green parties, co-existing with significance far right populist movements. Both effectively destroyed the historical and centrist socialist parties.

This possibility should not be ruled out, led by a breakaway from Labour, if an appropriate and charismatic leader can be found. It faces two difficulties, however. One is that it probably needs to link up with the Green and perhaps even the Liberal Democratic parties – and these parties have recently being doing well by scooping up liberal-minded voters in the rural areas – to whom a far-left movement is anathema. However, both parties may sense an opportunity if Labour weakens once in power – as they did during the last Labour government. The second problem is that the core of such an electoral coalition is metropolitan voters, typically graduates and working in the public or third sectors – these voters are not distributed efficiently geographically, as conservative voters are: they are concentrated in the big cities (hence “metropolitan”), and the country’s electoral system punishes such concentration. The two issues are linked – as those new Green and Lib Dem voters are distributed in a complementary way. So the far left somehow needs to fuse with the liberal middle class. Perhaps that is not so fanciful – if a programme can be agreed with electoral reform at its heart.

A further possibility is for a liberal-led revival – although this is arguably a variation of the left-led one, as the potential electoral coalition has a strong overlap. The model for is Emmanuel Macron’s En Marche in France – a move which also grew out a lacklustre government of the centre-left. That would be one in the eye for Mr Goodwin – but a Labour government would have sink rapidly for that to be a possibility.

The bigger picture, though, is that Britain’s post-election politics is extremely unpredictable. Much will depend on whether and where capable political leaders emerge. They are lurking deep in the undergrowth at the moment. But the opportunities are palpable.

The 2024 election is over. The 2029 campaign has begun.

AI is already outcompeting humans in the production of bullshit. It’s clearly got a talent for the surreal too. The prompt for this Bing Image Creator gem was “Political parties campaigning in a British city in 2029”.

We will have to endure many more months of campaigning, but the result of the British general election due later this year is not in doubt. Political leaders, at least in the Labour and Conservative parties, are now turning to the election after that. That anyway is what their behaviour seems to reveal.

Of course some important things need to be resolved for 2024: will Labour have a small working majority, a landslide or be forced to work as a minority government (a coalition is most unlikely)? Will the SNP or the Liberal Democrats become the third-largest party in parliament? Who of the Conservative leaders in waiting will retain their seats? But there is no doubt that the Conservatives are shot and that Labour will win enough seats to form the next government. The harder the Tories try to change this outcome, the worse it gets for them.

This is an astonishing turn of events given the margin by which the Conservatives won the election in 2019. They had assembled an electoral coalition that harnessed the populist rage at liberal elites. Labour and the Lib Dems were on their knees, their electoral strategies in complete tatters; only the SNP were offering the Tories serious competition, and they were limited to the Scottish seats. What went wrong? First was incompetence. Boris Johnson the Conservative leader in 2019, was a brilliant campaigner for bringing desperate political constituencies together. But he was a useless prime minister, not least of whose failings was that he appointed mediocre or worse people to his cabinet (Nadine Dorris for heavens sake!), and kept changing them. The few points of light in his ministry (the rapid roll-out of covid vaccines; decisive support for Ukraine; ambitious commitment to climate change objectives, although with zero follow-through) required little actual political heft, and a bit of luck in the case of vaccines. Things didn’t get better after Mr Johnson’s departure, with the calamity of Liz Truss and hollowness of Rishi Sunak. Second was that the government had no answer to the populist policy trilemma: low migration, low taxes and low inflation. All three aren’t possible at the same time, and you need to decide which of them goes to the wall. Instead they pretended that the trilemma didn’t exist and failed on all three. And third, the electoral coalition had a weakness: it didn’t include younger people. This is not the case with similar movements in other countries (for example Donald Trump’s in America, or Marine Le Pen’s in France). This seems to be linked to two things, which are not so applicable to other countries: the way home prices have escalated out of reach for younger people, and the centrality of Brexit to the British populist narrative. Brexit never convinced many British younger voters, and events since have further tainted it. Remarkably, in Britain, the general rightward shift in people’s political alignment with aging isn’t happening. That means that the Tory coalition is weakening as older voters leave the electorate, and the coalition lacks strategic depth. See this analysis by John Burn-Murdoch in the Financial Times.

These problems run so deep that it is impossible for the Conservatives to fix them while still in government. The party needs to be radically reshaped, to freshen up their message with more appeal to younger voters, and to replace their current leadership with something much stronger. Many consider that this is impossible – but they said that about Labour after the 2019 election. Labour will come under pressure in government quickly, and the fate of Olaf Sholz’s government in Germany shows how quickly things can get rough for a centre-left government. They, too, will be faced by the tax-immigration-inflation trilemma. They have more ideas about how to tackle it than the current government, but it probably won’t be enough. There will be an opening for a populist party of the right, and with their organisational depth and networks, there is a much better chance of the Conservatives being that party than anybody else. Reform, their main competitor currently, may be doing well for now, but it is too much the personal creature of its founder, Nigel Farage, who is an able communicator but lacks the skills hold together a serious political party.

Conservative leaders seem to understand this. Potential new leaders are jockeying for position within the party, so that they will be able to hit the ground running after the next election. It is notable how most Tories aren’t even trying to sing the praises of their record in government, but spend their time criticising it. That even applied to Mr Sunak’s conference speech last October – when he sought to contrast his leadership with the previous thirty years. This is self-evidently a pitch for the election after next. The party is not seriously trying to win this time, because its knows the task is hopeless. They are instead trying to build the narrative for afterwards. Government polices are designed either to make political statements, or to limit any future labour government’s room for manoeuvre. The idea of tax cuts is sheer lunacy, and yet the government is determined to make them before it leaves office, predicated on impossible spending plans for the next government. Labour dare not challenge this. The Rwanda policy for relocating illegal migrants is predestined to fail, but it helps build a narrative of liberal elites and what the populist commentator Matt Goodwin calls their “luxury beliefs”.

