Author: Matthew

The Lib Dems mission must be to pick up disillusioned Tory voters

Not so long ago the idea of a “progressive majority” was popular amongst leftish intellectuals. They noted that if you added together the poll ratings, and even general election votes, of Labour, the Lib Dems, the Greens and (for some people) the Scots and Welsh Nationalists, there was a clear majority of the electorate, outnumbering the hated Conservatives and Ukip. This majority was regarded as a state of nature, and so, it was argued, proportional representation would lock it into the political system for good.

It was always optimistic. Both Labour and the Lib Dems drew voters who would happily support parties that were not “progressive”. This word is left’s own favoured description for itself. Since, in practice,  most “progressives” oppose any kind of reform to make the state or the economy more efficient, I really can’t bear not to place it in quotation marks when it is used to represent the broad left, rather than those who genuinely favour ideas that stand for the positive progress of society..

The flaw in the progressive majority idea is now open for all to see. In the 2015 General Election the Conservatives and Ukip outpolled the “progressive” parties. And that is before any disqualification of the Lib Dems after they entered coalition with the Conservatives. And if that wasn’t enough, the clear majority for Brexit, not supported by the “progressive” parties, confirmed it. Most parliamentary seats for “progressive” parties voted to leave the EU.

This is a fact that the far left (I almost used the word “radical”, but once more the word would be seriously misplaced for a bunch that includes so many people nostalgic for the 1970s). Many are convinced that Labour did so badly in 2015 because it was not left wing enough, with its half-hearted embrace of austerity. Challenged, they suggest that there is an army of disillusioned non-voters who could be drawn into voting for a party of the true left. Certainly there are a number of under-30s that could fit that description, but not enough. In fact most people who explore the polling data suggest people who do not vote are often less-educated and supportive of populist right wing policies. The Brexit referendum was relatively successful in bringing these non-voters out, and they did not vote Remain.

And yet calls for a progressive alliance persist. The Labour left is sceptical, to be sure – to them Labour alone should be the progressive alliance. But many Greens and Lib Dems would contemplate ganging up with other parties in order to push forward progressive reforms. These include constitutional and electoral reform, sustainable economics, and stronger environmental protection. In principle I would support such an alliance, but only with a Labour Party genuinely committed to political pluralism – which rules out the current leadership.

And yet, even if Labour could be brought into the picture, the numbers don’t add up, even if the SNP could be brought into it. An alliance would need to present a serious challenge to the Conservatives in English constituencies. Labour and Green support might help the Lib Dems recover some of their lost seats; the Greens might pick up one or two seats. But it is very hard to see how Green and Lib Dem support would give enough help to Labour. Instead it is more likely that the Tories would successfully exploit Labour muddle to destroy the whole alliance.

So, is it game over for progressive politics? Not quite. Brexit may have won the referendum, but Remain still managed 48% of the vote. But that 48% includes a lot of people who normally vote Conservative. If a way can be found to peel these voters away into a progressive alliance, then it could be back in business.

And it isn’t hard to see what might do this. The Prime Minister Theresa May is enjoying a political honeymoon, but her party is at sixes and sevens over Brexit. It is not at all clear what shape a post Brexit Britain will take because her party is hopelessly divided on it. The moderates want to create a cosy relationship with the EU, in order to protect investment and the economy. But the Eurosceptics that make up so much of the party will not stomach the compromises that entails. Meanwhile, if the British economy goes into recession, as many fear, the pressure on government finances will drive further division. It is not beyond imagination that the only way out will involve a second referendum.

The Conservatives might split under the strain. That is unlikely. As Labour will find out as its MPs contemplate their position, the pressures for the large parties to stay in one unit under Britain’s electoral system are huge. There are no safe seats for breakaway parties, and safe seats are most MPs have no real idea of how to fight a hard seat or the stomach to do it. But the splits will undermine the Tory credibility, giving the chance for other parties to take their votes.

And surely this is the historic mission for the recovering Liberal Democrats. Labour has lost interest in anybody that has contemplated voting Conservative (as both leadership contenders vie to prove how left-wing they are), and the Greens have never had it. There is nobody else to fill the vacant space. For once the coalition experience may prove a positive. That might then revive the idea of a progressive alliance, though the credibility of the Labour Party would be a major obstacle. It remains the best chance for progressive politics.

The Lib Dems are understandably focusing on their core vote, and not on scooping up flighty floating voters. But in order to achieve anything the party will have to return to appealing to these voters in due course. Disillusioned Labour voters will not be enough. The party will have to detach centre-right voters too. That should be food for thought for the party as it tries to redefine itself in British voters’ minds.

Was the coalition’s austerity policy a colossal mistake?

