The English problem

The Scottish SNP government’s pursuit of a referendum on independence has created a constitutional crisis for the UK.  But the real problem is England, not Scotland.

I don’t walk the corridors of power in Westminster, or mix with the great and the good who take in hand the the country’s affairs as an oblivious public goes about its daily life.  But I imagine that something close to panic is taking hold there.  Scotland is moving inexorably towards independence from the UK, while compromise proposals seem to raise more awkward questions than they answer.

The humiliation that beckons for these people – senior civil servants and senior Conservative and Labour party types that I will now refer to as “the British establishment”- can scarcely be imagined.  We get a flavour of it from some of the awkward questions that would be posed by Scotland’s exit from the union.  From the seemingly trivial – like what do we call the country that is left behind?  “Britain” won’t work any more, since this geographical term refers to the whole island; the “United Kingdom” will no longer be true (neither Wales nor Northern Ireland are kingdoms, unlike Scotland) and has no adjective to describe its citizens; “England” does not cover Wales and Northern Ireland.  And then there are more serious questions, like what future does the country’s nuclear deterrent have?

Scotland is a core part of the country’s historical identity.  How on Earth to explain its departure?  There is no precedent, outside the break up of colonial empires and or the demise of the multinational Habsburg and Soviet empires.  What do the British establishment tell their opposite numbers in Germany, Spain, Canada, and so on, countries that have all managed a diversity of identity within their borders of greater historical significance?  The loss of international prestige would be enormous; instead of being up there with Germany and France, the country will be jostling with Spain and Poland.  All this humiliation will be felt most acutely by the Conservatives, who have a romantic attachment to the country’s past greatness.  Where will it fit in Michael Gove’s new history curriculum? David Cameron will not want to go down in history as the Prime Minister who lost Scotland.

But such a prospect is real enough.  The usual levers of power seem to be ineffective.  With the AV referendum – the most recent perceived threat to the British establishment – the establishment could rustle up strong support from Tory grassroots and donors, plus a more or less united press, while neutralising the Labour Party.  None of this will work north of the border, where the British establishment has been comprehensively outmanoeuvred.

To make matters worse, there seems to be no, establishment friendly middle way.  There is the idea of “Devo-max” – where Scotland would take to itself full taxation powers, leaving defence and foreign affairs to London…a bit like Gibraltar.  Except that the Scots will want a say in who the British Prime Minster, Foreign Secretary and Defence Secretary are and the policies they follow.  But surely it is unacceptable that Scottish MPs could still retain their say over English domestic policy?  This problem has troubled constitutional experts since Irish Home Rule was mooted in the 19th century, and no acceptable solution has been found.

The British constitution is failing, with generations of complacency from the British establishment at last taking its toll.  The problem is England.  The logical, time-tested, way for the country to deal with the Scots desire for more autonomy is through a federation.  There would be a constitutionally constrained federal government, with highly autonomous states operating as a tier beneath.  But in the UK England is just too big to be treated as a single state in a structure like this.  Either it is so powerful that it can force through whatever ever it likes on the other countries, so no real advance; or the tiddler states of Scotland, Wales and Northern Ireland are given such powers over the whole that the English will resent their right of veto.  I can’t think of any successful federation that is so lopsided.  Russia and the Soviet Union had a similar problem, which could not be resolved democratically.

So what about breaking up England into a series of regional states?  But this reverses hundreds of years of systematic centralisation.  Coherent regional identities either don’t cover swathes of the country (where does Northampton fit?), or are too small (Cornwall).  London, Yorkshire and East Anglia may fit the bill – but it gets much more difficult after that.  Worse than that is the total disdain with with British institutions treat the idea of English regionalism, from the Westminster establishment to the popular media.  The English public is indifferent to hostile.  John Prescott’s attempt to push regionalism in the last government was crushed when a referendum to set up an elected assembly in the North was voted down even more overwhelmingly in a referendum than was the Alternative Vote.