The Labour leadership are waking up to the 2029 challenge, while desperate to keep its activists motivated for 2024. This best explains their recent ditching of a commitment to spend £28 billion a year on green investments. This was always a number plucked out of the air, and never fully backed by serious investment proposals. It was consciously following President Joe Biden’s radical investment plans after he won the presidency in 2020. That was then – but now inflation stalks the land, and that limits the headroom for such ambitions. Mr Biden’s policies exacerbated America’s inflation problems, and helped trash his reputation for economic competence amongst US electors. It was a promise a Labour government could not keep. Abandoning it will have little impact on this year’s campaigning – the Tory attack lines need only minor adjustment – but in 2029 Labour will want as few broken promises as possible.

Back in 2019, nobody thought the 2024 election would look like this. 2029 will be equally unpredictable. But the best guess is that there will be a strong populist challenge from the right to a stumbling Labour government. It makes sense that politicians now are preparing themselves for that challenge.

This image from the same prompt for Bing Image Creator is less surreal but shows how backward looking AI creativity is

Value for money starts with effectiveness

Bing Image Creator’s take on a value for money audit in progress. Mid-2020s technology serves us with 20th Century images…

Inflation stalks the modern economy, and the public really doesn’t like it. Meanwhile public services are under stress, demand for welfare rises, and taxes are as unpopular as ever. Increasing public spending when the economy’s supply side is stretched either leads to more inflation or more taxes. How to square the circle? More immigration? That isn’t very popular either, and puts housing under stress. Economic growth? But that means facing severe headwinds, from the popular demand for more leisure (aka retirement), to NIMBYism, and resistance to globalisation. Public policy is a tough gig these days if you want to solve problems rather than just stir up resentment. But one thing pretty much everybody can agree on is that it’s a good idea to get better value for public spending. But how?

Back in the 1980s when I was in accountancy training I read up about value for money auditing, which was coming into fashion then, as accountants sought to expand their remit. The textbook said that value for money should be viewed at three levels: the three Es. First, Effectiveness: is the spending achieving the results it was meant to? Second, Efficiency: could the outputs be achieved with fewer inputs? And third, Economy: could those inputs be bought at a lower cost? This remains an excellent framework for looking at value for money. As you progress along this chain, though, the scope of questioning gets narrower, and the questions become easier to answer. Which means that too often the analysis gravitates towards Economy before the question of Effectiveness has been properly dealt with. In his recent speech on value for money, the Head of the National Audit Office, Gareth Davies, picked five themes for the achievement of better value for money, focused on Efficiency and Economy – Effectiveness hardly got a look in. The five themes were: large infrastructure projects, asset management, procurement, digital transformation and reducing fraud, error and tax evasion.

At the Economy level, lets’s look at two issues in particular to get a feel for the difficulties of focus on the third E – pay and procurement. Pretty much every time some senior executive is asked for ideas on value for money, they come up with the idea of more centralised procurement, so that government can drive a hard bargain with suppliers. This is a common idea amongst leaders of big organisations, who need to keep promoting the idea that size brings benefits, and that their massive salaries are just a rounding adjustment in the great scheme of things. And it makes sense in the right context. When buying drugs from massive pharmaceutical companies, it is best to do this a big centralised way, as the NHS does, or otherwise the suppliers will take advantage. But there is a dark side. When I worked for a big multinational bank as a unit finance director, I remember being hauled into a meeting at head office alongside my counterparts in other parts of the organisation, in which we were instructed to refer all significant purchasing decisions to the centralised purchasing department. The message was delivered by the head of that department, who showed no evident expertise beyond bullying, and it was received in a silence that bespoke passive resistance. This was yet more bureaucracy that was going make getting things done even harder. I applied for voluntary redundancy not long after. One story in particular always comes to my mind to illustrate the problems of centralised procurement. A hospital bought surgical gloves in packs of 50 as part of its procurement deal, but the hospital had no system for dealing with partially used packs. It was commonplace for staff to take a pack from stores, extract what they needed and discard the rest.

Things aren’t any better at the level of public sector pay. The government, in cahoots with unions, likes to negotiate pay levels centrally. The Treasury is in control of the government side, and clearly feels that its monopoly buying power can be used to keep pay rates down. It is generally right, which is one reason that public services are wading through a series of disruptive strikes as employees try to improve their pay without leaving and getting a better paid job elsewhere (perhaps in a another part of public service…). The particular needs of particular services in particular places is lost. With high staff turnover generating lots of additional cost, as well as staff shortages affecting performance, the actual value for money of this approach is very much open to question, never mind the strikes. Economy defeats Efficiency and Effectiveness.

To make real progress on value for money, you really have to get to grips with that first E. But there are a number of problems. One of the bigger ones is that we have divided public services up into so many fiefdoms that the issues aren’t being seen in the round. Mental health, physical health, housing, benefits and criminal justice are very clearly bound up with each other – but they are usually the responsibility of separate agencies and strategic cooperation between them is beyond anybody’s pay grade. The further up the chain of need you can define effectiveness, the more impact you are likely to have. The best way to secure value for money in many services is to find ways of preventing people getting into trouble, and so keeping them out of hospitals, police stations, courts and so on. But that’s nobody’s job, and so the question doesn’t get asked. It’s easier to try to keep pay down and order surgical gloves in packs of 50.

