Author: Matthew

Labour pays the price for internal party democracy

We don’t have a complete body yet, but the post-mortem has started. (Credit to The New Statesman’s Stephen Bush for the post-mortem without a body metaphor, which I find very appealing). The Conservative victory in the traditionally Labour seat of Hartlepool is not especially surprising, but the scale of that victory is greater than expected. Looked at in a broader, longer term perspective, though, and it is quite startling.

The scale of the result was not because the Tories did unexpectedly well (most people thought they would hoover up the Brexit Party’s substantial vote), but because Labour’s vote share sank from 38% to 29%. An independent candidate picked up nearly 10%, and that seems to be were most of the Labour loss went – though a string of other candidates picked up about 1% each. That included the Lib Dems who sank back from 4%; they had been in second place no so very long ago.

The first thing to say about this is that the Brexit referendum of 2016 has proved an astonishing political success for the Conservatives, if an unintended one. It has fractured the Labour Party. At first many of their voters went to Ukip and then the Brexit Party. The Tories then undermined and demolished these insurgent parties and scooped up the bulk of their votes. The party has been brutal to its own Remainer supporters, but has managed to keep many of these in tow – though as Hartlepool as on one of the most Leave-supporting areas of the country, the by-election itself does not provide much evidence of Remain-supporting Tories staying with the party. Now that the country has left the EU, the politics of Brexit are much easier for the Tories to navigate. Remainers can still be painted as bad losers, unpatriotic and metropolitans sneering at the working classes, while Remain supporting politicians have no convincing policies to rally around.

But Labour’s failure has deeper roots than Brexit. It is often attributed to the party’s estrangement from its working class base. It certainly seems to be true that what might be called “traditional” working class voters have been deserting the party for some time. These may be characterised as white, less educated and less physically or socially mobile people, often living in towns rather than big cities. And yet this is a shrinking demographic, and Labour’s hold on the more modern version of the working class voter (living in big cities, insecure job, rented accommodation, often with an ethnic minority background) looks as strong as ever. Labour is also missing out on a substantial non-metropolitan middle class vote, which is well represented in places like Hartlepool. Back in the 1990s these voters used to be called “Middle England”, and were the particular focus of Labour leader Tony Blair. Mr Blair proved very successful at this, but his success was denounced as treachery by many Labour activists. In the end Mr Blair, a consummate Metropolitan if ever there was one, was losing this demographic, especially because of his liberal approach to immigration.

But Labour’s rot turned toxic after 2010, after they lost power, and with the selection of Ed Miliband as its leader. This was about the time that I started this blog, and there was still some engagement on social media between Labour and Lib Dem supporters, before we fractured and disappeared into our separate bubbles. Those Labour supporters proved right about the Lib Dems, and how long-term the damage the Coalition would be to the party. But we proved right about them, when we suggested that Labour neglected Middle England at its peril. This was denied furiously. Labour supporters were convinced that their route to victory would come by consolidating their support amongst “progressives’, including people who had been too disillusioned to vote previously. They did not need to convince people who had voted Tory to change their minds; the collapse in the Lib Dem vote would be to their benefit. Tory and Lib Dem hating became a signature theme, along with increasingly shrill condemnations of “austerity”.

In fact at the next election in 2015 Labour succeeded in winning the Conservatives a majority in their own right, by scaring many Lib Dem voters into their arms, and by undermining the Lib Dems in Tory facing seats. That, of course, is not how Labour activists saw it, and they doubled down by selecting Jeremy Corbyn as their new leader. The relatively strong Labour performance in 2017 seemed to vindicate this. But Labour success was as much due to mistakes made by Tory leader Theresa May as the ability of Mr Corbyn to mobilise new voters. Mrs May still made headway with her strategy of pressuring Labour in their heartlands. There followed a further two years when the party hollowed itself out, ending in the disaster of the 2019 election. Hartlepool has shown that the Tory victory then was no flash in the pan.

A lot of the responsibility for this disaster rests with the two leaders, Ed Miliband and Jeremy Corbyn. But both were elected by the party membership and the membership placed them under particular pressure, though party processes on policy. These processes are usually referred to as “democracy”, which the party prides itself on. The Lib Dems, and I assume the Greens, are just the same, and indeed often criticise Labour for not being “democratic” enough. As you will notice, I am extremely reluctant to use the word “democracy” in connection with the processes by which members of a political party exercise their rights. Political parties are self-selecting groups of people, who can leave at any point, and who may be expelled if they annoy other members too much. Democracy is about broader society and the inclusion of people who don’t have a choice about whether they belong. This is one of the paradoxes of our political system: political parties are an important and necessary part of the democratic system, but they themselves are fundamentally not democratic. The Conservatives are so successful because their members have the least influence over leadership and policy out of all the main parties.

The Lib Dems and Greens have little choice but to give their members a strong say over what their party does and who leads it. They are insurgent parties that need to offer reasons for members of the public to join and stay with the party. For Labour it is different. They aspire to be a national political institution: part of a two-party system which shares nearly all the important political power. The party has an institutional assumption that political parties other than themselves or the Conservatives are a damaging distraction that no politically responsible person should support. But a successful institution of that nature can’t be over-fussy about about political values – it constantly needs to be thinking about recruiting support from any group of voters it can. That’s an exaggeration; the two big parties do have core values running through them. But whereas the Tory Party can dump a large part of its core support (in the case of the Remain supporting political elite) in a drive to recruit Middle England voters, Labour has been unable to pull off a similar feat since the days of Mr Blair. The membership naturally wants the party to focus on people like them; they cannot be counted on to take a cold hard look at the facts. It was the Labour membership, not the leadership, that fought tooth and nail against Brexit. That was seen as betrayal in Brexit-supporting parts of the country, though it did help Labour drive back a real Lib Dem threat in places like London. Mr Corbyn then compounded the trouble by appearing incompetent and unpatriotic – and yet the membership enthusiastically backed him as their mascot, preventing MPs from removing him when they could see all too clearly the damage he was doing.

That membership may now be chastened, and more accepting of compromise. Labour’s position is far from hopeless. They can still win the next election. They have a secure base among the metropolitan middle class and the “new” working class. They have strong support among younger voters, and escalating property values are creating a growing class of people excluded from the Tory dream. The Conservatives are not widely trusted. But in order to win Labour must go after groups of people who normally vote Conservative, and pressure Tories in areas where they had previously felt secure. That will mean taking Labour into places that it is not comfortable about. To date I have not seen any sign that anybody in in Labour’s higher echelons understands that. Perhaps the shock of these elections will jolt them into decisive action.