And yet the United Kingdom is crying out for a rebalancing of powers between different levels of government, including English regions – and such a rebalancing, across the whole country, is the only way to deal securely with the Scottish demand for autonomy.  It would benefit England too, but most English won’t have it, and that is the real problem.  The British establishment has suppressed sensible debate about the topic for so long that it seems too late to start it now.  The Scots are miles ahead.

The best way of dealing with the SNP’s drive for independence would be to offer a constitutional convention across the whole of the UK, and to ask the Scots to wait for its results before having their referendum.  This would at last allow the unionist side to take the initiative.  This would be a good idea for the Liberal Democrats to take up – since it closely follows the party’s existing policy.  But I can’t see the Conservatives biting.  The English simply aren’t ready for a mature constitutional debate.

If the British establishment are humiliated, as increasingly seems likely, they will only have themselves to blame.

Ballsed up – Labour’s economic narrative implodes

Labour’s economic narrative was always a bit of a balancing act, and now it is coming apart.  It is tempting to blame the messengers (Ed Balls and Ed Miliband), but its own contradictions are the real problem.

But what is this narrative?  It is rarely reported sympathetically, so confusion is widespread.  This is how I understand it:

  1. The Labour government’s careful middle way between free markets and social democratic intervention rewarded Britain with a prolonged period of economic growth, and growth too in public services.  Contrary to what political opponents and a hostile media claim, this was perfectly sustainable.  Indeed by 2007 Labour had won over most of its critics and the Tories were saying that they would do much the same.
  2. But in 2008 it collided with a global economic storm, originating in foolish economic policies elsewhere in the world, and misguided financial management, mainly in America.  Since full participation in globalisation was part of Labour’s economic policy, and had delivered enormous benefits, Britain could not but be affected.  After the first shock, sensible economic policies under Gordon Brown were delivering a sustained recovery.  These policies were based on maintaining aggregate demand in the economy, in particular by sustaining government expenditure, with only a gradual, carefully measured slow down.
  3. This was all undone by the coming to power of the Coalition in 2010.  They panicked (or else were driven by a malign wish to undo Labour’s good works) and cut back too far, too soon.  This has set off the classic Keynesian doom loop, where reduced government expenditure reduces private demand, causing further hardship.  There are any number of distinguished economists who point out the folly of excessive austerity (Paul Krugman being a favourite).
  4. The Coalition policy is failing, as growth has tailed off and government forecast after forecast is being missed.  This is doing long-term and lasting damage to the economy.
  5. Because of this long term damage, by the time we reach 2015 it will not be so easy to pump things back up again to where they were before.  As a result, Labour cannot promise to restore the cuts – even as we now declare they are foolish.

It is not my point today to pick holes in the economic logic of this.  Both Mr Balls and Mr Miliband are economically literate, and we have every reason to believe that they believe what they are saying.  It is not falling apart in terms of economic logic – and the likely future turn of events is not likely to undermine it.  The only thing that would be a problem for them is if the economy should start to pick up some serious speed.  Nobody believes that it will.

The problem is the politics.  Labour have been trying to achieve a tricky balancing act here.     The dismantling of so much of Labour’s legacy by the Coalition has sent their supporters into a frenzy of anger.  Labour needs to harness this anger to sustain its political “ground war” – the hard graft of daily political advance, for the most part achieved by unpaid volunteers, even if the wider public seems more sceptical.  This angry brigade has not accepted that any cuts are necessary, and grasp at the writings of Krugman et al, adding a little A-level economics, to sustain the idea that all the economy needs is more government expenditure to reflate its way back all the way to 2008.  They think that the Coalition is waging economic warfare on the poor, as one commenter on this blog put it, with the naive Lib Dems being taken for a ride, along with a large part of the public.