I can think of two attempts to break this deadlock. In the last years of the last Labour government it was decided that multiple agencies should get to together to focus on the needs of individual children who were at risk. It was called “Team Around a Child”. Alas it wasn’t clear who was accountable, and it often meant lots of unproductive meetings – though I suspect this was still worth doing. The Conservative-Liberal Democrat coalition that replaced Labour swept the system away as part of their austerity policies. But the new Prime Minister, David Cameron, was struck by a particular insight that a small number of individuals (a few hundred, I think) were driving an utterly disproportionate amount of work as they kept circling the various agencies. What if somebody was to focus on their individual cases and try to resolve the issues instead of passing the parcel? He managed to get an initiative going on this, but it soon collapsed amid wrangles over accountability and measuring performance.

The Coalition, in fact, was chasing up a blind alley in its attempt to radically improve value for money. What it tried to do was redefine what needed to be done, split it into digestible chunks and put these out to tender to social enterprises and private businesses, linked to clear performance measures, with, in some cases, incentives to improve measured efficiency. This led to a big drive towards the third E, with rapid de-skilling in many areas, such as probation services and social work. The first E quickly collapsed. The system could not deal with complexity, and multi-agency coordination (which was a lot of what those sacked highly-skilled workers had been doing) went out of the window. Only the consultants won out.

There is a very important lesson to be drawn from this. Public sector work is very different from that of the private sector, and often needs to be approached in a very different way. The private sector can walk away from the hard cases, and often that is a critical business strategy. If the costs of dealing with a particular customer are too high, you tell them to go somewhere else. It is the other way round with public services. For them, if you deal with the difficult cases well, the rest falls into place. Walking away might solve a problem in the short term, but it creates a bigger one later. This requires a completely different way of looking at the problem.

I have had the opportunity of seeing this first hand as a school governor in primary schools – and English primary schools are one of the most effective and efficient public sector institutions around. There is a growing issue of dealing with children with special needs – arising from autism or dyslexia, for example. This does attract additional funding – after succeeding in an arduous hurdle race to document the needs and interventions required. Some schools (and it’s been a big issue here in rural East Sussex) deal with this by trying to avoid special needs children. Head teachers develop skills in identifying such children and encouraging them to go elsewhere. Sometimes the schools that took a stronger ethical line were overwhelmed with pupils discouraged elsewhere, suffered a deterioration in their reputation and were eventually forced to close, as parents took their children elsewhere. But the three headteachers it has been my privilege to work with (two of them in Lambeth, not here) have taken an entirely different attitude. They see it as their duty to help all the children that come to them, if they can, whatever their needs. It is very hard, but they get a huge amount of satisfaction from it. Indeed they feel that it helps all the children if multiple needs can be dealt with in the same class. These headteachers and the teams they lead could do so much more if they had more resources to play with.

The reason why state primary schools do so well is because they operate with the right balance of focus on effectiveness, accountability and high professional and ethical standards. This was not always so, and it has been a long journey over the last thirty years or so. It helps enormously that they are relatively small and self-contained. It also helps that it is self-evident that the service needs to focus on the needs of particular children, rather than the ever-changing cast of characters that pass through hospitals, law courts and so on. There is plenty more work to do, but the progress has been huge.

How to progress? I think you have to start with accountability. The problem currently is that people are often not accountable for the right things. I think it would help greatly if accountability was more focused on smaller geographical units, with political leaders in these smaller units being empowered to set the agendas of the various agencies in their areas. Of itself this does not guarantee progress: indeed the record of Britain’s devolved institutions is patchy at best. But it is hard to see how things can improve without it. We need to get used to the idea that effectiveness is about solving problems for people – rather than simply improving the throughput of particular services.

But the public service ethos is there, waiting to be tapped and directed constructively. New technological tools are available to help. I detect a lot of pessimism amongst political commentators that public services are doomed to gradually fail. That need not be the case – we just need to encourage and empower the right sort of leadership.

The Conservatives are unpopular because power has forced them to make hard choices

Bing Image Creator is much easier than trawling public domain photos, though it’s quite hard to realise your initial vision. This is supposed to represent the collapsing Conservative coalition – but it looks more robust than the reality

I have discovered Matt Goodwin. Of course I have long known about him, as he is frequently quoted in articles on British politics. He started as an objective-sounding commentator on the rise of British populism, and has been slowly morphing into an partisan advocate for it. But he still has a certain respect for evidence, unlike many of his fellow advocates. Which means that it is more useful to read and digest his output, and not dismiss it out of hand. Recently a friend quoted one of his Substack posts at length, and this was interesting enough for me to subscribe to his feed, though not enough to be a paid subscriber, which limits my access somewhat.

The post quoted talks about the death of the British Conservative Party. Most political commentators assume that the party will recover to some extent before the forthcoming General Election. This has been the pattern for pretty much for every governing party in Britain that had been lagging the opposition in the year before an election. Personally I am not so sure this time, and Mr Goodwin helps me to sustain that doubt – albeit that we have very different ideas about where this should lead. He thinks that nationalist populism will be reborn and triumphant in a new guise; I think that it will usher in a long period of mediocre Labour-led government.