Politics is dominated by historical myths, about which the different political camps disagree. Examining these myths critically is one way that societies can find reconciliation. While “austerity”, the favoured shorthand for government cutbacks, is fast sinking as an issue in British politics, long since overtaken by Brexit, its mythology remains a defining issue. This mythology has right and left versions. I want to look at the mythology of the left.

Few in the Labour Party would disagree with Oxford Economist Simon Wren-Lewis in a recent article that austerity “will go down in history as probably the most costly macroeconomic policy mistake since the 1930s, causing a great deal of misery to many people’s lives.” We in the Lib Dems are implicated in this criticism, as part of the coalition government of 2010-2015 that implemented austerity. It is exhibit B in the Labour case that the Lib Dems should cease to exist as a political party, and that all “progressives” should simply join their party (exhibit A being the tuition fees fiasco). So what are we to make of it?

Mr Wren-Lewis sets out this narrative very clearly in his article. He is an open Labour supporter, so his comments come with a political slant – but he is a proper economist and the case he makes is a substantial one.

This narrative runs something like this: in 2008-2009 Britain followed the world into a severe recession, brought about by a global banking crisis. This inevitably created a government deficit, of which he says: “We experienced record deficits in 2010 simply because the recession was unusually severe.” The Labour government used fiscal stimulus to moderate the effects of the recession, but the Conservative-Liberal Democrat coalition that came to power in 2010 rejected this approach and focused obsessively (so the story goes) with reducing the deficit, using austerity policies – cutting government spending severely. He claims that this focus on austerity had no economic merit, and is best understood as a political exercise to reduce the size of government, with misery as its by-product.

Mr Wren-Lewis says that the government defended its policy with three arguments: that innovative monetary policy would provide the necessary stimulus; that improved business and consumer confidence would do the trick; and that financial markets would not finance the national debt unless action was taken. He demolishes each of these arguments, and I would not disagree with him, though there is an element of hindsight and the first two ideas came good in the end. As a result, he says, the British recovery was extremely slow, costing the average household £4,000 a year – coincidentally about the same as the Treasury’s estimate of the costs of Brexit.

But Mr Wren-Lewis is being disingenuous. There was a fourth argument for austerity. And that was that most of the deficit in in 2010 was “structural” – in other words had a deeper cause the recession. If I remember correctly, the Office of Budget Responsibility estimated that about 8% or so of the 11% deficit was structural. In other words a lot of the pre-crash tax revenues were gone for good, and would require more than short term demand management to bring them back.There is plenty of scope for disagreement amongst professional economists here – but it does suggest an alternative narrative, to which I personally subscribe.

This narrative posits that the British economy was not in a stable position when recession struck. It had already been pumped up by excess fiscal stimulus; there was too much private sector debt; and there was an unhealthy dependence on international finance and, to a lesser degree, North Sea oil. The evidence for this is not just the precipitate nature of the crash – bigger in Britain than in other developed nations – but the large current account deficit before, during and after the crash, and the high level of Sterling beforehand, and its abrupt fall. It is true that the public deficit did not look outsized by international standards before the crash, but, as my macroeconomics lecturer pointed out at the time, the overall economic context had classic signs unsustainable fiscal stimulus. The crash was more than an ordinary business-cycle downturn, it was Britain’s financial chickens coming home to roost.

So what does that mean? It means that fiscal stimulus as a response to the recession would have only a limited impact, and would not have restored the economy to its previous health, and in particular it would not have solved the government’s deficit problem. Before long the additional demand generated would have led to inflation (in fact unlikely outside economics textbooks) or (much more likely) a worsening current account deficit, i.e. stimulating other countries’ economies rather than ours. That put the British government in a bind. There was a case for stimulating demand through fiscal policy, and yet government expenditure had to be cut back towards something sustainable in the medium term. The government in fact plotted a middle way and, far from obsessively focusing on deficit reduction, moderated the cuts when the recovery proved slower than they expected. The trajectory of deficit reduction was close to that projected by the outgoing Labour government in 2010.

But many distinguished economists were and remain highly critical of the coalition’s austerity policies. Labour supporters can quote any number of famous names. But you need to read what these distinguished people actually said, rather than the mood music they fed into. In fact they hedged their bets. They focused criticism on the lack of public investment, and not across the board austerity. Investment, in theory anyway, is a magic bullet in this context. It generates future productivity growth, so helps to put the economy on a more sustainable future path, while at the same time providing short-term demand. This is a perfectly valid criticism of the coalition record, shared by many Lib Dems who were part of the government. But it does not suggest that the majority of austerity policies were wrong in principle. Taxes and spending were badly out of line and something had to be done to return them to balance. All I can say in the government’s defence is that public investment is much harder to do in practice than in theory – so often the money ends up in wasteful white elephant projects. But it would have relatively easy to allow the building of more council homes, for example.