The angry brigade hears what it wants to from the “too far, too fast” mantra and thinks that the Labour front bench is on its side.  But the Labour leaders also know that the economy has shrunk so much that many, indeed, most, of the cuts will have to be made eventually.  Labour’s plans to cut the deficit before they left office weren’t so very different to the current government’s, and very little at all compared the surprisingly slow pace at which the deficit has actually been cut.  Their plan is actually to win back and exercise power again, rather than simply have fun as an opposition party.  They know they need to present credible policies for when they are in power again – after all, look what happened to the Lib Dems when they promised that they could cut university tuition fees to harness student anger for their own ground war.  And a close reading of what Mr Balls and Mr Miliband have been saying is not nearly as reckless as the mood music of anger.

But Labour have encountered a wider political problem.  The passion and anger of their activists burns as bright ever, but the public are simply not convinced.  Why?  It is tempting to blame economic naivety, which allows the government and its supporters to present the government’s finances as if they were a household budget.  Actually I think the feeling runs deep that the economic prosperity of the late Labour years was unsustainable. There is no naivety about that standpoint.  Government debt catches the blame – but in fact it was private sector debt that was more to blame.  And for those that did not have a government job, the suspicion the state was too big and benefits too generous ran deep.  In my description of the narrative most people can’t get past the first paragraph.

And so the two Eds have started to reach out to the sceptics by emphasising paragraph 5 – that the cuts will have to stay.  The hope is that this will then give them an opportunity to get a hearing for whatever else they have to say, on corporate greed, the NHS reforms and so on.  But the activists are apoplectic.  The Guardian‘s weekend article has attracted a whole host of disbelieving and hostile comments from a group of people that is now feeling disenfranchised.

But the narrative is too complex to be accepted by the sceptics either.  Only a confession that the economy before 2008 and unsustainable, even without a financial crisis, will do that.  Alas the two Ed’s don’t think they can say that.  And so politically the narrative falls apart.  I would be surprised if Ed Miliband lasts the year.  He has had some bright ideas, and has begun to take Labour out of its denial phase.  But as denial moves into anger, he will surely be a victim.


Crimes and Misdemeanors: Woody Allen at the BFI

Last Friday we went to seen Woody Allen’s 1989 film Crimes and Misdemeanors in the BFI’s  Woody Allen season.  There are two more showings to go (including this evening), and I would recommend this dark comedy.

I am quite familiar with Allen’s earlier comedies (Sleeper, Annie Hall, etc), with Allen playing an engaging but ineffectual intellectual who manages to get the girl in the end.  In this film Allen plays that same character, as a New York maker of documentary films, but this time his life moves from failure to abject failure, as he competes with his shallow but successful brother-in-law, played by Alan Alda, and ends up with no girl at all.  Altogether a darker and more realistic observation of the nature of success in society – I nearly wrote “modern society” but this story is surely as old as civilisation itself.

But it is not the main plot of the film, just a counterpoint to another, even darker story about a successful ophthalmologist (played by Martin Landau), who decides that his unstable ex-mistress (Anjelica Huston) has to be bumped off before she spills the beans and destroys the rest of his life.  He succeeds, is wracked by his conscience, but comes through.  Amidst all this there is a lot of dialogue about the nature of God and morality – in a very Jewish setting.  This plays to a modern rather pessimistic view of reality, where just deserts can be avoided with a bit of care and luck.

The very Jewish nature of the discussion, with the trauma of the Holocaust very much part of the picture, put me in mind of the state of Israel – though there no references at all to it in the film.  There people also  ruthlessly resort to force majeure, including the loss of life of varying degrees of innocence, amid much talk of morality, which, in the end, seems to count for very little.  Life goes on.

PS If you go at the BFI, don’t bother with the programme notes except to look at the credits.  It consists of a dense review written 1990, a truly appalling examplar bad art criticism.  Hard to read, trying to be clever, and (almost) devoid of genuine insight.

Why is it to hard for the Christians to capitalise on Christmas?

Why should we take down our Christmas decorations on Twelfth Night (January 5th)?  According to this website it’s because the wood spirits will bring us bad luck otherwise.