Mr Goodwin’s argument is that the Conservatives won their substantial majority in December 2019 by “leaning in” to the populist trend evident elsewhere in the developed world, and mobilising a discontented group of voters angry at the level of immigration, the loss of national sovereignty and “woke” values infecting state institutions. These voters backed Brexit, and, he suggests, form a majority in 60-80% of parliamentary seats – evidenced, I suppose, by the referendum result in 2016 (whose parliamentary majority was much higher than its voting majority). This was main reason for the Tory victory, rather than the personality of the party leader at the time, Boris Johnson, or fear of the Labour leader, Jeremy Corbyn, he says. However, since that election, Mr Goodwin argues, the Conservative leadership have completely failed to live up to the expectations of these voters. Mr Johnson proved lazy and incompetent, filling his Cabinet with lacklustre loyalists. Subsequent leaders, Liz Truss and Rishi Sunak, have been out of sympathy with the populist project, in their different ways. Instead they listened to business lobbyists “addicted to cheap labour”, and to the liberal SW1 elite. The current government has no coherent ideology, and continues to be liberal on immigration in practice, if not in rhetoric. Whether this is a matter of their own policy preferences or sheer incompetence doesn’t really matter. The newly motivated 2019 voters have been betrayed, and will not be brought back to vote for the party, but will either stay at home or vote for the Reform party. It gets worse. The oncoming electoral disaster awaiting the party will wipe out all those MPs with populist sympathies, leaving the more liberal part of the coalition in charge – who will then blame the populists, and fail to rebuild the winning coalition. Or so Mr Goodwin suggests.

Mr Goodwin feels that the Tories have squandered an opportunity to drive forward a government true to the principles of low immigration and ultra-nationalism. It is worth developing that thought a little. The narrative prevalent in 2019 was that restricted immigration would boost wages for lower-skilled workers and enabled a redistribution towards many of the left-behind groups. This isn’t nonsense. A couple of years ago our local refuse collectors got a massive pay rise because restrictions to foreign lorry drivers had drastically increased pay for these workers. This was an example of this idea in action and working. So why has the government used the inflation crisis as an opportunity to squeeze public sector pay rather than try to draw in more local workers with more generous pay? It is not just businesses that are addicted to cheap immigrant labour, but public services are too. Generous public sector pay settlements in areas formerly reliant on immigrant labour would be a sign that the government believed their narrative. But, of course, it is in fact much harder than that.

I haven’t read much of Mr Goodwin’s work, but his narrative seems to be that a large majority of British voters are sympathetic to conservative values, especially over immigration and national sovereignty. These voters are being ignored or patronised by an “elite” of about 25% of the country, mainly university graduates, who have liberal values, and who control almost all the state institutions and big business. This dynamic is present across the Western world and is why populist movements of the right, from Donald Trump in the US to Marine Le Pen in France, and the AfD in Germany are gaining popularity. This narrative clearly touches on a grain of truth – but there are many problems with it.

Doubtless answers to polling questions and probing in focus groups can demonstrate majorities of the public supporting certain conservative views, and scepticism over immigration in particular. But turning these attitudes into both an election-winning coalition of voters, and keeping faith with them once in power, is a much more complicated business than Mr Goodwin allows. Those majorities can vanish very easily once the harder choices behind them are exposed. The 2016 Brexit referendum majority was a small one; populists have repeatedly fallen at the last hurdle in Europe – and their victories often aren’t what they seem. British media often report that the populist Geert Wilders “won” last year’s election in the Netherlands – but what they mean is that his party received more votes than any other. It was still less than 25% of the total vote, scarcely more than the serial British losers, the Liberal Democrats, get in a good year. Other winners, such as the populist coalition led by Giorgia Meloni in Italy only succeeded by making some major compromises to establishment politics – notably by dropping opposition to the Euro.

A particular part of the problem is that a critical part of the conservative coalition is formed by the mass affluent – people with a significant stake in financial assets such as property, pension schemes and other investments. Property investment are typically financed by mortgages. Shortly after the Brexit referendum I attended an event put on by an investment manager for the mass affluent (I too am part of this group, and I was one of their clients); I was taken aback that the overwhelming majority of people in the audience were pro-Brexit. These people were not the left-behind working classes of the Brexit legend. The mass affluent, and especially those with mortgages, have a huge stake in financial stability. Fulfilling the anti-immigration dream of rising wages for lower-skilled workers means letting inflation rip, at least in the short term. It is a wealth redistribution exercise, and inflation is one of the classic mechanisms by which such redistribution takes place. People imagine that a tiny mega-rich minority take the strain of wealth redistribution – in fact the pain goes much, much wider. Conservatives may be insouciant about the effect of conservative policies on economic growth – but that is largely because they assume that somebody else will face the pain. In particular high inflation leads to higher nominal interest rates, and that can cause the dreams of newer property owners to collapse, as their mortgage payments become unaffordable, and their property values plunge into negative equity. And those without mortgages will still see the real value of their assets sinking. High inflation is one of the reasons that Americans think their economy is in terrible shape, and blame President Biden for it – in spite of otherwise very good statistics. A conservative government can’t afford to let inflation get out of hand. Hence the tough line the present government is taking on public sector pay and the softer line on immigration.

In these circumstances it is hardly surprising that the Conservatives fell apart after 2019. They needed a strong dose of economic good luck to come anywhere close to fulfilling their promises. Instead they had the opposite – the Covid pandemic followed by the escalation in the costs of fossil fuels. Even a competent government would have found itself having to make impossible choices. It was Donald Trump’s good luck that he lost power in 2020, before the inflation surge took off. The main reason why Britain’s Conservatives are doing so badly while other conservative movements are doing so much better is that they are in power and the others aren’t, and therefore they cannot escape the blame for the economic mess. Their incompetence just compounds the problem.

The problem for all conservative populist movements is how to reconcile their hostility to immigration and free trade, and worship of national sovereignty, with maintaining a financially stable economy. This is not impossible – the Liberal Democratic Party in Japan has succeeded in just such an accomplishment – but it requires the cooption of those hated elites, who bring with them the administrative competence required, and not hounding them out of government. The Conservatives after Brexit did have an opportunity, but by selecting Boris Johnson as their leader in 2019, they threw away that chance. One of his first moves was expel almost all his most experienced MPs who had demonstrated administrative competence. He demanded that loyalty was the only prerequisite for ministerial office.