Where I agree with Mr Wren-Lewis (though he does not explicitly say it) is that the macro-economic policy presented by Labour at the General Election in 2015, under Ed Balls and Ed Miliband, was much more sensible than the one presented for the Conservatives by George Osborne. Mr Osborne proposed a charge towards fiscal surplus that made little economic sense – and one year on it is being buried by his successor. The Labour strategy would have knocked some of the hard edges off austerity, while promoting a higher level of investment. The left is right to call to call it “austerity-lite”, but wrong to suggest that this was a bad thing.

So criticism of austerity is warranted, but this does not amount to what the left wants it to do: to prove that cuts to government spending and benefits were unnecessary, and still less that they can be reversed. Extra spending will require higher taxes. Economists may feel that austerity policies are self-defeating in many instances, such as in some of the Eurozone adjustment programmes. But there is also growing recognition of a deeper weakness in many advanced economies, including Britain’s, signified by the stagnation of productivity. That is limiting tax revenues and what governments can afford to do. That weakness should be the central topic of political debate.

 

 

How should Lib Dems embrace economic policy?

The British Liberal Democrats are setting up a policy working group on the “21st Century Economy”. I was among over 200 people to volunteer to take part, but sadly I was not picked. Those that have been picked will face truly daunting quantities of advice and  reading material, but nevertheless but doesn’t stop me from offering my thoughts today. This time I won’ focus on the hard content of any new policy, but on its all-important political framing.

So far as content is concerned, regular readers will have got the hang of it. I blogged about it last year as part of another Lib Dem initiative, recommending Four Themes. These themes are green growth, small is beautiful, humane public services and redistribution of imbalances.

This line of thinking is very compatible with Lib Dem values and should go down well with the membership. But it presents a political problem. It means overturning several beliefs that the British public policy establishment holds dear. These include that higher volumes of consumption of things are essential to economic health (and may even be a measure of it), and that large, centrally controlled systems and organisations are the most efficient.  It amounts to a policy revolution. And revolutions make people uncomfortable.

It is essential for future political success for the Lib Dems to have one foot in the political mainstream – so that they are regarded as being basically a sensible party. If they aren’t they will be condemned to the margins of politics like the Greens. It is the same dilemma faced by Labour supporters as they challenge capitalist ways. You do not secure lasting political progress in a democracy from the extremes.

The Lib Dems should therefore present a radical policy agenda in an un-radical way. It must be evolutionary, not revolutionary. The party needs to specify small steps forward, each of which is able to achieve demonstrable improvements, that will over time change the conventional wisdom.

This is why I particularly like the idea of Green Growth. it contains a highly constructive ambiguity. On the one hand it suggests that the party favours economic growth in the conventional sense, which the public has come to associate with better employment conditions and higher pay. But it does not quite say what is actually meant by growth – it could mean general wellbeing and quality of life rather than volume of consumption. Meanwhile the phrase unambiguously points to environmental sustainability. I strongly suggest that the Lib Dems make the phrase central to their proposition, or come up with something that does the job even better.

That’s my first piece of advice. My next advice is that they need to tread very carefully around two hot political topics: free trade and macro-economic management (aka “austerity”). These may well be excluded from the policy group’s formal scope, but the party’s wider narrative cannot avoid tackling them.

Free trade is a totemic issue for the Liberal Democrats. It was the one of the key organising themes of its predecessor: the Liberal Party. That was in a different time and context, of course. The Liberals then saw free trade as a way of breaking the hold of the landowning classes, who sought to protect their business interests (especially agricultural) at the expense of high prices for the masses. But even now, it is clear that freedom of trade, and competition, is a good way of keeping consumer prices down and freedom of choice up. By and large the general framework of world trade is something that Lib Dems will be quite happy with.

But something has changed in the power balance. Free trade helps keeps prices down, but it also seems to be doing the same with wages, until you reach a globally mobile elite of senior managers and other professionals. And worse, the instruments of free trade can allow globally powerful businesses to legally challenge public policy. There are some particularly odious examples from the tobacco industry as they have successfully slowed down, though not defeated, the introduction of plain packaging of cigarettes. Intellectual property is another issue that needs to be examined with a sceptical attitude. It is promoted by many businesses as being akin to any other form of property right and fundamental to civilised existence, but it is often used to stifle freedom and innovation, rather than encourage it. It is a favourite means for the manipulation of profits to low tax regimes by multinationals.

And trade agreements make this a hot topic. Brexit adds to the relevance. There were already cogent arguments that the EU was using its free trade rules to block general public policy (such as restricting state subsidies to the steel industry – though liberals should see two sides to that argument). Brexit does let Britain off the hook for the proposed EU-US trade pact – TTIP – which is causing a lot liberal angst. But the country must decide what sort of trading relationships it wants, and how far to go – including whether to join multilateral pacts such as the nascent one in the Pacific, TPP, which the country could join if it left the EU (or so I read). I have to say that I am agnostic on this question. My faith in free trade pacts has been shaken, but not destroyed. But the issue is becoming a political touchstone, and the Lib Dems would do well to apply some serious thought to this area, rather than recycling old slogans.