Joe Biden has made a strong start

“Cometh the hour, cometh the man,” is what I wrote when Joe Biden was elected US President last November. I had a good feeling about the man because Mr Biden looked to be somebody who confronts the world as it really is, rather than on some projection based on conviction, as more partisan politicians do. It is going better than I expected.

In that post I said that the new president needed to do three things: revive the economy, get on top of the virus, and put pressure on the Republicans. On all three counts he is doing well. He has been lucky, but he has helped to make that luck. We can now see that this is the job he has wanted to do all his political life. He was ready for it. It turns out that being a Vice President is good preparation for the Presidency, especially at the start. The last Vice President to make it to the top was George Bush Senior in 1988; he proved very effective at the job, even if he was less effective at the politics. Before that we might remember Richard Nixon and Lyndon Johnson, also very effective operators. Mr Biden knows how the machinery of government works and was well prepared by the time inauguration came, notwithstanding the tardy cooperation of the outgoing administration.

Mr Biden has also proved an adept politician. He made a good start before he took office when the Democrats took both the Senate run-off elections in Georgia. The Republicans had been favourites. How much he can take personal credit for this is hard to say – but he clearly didn’t get in the way. That gave him control of the Senate by the narrowest possible margin. He has used it skilfully. His biggest achievement has been pushing through a massive economic stimulus bill. He now has two more ambitious efforts involving massive outlays: an infrastructure plan and welfare reforms. He has not sought to build bridges with the Republicans, in the way that Barack Obama wasted so much time doing, but the measures are likely to go down well with many Republican voters, especially the ones that switched to Trump in 2016 and 2020. I can’t see that the welfare changes stand much chance, as they look too strong for conservative Democrats in the Senate – but they should help keep up the pressure.

And the next point about Mr Biden is that he takes decisions, even tough ones, quickly. This is part of being ready for the job, but it is a strong contrast with Mr Trump and Mr Obama, and especially the former’s gaggle of squabbling advisers. A striking example of this has been the decision to withdraw the US military completely from Afghanistan by 11 September. We might well think this is wrong (The Economist argued that keeping on a small commitment would be value for money), but it happened quickly.

But is he taking America in the right direction? One criticism is that he is just rehashing failed policies from the 1970s. This is put quite eloquently by Gerard Baker in The Times. Mr Biden wants to throw a lot of public money at problems, promoting federal agencies and trade unions, in a striking reversal of the prevailing wisdom since Ronald Reagan came to power in 1980 – even if the practice never quite lived up to the rhetoric. There does seem to be something quite old and familiar about this approach. Mr Biden has been compared to Franklin Roosevelt and Lyndon Johnson – falsely because he doesn’t have enough Senate votes to be anything like as ambitious as this pair. His infrastructure plans recall Dwight Eisenhower. These policies just led to stagflation in the 1970s, it is said. But context is all. Big government worked well enough in the 1950s, with the rise of light manufacturing and the bureaucracy of the consumer society – all those salesman, account clerks and insurance administrators. But in the 1960s and 1970s, the economy and society suffered a number of problems. First came the Vietnam war, which the US government refused to finance through taxation, causing the postwar world financial infrastructure to buckle. Then came the malign effects of union inflexibility, which meant that consumer price rises fed through quickly into wage inflation, creating a wage-price spiral. And then came the shock of escalating oil prices in the 1970s, the first important symptom of environmental constraints on the US model of growth. Combine these with big government and you got stagflation.

That was then. Now is a very different world. The wage-price spiral has been broken by the growth of globalisation and the impact of technology. A new world financial infrastructure has emerged. Environmental constraints are being embraced rather than denied. And anyway since 2008 the developed world seems to have been suffering from deficient demand. Interest rates have been cut to rock bottom; there does not seem to be enough positive pressure in the labour market. Nominal jobless rates may look low (slowing for the pandemic), but pay at the lower end is propped up by minimum wages, job insecurity is rife, and people are dropping out of the workforce. Throwing public money at problems could be quite beneficial at such a time, even if it was harmful in the 1970s. And excess public spending is much more likely to get the money to where it is needed that tax cuts.

Still, you don’t have to be on the political right to worry that president is taking things too far. Predictions of a rise in inflation are widespread, though an awful lot of people seem to think that this will work in a similar way to the late 20th Century. One way or another interest rates are likely to rise – a sign of a better balanced economy after all – and this could have some fairly scary consequences in a financial system that seems to take low interest rates and booming asset prices as one of the fundamental rights of man. But it could take some time for any problems to emerge.

A second criticism is that Mr Biden is taking his radicalism too far. He has spoken of bringing America together and healing the partisan divides. But in many ways he is doing the opposite. Much of the Republican base – the wealthy rather than the populous part of it – was horrified by Donald Trump, whose grip on that party shows no sign of weakening. But they will be even more horrified by fear of tax rises, and will doubtless find themselves returning to the party fold. That does not matter that much in terms of votes (these are the top 1% after all, even if you have to add in larger numbers who fancy their chances of entering that elite) – but it means lots of campaign funding to promote misinformation and damaging memes. The Republicans scared a lot of people into voting for them in Congressional races last year by portraying the Democrats as being taken over by the “radical left”. It won’t be too hard to paint Mr Biden’s policies in that light.

A big challenge will come in 2022, when the mid-term elections come. Most commentators already seem to have written the Democrats’ chances off, following what happened to Mr Obama and Mr Trump at the same points in their presidencies. But that can’t be in the plans of a consummate politician like Joe Biden. He clearly feels that his policies can peel away a lot of voters from the Republicans.

And that will make American politics very interesting over the next year and a half. Mr Biden has started well, and he means to keep up the momentum.

What is the significance of “Tory sleaze”?

A series of incidents have made the news where Conservative party officials, and especially their leader, Boris Johnson, have had a questionable regard for compliance with rules. Labour think they are on to something by raising the spectre of “Tory sleaze”. Are they?

Well yes if the audience is liberal professional types. They equate cronyism and nepotism with corruption and inefficiency, and understand that their own careers can be badly damaged by a disregard for compliance, and assume that politicians should play to the same rules. But do things look quite the same way to everybody else? Are the rules just there as a means to an end, and shouldn’t we look to the results first and foremost?

