February 2015 – thinking liberal

The Coalition wrong-foots Labour on its (lack of) NHS policy

Labour’s plan for winning the General Election in May has a special place for the NHS. They are seeking to “weaponise” it, and promote themselves as the only party that can be trusted to run this great British institution. And yet their NHS policy has deep flaws. Now the Conservative/Liberal Democrat coalition government has come up with a plan to integrate health and social care budgets in Greater Manchester. To maintain the warlike metaphor, this looks like surgical strike on Labour. In fact the story arose from a leak in the negotiation process, and seems to be the brainchild of Simon Stevens, the politically neutral head of NHS England. But the policy poses serious questions for Labour.

The details of yesterday’s news are a little vague. The Coalition had already announced plans to devolve more powers to Greater Manchester, working through the local councils (mainly Labour, but with Conservative and Lib Dem ones too) and an elected Mayor. And integration is everybody’s favourite reform idea for the NHS. It refers to merging the health budget with that of social care (currently controlled by local authorities), so that the policies for the two can be coordinated properly. This is important because one of the main problems at NHS hospitals is that they cannot release patients to social care beds. Integration of this sort is already being piloted in such places as Torbay. This looks like a pilot on a grander scale.

As a reform idea, the Manchester proposal looks entirely sensible. Sarah Wollaston, a Conservative MP who is a doctor, and no government stooge, offered a knowledgeable and effective advocacy on Radio 4 yesterday lunchtime. Integration has been one of Labour’s big ideas. But Labour can’t bear to give the government any credit for policy on the NHS – as this undermines their weaponisation plan. So their spokesman, Andy Burham, rubbished the idea. He attacked it as undermining the “National” in the NHS, because it was a localised solution rather than being dropped from a great height from Westminster. He also suggested it would be another “top-down reform”, which the government had promised not to do.

And yet both these lines of attack expose weaknesses in Labour’s own NHS policy. In the first place, if they are serious about promoting NHS integration, how on earth are they planning to do it? The quid-pro-quo of an integration plan is surely more local devolution – otherwise you simply create a monstrous bureaucracy, and a feeding frenzy of large consultancy firms proposing over-engineered implementation plans (er, like the last Labour government’s reform of NHS commissioning). And secondly, are Labour or are they not planning a top-down reform all of their own? Their proposal to scrap the government’s Health and Social Care Act suggests just that. And if they intend to implement integration across the whole country at once… well, that just proves it, doesn’t it?

Which highlights the real problem for Labour. Their plan is to ride the tide of anger amongst NHS insiders over the government’s record on the NHS. They headline attempts to outsource some services as an NHS “sell-off” or privatisation. This is vastly exaggerated – no major hospitals are being outsourced (private businesses would be mad to take them on) and GP surgeries, er, have always been private businesses (a fact that confused the hell out of a save-the NHS campaigner that called on me a couple of months ago). But any plan to reform the NHS in any serious way involves taking on these insiders. The idea of integration to insiders is popular probably because it is seen as a way of hitting the ball into the long grass: the setting up of some toothless committees of professionals who purr about “collaboration not competition” and achieve very little except requests for yet more money. The more serious and specific Labour gets about reforms that promote efficiency, the more dissent they will get from their core supporters, and especially the trade unions. The hard fact is that Labourare proposing to dismantle the Coalition’s health reforms at the moment they are starting to show some promising results, like this devolution initiative.

Now the public probably don’t think much of the Coalition’s record on the NHS, but they surely accept that reforms will be needed to make the organisation more efficient. And if Labour appear not to be serious about that, then their line on the NHS is undermined, and their line on tax-and-spend, already weak, gets shot through. With enough pressure this weakness will become more and more apparent – and there will be a greater and greater risk of dissent in Labour ranks. They are offering just bluster. Far from trying to avoid the NHS as a campaigning issue, the coalition parties have the opportunity of a devastating counterattack, especially if Labour persists in opposing the Greater Manchester plan.

All of which shows how fatally bad is Ed Miliband’s leadership. He has valued party unity over making serious political choices. He has chosen sound and fury over policy substance. He hoped to craft clever policy positions that cover the cracks in his own party while providing credible ideas for saving the country. Alas serious policies mean taking on vested interests in your own ranks, not just the usual villains. The unity of silence in Labour ranks is not a token of assent – it is a token of denial. Labour’s most vocal supporters, and the providers of the bulk of their funding, do not think that Labour is serious about public sector reform and austerity. As Labour is pressured by the coalition parties the greater it is in danger of falling apart just when unity is most important. It is a political strategy put together by policy wonks and campaign tacticians – and not those with serious nous about taking on political responsibility.

The Coalition parties have their own weaknesses of course. These may yet save Labour. But a meltdown for Labour cannot be ruled out on this form.

Can any of Britain’s political parties break the deadlock?

The rise of fringe parties takes British politics into a whole new era. and yet the outcome of the election due on 7 May 2015 seems strangely predictable. The parties seem to be stuck in a deadlock where none can win. What are the chances of one of them breaking free?