This is yet another example of a wider political lesson. Electoral success is gained by stitching together coalitions of voters who can agree on some things, but who also have conflicting vested interests. The creation of these coalitions, and holding them together in power is where the skills of political leadership lie. Elements of a coalition will aways end up feeling let down or taken for granted. This has happened with unusual speed to the Conservatives after 2019.

What of the future? Mr Goodwin is wrong to suggest (as I think he does) that a stable electoral coalition can be built on a radical populist base, i.e. based on very strict limits to immigration. But what is surely true is that no stable governing coalition can be put together without the support of conservative voters. The current Labour leadership clearly understands this, though many of its activists do not.

What of the Conservative Party? The odds are surely that it will reform and survive after losing the next election. A radical rival, based on the Reform Party perhaps, would undermine it but not destroy it, unless a particularly skilled leader emerges from the shadows that understands that it must ultimately make compromises. That leader is not Nigel Farage, Reform’s most successful leader, who effectively owns Reform. And even if the party goes down to a heavy defeat, unseating its most radical MPs, I don’t see that the rump party will reject radicalism. Too many of its centrist denizens have left, and its activist base remains radical. A long period in the wilderness beckons. Probably.

That bodes well for Labour, in spite of its evident mediocrity. But it too could be ruined by economic bad luck. There may yet be an opportunity for the 2019 conservative coalition to come back quicker than anybody expects. Opposition is much easier than government, after all.

The Post Office scandal shows the limits of nationalisation

More fun from the Bing image creator. Post Office management about to conduct a branch audit. Actually I told Bing to portray gangsters…

The big British political news of 2024 so far has been the scandal of the Post Office’s persecution of sub-postmasters from the late 1990s on, based on erroneous reports from its Horizon system. The scandal itself wasn’t news; it had been making a number of people’s blood boil for years (including mine), but no politician in government felt the need to deal with it with any urgency, and all tried to manage it through the organisation’s dysfunctional management. An inquiry had been set up – the classic British method for kicking institutional problems into the long grass. But a television drama over the Christmas holiday caught the public imagination, and at last pushed it to the level of public attention it has deserved for years.

I personally still don’t understand what went wrong. As an accountant who has had quite a bit of experience unravelling knotty problems, I have not been able to get any sort of clarity. The drama did help a bit here – as the previous press reporting was extremely uninformative as to what the problem with the system actually was. Just what were the deficits that the sub-postmasters were being asked to fund? Usually these should fall into one of three categories: missing sales, false expenses, or missing assets. This doesn’t seem to be any of these – but just muddle. The Horizon system doesn’t seem to have been properly integrated with the accounting systems, and appears to have lacked basic accounting controls. This is not so uncommon with systems designed by computer programmers rather than accountants. But the system does not appear to have been adequately managed or audited by the Post Office’s accountants. The suggestion made by one of the characters in the drama was that the differences were parked in a suspense account, which was then not properly interrogated or investigated. That may not make much sense to my readers, but it does to me. As an auditor most of the big errors I have found arise from pulling apart suspense accounts.

Meanwhile responsibility for managing the problem seems to have been split between senior managers unable to grasp the detail, and junior auditors not given a wide enough scope to explore what the problems actually were – they were just hired bullies. There was a missing middle. But the senior managers should have asked questions as problems started to emerge; as should the investigators. Instead they swept the problems under the carpet, assuming that people raising concerns were just trouble-makers. People have a natural tendency to compartmentalise their lives, and set boundaries to the sort of things they worry about. This is one of the leading causes of organisational dysfunction as those boundaries always leave gaps (as well as overlaps). Still, senior managers should be alive to those sorts of risks and much of the Post Office managers’ behaviour was clearly unethical. Injustice to individuals should not be sacrificed to maintaining an organisation’s reputation. The propagation of untruths is not quite the black and white issue we might like to think – but the Post Office managers clearly went into the black zone far too often.

But such a lack of ethics in senior management is extremely common. This transcends time (think of the Dreyfus scandal in the 19th Century), and culture (problems are at least as bad in China and India, for example; would you believe what an Iranian government spokesman said?). It affects all types of organisation: government, commercial and religious (think of child abuse scandals in various churches). Having said that, I haven’t seen it, or not in extreme, in any of the commercial, public or political organisations I have worked with. There is always a defensive first reaction to bad news; but what happens next is more telling, and here things were better. But those organisations have almost all been relatively small; I have worked in two multinational groups, however, although in one of there were ethical questions haunting senior executives, they didn’t last long. That’s not to say these organisations were perfect – it’s just to say that I didn’t witness the extremes evident in the Post Office, and often witnessed its opposite – the owning up to problems and mistakes.

But what tilts an organisation towards ethical conduct? Prevailing culture in society clearly helps. Most developed countries have a bit of a head start there. I don’t think there is anything special about Western culture here, even though it generally prevails there. All cultures know what strong ethical standards are (think of Confucianism in China, for example). The more ethical conduct becomes the expected norm in a society, the better. Accountability is clearly critical. If it is easy to sweep things under the carpet, and if you are confident that you will never be scrutinised aggressively, then the temptation to do so is often irresistible. It is easy to persuade yourself that you are protecting something more important, and that it is all for the greater good. But accountability comes with a certain precariousness amongst senior leadership; the more entrenched, the less accountable. That precariousness was visible in all the organisations I have worked for. But in the Post Office it seems to have been lacking. It was a publicly owned organisation, accountable to, in theory, everybody but in fact nobody. It had extraordinary control over the information required to make judgements. The politicians to whom they were nominally accountable are good at some types of scrutiny, but not the oversight of large, complex organisations, and still less the operation of their IT and accounting systems.