This was brought home to me when I read a history of the Royal Navy. Back in the 18th Century and into the Napoleonic Wars and the era of Horatio Nelson, it was one of the most effective large organisations on the planet – a considerable feat since command and control was often very dispersed. This was founded on a system of rewarding effective performance. The key to this was the prize system, whereby the money made from captured ships (“prizes”) was divided between the ship’s captain, officers and crew. (As an aside this was not dissimilar to the other highly effective institution of the era: Napoleon’s French army). The captain had control over the recruitment of his ship’s complement. And nepotism and cronyism was rife. How to reconcile this? Captains still recruited highly effective crew – but nepotism and cronyism was the simplest way of hiring people they knew and could trust. But if your cousin or other contact wasn’t up to the job, they would be moved on at the first opportunity. For many that is still true. The key is whether the organisation’s leaders are truly and directly accountable for the success of their organisation. The reason why cronyism is lethal in public service is because there is no equivalent system of direct, financial accountability, such as with the old Navy’s prize system, or with profits in a small or medium-sized business – where nepotism and cronyism is also widely practised.

So what to make of the current Conservative government’s difficulties over cronyism, especially amongst the urgencies of dealing with covid-19? They claim that in the crisis government ministers were making shortcuts to get things done. And if some of the the bureaucrats were uncomfortable, that just shows how ill-equipped thy are for emergencies. The Conservatives under Boris Johnson are not starting with a great of credibility on this however. Before the pandemic, the actions of minister Robert Jenrick on a property development after lobbying from a party donor shocked many, including me, but were simply shrugged off by the Prime Minister. Still, we should try to focus on the facts, not simply what we expect.

In fact enough the most recent row, over WhatsApp exchanges between Mr Johnson and entrepreneur James Dyson, is capable of being interpreted as “getting thing done”. Mr Dyson has a formidable reputation as a practical engineer; there was a genuine panic at the time (actually misplaced in hindsight) about the lack of ventilators, so there would have been nothing wrong if the government had called Mr Dyson for help, or if they had responded positively to an offer for help from him. The situation of Mr Dyson’s enterprise being based overseas is relatively unusual for a British company, so helping out with tax paperwork could be fine. The prior relationship between the two men doubtless helped, but I find it hard to see this as the government doing a favour for a friend. Labour has to do what it does, by trying to make the most of it, as that is how politics is done. The Tories would hardly be different if the roles were reversed. But this is either faux outrage or a failure to understand what was actually going on.

But what about the “VIP list” of businesses bidding for urgent contracts for personal protective equipment (PPE) early in the emergency? The urgency was real, and the need to simplify procurement procedures was doubtless justified. But did the VIP list help? This time the circumstantial evidence looks negative. The VIP list seems to be based purely on businesses being well-connected; there is no sense that they were being selected on the basis of any relevant competence. I had my reservations at the time about government procurement, and I still do. The process looks to have been too centralised and too detached from the people who actually needed the PPE. But this really needs to be picked apart by the sort of enquiry the government keeps putting off until the day after tomorrow. The point here is that is not that delegated procurement and streamlined procedures would have reduced cronyism. Indeed cronyism is the dark side of localism, and one that its advocates often neglect, myself included. But local cronyism in the circumstances of crisis, when results are short-term and obvious, is not necessarily all that harmful, as in the Royal Navy in the 18th Century. In some circumstances, if driven by the right sort of leadership, it can even be the best thing to do. The problem with the government’s procurement was that those taking the decisions, and pushing forward their proteges, were too distant from the outcomes to have an incentive to do the job well. Anyway, the VIP list was apparently far too long; it isn’t hard to imagine the feeding frenzy of businesses who could claim even a vague connection, and the lack of an incentive, or criteria, for the gatekeepers to say “not you”. The result is certainly that some inappropriate suppliers were picked; it is also probable that some people who could have helped out more effectively never got the call.

The next thing to consider is the lobbying by former Prime Minister David Cameron on behalf of Greensill Capital. On the face of it there is not much to be excited about: the lobbying failed to get extra financial support for Greensill. It is hardly surprising that Mr Cameron had privileged access. The more important question is how far Greensill had got into government procurement before the pandemic. It’s hard to understand what need the government had for a finance provider. More needs to be dug up about the relationship – but the issue isn’t just cronyism, it’s the degree of grasp of government ministers and civil servants of administrative processes. The former tend to have little commercial or organisation experience; the latter draw a false distinction between high status “policy” and lowly “implementation”. Greensill seems to have been inserting itself into the “implementation” side of things, which senior civil servants don’t feel they need to dirty their hands with.

The other issue doing the rounds on the general subject of “sleaze” is how the Prime Minister financed improvements to the Downing Street apartment, which wasn’t posh enough for his tastes. The careful wording of his spokespeople suggests that there is something to hide. But it does not appear as if public money, or much of it, was wasted here, though. The main issue is whether the Prime Minister broke rules on disclosure. I find it hard to get excited about it.

So far it doesn’t seem to be cutting through to the public. The attitude seems to be that, “They are all at it, so it doesn’t influence my vote.” They aren’t all at it in fact – but it doesn’t cut cleanly across party lines. You couldn’t get more prim and proper than Mr Johnson’s Tory predecessor, Theresa May. And Labour Prime Minister Tony Blair was quite comfortable with cosy relationships with business leaders, and the Labour Mayor of Liverpool is in deep do-do. Then again, the Labour leader Sir Keir Starmer looks very straight, but that doesn’t seem to be doing him much good. I suspect that most people bend the rules a bit themselves, and don’t mind so much if others do too. Liberal professionals are in a small minority.

What could cause the public to get more angry? Personal enrichment, as happened with the MPs expenses saga in 2009, is more likely to inflame. Alas poor judgement and incompetence seem to get people less excited, as expectations appear to be low. The last time “Tory sleaze” got traction was in the mid-1990s, when the Conservative administration under John Major appeared tired and out of ideas. The expenses scandal, which engulfed all parties, was also at a time of perceived government failure, after the financial crash. The current government has some disasters to its name, but the news for it isn’t all bad. Success on vaccinations, and better judgement in 2021 on lockdown management, may erase memories of the Christmas, and earlier, disasters. Brexit is “done”, as promised, with teething problems not so far in excess of expectations – if you brush over Northern Ireland and the food export industry, which most people can.

What will be toxic for Mr Johnson is if his government starts to take on a general air of incompetence and failure. It clearly has that potential, as we saw in 2020, but it is not a foregone conclusion.