Britain’s electoral system (misleadingly referred to as “first past the post”) is capable of producing dramatic swings in the balance between the parties. But a plethora of constituency polls allows pundits to make some quite stable predictions this time. The main features are these: the Liberal Democrats will lose up to 30 seats of their current 57. The Scottish Nationalists (the SNP) will pick up a similar number, or perhaps more, giving them 30-40 seats overall. The new insurgent parties, Ukip and the Greens, will only pick up a handful of seats, and the latter maybe none at all. Overall Labour will advance, and the Conservatives will fall back. The main debate is whether Labour will be able to overhaul the Conservatives to become the largest party. Interestingly, the fortunes of both major parties will be largely determined by how well they do against the smaller parties rather than each other. But neither party will win enough seats to form a government with one of the smaller parties; they will need to do a deal with each other to form a stable government. This is the outcome nobody (except the SNP perhaps) wants.

Can any of the parties break out of this stalemate? Sudden changes of fortune can happen. Two stand out in recent history. The first was in 1992, when John Major’s Conservative government suddenly overhauled Labour in the last week of the election campaign to win a comfortable majority, under the slogan “Labour’s Tax Bombshell”. The second was Cleggmania in 2010, when the Liberal Democrats surged forward after the performance of their leader, Nick Clegg, in the first of the television leadership debates. The surge faded, but the party avoided the drubbing they were heading for, defending their record result in 2005.

Such sudden surges are entirely possible this time. No political leader dominates the scene as Margaret Thatcher did in the elections of 1983 and 1987 or Tony Blair in 1997, 2001 and 2005. As in 1992 and 2010, political leadership is weak, and so things can be more fluid. Public frustration with politics is high.

To understand that we only have to look at Scotland, where the SNP have surged forward after last year’s referendum on independence (or, more precisely, they are consolidating their spectacular gains in the Scottish Parliament in 2011). Labour, who are defending 40-odd seats at the election are in serious trouble. That surge, however, is already built in to the forecasts. The surprise might be if the anti-SNP vote rallies and votes tactically. That’s a real possibility, though – and it would mainly benefit Labour (whose majorities are generally big), and might stem some of the Lib Dems’ anticipated losses. It would be particularly satisfying if the Lib Dem candidate Christine Jardine is able to hold off former SNP leader Alec Salmond.

What of the English insurgents, Ukip? They won the European Parliament elections as recently as last year. But their support has sunk to 15% (less than the Lib Dems achieved last time) and it is too thinly spread. Their novelty is wearing thin, and there is quite a strong anti-Ukip reaction, visible in their leader’s negative approval ratings in polls. The press, who often set the news agenda, found it convenient to boost them, but they are now poking fun at them. Yet they are well-funded and in some regions (along the south and east coasts especially) they might yet hit the zeitgeist, and pick up a few more seats than the pundits expect. There is a more remote possibility that they do well in northern urban Labour strongholds – but this looks too high a hurdle for them this year.

How about the other insurgents, the Greens? They have done well in the polls this year, catching up with the poor old Lib Dems quite often. They have picked up the “none of the above” vote that dislikes Ukip. They have the possibility of repeating Cleggmania and advancing into teens of %age of votes, if not better. But they could suffer if they come under scrutiny. They have a rather mad collection of policies and their leader, Natalie Bennett, struggles to break out of fringe appeal. There is a challenge for the party. If they could dump Ms Bennett as their figurehead and replace her with their only MP, the impressive Caroline Lucas, and if they ditch most of their silly policies as “aspirations”, with a more mainstream manifesto – then they might be in business. It would be a big moment of growing up – but, my sense is that they can’t. Too many activists would see such a move as a betrayal. A further difficulty is translating an advance in the polls into seats, as their vote is thinly based. They seem to do well where Labour are already strong – and they lack the time and organisation to marshal a stronger vote in particular seats.

Could the Conservatives repeat their feat of 1992, and break through to an overall majority? They have an impressively disciplined campaign. They could even repeat the tax bombshell line of 1992 line with some justice (Labour’s instincts are free-spending); and Labour’s leadership is seen as not up to it, again as in 1992. Their leader, David Cameron, may not as impressive as Mr Blair or Mrs Thatcher, but he is more convincing than John Major was. But. But. I just think that the Conservatives are on the wrong side of history and will find it impossible to extend their appeal enough. Back in the 1980s they were the party that broke the unions (which most people saw as a good thing) and made the country self-confident again. Mass affluence broke out – even if a lot of it was through the false wealth of rising property values. Now we seem stuck; the rich do well, but few others. Even increasing property values are seen as double-edged, forcing youngsters from even affluent families back onto “the bank of Mum and Dad”. In the 2000s the Tory brand became toxic; they haven’t done enough to reverse that. Tactically they are in a bind too. They need to win back Ukippers with sour policies on Britain’s international role and immigrants – while at the same time as appealing to more optimistic, liberal voters. I just can’t see a breakout. Their only hope of a breakthrough comes from the collective weakness of everybody else – which remains possible.

How about Labour? They have the opposite problem. They are much more in tune with the popular zeitgeist. They understand a lot of what people feel is wrong about society. But their narrative is chaotic. They look like a coalition of grumpy protest groups rather than a coherent government in waiting. I am reminded a little of Labour under Jim Callaghan in 1979: when they try to make a clear stand on a policy, one of their number undermines it. Tough on immigration? Protests from London MPs. Stop any serious reform of the NHS (which they call “saving” it) – yes one moment, no the next. The current awkwardness is on a promise to reduce university tuition fees. They want a headline policy to whack the coalition with (especially to consolidate former Lib Dem voters) – but how to do so without damaging universities or giving a gift just to the richer students? It seems as if the party has lost the discipline of the New Labour era. But the party does have some strengths – in particular an army of younger canvassers, especially in London, and probably the strongest central organisation of any UK political party.