This is a huge problem with all nationalised industries. Being accountable is to a large extent a choice made by the people running those organisations. I have witnessed this at first hand as a school governor. Fortunately all the headteachers I have worked with thought accountability was a good thing, and accepted scrutiny, even when it got annoying. But I have seen cases of schools where this is not the case, and where the governors were bypassed and flanneled – and looked woefully ineffective. This is less of problem with commercial entities, because they are judged on commercial success, which is hard to fake, or not for long. Public organisations seem to have a degree of political protection that most commercial organisations do not.

This is a problem for the sort of left-wing narrative that suggests that capitalism has failed, and that the solution to any given market failure, especially in public utilities, is nationalisation. They are often right to point out the failures of commercial organisations, such as Britain’s water or rail companies. They are wrong if they think that nationalised organisations will be any better. They are often worse. Water companies are accused of milking their assets to pay fat dividends to investors instead of investing in infrastructure. And yet tight public Treasury management has a similar practical effect, with holders of public debt being the beneficiaries. Perhaps the division of the spoils would be fairer, but it won’t stop the under-investment. The nationalisation of the water companies was undertaken in the first place to increase the level of investment – which it did.

There is no easy answer. Public services are usually natural monopolies, which often bring out the worst in capitalism. But there is no fool-proof way to make public organisations properly accountable.The answer is surely some sort of messy mix private contracts, regulation and intelligent structure.

Meanwhile, Post Office culture looks so rotten that it surely needs to be wound up and replaced by something with better organisational design and stronger governance.

Britain is not Japan. Abenomics would stoke inflation

I asked Bing Image Creator to give me a picture of shoppers in an English town buying foreign goods. This is one of the four results. Me neither.

Somewhere over the Christmas holiday I heard on BBC Radio 4 a very authoritative gentleman suggesting that Britain should copy Japan’s economic policies. Alas I didn’t catch who it was, and can’t trace him. I think he was on the World at One, but these days the BBC doesn’t let you search past programmes for particular items. Anyway, it is an excellent illustration of the point that I was making about the British economy a couple of posts ago. It’s worth explaining why he is so wrong. I suspected that the gentleman was a graduate of PPE at Oxford, like former Prime Minister Liz Truss: a degree course that equips its subjects to sound plausible when talking about economic policy, without necessarily grasping even the basics of the subject. Ms Truss did not seem to realise that reducing inflation meant limiting demand.

The particular set of Japanese policies the interviewee referred to dates from a number of years back, and was advocated by the late Japanese Prime Minister Shinzo Abe, and is often referred to as Abenomics. He himself called his approach as the “three arrows”. This was based on the ancient wisdom that while it is easy to break the shaft of a single arrow, it is hard to break the shafts of three arrows bound together. His three arrows were monetary policy (ultra low interest rates supported by Quantitive Easing (QE), i.e. the buying of government bonds by the central bank), fiscal policy (extensive infrastructure investment funded by budget deficits) and supply-side reforms. All these policies were mutually reinforcing. Supply side reforms were required to expand the capacity of the economy, fiscal policy to ensure that aggregate demand met this this expanded capacity, while loose monetary policy made the large government budget deficits implied by this sustainable. Without all three strands of policy, there would be failure. Japan had endured many years of economic stagnation, and Abenomics was an elegant and coherent approach to this – more than can be said for British policy economic policy since 2010, when the different policy levers often seemed to work against each other.

The interviewee did advocate one point of departure from Abenomics. When explaining supply side reforms, he advocated three “Is”. The first of these was “investment” – I can’t remember what the other two were (perhaps “institutions” was another). Investment was not a focus of Abenomics. Fiscal policy was directed at public investment, admittedly, but there was little economic coherence to this – it. was mostly about the dispensation of political favours (“bridges to nowhere”) – and the desired economic impact was to raise aggregate demand, not to expand economic capacity. Supply side reforms were aimed at non-financial barriers that were holding the economy back, such as the low rate of employment of women, and not investment.

So what’s wrong with all this in the British context, skating over its mediocre results in Japan itself? Japan was, and is, in a very different economic place. It has a robust industrial base which routinely delivers export surpluses, in spite of having to import raw materials and energy. It has a high rate of domestic savings (in other words domestic consumption is much less than income). Investment is plentiful. But it has all manner of market inefficiencies due to conservative business practices and cultural mores (for example severe prejudice against working women). Contrast this with Britain: its industrial base is comparatively weak, delivering no trade surplus so far this century; the private savings rate is low; investment is weak; but business practices, regulations and social mores are as conducive to economic efficiency as they are anywhere in the world – with a high rate of overall employment, for example. Both countries share grim demographic trends, with a reducing ratio of people of working age – though Britain has been mitigating this with immigration on a scale that Japan doesn’t.

What ails Britain? Pretty much everybody seems to agree that the country lags other developed countries, though whether you compare with America or with Europe depends on your politics. Apart from the lacklustre growth record since 2007, the main evidence is poor comparative statistics on productivity. A lot of the analysis is very shallow, however. Even many academic economists who should know better are susceptible to the fallacy of composition. While they quickly recognise that national decisions on budgeting and demand management are not the sum of individual household budgets – and what would be right for a household would not be right for the country as a whole – they fail to see the same thing on the supply side. They often talk of the country’s production side as if it is a single business (“UK plc”), but that is grossly misleading.