There is something hopeful about the ESL debacle

I don’t write about sport, because I don’t engage in it much. So why am I to writing two posts in a row about football? Well I think the rise and fall of the European Super League (ESL) is very revealing. And I don’t think I can leave things with my last post. Since then the whole thing has collapsed amid unanimous disapproval amongst football fans, institutions and politicians. Only overseas fans could be found to like the idea.

First I need to shine the spotlight on myself. I descried myself as being in a minority because I have a taste for iconoclasm. My attitudes turn out to be much closer to those reviled foreign football bosses than the general public. I couldn’t see that the US way of running sport was fundamentally any worse than the European one. And isn’t the “greed” that these owners are accused of just another way of saying “a desire for success”. They wanted their clubs to bring in more money by persuading the public to part with more of their cash, which they can only do by producing more of what the public wants. And that, of course, is why the whole thing collapsed so quickly. If the ESL wasn’t gaining traction in its core market, it was pointless.

And ranged against the greedy bosses were the lumbering and complacent football hierarchy, who seem incapable of showing real leadership. Racism remains rife in the sport in Europe (which includes Britain in football terms); the authorities couldn’t even protect vulnerable young people from abuse.

The point I was trying to make in my last post was than football fans themselves had contributed to the problem. They flocked to the wealthy clubs by and large after they were taken over by the wealthy owners happy to splash the cash, after the more traditional sort of owner had run the cubs into the ground. How else can you explain the rise of Manchester City, for example? The fans weren’t actually supporting their local clubs through thick and thin, but they were flocking to big international brands.

But I clearly hadn’t got that quite right. If most fans were in fact just after the glitz and branding, their attitudes would have been much more similar to those the BBC interviewed in Kenya and Thailand, who like the idea of more “better quality” games that the ESL would bring. In fact they were horrified. There is actually something rather heart-warming about this. The first point is that the football clubs provide a sense of belonging to people in a way the their US equivalents do not. When you buy into a club you buy into its history and traditions; the ESL looked as if it would be pulling up some of those roots. It was an idea that came from outside, from owners who had not themselves bought in to that rootedness.

But there is something deeper. It is a recognition that you can’t buy into all that belonging without paying a price. That means giving unfashionable clubs a chance. It means putting up with insecurity – about promotion, relegation and qualifying for Europe-wide tournaments. And in Europe it means giving teams from smaller countries, like Slovakia or Scotland, a chance. You can’t enjoy the prestige of being in a popular, successful club without recognising that all the others have the same rights and chances, in theory, that yours does. “We want our cold nights in Stoke,” read one banner carried by a Chelsea supporter. In an age of atomisation, winner-takes-all and hedonism, that is a hopeful sign of human maturity.

But, of course, that still leaves the game with its huge money headache. The fashionable sides grab all the TV audiences and are the only ones able to pack stadiums. But their income is still subject to cliff-edges. While the big teams are mainly secure in their country’s top domestic leagues, that is not the case with participation in the European Champions League, which is a huge draw. The fans may not mind the uncertainty, but it comes with a price.

Something has to give. Replacing the wealthy owners with something broader-based and more democratic is likely to drive away the deep capital that big businesses need in such a risky arena. And it still leaves clubs vulnerable to populism and mismanagement, as elected leaders make unrealistic promises of success (I heard one person suggesting that has been a problem in one or more Spanish clubs that signed up to the ESL).

And that is enough from me on the subject of football for a long time to come.

Football sold its soul to the devil long ago

The legend of Faust and Mephistopheles is one of the most enduring. Faust makes a pact with the Devil (through his agent Mephistopheles) to secure earthly pleasures. But in the end the Devil returns to secure Faust’s soul – a short interval of pleasure at the cost of eternal damnation. I feel something of this in the spectacular row over the attempt by twelve rich European football clubs to form a European Super League (ESL).

There is little doubt that the ESL is the work of the devil. JP Morgan Chase are behind it for God’s sake. It has no grounding in the web of passion and community that is club football, and is designed to maximise the sport’s financial return for a number of wealthy investors first and foremost. There has been an explosion of anger from right across society. I am not football fan, and I support no club. That gives me a bit of an outsider’s perspective.

The first thing that strikes me about the flood of arguments made against the ESL is that they are pretty weak, in the cold light of day. The ESL is based on an American model, where leagues operate as closed clubs, with no relegation and hence greater financial security. Sport in the US has its problems, but American football, basketball and baseball all have big followings delivering lots of thrills to fans. Does our system really work better? Do those desperate and depressing relegation struggles really form an integral part of the enjoyment of the game? The main complaint about European football from those outside Europe (actually a big and important market) is the number of “low quality” games. I suspect what people mean by this is games with clubs that many people haven’t heard of or which don’t have star quality. I’m not sure if the quality of the games is any more dire than that between well-branded clubs, but I’m open to correction on that.

But if I find the argument a bit muddled, the shock and emotion is easy to understand. People tend to be iconoclasts or conservatives. Mostly I’m an iconoclast; I like it when long-established things change; I tend to think that there is always a better way. But I have long learnt that I’m in a minority. Most people love the familiar patterns of life, and get upset and disorientated when they change. And football is a big part of many people’s lives. The ESL would upend it to be replaced by something very unfamiliar. Most people cannot see how it can possibly work.

But somehow the whole plan holds up a mirror to sport-watching public. What seems to upset people most about the ESL is an abandonment of the community game – the lives of the middle-ranking clubs and smaller. But that leads to the question of how people let these six English clubs develop into the massive global brands that they have become. A long time ago, when satellite TV was taking off, one satellite provider thought it had delivered a coup by securing the television rights to second division games (known as The Championship). It was a complete flop. Few wanted to watch lower league games, preferring to affix themselves to the heavily-marketed big brands. This mirrors British attitudes to local communities more generally. They think that local communities are a good idea, but not many people put themselves out; it’s somebody else’s problem. The idea that money trickles down from the big games to the lesser folk is a sort of salve to the conscience to make up for the lack genuine community support.

But life in the big clubs isn’t so easy. They are locked in an arms race for more expensive players, facilities and marketing, and the insecurity of European level competition is placing them under a major strain. They used to rely on people with more money than sense to fund this but this was a pact with the devil. Now the finances are moving out of range of such people. Private equity is moving in, and most billionaires have a strong instinct for financial sense anyway. The owners of the big clubs are in strong bargaining position and it may take more than bluster to stop them. The hostages are trying to negotiate their release by threatening to kill themselves. The clubs’ supporters are angry because they have no say in their clubs’ future – but most of them were drawn to those clubs in the first place by the lavish spending of the club owners. What do you expect?