Christmas is the second most important festival in the Christian calendar, and it has become the biggest festival in modern Western society.  But Christianity plays a diminishing role.  In the many-layered concoction that Christmas has become, Christianity has left a number of distinctive strata.  The carol service, the children’s nativity play, concerts of sacred music and midnight mass.  These come on top of European pagan strata, and underneath more recent secular ones (Father Christmas and all that).  And as this website shows, more secular types sometimes try to escape the Christian nature of Christmas by appealing to the more ancient traditions.

By and large Christians seem to be accepting this retreat with good grace.  We did get a grump from the Pope about excessive commercialisation, but that was about the only grumbling I picked up this year.  The Archbishop of Canterbury was on the front foot and positive.  This is wise.  The trouble is that the Christian Christmas message has diminishing evangelical weight.

Christian Christmas (it’s a stark sign of the retreat that I have to call it that given that Christianity is embedded into the festival’s very name) is about the fact of Jesus’s incarnation.  It’s about who he is, rather than what he said.  And this takes us into the areas of Christian doctrine that resonate least with the modern world.  “God sent his only Son to save the world” is an expression of faith has become a meaningless string of words to people without faith but with a modern understanding of the Universe.  You are not a Christian because you believe this; you believe it because you are a Christian.

And it shows.  Those carols and nativity plays are distinctly unthreatening to the modern secular sensibility.  The words of the carols have become meaningless, if charming images.  There’s a lot about Kings and Kingdoms, reflecting political arrangements that we now consider to outmoded, and indeed illegitimate as anything more than a token figurehead.  The Virgin Birth is clear nonsense to the modern mind (What does God’s genome look like?).

There is much in the Christian message that resonates as powerfully today as it did 2,000 years ago.  But these Christmas trappings get in the way to the non believer.  To the believer it might be different – they serve as link to the ancient past.  They might help deepen faith, but they will not broaden the appeal.  So Christians at Christmas are best off preaching to the already converted, and watching the evolution of the secular festival with amusement.

Time to wake up to the de-industrialisation of advanced economies

Trying to understand the global economic crisis?  This article from Joe Stiglitz is required reading.

I have flagged it already on Facebook and Twitter, but without much in the way of reflection. In fact it has produced an epiphany moment for me.  I have maligned Professor Stiglitz in a past blog as producing only superficial commentary on the crisis, alongside his fellow Nobel laureate Paul Krugman.  This was based on one or two shorter articles in the FT and some snatches on the radio; I wasn’t reading or listening carefully enough.  Professor Stiglitz is one of the foremost economists on the current scene.  He used to be part of the Clinton administration, and worked at the World Bank in the 1990s, but his views proved politically unacceptable.  He also wrote the standard text book on public economics, which I used in my not so recent degree course.

The article is wonderful on many levels, but the epiphany moment for me came with his observation that, underlying the current crisis, is a long-term decline of manufacturing employment in the US, and by implication, other advanced economies too.  He draws an interesting parallel with the Great Depression, which was caused, he claims, by a comparable shift from agricultural employment – again in the US; I think that such a shift was less marked in Britain, but the depression was also less severe.  This decline in employment brought about a doom-loop of declining demand across the economy as a whole – which was only reversed by World War 2.  The war effort caused a boom in manufacturing industry which was readily redeployed into the postwar economy.  This view of the Great Depression rises above the fierce controversies over fiscal and monetary policy, and places them in a proper context.

We have been witnessing the decline in manufacturing employment for some years, and grappling with its social consequences.  The important point is that it is mainly irreversible. It has been brought about by technological change, which has improved productivity.  There is a limit to the number of manufacturing products that we can consume – just as there is a limit to the food we can consume, and we are at that limit.  So the number of jobs declines.

Of course the picture is complicated by the rise of manufacturing in the developing world, and especially China, and their exports to the developed world.  In the US I am sure, and certainly in the UK, more manufacturing output is now imported than exported, causing a further loss of jobs.  This is reversible, though, and in due course will reverse, as the developing world advances and loses its temporary competitive edge.  But this won’t be enough to reverse the overall trend of rising productivity.