For a start, the supply side of the economy is very heterogeneous. Computer factories are highly productive; hospitals are the opposite. It doesn’t follow that we would be better off if we closed our hospitals and replaced them with computer factories. Furthermore, if individual businesses become more efficient, it also does not follow that this translates into the whole economy doing so. That depends on what those individual businesses do with their extra efficiency. They might expand production, perhaps helping to expand the economy as a whole – provided that there is latent demand for their product. If this happens there may be a virtuous circle that helps the whole economy grow. Or they might just keep production levels steady and sack some workers, paying extra dividends to investors who use it to invest in other businesses. Or the directors may pay themselves more in bonuses to spend on personal trainers, luxury goods, and other things where low productivity is the essence. Overall there is a well-established pattern, however, referred to by economists as the Baumol effect. As productivity advances in some sectors of the economy, lower productivity industries come to occupy a higher proportion of the economy as a whole. The balance of wealth creation (highly productive industry) to wealth realisation (the part of the economy that prioritises self-actualisation and typically has a high human content – i.e. low productivity) shifts towards the latter. What’s the point of being rich if you can’t access decent healthcare, drive around in Bentleys or eat organic food?

The problem for Britain is that the overall mix of its economy is out of kilter. It imports a disproportionate share of the goods and services where productivity is very high, while producing too much of the goods and (mainly) services that are critical to quality of life, but where productivity is low, and export potential is much weaker. The answer isn’t to try and raise the productivity of the latter goods, as this will tend to kill the quality. It into rebalance the production side of the economy towards high productivity goods that can be exported. There is another way of looking at this problem: it is that British consumption is too high. We are living beyond our means, importing more than we export. Consuming less would give the supply side of the economy the chance to rebalance in favour of exports. This is the opposite problem to Japan, where aggregate demand tends to be too low for economic efficiency. In Britain there needs be more private saving and more investment. In Japan it is the opposite.

So Abenomics would not work here. Looser fiscal policy would push us into inflation. Loose monetary policy would simply build speculative bubbles. Supply side reform would not make enough difference, though doubtless there are some useful things to do.

But the interviewee was right about one thing: the key to progress in Britain is greatly increased investment. Any move to highly productive, high exporting businesses will entail substantial investment. What are these businesses? Basic economics teaches us that these should focus on areas where the country has a comparative advantage – but that is a very slippery thing to identify. We shouldn’t be chasing a past golden age, or trying to directly copy other successful economies. If you care to look, there are areas of promise – for example life sciences, especially if the country can tap into NHS patient data. The government, at least does seem to appreciate this – it talks about building the industries of the future. But it struggles to deliver the right economic conditions to generate the level of investment required. There are not enough private savings to fund the business investment required; too much of what there is disappears into government debt – pushed that way by conservative regulation.

This points to a different three arrows to those advocated by Mr Abe. We need to incentivise more equity investment in businesses with export potential – especially if these are based outside London and the South East. Much of this must be led locally by regional and local governments, able to raise their own revenues. Pension regulations need to be overhauled. Second we need a much tighter fiscal policy in order to damp down private demand and keep inflation in check – this will consist of higher taxes and more efficient government (e.g. coherent public services that solve problems rather than passing the buck). If the public won’t save more of their own volition, then the enforced saving of higher taxes has to do the job. This would then give the government space to kick-start investment and tackle bottlenecks. Third monetary policy should primarily be focused on creating a healthy climate for savers, and ensuring financial stability. That will surely mean higher interest rates.

No politicians can advocate steps two and three of this programme. But the first part is near political consensus – and we could find that it drags fiscal and monetary policy in its wake. British policy usually advances by muddle. It is possible that the country will muddle along in the right direction. That is the best we can hope for.

The forces of darkness are weaker than they seem

The fall of the Berlin Wall in 1989 was not predicted.
Picture:Raphaël Thiémard from Belgium., CC BY-SA 2.0, via Wikimedia Commons

My last post was a bit gloomy – and indeed there is a lot to be gloomy about at the end of 2023. But you can overdo it, as amid the darkness there is hope. That hope does seem rather remote, but we must hold onto it.

What I want to reflect on today is something that I will call liberal capitalism, a system that is often referred to as liberal democracy – but I wish to emphasise that capitalism is at its heart. It is a system based on democracy, tolerance, respect for individual rights, a system of law and justice separated from political control, freedom of speech and news media, free commerce, and the private ownership of capital in a mixed economy. The system is often referred to as Western, but there is nothing inherently Western about it – and indeed Japan, South Korea and Taiwan have all found their own versions.

Liberal capitalism is under siege. The Chinese and Russian political leaderships in particular, having started an embrace of the system, are turning hostile. They point to the hypocrisy of Western governments and politicians, and resent the way that they, or we, espouse universal values and seek to undermine systems that are perceived to be corrupt or oppressive. Chinese leaders point to the chaotic ways and allegedly short-termist policies of democratic systems. Russian ones prefer to talk about the erosion of traditional values – by which they mean the advance of such things as gay rights, feminism and multiculturalism – although the Chinese leadership has similar views.

The Chinese and Russian leaderships are not alone; there is also an Islamist line of attack – though there is nothing inherently un-Islamic about liberal capitalism, once you have resolved the issue of debt and interest (where, incidentally, I have much sympathy with Islamic scholars – they have spotted a real moral problem). Iran is the leading state to push this line of thinking, as do a number of violent, and some non-violent, non-state movements. It differs from the Chinese and Russian critiques in propounding universal values, and very much seeking to interfere in the political systems of others (including those of Russia and China, as it happens). Beyond China, Russia and Iran, there are any number of states who reject critical aspects of the liberal capitalist systems, leading to criticism and worse from Western states.

And there is opposition to liberal capitalism from within liberal capitalist states. I frequently read from leftist authors that capitalism has failed, and needs to be replaced; others equate liberal capitalism with colonialism. And on the right populists say that the superstructure of democracy and the independent judiciary is simply a plot by liberal “elites” to impose their values on an unwilling majority. These populists have an admiration for the Russian system, with its espousal of traditional values, buttressed by a corrupt elite (though they aren’t explicit about the corruption, of course).