Of course the ESL still raises many profound questions about the sustainability of the sport, and the scheme is more likely to collapse than not. But something else has to give if that happens.

One of the more interesting aspects of the whole episode is that the ESL only covers three countries: England (Scotland is out in the cold), Italy and Spain. Football in France looks too weak at major club level for that country to take part. But Germany is a football powerhouse, and its top clubs don’t seem to be tempted. But these clubs are much more genuinely grounded in their communities. There is a lesson there surely. Alas strapping German-style rules on local ownership onto the British system is unlikely to go well unless public attitudes change, and more people start supporting less fashionable teams.

The Royal Family is a factory of human misery

How I hate the British fascination with royalty. I will not watch That Interview. But the Royal family is a critical link in my country’s constitution and we can’t ignore it entirely, much as we might want to. Both sides in this spat are making the case for the family’s release from its constitutional role; the grubby business of elections and politics can’t be worse than this.

For somebody that affects uninterest in the royals, I have a guilty secret. I immensely enjoyed the Netflix series The Crown. I only started to watch last autumn, but I have now seen all four series. Before the last series I was interested to read the criticism of it in the press, from royal experts. This is a class of people who make my flesh creep, as they try to exploit the social cachet of knowing the royals. Mostly this criticism was pretty weak – a lot of trivial things (but none that made as annoyed as the use of a Crusader III tank in Suez in 1956; this vehicle was obsolete in 1943). More serious were the conflations and exaggerations in the drama, and events that never happened. These often annoy me too (machine-guns at the Curragh, etc) , and I’m very wary of the defence that the dramas are following a higher historical truth. But to my surprise, I found that I felt that the makers of the series had a point in this case. There was another category of criticism, the knowing “they wouldn’t do that” about some or other misbehaviour, such as the mistreatment of the Thatchers when they visited Balmoral. And yet the drama made it clear that this arose from a gulf of misunderstanding, not intention, and it is all too credible.

The strength of The Crown is that it has a clear and consistent theme, and that theme is clearly true. The institution of the monarchy overpowers the individuals in the Royal Family, and crushes all those who attempt to assert their individuality. Although the drama starts with the last days of George VI, its real beginning is the Abdication Crisis of 1936, when Edward VIII had tried to rebel against the system. This casts a heavy shadow over the first two of the series. The drama shows how the Queen herself came to terms with not being in control, and how pretty much everybody else in the family was crushed and became very unhappy. It focuses on Prince Philip, Princess Margaret, Prince Charles and Princess Diana. But we know that the unhappiness doesn’t end there. Funnily enough the series doesn’t make a big deal out of the tabloid press, the big focus of Prince Harry’s anger – but they point to the contradictions of the institution itself.

The fourth series of the Crown ends in the early 1990s. But we all know that the same drama has been continuing at the same pace in the quarter-century since. And That Interview is only the latest twist. What to make of it? The most explosive claim, about remarks over the colour of Harry and Meghan’s baby is quite hard to take seriously without more context. Was is overt racism, or was somebody being a twit? We may never know – but sensitivities differ across the Atlantic. The broader claim is more serious though: that much of the British public struggled to accept an interracial marriage, which was stoked by the British press. This was part of the toxic atmosphere that the couple felt they had to escape; Prince Harry feels that the Royal Family machine ran for cover rather than fight their corner. The Crown suggests that this was always so, but that this is out of necessity. Another serious charge was that Meghan was not offered help, or help that she felt she could use, when she complained of suicidal thoughts. This echoes, consciously perhaps, of the Palace’s neglect of Princess Diana. In that case the usual secret sources suggested that The Crown was being unfair and one-sided, and that Diana was pretty difficult to deal with. That defence reveals an incomprehension of the problem; the television portrayal was all too convincing. In Meghan’s case the story is likely to be more complicated – but establishing the truth feels like an intrusion.

But the big picture is clear; it is another variation on a theme that has been played out many times. A younger member of the Royal Family feels they can freshen things up. The ‘Firm” feels that this is intolerable and will undermine the monarchy, and crushes the troublemaker. The interesting thing is that The Firm could well be right: the moderniser may do much more harm than good, given the ambiguous nature of the institution, being an upholder of democratic values while being deeply undemocratic itself.

Is it worth it? The British Monarchy does a reasonable job of being the ceremonial head of state. It has its weaknesses. In 2019 the Queen could do nothing to stop several months of Boris Johnson controlling the considerable executive powers of the state with no parliamentary or democratic mandate – a constitutional and democratic outrage. It was the Supreme Court, not the Monarch, that stopped the most outrageous element of this: the attempt to prorogue parliament.

But this constitutional arrangement comes at a huge human cost to the family at the centre of it. By and large they don’t choose to be members. If we had an elected head of state, they at least would have chosen it as a career. The Monarchy has turned the Royal Family into a factory of human misery. There are better ways. Alas reform is unlikely to be a political priority. The misery of one family is not worth the time and trouble.

Rishi Sunak shows a sure touch with 2021 Budget

Yesterday Rishi Sunak, the British Chancellor of the Exchequer (though that job title belongs to no other country so far as I know), showed why is considered to be the country’s top performing minister after Boris Johnson, the Prime Minister. It was Budget Day; he got most things right, while putting off a lot of decisions for another day.

The central issue for the government is, of course, dealing with the pandemic. His decision was to continue with a whole raft of fiscal support measures, such as the furlough scheme, until the end of September. This is well after the vaccine programme is supposed to have brought society back to normal, sort of. This shows that Mr Sunak has learned from his mistakes. Last year he was too eager to hurry things back to normal and withdraw fiscal support. Like his boss, he seems to have effortlessly risen above the mistakes of 2020.

But how is this to be paid for? Government finance does not work like household finance, and especially not for a medium-sized developed country with its own currency, like the UK. Mr Sunak has simply added the costs to the national debt without any serious plans to repay it. After dealing with short-term support for the stricken economy, Mr Sunak’s next priority is to show how he will stabilise government finances in the new, shrunken, normal by reducing the budget deficit. He did this by freezing tax allowances and raising the rate of corporation tax (from 2023). The former will allow the government to benefit disproportionately from incomes increasing through inflation. This allows the Conservatives to stick to their pledge not to raise personal tax rates, nowithstanding the hurricane that has hit the economy.