But advancing productivity should be good news in the long run.  It releases the workforce to do other things, or, if people prefer, to increase leisure time.  So what replaces the manufacturing jobs, in the way that manufacturing took over from agriculture?  Services, of course.  What is, or should be, the product of these services?  Improved wellbeing.

Services have rather a poor reputation in our society.  Traditionalists see them as ephemeral, compared to the real business of making things – a bit like Soviet planners were obsessed with producing steel rather than consumer goods.  More thoughtful people associate them with poor quality jobs in fast food restaurants or call centres.  But it doesn’t have to be this way.

We need to develop clearer ideas of what tomorrow’s service-based economy will look like. That’s important because the way out of the current crisis is through investments that will take us closer to this goal, just as war led to investment in manufacturing in the 1940s (and earlier in Europe).

And the key to this is thinking about wellbeing.  This is important because one of the answers could be an increase in leisure, hobbies and voluntary activities – which is not normally regarded as economic activity at all.  Reflecting on this, I think are two areas whose significance will grow and where investment should be made, both of which raise awkward political problems – health and housing.

It is easy to understand that health and social care will take up a higher proportion of a future economy than they do now, and not just because of demographic changes.  These services are vital to wellbeing.  But we are repeatedly told that we can’t afford to expand them.  And that is because we are reaching the limits of what state-supplied, taxpayer funded services can deliver in the UK. (In the US it’s another story for another day).  The health economy of tomorrow will have a larger private sector component, whether integrated with the NHS or parallel to it.  But what should our priorities now be, while this private sector is on the back foot?  It seems sensible to make the NHS more efficient and effective, but foolish to cut jobs.  We should be building the skill base alongside the reform programme.  The chief critics of the government’s NHS plans (including the Labour front bench) are that NHS reforms should be stopped so that they can focus on the critical business of raising efficiency.  But maybe it should be the other way round – we should be pushing ahead with reform, but relaxing the efficiency targets and letting the costs rise a bit until the economy starts showing greater signs of life. then, as any cuts are made the private health sector can take up the slack.

Perhaps housing is pushing at the boundaries of what “services” are.  We traditionally view this as a capital investment.  But what I mean is providing more and better places for people to live in, whether they own them or not.  Most of the country is quite well off here, but poor housing is probably what divides rich from poor more than anything else – and more investment in the right places (decently sized social housing) could rebalance things nicely and dramatically improve wellbeing.

But beyond this we badly need to get out of a manufacturing mindset, both in the private and public sectors.  We should not view division of labour and specialisation as the ideal form of organisation (massive call centres, and so on), and we should value listening skills much more – I nearly wrote “communication skills” but most people understand this about getting over what you want to say, not understanding what your customer or service user actually needs.  This is happening only very slowly.

So I would add a third priority: education.  We need to greatly expand the teaching of life skills at school and elsewhere.  This would not only help build the skills that tomorrow’s economy needs.  It would help people make better choices in a changing world.


Capitalism, crony capitalism and neoliberalism. What’s in a word?

Are the Occupy protesters on to something?  Or is theirs just a hopeless battle against abstract nouns?

I have been rather exercised about some abstract nouns recently.  First was the word “Neoliberalism” selected by Simon Titley of the Liberator as one of three Bad Ideas to have infected British politics over the last 30 years, sweeping along the Liberal Democrat leadership with the rest of the mainstream.  The other ideas were the “Westminster Bubble” (the idea promoted by a lazy media that only ideas that have taken hold in Westminster matter), and that the Westminster elite have a monopoly of political wisdom (expressed by contempt both for grassroots activists).  Neoliberalism had a starring role in the previous month’s Liberator when Mr Titley and David Boyle roped it into their narrative of what went wrong with British politics in their article “Really Facing the Future”.  Mr Titley felt he had written enough already on the subject to explain what he meant by neoliberalism – unfortunately before I have been subscribing to Liberator.