Often it seems as if the forces of opposition are winning. This partly stems from the way democracy and a free press works. Threats and danger make for more saleable publicity than optimism, which in any case reeks of complacency. Right up to the fall of the Berlin Wall you could read commentary that the USSR was winning the Cold War because Western democracies didn’t have the spine to resist. Even after the fall of the Wall, many westerners could not believe that the USSR was so rotten that it was fated to collapse under its own weight. But in 2023 there are indeed many worrying developments, and liberal capitalism seems to be on the retreat in many places. Across the world many accept Russia’s assault on Ukraine with a shrug; anti-democratic coups are becoming the norm in Africa; China’s diplomatic influence has grown immensely; populists (though not leftists) are doing well electorally in liberal capitalist systems.

But look again at the forces of darkness. What is it that they are offering? China and Russia celebrated the fall of the Western-backed regime in Afghanistan. But have they offered to replace the flow of Western aid? And as American interests come under threat in the Middle East, China and Russia are mere onlookers, their recent diplomatic advances proving to be weightless. Many states have welcomed the political neutrality of Chinese aid, but find this is linked to the use of Chinese contractors, and that Chinese creditors are less flexible than Western ones when things start to go awry. Debt forgiveness in developing countries has now become almost impossible due to Chinese obstruction. Russia extracts a heavy price for its aid, with ruling elites required to pay off the support of Russian thuggery with corrupt contracts for natural resources. Russia and Iran do not look like good places to live, though better than North Korea. China offers something a bit more appealing, but the costs are becoming increasingly apparent, as the state has to expend more and more effort in suppressing dissent, while managing a faltering economy and a shrinking workforce. And a closer examination of the Chinese system reveals striking degrees of racism, and at the fringes of its empire, such as in Inner Mongolia, Tibet and Xinjiang, it looks distinctly colonialist – not that you will hear Western leftists complaining.

Also on closer examination, ideas of political non-interference proposed by China and Russia turn out to be not quite what they seem. Russia has a very flexible idea of what the boundaries of its state actually are. The Chinese are slightly better, but not much. The idea of self-determination for the peoples of the empire’s further reaches is treasonous – even though these places were once outside its borders; the country has laid claim to the South China Sea without any internationally recognised legal basis. And there is Taiwan. Neither China nor Russia hesitates to interfere in other states’ affairs if they feel their interests can be advanced that way. Their covert operations are massive. For them it is simply enough to deny anything that is inconvenient. Western states may not be good at respecting the truth in their pronouncements; non-Western ones are much worse.

Liberal capitalism’s internal critics are no better. They are better at stoking feelings of victimhood than of offering constructive alternatives. Leftists may claim that capitalism has failed, but their alternative ideas are weak at best. On the few occasions they have been tried in practice, they have collapsed into economic weakness and political despotism, and, eventually to cronyism. The right evokes an unachievable past golden age; the closer they get to actual power, the weaker their ideas look.

Against all this the liberal capitalist system has much to offer. No other economic system has produced such serious advances in popular wellbeing, or driven back poverty so far. China’s highly impressive impressive economic achievements precisely follow its adoption of liberal capitalist policies. As it turns against those policies, its advances flag. Supporters of liberal capitalism say that you can’t cherry-pick aspects of it and expect to succeed in the long term. China has sought to contradict this by adopting the economic side of liberal capitalism, while standing against tis political one. This is at last being tested. Russia has also shown some economic success from its adoption of liberal capitalist economics, although the exploitation of natural resources has an added dimension there. It has a largely capitalist economic system, but it has institutionalised cronyism and corruption. This may prove attractive to other country’s ruling elites, such as in Victor Orban’s Hungary, but this system only works as long as there is enough meat on the carcass to go round. It does not maximise economic efficiency and is doomed to eventual decline.

Liberal capitalism does face important challenges though. Charges of hypocrisy made by its critics are often well-founded. But for these critics, or the state ones anyway, their point is that we are all hypocrites, so let us be openly cynical in the way we advance our interests; that is not a message of hope. They may complain that Western support for Israel is inconsistent with its attitude to Ukraine – but nobody else is offering more than token support to the Palestinians, who will receive more external aid from Western countries than they ever will from China, Russia or Iran – though the Gulf Arabs will hopefully contribute even more. The rationale for when Western states intervene militarily, or with military aid, and when they don’t is far from clear. The comparison of Ukraine with Palestine is a deeply flawed one; that with Iraq in 2003 is less so. The West’s universalist rhetoric is tying it in knots (non-Western liberal capitalists tend not to make this mistake). I believe this needs to be tempered with a proximity principle, which shows why Ukraine is different from Syria, say. Alas that invites many questions of definition.

There are more substantive challenges. One is economic. Liberal capitalism was once associated with high economic growth, but in the more developed countries this has come to an end. This is not a failure of the system, as some suggest, but a feature. Liberal capitalism delivers to its people what they want as revealed by their consumer and democratic choices. These choices now favour lower growth, and that is exactly what the system is delivering. The priority now is to advance wellbeing through the use of technology and scientific knowledge without this being tied to ever-increasing consumption. Liberal capitalism can do this, though its political leaders have for the most part failed to see how the game has changed. Environmental sustainability, including the need to be carbon-negative, is another, more widely recognised challenge. Migration and cultural integration is also widely recognised as an issue. In less developed countries adopting the system, law and order and the rise of gang culture is a further challenge for the restrained systems of law-enforcement associated with liberal capitalism.

But in the end people will recognise that liberal capitalism offers the only real path to achieving a better world – the sort of place in which most people want to live. Because they can’t deliver this, its opponents are weaker than they look – like the USSR in the Cold War.