A lot is missing from this plan. Public spending plans have not been changed once the emergency subsides, though it isn’t hard to see many ways in which the stress on public services will rise; some are painting this as strategic choice for a return to austerity, but surely it is too early to say for sure. The long-promised solution to social care funding did not materialise. The temporary increase in Universal Credit, which many want to make permanent, has been prolonged only until 30 September. There were various gimmicks under the heading of “growth strategy”, i.e. measures to encourage business investment, but nothing major. Tax advisers will indeed get an economic boost, especially from his 130% capital allowance scheme for “productive” investment. So the Budget was not the long-term strategic rethink many had been hoping for. The big question is whether the government has such a rethink in mind at all, or whether it is saving it for later. Saving it for later would be perfectly sensible in the current fast-changing environment. A lot of criticism is focused on these missing items, however. Another line of attack, notably from the Liberal Democrats, points to gaps in the emergency support, especially for smaller businesses. This is valid, but it is a bit late for a government rethink.

The leaves two bigger questions: is it sensible to put off dealing with the expanded national debt? And is it sensible to raise the rate of Corporation Tax? My answer to both is “yes”. The limits to government finance are very tricky to assess. On the one extreme we have countries like Argentina, constantly overdoing it and stuck in a world of inflation and debt crisis; on the other we have Japan, whose mountainous public debt and frlarge budget deficits are simply shrugged off. A large national debt needs to be refinanced over time, as the bonds that finance it mature. For now this is cheap and there are plenty of buyers. But that can change; interest rates can rise; investors can be scared off. There’s no sign of this at the moment, but this debt will be with us for a long time. Can’t the Bank of England take on the debt that the markets can’t digest anyway? Yes, but this is a bad idea if inflation is in the system, especially wage inflation. But some wage inflation is good – it is the process by which living standards increase, especially in poorer households. Another problem is if the country requires a lot of foreign currency (the position Argentina got itself into); this is a risk if the country has a large current account deficit. But there are no warning lights flashing on either inflation or currency needs. If that changes the government might need to raise taxes further – but not yet.

And as for Corporation Tax, the government’s reversal of strategy is spectacular. Starting with the Coalition with the Lib Dems in 2010, the rate has been steadily reduced to 19%; the plan now is to bring it up to 25%. This rise is widely portrayed as an attack on business. But that isn’t the right way to look at it. As a tax on profits, rather than on sales, employment or property occupation, it is a very efficient tax. The incentives to run a business efficiently remain unchanged by the rate. It is better regarded as a tax on capital. It is certainly one of the things that companies look at when deciding where to locate a business internationally – but it is still quite competitive at 25%, and basing attractiveness to business investment on tax rates is an invitation to footloose capital, not secure growth. Capital is already cheap, and the story of this century has been the rise of rewards on capital compared to labour. This looks like a good place a tax hike. There are problems with the tax, especially in its treatment of foreign trade and borrowing, but the rate is surely not too high.

Politically, though, this Budget is part of a general revival of the Conservatives’ fortunes. Mr Johnson and Mr Sunak are often painted as rivals, and doubtless they are, but so far this year they are working well together, promoting a narrative of a sure-footed, cautious but fiscally generous recovery from the pandemic. Labour, who had opposed the rise in Corporation Tax, are floundering.

The pendulum swings rapidly in politics, but Rishi Sunak is showing a sure touch. Later this year, as his bluff is called on public spending, it will be interesting to see what he and the rest of the government do.

Rethinking economics – what we should learn from the pandemic but probably won’t

I recently published some thoughts on the economics of the pandemic. This wasn’t one of my more coherent offerings, but somehow I needed to break the ice. I wrote about the short-term question of government stimulus. I made a throwaway remark about the pandemic throwing up deeper issues as well. I want to open the box on these, because I think the pandemic has shown the poverty of conventional economics. So here are some early observations

The narcissism of small differences

Economic commentary used to be about small changes to the economic aggregate statistics, such as GDP or productivity. That didn’t prepare us for the earthquake that came. There are some big things happening in the world, and the risk of a pandemic is only one: there is climate change, nuclear proliferation, bottlenecks in global production processes (microchips, rare earth minerals, etc), but we tend to overlook these in a quest for small gains here and there. It seems like an avoidance strategy for not confronting the bigger questions of our time. Above all we need to break away from our obsession with monthly or quarterly or even annual GDP growth. Alas even during the crisis commentators are trying to compare quarterly GDP figures between countries, at a time when they are surely unreliable, where differences in statistical methods between countries are not well understood, and when timing differences between countries on the evolution of the epidemic matter a lot.

Production is no longer central to economic performance

We depend on food, clothing and many manufactured goods, but these represent a diminishing proportion of the economy. Or, to put it another way, these activities only occupy a minority of workers. Manufacturing, by and large, has had a good crisis. Clearly it has been bad for some things, but it has been good for others (computers and PPE for example). Our roads and ports have stayed busy with goods being moved to and fro. But this has still left economic devastation. And yet economic commentators still tend to talk of manufacturing as being central. They fret about barriers to trade, the effect of bottlenecks on inflation, and stagnant productivity. And yet developed world economies have moved on from these things.

An economy where services matter more than anything for the supply of jobs, and health and care services in particular, needs a different mindset from one based on factories and products moving around on lorries.

Most of the economy is non-essential

As we locked down, we drew a distinction between essential and non-essential supplies and services. The former turned out to take up a surprising small share of economic activity, and it wasn’t hard to keep the show on the road. And much of what we deemed essential has a dubious claim to that status (garden centres? – of course that doesn’t mean that there aren’t very good reasons for keeping them open). That is good news because it shows that there is more resilience in modern society than we thought. But it should make us reflect on whether we have our priorities right for the non-essential parts of our lives. Their action should be about providing wellbeing both to those using and supplying them. How well do they actually do this?

It also turned out that essential workers included a lot of people of rather lowly status in our society. Hospital cleaners; care home workers; supermarket shelf-stackers – all of whom tend to be paid as little as possible. The habit of calling these and other workers “low-skilled” has rightly been challenged. It is a stark reminder that a modern developed economy often rewards the ephemeral while taking the essential for granted.

We have found the magic money tree

The government has been called upon to open the floodgates of public finance, with a “what it takes” approach. The budget deficit has duly expanded into unthinkable territory. The sky hasn’t fallen in. Inflation and interest rates remain low. In fact there are no signs of financial stress at all, unless you count rather bubbly markets in financial assets. Doubtless that is partly because of the extraordinary economics of lockdown, when so much private spending and investment has been suppressed, leaving room to finance government spending. But we have much more flexibility on government finance than many thought we did, especially when we control our own currency.