The Lib Dems will also find a minefield confronting them on macroeconomic management. The left have decided to make opposition to “austerity” one of its organising principles. I suspect that is because they draw so much strength from public sector employees and people from places such as universities and charities that depend heavily on public largesse in some shape or form. But anti-austerity does not resonate amongst the general public, who generally get the impression (justified or not) that public spending benefits other people. Since the Greens and Labour have drawn away the more trenchant political voices on the left, the Lib Dems have the opportunity to strike a more nuanced tone. Austerity is an elastic idea, so it is quite possible to say that you are against it, but the party should not apply “homeopathic policy” – mouthing anti austerity rhetoric while diluting the substance – as this did not work well for the previous Labour leadership.

My advice is for the Lib Dems is to stay clear as they can from the word “austerity”, and to strongly advocate higher levels of public investment in education (not just schools, incidentally) and green growth. Public services, though, must deliver value for money, and will need continued reform – though not the brainless outsourcing and “payment by results” favoured by the Conservative government.

So there are some hard questions and tricky politics. But as I said last week, the left has to develop a new economic narrative. Given the staleness of the economic discourse on the far left, the Lib Dems have real opportunity to take up thought leadership. There is a real prize to be taken here.

The Mandibles: Lionel Shriver’s liberal dystopia is a must-read

I have recently finished reading The Mandibles, the latest novel by Lionel Shriver, whom I chiefly know through her novel We Need to Talk About Kevin, which I haven’t actually read. The new book is set in the US in the future (2029 to 2047), and the core of the book’s meaning is in economics and politics. It is a must-read for anybody interested in either.

I don’t want to spoil the plot too much. I will say nothing about the interplay of the characters, which is very well done, in the first two-thirds of the book anyway. This may be strong enough to entice even readers not interested in the wider narrative, if it wasn’t for rather long passages of explanatory text in the first part of the book, thinly disguised as conversation. I found the economic explanation fun, of course, but it does slow things down in the first part of the book. Ms Shriver is very skilled at understanding how different the world looks from different points of view, and how this breeds misunderstanding. She also has a wry sense of humour, which is never very far away.

I will instead talk about the economic and political context which she sketches out. The book is in two parts. The first part (which is about two thirds of the text) is set in the years following 2029. In it the US economy suffers an implosion when the rest of the world turns on it. This follows from three trends which are clearly visible in the current US scene. First, the country can get away with huge net indebtedness to the outside world because the US dollar is the top global reserve currency. This allows it to sustain large trade and fiscal deficits, which “Keynesian” economists suggest is not an urgent problem; Ms Shriver suggests that liberals will never get round to taking it seriously. And second, the political liberals will come to dominate US politics, in the way they have Californian politics, through the rise of Hispanic Americans. And third demographic change will exert a growing pressure on state finances with rising demands on the state to deal with the needs of aging baby boomers.

So the US deficits persist until the rest of the world decides that it has had enough, and no longer wants to keep piling up US currency debt. They launch a coordinated coup to replace the US dollar as the reserve currency with a new currency that they create for the purpose. To cut a long story short, the US government reacts badly and the US economy collapses. I will leave the details for those who want to read the book. The striking thing to me is the plausibility of it all. Notwithstanding the elegant arguments put by one of the characters, who is a Keynesian economist, which at times sound very similar to the sorts of things I say in my blog (especially his hatred of gold).

The second part of the book takes the scene to 2047, after the US economy stabilises and recovers, and takes up a much diminished place in global terms. In terms of drama this part of the book is much weaker. The cast of characters is greatly reduced, and the main focus is on just two of them (one of whom, is Ms Shriver’s alta ego, a by then nonagenarian novelist), and much less actually happens. From purely a novelistic point of view, this section probably wasn’t necessary. But it is essential for the development of Ms Shriver’s political message. She sets out the US as a sort of liberal (in the US sense) dystopia. There is a wall along the US border with Mexico; it is built by the Mexicans to keep US refugees out. The demographic balance has become so out of kilter than the tax rates have to be raised sky high – and the government creates an insidious method of ensuring compliance – planting a chip in each citizen’s head that records all their financial dealings.  Again I will spare you the details: read the book.

Ms Shriver’s political standpoint is clearly a libertarian one. She values individual freedom ahead of collective social obligations. Her novel’s message is that social democracy contains the seeds of its own destruction, and will either collapse, or undermine the liberal ideals that many of its supporters hold dear. I have to say that her alternative does not look much better: wellbeing seems to depend on inheriting wealth to create a degree of personal capital.