Like the Tories, the main hope for Labour seems to be the weakness of others: the Lib Dems, the Greens, Ukip and the SNP. On the other hand, it is easier to foresee some sort of implosion by Labour than it is for the Tories. A public rift on economic policy could be the cause: the tension between their trade union backers and the more realistic parliamentarians is palpable. There is rather strange paradox here. Ed Miliband has kept the party together much better than expected over the last four years. But this has been achieved by placating rather than resolving the tensions within it. Which makes the unity and discipline less easy to achieve when it is most needed.

Which leaves the Lib Dems, in my review. Their fall has been dramatic. They commonly show up with a poll rating of just 7%, compared with the 23% they achieved in 2010. In many places they would do well to get 2-3%. But they have strongholds, and a strongly focused constituency-led campaign strategy is helping to limit the damage. They are helped by Ukip undermining the Conservative vote, though they seem to have fewer defences in the minority of seats where Labour is their main opponent. In terms of popular vote it is difficult to see the party falling much further – but there is a risk that their constituency-led strategy falls apart, and they are left with very few seats indeed. But they do have upside potential. Their hope is to be seen as a sensible, liberal party, with none of the extremist politics of Ukip or the Greens. The more Labour and the Conservatives move to the extremes to face the threat of Ukip in particular, the more appealing the Lib Dems might look. There is reason for them to hope that their poll ratings will rise – though this may make surprisingly little difference in terms of the number of seats that they lose. Indeed a surge in the polls might undermine the party discipline needed to make the constituency strategy work.

All of which leaves British politics in a predicament. An electoral system that used to practically guarantee a succession of stable single party governments, is now moving towards one that simultaneously disenfranchises most voters (by stranding them in seats where their vote makes no difference), while delivering a result from which it is hard to form a governing majority. And yet such is the conservatism of Britain’s politicians and public, that it is difficult to see any successful move to change it.

Greece: can you have reform without austerity?

The standoff between the Greek government and most other EU governments continues. The other governments are happy to extend loan facilities, but only if Greece stands by the conditions it had previously agreed. For the Greeks that is anathema, because it means holding to austerity. Many observers here in Britain seem to sympathise with the Greek side. And they offer a middle way: reform without austerity.

Three columns in the FT make the case. I have provided links, but beware – the FT operates a paywall with a very limited number of free goes. First was the weighty (intellectually) Martin Wolf. He condemns the EU programme for focusing too much on austerity and not enough on reform. Austerity sucks demand out of the economy, causing mass hardship; reform would make Greece’s economy more efficient. Next came the intellectually much lighter Tony Blair: Two false paths for Europe – and a new third way. This puts the idea into more overt political terms, though conjuring up memories of his own British “third way” that was politically successful for a while, but whose reputation is now somewhat tarnished. As an aside this is interesting because it shows that Mr Blair accepts uncritically the basic left wing economic narrative – looser fiscal and monetary policy will lead to growth. On Monday was regular FT columnist Wolfgang Munchau: Athens must stand firm on failed policies. This is positively vitriolic about the EU conventional wisdom on austerity, which he regards as economically illiterate and a complete failure. This article contributes to the picture by exploring Greece’s options in the event of breakdown, including the intriguing one of the country printing its own money.

So what to think? Austerity refers to the reduction of public spending and the increase of taxation. It is considered economically counterproductive because it sucks demand out of the economy, which in turn knocks tax receipts – which makes things worse by creating a downward spiral. In Greece’s case the object of vitriol is the target that the government should run a primary budget surplus of 3% , to pay for debt interest, which comes to about 3%, after the recent restructurings (and a remarkably low figure for debt of 175% of GDP). Surely even prudent governments should be allowed a deficit in a recession? So what about reform? It is here that each of these commentators is awkwardly silent. Just what on earth do they mean?

Economic reforms to promote efficiency usually mean changes to product and labour market regulation to make them more open to free market forces. These are undoubtedly required in Greece. But they promote short-term insecurity to jobs and businesses. They are not politically popular, and I doubt very much that there that the Greek public distinguishes between these reforms and austerity. They all part of the same hateful phenomenon.

And the problem goes deeper. Regulation tends to create public service jobs., which deregulation threatens. Besides it is the scale of the public sector, both in terms of jobs and transfer payments, that is a large part of the problem. In several ways this undermines a dynamic private sector. They tie up resources; they undermine labour markets, and so on. For too many people the way to wealth involves politicking rather than delivering things that people actually need and want. And so reform often means cuts – which is back to austerity.

In fact to find ways of stimulating demand without blocking reform is quite hard. There is the economists’ old favourite: investment. But efficient public investment requires an efficient state to direct it. Otherwise the money simply lines the pockets of well-connected people. Surely Greece is vulnerable to this? More bank lending? Another can of worms. Frankly I will not be convinced that reform without austerity is a possibility until somebody can spell out a programme which delivers it. The Greek government is proposing a reversal of both austerity and reform. Once again British (and American) economists are guilty of using macroeconomic analysis to skate over practical problems that turn out to be the very heart of the issue.