If this looks too good to be true, it probably is. But we don’t really know what the vulnerabilities are. How do we know when we are overdoing it? For my liking economists are too focused on inflation. The consequence of overdoing things could as easily be some form of financial crisis that makes people poorer.

Hayek was right

We are supposed to be living in an information age, but governments, and everybody else, are blundering around for the lack of information. Governments can’t devise efficient schemes to help businesses in lockdown, even though they can afford them, because they have no good way of knowing which businesses need help, and how much. The result is that many are getting generous help they don’t actually need (including a lot of fraudsters), while many more that need help aren’t getting it. This information gap brings to mind the neoliberal ikon Friedrich Hayek’s argument in “the Road to Serfdom”. The most effective way of transmitting information in a complex society is the use of free markets. Government attempts to close the information gap result in oppression and corruption. The truth of that is evident in China, which has done most to gather and act on information about its citizens.

To them that hath shall be given

But the injustice of leaving matters to free markets is also very apparent. At first I was a bit sceptical by reports that poorer people were being hit hardest by the pandemic. People always say that, regardless of the facts. But it is very clear that people in poorer communities with less stable jobs have suffered more than anybody else. The big problem with free markets is that so many people lack the wherewithal to take part properly. This helps make the case for ideas like Universal Basic Income. The US scheme of giving handouts to everybody has been very helpful to the poorest, though it has also led to excessive gambling on financial markets by retail investors.

Free choice doesn’t work well in a pandemic

Libertarians have been very exercised by what they see as excessive government restrictions to individual choice. They feel the people should be left to make their own choices about the risks they want to run. Such critics have been made to look very foolish more than once. People may be able to make choices about personal risk, but they are ill equipped to assess the effect of their behaviour on others. The idea that the vulnerable should hide while leaving everybody else to take their chances doesn’t fit the complexity of society, where vulnerable people depend on others, or are forced to go out to earn a living. Instead of confronting these realities many libertarians instead tried to deny the facts, suggesting that covid-19 was similar to flu. This is another sign that unfettered free markets don’t provide efficient outcomes in many circumstances.

So where does the leave us?

What strikes me first and foremost from this is that we have become slaves to chasing marginal benefits while the planet is in crisis. As societies we could do a lot more to change the way we do things to address the dangers we face, without damaging health and wellbeing beyond some short-term disruption. “It will damage the economy,” is not an adequate reason for not acting. And the notion that economic growth is a prerequisite to positive change is false, in developed countries at least.

Government action is clearly part of the solution, but most successful action will come through individual initiative, with the action of free markets playing a central role, alongside a strong civic society that is able to challenge and complement government action. And it means that economists must move on from a focus to one focused on broader wellbeing.

Will we do this as life starts to return to normal? I wish I could be optimistic.

The same, only different – from Tony Blair to Keir Starmer

“The same, only different.” This is the advertising slogans I remember most clearly from the later 20th century (the 1970s most likely). I can’t remember what it was for, and a Google search doesn’t help. It was not one of the era’s more successful slogans, evidently. The advertiser was trying to say that its product had been improved, but without saying that it had been rubbish beforehand, or to put off loyal customers. I have often used it in connection with the Labour Party led by Tony Blair in the mid 1990s. As Sir Keir Starmer attempts a relaunch with a big speech today, it seems appropriate again, as indeed I was saying last week.

The same as what? In my original analysis of Mr Blair, I meant that the Conservatives. The party was making a pitch to “Middle England” voters who had been voting Conservative, and needed to reassure them that his party stood for a was a triumph of style over substance. Labour’s policies, notably on taxation and spending, were almost the same as the Tories. The key differences could be confined to four points that could be put on a small pledge card, alongside a fifth that said there would be no increase to income tax. Tories worried about putting “clear blue water” between them and Labour, but when they tried, Labour either immediately adopted the policy themselves, or let the Conservatives dig deeper into a hole with an unpopular policy. It was an extraordinarily disciplined effort, resulting in the most spectacular election victory of modern times, but which left the party with a weak mandate to actually do anything radical.

On reflection the slogan also applies to Mr Blair’s message to party activists. His policy stance displayed a marked turn to the right, in favour of the neoliberal orthodoxy. But Mr Blair maintained that the party retained its ultimate objective of getting a better deal for the working classes; it was just the tactics that were changing. He wrote the slogan “For the many, not the few” into the party constitution.

Mr Blair’s highly managed approach to politics invited distrust, but in both these messages he was as good as his word. In his first term he implemented austerity policies just as severe as the Conservatives were proposing, and was careful about raising taxes. In 2001, when the public had got used to Labour being in charge, he won another big election victory, but took a distinctly more socialist approach. Over the next two terms, Labour ramped up public spending and invested in public services. Anybody who did not think this approach was of the left only has to compare it with what followed. The problem was that he, and Gordon Brown his Chancellor and successor, and just as much an architect of this strategy, chose to avoid raising taxes on income and spending, and instead focused on the bubbly capital markets. When the crash came a massive hole was left in public finances. Mr Brown’s progressive cuts of the basic rate of income tax to 20% were a massive misjudgement.

What of Sir Keir? It seems to that he is trying a similar trick. His speech today was long on vague talk of transformation and a “fork in the road”, but his policies sound distinctly close Boris Johnson’s Conservatives, which are a distinct turn to the left for that party. He made working with business a central theme, and stressed sensible management of the nation’s finances. But the comparison with Messrs Blair and Brown does him no favours. These two offered the public clear messages of what they were about, especially Mr Blair. Even before he was leader, he offered us “Tough on crime, tough on the causes of crime”. As the election approached it was “Education, education, education”. On the radio this morning the Shadow Chancellor Annaliese Dodds was offered the chance sum sum up what Labour now stood for in a sentence. She waffled; I really can’t remember what she said.

But it is early days and this is not the mid 1990s. The Tories then were led by the uncharismatic John Major. Often the public go for opposites – so the best way to oppose the charismatic Mr Johnson might be something much more competent and mundane. It worked for John Major in 1992 after all, contrasting with his predecessor, Margaret Thatcher, as well as the Labour leader Neil Kinnock.

Still, clarity of message can’t hurt. The real test of that is that it must upset people, especially on the left. Only then will the public understand that Labour has moved on from the crazy years of Jeremy Corbyn, and that the party will deliver what Mr Johnson say he wants to do, but is too chaotic to succeed. The same, only different.