So why should somebody like me, who has very different political values to Ms Shriver’s, give so much time to this novel? Firstly, those ideas are presented in a digestible way. The second part of the book may drift into one–sidedness occasionally, but Ms Shriver’s great gift is to understand differing points of view, which makes her case much more accessible.  Secondly we must resist the tendency for modern political discourse to be tribal. Liberals like me do spend quite a bit of time in dialogue with those on the left of the political spectrum, but not nearly enough trying to understand the right. That is a dangerous thing.

It is dangerous because so much of politics and economics is a matter of balance. It is not a matter of finding the right ideas and taking them to an extreme, but understanding the dangers of different policies and plotting a way between them. Too many on the left have an excessive faith in “Keynesian” economics (I use quotation marks because this economic philosophy has drifted so far from the flexibility of mind that characterised Maynard Keynes himself). The fact that many developed countries can easily afford high levels of government borrowing is not to say that such borrowing does not present longer term dangers. And high-tax high-public service societies have their attractions, but present major challenges for the longer term, which the political right see more clearly than we do. Above all the novel serves to show how fragile the foundations of modern middle class society might be.

So this book should promote a bit of healthy self-examination among those on the liberal left. As well as being a well-written and very enjoyable read.

 

 

Economics is at the heart of the left’s weakness

In my last post I said that the lack of a convincing economic vision was at the heart of the British Labour Party’s difficulties, and a problem for the left generally. It is worth unpacking that a bit and sketching the direction that any new thinking should take.

The central political problem for the left is the disaffection of so many working class and lower middle class voters, particularly ethnically native people. They are becoming increasingly voting for right wing populist parties and causes. This was a dominant factor in the vote for Brexit in Britain, and the rise of Donald Trump in the US and Marine Le Pen in France, to name just a few examples. These voters had been part of a left wing coalition, but leftist parties moved up market to attract liberal middle class voters, especially those employed by the public sector, and also pitched for ethnic minorities.

Meanwhile problems for the traditional working classes go beyond political neglect. They are overwhelming the losers from the advances in technology and globalisation which have destroyed the relatively stable and well-paid jobs on which they used to depend. Whole swathes of Britain are stuck in a post-industrial doldrums, especially in smaller towns in England and Wales. The left needs to win back these voters if it is to challenge the populists and the centre right. They have little clue as to how to do this, and distract themselves with other issues. Labour indulges in internecine strife. The Lib Dems are concentrating on rebuilding their core vote – i.e. focusing on the middle class vote.

But the cluelessness of the left in Britain struck me most forcibly from a comment made by the Green MP Caroline Lucas. She blamed the Brexit vote on austerity – government cutbacks since 2010 following the financial crisis. And yet the bulk of the disaffected voters were never very dependent on government jobs and handouts, and are often quite supportive of austerity policies, as they felt they hit the undeserving – immigrants and layabouts –  rather then themselves. Indeed, they benefited probably more than most from government generosity on raising tax allowances. It’s not austerity, it is the lack of decent jobs that is the problem. And government handouts are not the answer because these foster dependency and undermine people’s sense of self-worth.

The left starts with a cultural problem. They are by and large liberal, inclusive and cosmopolitan in outlook. This helps in coalition building generally, and especially in outreach to ethnic minorities, but it creates immediate distrust from native working classes. In order to overcome this the left needs to offer hard benefits – and that involves two things. Good quality jobs and decent public services. The left loves good public services too, of course – they provide lots of employment opportunities for their core supporters – though they are less certain how to pay for them as an aging population pushes up demand. But on jobs they have almost nothing to say.

Such talk as there is concerns macroeconomics. The left favours stimulating demand through generous fiscal policy to create jobs in the economy as a whole. Jeremy Corbyn, the Labour leader, talks of investing in infrastructure. This may be a good idea in itself, but by and large these policies create the wrong jobs in the wrong places. New housing, for example, needs to be built in the prosperous south east, where the shortage is greatest, and firms often have to import the workers from abroad because local ones lack the skills. Some infrastructure projects should help the economies of the more run-down regions, it is true, but these need to be part of a more coherent strategy of regeneration. Meanwhile the centre-right has cottoned on the ideas of infrastructure and regional redevelopment as well.

What to do? The first thing is accept that the problems of the disaffected working classes are more than a little local difficulty with conventional economic policy. It is an aspect of a broader crisis brought about by globalisation and technology change, and a blind spot in conventional economic thinking, with its emphasis on aggregated statistics like GDP, and one dimensional concepts of efficiency and productivity. It needs fresh thinking of a type that will be heavily criticised by the conventional public policy establishment. As fellow blogger David Boyle has pointed out, this is not necessarily a problem with economists, but with public servants tied to the old conventional wisdom.