There may be some hope a middle way though. Perhaps some fudge around economic cycles can be used to cut the target for primary surplus. And there must be some opportunity to reshape the austerity/reform programme to put more weight on collecting tax from wealthiest – which the new Greek government seems much better placed to do that the last. Alas I am too far away from it all to have any feel for how likely such a deal might be. All I will say is that British commentators are generous with the taxpayers’ money of other nations, but their credibility would rise if they suggested that British taxpayers should join in. All the talk of respecting Greek democracy would then be put into a clearer perspective.

Meanwhile it seems quite likely that there will be some kind of Greek default. Following Mr Munchau it looks quite likely that the Greek government would issue some form of electronic currency of its own, in the from of IOUs, to keep things going. This may well be against the letter of the rules for the Euro area, but it could buy enough time for a compromise to be reached. And perhaps the development of a safety mechanism for the Euro currency area. The Eurozone needs to find some sort of middle way between the inflexibility of a gold standard, and the creation of a federal state without democratic consent. Might what amounts to local currencies be part of this?

Meanwhile, as the saying goes, if something looks too good to be true, it probably is. That is surely the case for reform without austerity. Sorry Mr Blair.

How far will liberals go to defend their values? Putin poses the question.

Liberal values are under attack by people happy to use violence to stop their advance. Two main groups of attackers have emerged: various flavours of Islamic extremism, and Vladimir Putin’s Russia. This onslaught is causing stress for traditional liberals.

We are used to dealing with constitutional opponents: from the collectivist ideas of the left to the social conservatism of the right. But these opponents play by a set of rules which, though they include some manipulation of the media, by and large do not involve killing people. The debate is engaged on liberal terms and settled democratically. But what happens when our opponents do not accept such rules? What happens somebody else has declared war on liberalism?

We have an ideal that we defend ourselves using the minimum level of force, while trying to move the dispute on, and into a liberal and democratic form. In particular we want to maintain peacetime rights and methods as far as possible – since the idealisation of war is itself a rejection of liberal values. This is largely appropriate as we confront Islamic extremism. This is guerilla activity from within our societies. But there are some types of threat where we have to accept something far from the peacetime ideal. Hitler was stopped in Stalingrad, by forces whose methods were no less ruthless than his own. Sanctions and a peace conference would not have liberated Germany. The problem arises when a state decides to project its military power to evil ends. In recent memory we have the appalling example of the former Yugoslavia. There the state power of Serbia was used to promote ethnic cleansing. Liberals in the West tried to step back, not takes sides, and talked of promoting dialogue. But to Serbia this was just weakness. It was not until the appalling massacre of Srebenica that Western countries realised that they had to take sides.

And now Vladimir Putin’s Russia poses a similar threat. Ethnic cleansing may not be on their agenda, though defence of Russian-speaking people is supposed be one of their motivators. The Russian aim seems to be to maintain the power of its ruling elite, not just in Russia, but across a broad sphere of influence outside. This involves a cordon-sanitaire of neighbouring client-states, and undermining the multinational organisations of NATO and the EU that represent opposing value systems. In this they are building on a deep sense of Russian otherness to the rest of Europe, and widespread suspicion, or outright hostility, to liberal values. Persecution of gays, for example, is something of a totem. The Economist this week has published an analysis, though some might doubtless it to be a little paranoid. Russia is prepared to use a projection of military power to secure its aims, and it is also projecting “soft power” of propaganda and sponsorship of extremist political parties, such as the National front in France. They are deploying great subtlety on both fronts, having learnt much from previous adventures, for example in Georgia.

And I worry about the reaction here in the West. I recently had a din-dong on Facebook after somebody started posting a series of stories (from respectable sources) to suggest that the Kiev government were a bunch of ruffians and that we should leave them to their fate. I will quote at length from this conversation, perhaps stretching Facebook etiquette a little (Facebook is regarded as “semi-private”, but the person publishing these views is using a political label rather than their own name, so I feel fewer scruples about quoting them here).

We are talking apples and oranges. You seem to be more concerned with the geo-political battle between Washington and Moscow. Liberals should be more interested in protecting the rights of minorities in Ukraine rather than standing up for a nationalist state who wants to crush opposition by violence. Very few people seem to be speaking up for the innocent civilians caught up in what is a classic proxy civil war, with the USA and most of the west supporting and funding one side and the Russians the other, no doubt with covert support. The constant blame game by both sides means little to people who have had their homes or family blown up.
There is no military solution for Kiev, Putin will increase his support for the rebels to match anything that we can provide. Even if Kiev could conquer the rebel territory, what then? Journalists who have been there report real anger by local people with the Kiev government. In the Ukrainian parliamentary elections last October in government held areas of the Donbass the turnout was less than a third and in those areas less than 20% of voters voted for government parties. There clearly needs to be proper political dialogue between Kiev and the rebels, anything less than this will prolong the misery for everyone. It was not a wise move for Kiev to declare war on their own people and call them terrorists. Kiev is very dependant on western financial support, we need to start pressuring Kiev to stop breaking international law on human rights and war crimes and start entering serious negotiations with the rebels as we did with the IRA. Russia needs to do the same with the rebels. Ultimately, this conflict needs to be resolved by the will of the people through a proper referendum not through violence.