Another tiresome abstract noun has been even more prominent: “Capitalism”.  This has been the main target of Occupy.  It was recently brought into further focus by Tory MP Jesse Norman in an FT article based on his pamphlet “The Case for Real Capitalism“.  This pamphlet is not a particularly coherent or convincing piece of work, though to be fair he does say that a longer, and presumably better argued, version is in preparation.  But by harnessing a couple of qualifiers (“crony” and “good”) he tries to make sense of capitalism, and brings neoliberalism into the picture too.  It’s good place to start a probe into whether these words have any useful purpose.

In Mr Norman’s picture the world has been suffering from “crony capitalism”.  He identifies various strands (e.g. “narco-capitalism”, taking it well beyond what I would call “crony” capitalism, which should really involve cronyism – business leaders being too close to political leaders.  Still he does offer a workable definition of bad capitalism:

Crony capitalism is what happens when the constraints of law and markets and culture cease to be effective.  Entrepreneurship and value creation are replaced by rent-seeking, and certain groups become enormously wealthy without taking risk. These factors in turn lead to long-term economic underperformance, and sometimes to social unrest.

Apart from the use of “crony” and the economics jargon of “economic rent” (which means profits accruing to a business over and above the opportunity costs of inputs) this is quite useful.  Something that is recognisably capitalism – an economy based mainly on private enterprise – can look like this, and when it does, it is bad.  But capitalism doesn’t have to be this way – hence Mr Norman’s employment of “good capitalism”.  This version emphasises the need for free competition and the consistent application of the rule of law.  But that by itself is not enough.

Mr Norman contrasts “good capitalism” with our friend “neoliberalism”, which does not have a moral dimension.  Like Mr Titley, he does not bother to define neoliberalism.  But from context I can identify it with what the FT writer and economist John Kay called “the American Business Model” in his 2002 book The Truth about Markets which was part of my Christmas reading.  This elevates the simplifying assumptions of classical economics (rational behaviour, consistent and stable preferences, perfect competition, and so on) into a moral value system.  In particular it idealises a ruthless focus on maximising personal gain in the framework of impartially enforced rules (property rights in particular).  This way of thinking remains very popular in America, with the Chicago School giving it considerable intellectual heft.  But it has never taken off in Europe, and Britain is very much part of Europe on this issue, as in so much else.  The emphasis on personal gain – greed – and antipathy to social solidarity are too much for all but a lunatic fringe to accept.  And that includes Conservatives like Mr Norman.  Good capitalism has a moral dimension – and one that celebrates the virtues of hard work and social responsibility.

Meanwhile the use of “neoliberalism” on the British left (including Mr Titley) clearly does not conform to the definition that Mr Norman uses.  Within its scope are swept Margaret Thatcher, Tony Blair, Gordon Brown and the “Orange Book” Liberal Democrats such as Nick Clegg.  But none of these are or were Chicago School types.  Apart from Mrs Thatcher, maybe, all see a huge role for government in our society and would expand its remit.  But they have criticised the way producer interests have captured public services, profoundly undermining its quality.

Another issue needs to be mentioned here: and that is financial explosion in the UK and US that occurred in the period 1997-2007, and which ended so badly in the current crisis.  This is closely associated with greed in the public’s minds, of bankers mainly, but also chief executives and (whisper it) all those ordinary members of the public that racked up credit card and mortgage debt.  This is swept into the general idea of “capitalism” and “neoliberalism”.  And indeed neoliberal ideas were used to justify the behaviour of many of the more egregious participants.  But true believers in neoliberalism have little difficulty in shrugging such criticism off.  To them what caused the crisis was excessive government intervention (e.g. by encouraging subprime lending in the US)  and the failure to uphold proper open markets (through the implicit government guarantee of banking activities, for example).

All of which renders the words “capitalism” and “neoliberalism” as useless abstract nouns.  There is little consistency in their use between the different political factions; their use by one faction is misunderstood by the other in an endless cycle of talking at cross purposes.  The Occupy movement seems particularly bad at this.

To make headway in the political debate we need to move on from the abstract to the practical.  What is the best way of providing health and education services?  What should the scope be of social insurance?  How can we get private businesses to invest more in the future and distribute their profits (or economic rents if you prefer) more equitably?