The problem is that conventional policies are tied to highly centralised political structures and tend to concentrate the benefits of economic growth at the centres of power, while hollowing out the rest. While promising efficiency, it is in fact wasteful because it leaves so much human capital under-used. So political decentralisation is a large part of the solution. This is very hard for Britons to grasp, since we have been centralising since William the Conqueror in 1066. But countries with a more distributed history of political power, like Germany, Scandinavia and Switzerland, perform much better while having very similar cultural conditions.

But if political decentralisation is part of the answer, it is incomplete. The USA is politically highly decentralised and yet suffers similar problems of alienation. There localised political units have not been able to challenge the power of big corporate interests, who collect large monopoly profits and suck them out of the local economies in the name of economic efficiency. Wider national and international political structures need to keep these corporations in check, and yet too often they are captured by them. This is an unresolved battle in the European Union, incidentally, and the best reason to be sceptical of the EU project – though the EU also does much to counter global corporate power.

Meanwhile we need to stack the economic odds in favour of local entrepreneurship and innovation, and celebrate localised, human and integrated services that tailor service solutions to individuals. Much more public money needs to be channelled into rebuilding skills in de-industrialised regions – something Britain is woefully bad at by international standards (consider this interesting article in the Economist).

Some on the left are starting to get this. American Democrats are waking up to the evils of large corporate oligopolies. British Lib Dems are sympathetic to the decentralisation agenda. A number of Labour city leaders also grasp it. But it is complex and difficult area. It needs both grand visions to change mindsets and capture the imagination, and small, practical steps that will achieve the goals in an evolutionary way that convinces sceptics.

I will try to use this blog to help develop the new economic thinking in my very small way.

 

The rise of Labour’s hard left reflects the weakness of the soft left

I am no fan the British Labour Party. I have spent years enduring its arrogance and tribalism; I would not mind terribly if the party did not survive its current crisis. There is a temptation to gloat over its predicament – though this would be a distraction from the important political questions of our time. But it is more important to reflect on wider lessons for the political left.

Labour’s immediate problem is that their leader, Jeremy Corbyn, has no idea how to lead a political party, even if he were inclined to lead it in a sensible direction. To understand the depth of his failure I would point to two articles by former supporters. First from the Guardian journalist Owen Jones is getting a lot of attention right now; but what really shocked me was this from Richard Murphy, who developed Mr Corbyn’s economic manifesto last year, when he was running for the Labour leadership. And yet Mr Corbyn remains very popular in the party’s mass membership, much of which has only recently joined, who seem convinced that he represents a new kind of politics, and that criticism arises from malign forces. And that is enough to keep Mr Corbyn secure in his role.

As a convenient shorthand I will call Mr Corbyn and his supporters the “hard left”, though it is in fact a more complex fusion of old and new leftist trends than this name suggests. The word “hard” suggests its uncompromising attitude towards the political and business establishment, and its rejection of the conventional methods of politics. It compares with two other loose groupings. First are centrists, who held sway in the late 1990s and 2000s under former leader Tony Blair. These combined an embrace of global capitalism with a broad role for government intervention, albeit using quasi-market structures much of the time, and with a contempt for intermediate levels of democratic intervention below national government. The centrists made a successful pitch for formerly Conservative voters, giving the party power from 1997 to 2010. And yet the left of the party felt betrayed by its compromises, and especially by the Mr Blair’s support for the Iraq war in 2003.

In between the centrists (otherwise referred to as Blairites) and the hard left stands what outsiders call the “soft left”. I’m not sure if they would be happy to use that term themselves, they might prefer “liberal left”, but it seems to me highly appropriate. The soft left want to have the best of both worlds: drawing on the anger felt by the public sector workers that are the core of the hard left, while still wanting to achieve and wield political power through conventional political processes. The soft left became the dominant Labour faction under the leadership of Ed Miliband, after Labour lost power in 2010 until last year’s general election. It still forms most of Labour’s parliamentary party, and it is trying to oust Mr Corbyn as leader.

The success of the hard left reflects the weakness of the centrists and the soft left. The centrists are now a busted flush. The financial crash of 2008 exposed the hollowness of their achievement; the economy was not robust enough to support the level of public expenditure they favoured. Meanwhile their economic policies seemed to favour an affluent minority. While they might use government agencies to redistribute much of the wealth, what was required was decent jobs in poorer parts of the country. The Conservatives took over much of their governing ethos.