This is interesting because it is largely accurate on the core facts. The people of the Donbass never trusted the Kiev government; the war has polarised their views against it; a projection of Russia’s military power means that a military reconquest by Kiev looks impractical. The Kiev government has been responsible for indiscriminate shelling of civilian areas, and some fairly robust enforcement of its conscription laws, which can, of course, be described as violations of human rights.

But hang on. Moscow’s intervention is what prevented any kind of peaceful or constitutional solution. The “anti-terrorist operation” by the Kiev government was only started after the “little green men” had appeared to stiffen up the rebels, and persecute anybody that supported a united Ukraine. Russia was building on genuine discontent by the people of the Donbass, but ultimately it was and is a projection of Russian military power. It is not wrong to respond to such a projection of power by military means, and if the Ukrainian government had not, the “rebels” would control a much broader area of territory – to say nothing of encouraging the Russians to push their luck elsewhere. And when wars start, things get messy – especially when the Ukrainian military is not the fully modern, professional and well-equipped forced force that we are used to seeing in the West. They have not, so far as I know, bombarded civilian areas that were not part of a military conflict zone (i.e. containing Russian weapons) – unlike the indiscriminate recent attack by Russian rockets on Mariupol, or, indeed, the attack on MH17. Finally, the Ukrainian government has the backing of its citizens in the areas it controls, even Russian speaking ones, as Kiron Reid’s article in the current edition of Liberator makes clear (and also my limited personal contacts in the country).

The best chance of promoting liberal values in Ukraine remains a strong government in Kiev that is aligned to the West in outlook, if not formally a member of NATO or the EU. The current government is the best prospect so far of achieving the sort of reforms that will push back the influence of the malign oligarchs and security aparatchiks that are the hallmark of the Putin way. It is clear that the sort of peaceful settlement that Russia would allow in Ukraine would fatally undermine such a government and give it (or its puppets) a veto over any serious effort at reform. Liberals in the West can’t use the familiar formula from Yugoslavia that there is bad on both sides, and wash their hands of it. We must take sides. This does not necessarily mean supplying arms, still less military assistance, though we should not rule out such support on principle.

It is not just the people of Ukraine that would suffer if Ukraine is humiliated further. There is no reason to think that Russia’s adventurism will end there. The Russian elite has never accepted the loss of the Baltic states, all of whom have large Russian-speaking minorities. Russian adventurism there could involve Western, and British, troops.

At its best liberalism means the defence of the weak and the promotion of universal human dignity. At its worst it can be camouflage for avoiding difficult choices. In the face of the lethal threat posed by Mr Putin, please let it be the former.

Economics in the age of information. Why are so many conventional economists wrong?

It feels an unequal battle. On the one side are ranged distinguished Nobel laureates, such Paul Krugman and Joseph Stiglitz, formidable intellects such as the FT’s Martin Wolf, together with any number of media economics correspondents, bristling with PhDs. On the other there’s me with a trifling 2:1 BSc (Econ) awarded in 2008 by UCL. But I’m hanging on in there. Clever as these people are, I think that they are working in the wrong paradigm. The world has changed but their basic views as to how the economy works hasn’t.

In my defence I can usually quote some formidable intellects, though, pronouncing very similar views to mine, such as Adair Turner or The Economists’ Buttonwood column. In this post I sketch a narrative that explains how this divergence of views came about, and why so much intellectual firepower might be ranged on the losing side of the argument.

My narrative pictures the developed world economy moving through a series of ages, each of which required its own style of economic management and analysis. This is a giant oversimplification, of course. But then the science of economics is a giant oversimplification, and not physics applied to the human sphere.

I start my narrative in what I will call “the age of heavy industry”. This is not the beginning of the story, of course, just a good place to start. This is the century leading up to 1945. In this period economic development is led heavy industry and the construction of public facilities. These include infrastructure such as railways, ships, roads, and houses; intermediate facilities such as coal mines and steel works; and, we should not forget, armaments. Other things were important, of course: agricultural development released workers from the countryside; the textile industry provided an important consumer goods sector. But world leaders saw their nations’ status in terms of the big, dirty, heavy things. Railways and steel works; dreadnoughts and artillery pieces. “Guns will make us powerful; butter will make us fat,” Hermann Goering said, capturing the spirit of the age. Such concepts as GDP were hardly developed; by modern standards rates of economic growth were unexciting. The view that inflation rates should be small and positive was alien, as the world swung between bouts of positive and negative changes to prices. Classical economics dominated conventional wisdom. “Working class” was synonymous with “poverty”, something which cut through political discourse, and many simply assumed was an inevitability.

After 1945, and starting in America, this morphed into the age of light industry. Suddenly the domestic consumer became the leading driver of the economy. Technologies developed in wartime – such as plastics, motor vehicles, antibiotics – transformed the lives of ordinary people, and their production and distribution created stable blue and white collar jobs in a virtuous circle of job creation and consumption. Growth was led by increased consumption of ordinary things like cars and fridges; alongside this grew a service economy to support the growing wealth of ordinary people. The Soviet Union, stuck in the mentality of the age of heavy industry, was caught out completely, and in the end collapsed from a complete loss of faith in itself. All those steelworks, nuclear missiles and coal mines did not lead to economic power. Economically the management of GDP started to dominate everything, and an orthodoxy of demand management, whether through fiscal or monetary policy, became taken for granted. Arguments between different schools of economics were vitriolic, and yet they agreed on much. That inflation should be low but positive, for example, or that productivity growth would generate a steady, long term increase of national income, or again that distribution of income and the workings of finance were of secondary importance in economic management. And this is the world still inhabited by the those Nobel laureates, modified only slightly by recent events. The problem with the modern economy, they say, is a lack of demand. It needs to be stoked up with fiscal or monetary policy; once this has been achieved rising productivity will get us back onto the road of steadily increasing income and the repayment of debt.