The economics of the pandemic: don’t panic

One of my favourite subjects in ten years of blogging has been economics. But for the last year I have hesitated. There has been a lot to write about, but somehow I did not have the confidence to say anything. A couple of weeks ago I got as far as writing an article, but it just meandered. But this week I have been bombarded with different opinions on the impact of the pandemic and what to do next, so I feel I must try to make some sense of it.

Most recently there were a couple of articles in the FT. There was an interview with economist Dani Rodrick, in which he urged that the left should make up for its attachment to neoliberalism in the 1990s and 2000s and meet the challenge of right-wing populism with a sort of left-wing populism. The focus of this should be the creation of decent jobs (the populism bit being the blaming of everything on plutocrats and bankers). He has certainly hit on something important, but to me left-wing populism brings to mind the late Hugo Chavez, and the creation of useless jobs given to political cronies, the running down of productive industries and bankrupting the economy on welfare programmes used to shore up politically compliant communities. This is where the policies of Labour’s former leader Jeremy Corbyn would have led in my view (he is a fan of Chavez after all). On the same day the neoliberals fought back with a piece by Ruchir Sharma, a banker, who claims that emerging market economies have responded to the crisis by pressing forward with supply-side policies, rather than splurging on stimulus. These are IMF-style programmes without the IMF – he points to China and India, amongst others. With developed economies resisting such reforms, he says these emerging economies will be better placed to overcome the shock. This is an interesting take on what is happening, but the conclusion is facile. Developed economies are at the productivity frontier, and they are not in need of many neoliberal reforms (with some exceptions such as Italy) – I agree with Mr Rodrick here, even if his picture of left-wing populism sends shivers down my spine.

And then we have some writing about President Joe Biden’s proposed massive stimulus for the US economy (£1.9trn is the headline). Left-wing commentator Robert Reich launched into enthusiastic support on Facebook. The Economist thinks it goes too far, and should be better targeted, echoing criticism from former adviser to President Clinton, Larry Summers. They fear that it will trigger inflation, and then rising interest rates, and a financial crisis. Meanwhile, also in FT, Gillian Tett has written about the remarkable stance of Chairman of the Federal Reserve Jay Powell, whom she thinks is being far to aggressive on the length of time he suggests interest rates should stay low. Meanwhile there is a lot of fretting about signs of overheated financial markets, with the popularity of crypto “currencies” like Bitcoin eliciting much angst.

There is quite a lot of agreement that governments are right to spend to support the economy, but a big concern on how far this should go. Critics of stimulus worry about setting off inflation. But conservatives have cried wolf on inflation many times in the last few years, and yet it remains stubbornly low. Most commentary on inflation misses the mark.

What is inflation? It is a devaluation of the currency, so that the same nominal units income or savings buy less, but that a fixed nominal amount of debt becomes easier to pay off. The focus of commentary tends to be almost entirely on the first, measured by overall movement in consumer prices. But if wages do not rise to match prices, then debts are not depreciated. It isn’t really inflation, in my books, but a structural adjustment. The three main reasons for this can be worsening terms of trade (i.e. imports becoming more expensive, usually because the exchange rate is depreciating), a decline in productivity, or a shift of bargaining power from labour to capital. None of these require the same policy response as inflation proper (i.e. higher taxes or reduced public spending, or higher interest rates). And in the 21st Century consumer prices and wages have rarely moved in line with each other in developed economies. Before the financial crisis of 2007-2009, wages trended ahead, largely because of improving terms of trade from cheap imports, mainly from China. After the crisis wages have usually failed to keep pace with prices, as the terms of trade moved against developed countries (Chinese products stopped getting cheaper), unmasking a steady process of the balance of advantage moving from labour to capital. All this is very different from the later 20th century, when most of the current theories of economic management were developed. Then wages and consumer prices usually moved in lockstep. The breaking of the link between prices and wages is one of the critical things to understand about the modern economy.

So what happens when demand runs ahead of supply? Inflation remains stuck because rising prices choke off demand, because wages for most people do not keep up. The typical response is for imports to rise. At least that is what I suspect from the limited times where this has happened in the 21st Century (I believe Britain in the mid noughties was a case in point). But a feature of modern developed economies, especially since 2007, has been a chronic lack of demand, while conservative government fiscal policies were the accepted wisdom.

So what will happen if President Biden’s stimulus gets going, with the Fed minded to keep interest rates low? I don’t think it will lead to more than a slight increase in inflation, largely because of the disconnect between prices and pay, but also because of the nature of the recovery. The Economist refers to some supply bottlenecks, such as in microchips, but these relate to distortions in demand arising from lockdowns. Assuming that the US comes out of lockdown, then the main rise in demand will be for services, rather than such manufactured goods, where there seems to be quite a deep pool of unemployed or underemployed labour. And doubtless imports will rise too, and the US dollar will strengthen relative to other currencies. Also much of the excess demand will be funnelled into asset markets, so the current distinctly bubbly markets could well continue. If there is trouble it will come from some kind of breakdown in financial markets. But they do not seem to be as vulnerable as they were in 2007. All this rather supports Mr Reich’s optimistic outlook. As the stimulus plays out things become a lot less predicable, but that is a couple of years away and not necessarily unmanageable.

What should the British government do? It has run up an astonishing budget deficit in its largely successful attempt to keep the show on the road in the crisis – unemployment is remarkably low I the circumstances. According the Economist the deficit is nearly 20% of GDP, the largest of any of the economies it follows. But the same statistical table shows something rather interesting: that the current account deficit to has fallen to 1.3%, and is unremarkable by international standards. Not long ago it was one of the highest. This, together with very low interest rates, suggests that there is no financial crisis, and therefore no need to panic, as the country did in 2010, when the budget deficit was 11%, though the current account deficit was a bit higher at 2 to 2.5%. The government’s main problem is its own rhetoric about government finances.

How quickly could things turn nasty in the UK? We are much more vulnerable to a financial crisis than the US, because we lack financial clout. But again we look much less vulnerable than in 2007. A big question is what happens if the current account goes sharply negative again. That is not necessarily unsustainable (it can be financed by selling property to foreigners). But if world interest rates should start to rise then problems might spiral. But my guess is that the country is safe for a couple of years at least.

There are some much deeper economic questions emerging from the covid crisis, which point to a major change in direction for economic management. These should occupy us more than short term government finances.