The soft left are no better, and that goes to the heart of Labour’s problems. They have no more idea about what to do than anybody else; the hard left doesn’t have much idea either, but is able to focus its energies on being against things instead. They nevertheless focus hard on what they have to do and say in order to win back political power. Under Mr Miliband this took the form of endless re-launches as they tested out one half-baked idea after another.  By 2015 they ended up with an election manifesto that was generally centrist. Its core fiscal policy is in the process of being adopted by Theresa May’s new Conservative government, along with many other policies and priorities. But in order to coopt the anger of the hard left they had to dress it up as something more radical. This is what, in another context, the Economist calls “homeopathic politics”: the adoption of radical policies in minute quantities in the hope that it will create a positive aura by association. The Economist framed this idea to describe the way the American right tries to tap into the anger of the working classes at globalisation. Its warning was that it always backfires, as it will never satisfy the people that it Is trying to appeal too. In due course it led to the capture of the Republican nomination by Donald Trump. Something similar has happened to the soft left.

The soft left have compounded their problems by changing the leadership election rules so that not only is the mass membership in control, but they are boosted by temporary members (though they are trying to backtrack on this now). Two muddled ideas seem to be behind this. The first was that broadening the franchise for the leadership battle would make the selectorate more representative of the country at large; a quick glance at US primary elections should have shaken them out of that. Second was that the soft left could ride the tide of left wing anger at “austerity” and “neoliberalism”, the abstract ideas that the hard left choose to obsess about. But they have been outgunned by the hard left.

Meanwhile soft left MPs have shown little backbone. Their chosen challenger to Mr Corbyn, Owen Smith, was almost unheard of outside Labour circles, and even he required another MP, Angela Eagle, to break cover and make the initial challenge. The best qualified MPs to be leader are keeping a low profile.

The political misjudgements and the lack of backbone are signs of a wider weakness – a failure to develop distinctive political ideas of their own with which to excite the country at large. Owen Jones’s article, linked to above, takes the form of a series of questions to which he feels Mr Corbyn’s supporters have no convincing answer. But the soft left would struggle with exactly these questions.

This vacuum of ideas on the left is not unique to Britain. It is why populists of left and right are doing so well in so many developed countries. It is why the left is in full retreat in Latin America too. Beyond the populists it is leaving the political space dominated by the centre-right, such as Britain’s Conservatives and Germany’s Christian Democrats. Developing new, liberal ideas on economics and democracy is now of the utmost urgency on the left. I wish more people were engaged in that exercise.

And it is the best hope for my party: the Liberal Democrats. It has flirted with both centrism and the soft left; neither will work now. But it is as close as anybody to the new ideas that will be needed to take our society forward. It should make development of these ideas its top priority.

But what are these new ideas? A topic for another day!

The Liberal Democrats: a rebirth not a fightback

Britain’s political system is in turmoil, and each political party faces distinct problems. For now the Conservatives seem to be weathering the crisis best; the referendum result was the right one for them, in party management terms at least. Labour’s crisis is looking terminal, “the reek of death” as this excellent article by Nick Cohen has it, describing the particular lunacy of the political far left. But what of the party that has already suffered death: the Liberal Democrats?

Death might sound a bit strong. It continues to bob along at 8% or so in the opinion polls, win the odd local election, and its membership is resurgent. But the party has regained little of the political traction it lost during its coalition with the Conservatives from 2010 to 2015. And so much of the human capital and community connections it built up in its growth years in the 1990s and early 2000s has gone. Locally I can’t get over the fact that the Lambeth party has lost all its councillors – I remember so well the process by which the party took de facto control of the council in 2002, a process that will now have to restart almost from scratch. The party is now almost completely ignored by the mainstream media. In David Cameron’s valedictory Prime Minster’s Questions last week the Speaker saw fit not to call any of the party’s MPs, in spite of the important role the party played in his premiership. Only Lib Dem activists noticed.

And yet new life is stirring. Last year, after the calamitous General Election, party membership surged, and the Autumn conference was one its best attended, though ignored by lobbyists and media. But that is as nothing compared to what has happened in the last month – after the referendum. Membership has surged again (my local party has grown by about 60% – this may be the strongest it has ever been), but it is very different from last year. In 2015 the members were sorry for the party; they were interested in it, but few were up for a fight. In 2016 they are boiling. Membership events are better attended than ever; new and recent members want to get involved. The party is benefiting from a general increase in political engagement, which is benefiting most other parties too.

What is happening? Last year the party celebrated the membership surge under the hashtag #libdemfightback. This made me cringe. The old party is dead. A new party is being born. Not enough of the party’s remaining old hands recognise the difference between a fightback and a rebirth. With the latter you are dealing with a new party.

I want to say something about what I suspect about the reborn party. This is unashamedly based on my local experience in this part of cosmopolitan London, plus reading the odd blog and social media comment. I may be proved wrong – this year’s party conference in Brighton will be an important test. But here goes anyway.

First the new party is cosmopolitan, well educated, and, as a generality, distinctly younger than the old one.  Many in the old party, including me, find the new members to be kindred spirits. But much of the old party was built through local campaigning, and drew in a distinctly less cosmopolitan crowd. Many female activists reported casual sexism that would be anathema to the new membership. The new party may find it harder to rebuild in its old rural strongholds than many suppose, but it should be less dominated by white male representatives.