But the world has changed. Since the 1990s the age of light industry has been supplanted by the age of information. To understand this, think about a few ideas. First is the idea of satiation. People only need a certain number of things, after which increased consumption becomes pointless. There are still plenty of poor people, of course, but they are in a minority. and it is increasingly hard to understand poverty in terms of a lack of volume of goods in circulation. Many observers define poverty in relative terms, not in terms of physical benchmarks like nutrition and shelter. Thus you might be poor because you lack a flat-screen TV. Not because you need it, but because you feel excluded without it. It is clear that this kind of poverty is not going to be solved by cranking up the volume of goods produced.

Secondly, consider that often what people buy when they spend money is actually rather intangible. They pay a lot of extra money for the right label or provenance. These goods aren’t really being bought for their direct utility, but for what owning them says about the purchaser and where they belong. Again, these things aren’t driven by quantities that are consumed and plays havoc with quantitative notions like productivity.

Thirdly consider how the nature of technology has changed. Information and communications technology, and the services delivered by the new devices, lead the way. These advances are not, by and large, driving us into an ever rising cycle of consumption of physical things or even services. We are consuming experiences and information. and these things do not follow the standard laws of economics developed by Marshall and Walras who laid the foundations of modern economic theory.

And fourthly look what is happening to the nature of work. Those steady blue and white collar jobs are disappearing. Once they were considered demeaning and soul-destroying. But we valued the social stability they brought. Instead we have a world of work that is increasingly polarised, and where stability, in all jobs, is becoming rarer.

A further point is worth mentioning. Globalisation, and the rise world trade, especially between the West and the Far East has obscured many of these changes. Driven by the law of comparative advantage, developed economies gained from cheap manufactured imports in the 1990s and 2000s. But this economic principle is driven by differences in the makeup of the trading economies. But each of the Far eastern economies, starting with South Korea and Taiwan and moving on to China, progressed and became more like the developed world. Comparative advantage, and gains from trade, are falling away. That party is now over. And as for the effect of global financial integration on national economic management… suffice it to say that this has profoundly changed the way nation monetary and fiscal policy works.

All these things point to a world that doesn’t follow the old macroeconomic patterns. Fiscal and monetary policies don’t seem to working as they once did. Variables such as inflation and productivity misbehave. These then join forces which old-fashioned economists understand, or should. Demographic change is reducing the number of workers as demand for labour-intensive health services is rising.

This creates a world in which economic growth cannot be assumed. Distribution of income and wealth becomes of primary importance, as does managing finance, and especially levels of debt. The world is ill equipped with economic models for this new age, and many distinguished economists are contributing nothing, especially when pontificating rather than basing their views on deep and up to date analysis of the data.

We have cause to be worried by the new trends, as it appears that much government and private debt might never be repaid. If that is gloomy, we should also reflect that this is a problem of success. The ages of heavy and light industry have achieved their wider purposes and left us with societies of unbelievable wealth and comfort. But we need to understand that improving the human lot requires a new way of looking economics.

Danny Alexander is the Lib Dems most successful minister. Why does he not get the credit?

The Liberal Democrat Treasury Secretary Danny Alexander’s place in history is assured. He is a member of the “quad” that sets the coalition government’s agenda, along with the Lib Dem Leader and Deputy Prime Minister Nick Clegg, the Prime Minister David Cameron and the Chancellor George Osborne (with whom he is pictured here). But recently there was a revealing kerfuffle, when the Lib Dems named their election “shadow cabinet” with him as the Treasury spokesman. Shouldn’t it be the more senior Vince Cable, people asked? Many Lib Dem activists fell for the bait and were suitably outraged. In fact this was a non-story – the shadow cabinet simply reflected current ministerial responsibilities with the gaps filled in. But if anybody had doubted Mr Alexander’s weak reputation, the response to the story proved it.

But more recently the highly respected Institute for Fiscal Studies (IFS) published a study of the effects of government policies on tax and benefits on people of different income bands. For the rare few voters who are interested in the facts of the coalition’s record this 30 page report is a fascinating read. The core of it is contained in this graphic:

What this shows is that the burden of the changes has fallen hardest on the top decile, but that every other decile has benefited from a reduced tax burden (i.e. the solid green bars), mainly the increase in income tax allowances. That, of course was the Lib Dem manifesto promise in a nutshell. Reductions in tax credits and benefits, however, have hit the poorer, so that as a proportion of income the overall effect on the bottom decile has been greater than the top (about 4% to 3%). The lucky 7th decile have suffered a net effect of nil. Further analysis shows that households with children have been hit the hardest, while even the poorest pensioner households have been protected:

This represents a reversal of generous policies for families from the last government. If you take the whole sweep of policy since 1997 you get the following change:

Now this shows that the treatment of families overall lines up with that of pensioners – but that working age people without children have ended up with little net benefit. This may feel a bit harsh, but politicians have never suggested that their policies would do anything else. Pensioner and child poverty were the stated priorities.

And in case you are swept on by leftist rhetoric that these changes will be swamped by changes in income inequality before tax, a separate IFS study suggests that pre-tax income inequality has actually narrowed over the period of coalition. Put the two together and you get the picture of a government with a clear agenda to redress income imbalances. All this follows the policies Liberal Democrats advocated before the election.

The Treasury is also held responsible for managing the government’s overall finances, and Mr Alexander had a critical role in managing government expenditure. In 2010 the Conservatives promised to eliminate the structural government deficit in 5 years. Labour and the Liberal Democrats converged on about 8 years. Guess what? Though the coalition initially talked about the former target, it moderated when the economy struggled, and it is on course to follow the original Lib Dem (and Labour) target. Overall economic growth projections have disappointed the politicians, of course. But what, in Labour’s alternative strategy, could have led to a better overall outcome? They called for a softening of austerity and that’s exactly what the coalition did. Beyond some sound and fury over Keynesian stimulus, now irrelevant, Labour has had nothing to say about redressing weak productivity, the real reason for the lack of economic growth and real incomes. The scale of the deficit was such that it was always going to be hard going.

So Mr Alexander has, in spite of his position as junior to one of the most powerful men in the Conservative party, delivered a government record that is much more similar to what the Lib Dems had planned than the Tories had (they had planned to be much easier on the rich). Quite a record.

How does that compare with other Lib Dems? Poor old Mr Clegg’s political reforms have largely sunk without trace, and he also failed to spot the problematic NHS reforms quickly enough (as did Mr Cameron). Vince Cable was responsible for the reversal of Lib Dem policy on tuition fees, as well as the PR disaster of the Royal Mail flotation. Chris Huhne and Ed Davey battled valiantly at Energy but have had to give ground on nuclear power and fracking. Michael Moore and Alistair Carmichael at the Scottish Office have supervised a calamitous straining of the Union. All of these men, it should be added, have a string of positive achievements too, but they’ve been forced to compromise more than Mr Alexander has. There have been some impressive performers in the junior ranks (Steve Webb and Norman Lamb in particular), but their scope is inevitably narrow. Surely Mr Alexander is top of the heap?

So why are Lib Dem members reluctant to give him credit. First is a rather indifferent record on media interviews. He lacks a sense of ease and the ability to move away from pre-prepared sound-bites, unlike his Lib Dem cabinet colleagues. He doesn’t sound as if he is in command. He manages the detail rather than the big picture. And he sounds a bit Tory sometimes in the messages he gives.

But I don’t think that’s all. I don’t think that many Lib Dem members are at ease with the government’s record on tax and benefits. Those graphs in the IFS report show that the effects of increased tax allowances have not really helped the poorest, and that cuts to benefits and tax credits, especially to those with children, have squeezed the bottom half of the wealth distribution. There has been no offsetting increase in real incomes before tax. Labour have been energetically pointing all this out.

But given Lib Dem promises on tax allowances, on cutting the deficit, and on reforming pensions, cuts to benefits and tax credits were absolutely inevitable. The government has already gone after the richest 10% heavily, in increased taxes and, especially, a clampdown on tax avoidance (something with Mr Alexander has particularly championed). The only major budgets that haven’t been heavily squeezed are those for education and the NHS (foreign aid does not count as major), something Lib Dem members would support. Benefit cuts may not have been in flashing lights in the Lib Dems’ manifesto for 2010, but they might as well have been.

And this leads to a question that many Lib Dems would rather not think about. Just how much is it the state’s duty to top up low incomes with automatic entitlements to state benefits? And how much do such entitlements create dependency and a sense of victimhood from rich and poor alike? The great Liberal designer of the the welfare state, William Beveridge, was very worried about creating unconditional entitlements. Just what he would have made of the blank-cheque of the old Housing benefit we can only imagine. But modern leftist thinking takes such entitlements for granted, forever trying to raise the bar. But most of the public regards the idea of topping up incomes with taxpayers’ money with suspicion. It stinks of a freedom with other peoples’ money.

Personally, I think the expansion of automatic benefit entitlements is a blind alley. Instead we need much more intelligent and directed interventions to help people cope with poverty, and manage their way out of it, if they want to. This needs to be done in a person-centred way that to tackles the underlying problems (housing, mental health, addiction and so on) head on, instead of paying people money to go away and keep quiet.

But that’s just my view. Meanwhile Mr Alexander has implemented a liberal agenda at the Treasury and deserves more credit than he gets.

The Greens. All that was wrong with the Lib Dems. On steroids.

To me it was one of the surprises of 2010. As the Liberal Democrats joined the Conservatives in coalition, and their popular support promptly crashed, why didn’t the Green Party benefit? Surely large numbers of the rather leftist, protest voters that were disillusioned with the Lib Dems would migrate there? But Green support hardly moved, while Labour surged. But now many more people are asking themselves whether they should vote Green in the forthcoming General Election. Should they?

The Greens have not been idle since 2010. Perhaps they too were surprised about their failure to draw in ex-Lib Dems. To people from a relative distance two changes are conspicuous. First they reformed their leadership structure so that they elected a single leader – rather than the confusing collective leadership they previously had; that leader is Natalie Bennett. Second they changed tack on policy to push their environmentalism back in favour of “social justice” – a concern about the distribution of wealth, the workings of capitalism, and so on. Now of the three main policy stances on their (English) website “Vote for real change” only one, and the third in the sequence, refers to environmental sustainability. The first is opposition to austerity, and the second is opposition to the privatization of public services. They have become more like a mainstream political party in sharpness of leadership and messaging.

Whether or not it is a result of these changes, the party’s fortunes have improved dramatically. Now they regularly poll more than the Lib Dems, whom they beat in the European elections in 2014. They received a boost when the Prime Minister, David Cameron, insisted that they be included in the proposed leaders’ debates at the General Election. That boosted publicity and their membership has surged to 50,000, more than the Lib Dems. Their support amongst younger voters is striking.

This attention has not been entirely welcome. Their policy of a Citizens Income came under particular scrutiny and promptly fell apart, when it appeared to hit the poorest hardest. Incidentally that link (to the Guardian) has my favorite picture of the new Green party – which I haven’t published on this page because of copyright.

It is very tempting for members of other political parties to sneer at the Greens. Their chaotic policies; Ms Bennett’s Antipodean accent; the alleged misfortunes Brighton council, which they control. That would be a mistake. As a Lib Dem I have endured a life-time of sneering and it hasn’t changed my mind. The Greens attract support from those disillusioned with modern politics – sneering from the sidelines just reinforces that disillusionment. But voting should be a serious business; we should expect anybody asking for our vote to make sense. and here I struggle with the Greens.

Two experiences over the last year have turned me against them. The first was a computer graphic of an election poster. Unfortunately I didn’t bookmark it, and I can’t find it, so I can’t reproduce it here. It promised everything. Growth; reversal of austerity; sustainability – and more things besides. There was no inkling of hard choices. The second was hearing a radio interview with Ms Bennett. She dripped with smugness; she had pat answers to everything. When asked if the Greens would go into coalition, she said no. They weren’t interested in ministerial cars; they would enter a confidence and supply agreement. This, of course, was an attack on the Lib Dems’ readiness to enter a coalition. It’s also utter nonsense. The British government has huge executive powers, and parliamentary controls aren’t strong. The Greens would have far more scope to change things if they had ministers. Ms Bennett clearly didn’t want the responsibility that would entail.

So what? That poster disappeared without trace. Ms Bennett is just one person. The Greens’ MP, Caroline Lucas, is much more impressive. But these things foreshadow something bigger, and a visit to the Greens’ website does not reassure me. The party just doesn’t seem to be interested in making serious choices. They just want a good whinge.

To illustrate let’s look at their “mini manifesto” Real Choices. After the introductory page it starts off well enough with a page on the environment and climate change. It firmly states a commitment to reducing the use fossil fuels, rejection of nuclear power and replacement with renewables – plus some stuff about protecting the environment more generally. This is what most people think the Greens are about. Some may say it as impractical – especially the rejection of nuclear power – but I forgive them for that. If you feel strongly that climate change is the biggest challenge facing man on this planet, then this is a perfectly respectable line to take. And so is scepticism of nuclear power. But it involves hard choices.

Which is where we run into problems. The next two pages “Building a fairer society” and “Health and education – free for everyone” move into the party’s new agenda. No to austerity – investing in a low carbon future instead; raising the minimum wage; more affordable housing; more welfare spending; bash bankers some more; stop outsourcing health services; scrap university tuition fees;protect pay and conditions of health and education professionals; stop the Academy programme for schools. Leave aside the “oppose austerity” bit and individually there is something to be said for each of these policies; some even look sensible (the bit on affordable housing, and a low carbon future). But together they are comically incoherent. The “oppose austerity” says it all. You might think that an environmentalist party would understand that resources are limited. If there is to be a serious drive to invest in low carbon projects, while also preserving bloat in the health and education services so as not to upset their employees, then surely something, somewhere has to give. There is going to be austerity somewhere. Austerity is about ensuring that the state is financially sustainable. Pah! say the Greens.

The next couple of pages carry on in the same vein. Energy – permanently lower bills. Here the party tries to show that its energy policies won’t mean higher bills – insulation will square the circle. And Transport – cheaper and cleaner. Apparently by nationalizing public transport and cancelling the HS2 railway project, public transport is going to be cleaner and better.

All this leads me to a very painful reflection. I am reminded of something by this incoherent set of protest responses. The Liberal Democrats. Especially the Lib Dems under its previous leader, Charles Kennedy, and its manifesto for the 2005 General Election, the party’s most successful. The present leader, Nick Clegg, reined things in a bit, but was left with policies like the abolition of tuition fees. This proved successful politics for a while, but in 2010 the party bumped into a glass ceiling. Early in that campaign the Lib Dems surged. And then the voters looked a bit harder. And they saw a party of protest and not one of government. The surge collapsed.

Ironically the public was wrong. Against expectations the Lib Dems entered government and proved more than ready for it. But they had to ditch the protest policies and the protest voters, and added to a public disillusionment with politicians.

The Green Party now is the old Lib Dems on steroids, but without the underlying ability to deliver effective government policies. As a voter that should give you pause.