Second, the new party is not very tribal by British political standards. The need for political alliances to achieve wider political ends is often mentioned. The wider political scene, and especially the promotion of cosmopolitan values, is more important than the party’s own fortunes. Old hands need to be conscious of this, though the party leader, Tim Farron, has clearly picked this up.

Third, the new party is distinctly more centrist than the old one. After the coalition with the Conservatives ended in 2015, many old hands thought they could put those years behind them, and recover the party’s old standing as part of the “radical” left, which peaked in 2005. The new members will give them a shock. They may cringe at the tuition fees debacle, but they do not regard the coalition government, and its austerity policies, as a betrayal. They are largely private sector in employment and outlook. The more left-wing types have joined Labour. Members of the old party who think the former leader Nick Clegg should be erased from the party’s history will not find a receptive audience.

So, those are the main elements of the new party that is taking shape. What about its political opportunity? So far there is little evidence of traction with the public at large; but with the Conservatives embracing Brexit and Labour showing suicidal tendencies, that could easily change. At this point I just want to posit one negative and two positives.

The negative is shared with the emerging Labour Party, which is undergoing its own rebirth, except that in their case the old party hasn’t died yet. The social base of its membership is narrow. It will be a huge challenge to broaden the party’s appeal to less cosmopolitan groups – and yet that is what the party must do to succeed. At least the Lib Dems, unlike Labour, who are victims an overblown sense of political entitlement, can have few illusions about the scale of the challenge.

The first positive is that the referendum has proved to a cataclysmic political event, that has helped erase memories of what went before it, or at least changed their perspective. This gives the Lib Dems the chance to move on from its recent traumas more speedily that otherwise.

The second positive is that the referendum result has changed the political dynamic in the party’s favour, just as the country embarks on a course that it thinks is profoundly wrong. Previously being against the EU was a central organising theme of anti-establishment politics.  All sorts of ills could be blamed on EU membership, and it was very hard to refute these claims. Now that dynamic is reversing. The country’s ills can plausibly be blamed on Brexit, and life in the EU can slowly be built into a sort of promised land. Being pro-EU and pro-immigration will become anti-establishment. That is a much easier dynamic for an up and coming political party to play with, whatever the justice of it.

The media will continue to treat the Lib Dems as if their party was dead. The survival of the reborn party is certainly not assured. But something interesting is happening.

Why WTO-plus is better than EEA-minus as Britain negotiates Brexit

It’s still very wounding to think of the UK leaving the European Union. The Leave campaign was based largely on lies and wishful thinking; those who voted to leave fell well below 40% of the electorate, which might be a reasonable threshold for such a major change. But Theresa May, our new Prime Minister, has said “Brexit means Brexit”. This is surely the best way forward. Rather than try to undermine the referendum result, it is better in the long run to test it to destruction.

Calls to rerun the referendum are understandable but unrealistic. The Conservative Party is overwhelmingly Eurosceptic amongst its membership, if not amongst its MPs. The party must rally to that cause. Members and MPs who don’t like it should leave the party. Politically it needs to rebuild its appeal to the working and lower middle classes outside London, who overwhelming voted for Brexit. Mrs May stands a better chance of succeeding here that the duo of David Cameron and George Osborne.

Labour is in an impossible position. Though its MPs overwhelmingly support membership of the EU, most of them had large Leave majorities in their constituencies. They will be unable to ignore this. So with neither the Tories nor most of Labour ready to fight to overturn the referendum result, that leaves the SNP, the Liberal Democrats and an assortment of Northern Ireland MPs to take up the fight. They are impossibly outnumbered. Which does not mean that they should stop putting the case. But that fight is the first step in a very long road. It may be possible that the UK could limp back into the EU as its negotiating position collapses and it faces a deep economic crisis. This would leave a bitter legacy and it is not to be wished for.

That leaves the question of what Britain should aim for in its negotiations for exit. Many advocate something referred to as “EEA-minus”. EEA is the European Economic Area, which consists of the EU plus Norway and Iceland and one or more tiny statelets.  EEA members have access to the Single market, but must also abide by the three key freedoms of movement: goods, capital and labour. The idea behind EEA-minus is that the UK would negotiate exceptions to freedom of movement of labour – as immigration was easily the most successful argument used by Leave campaigners. It feels like a pragmatic compromise between the 48% who wanted continued membership and the 52% who wanted to do something about immigration. It would reduce economic disruption. But it is a shabby compromise that would please almost nobody. Leave supporters would still find the country bound by EU laws and courts, and making budget contributions, with the indignity of not being able to influence them. It is hard to argue that it isn’t a net backward step on practical sovereignty. Remain supporters would look at the whole exercise as being pointless. And any fudge on free movement of labour is guaranteed to disappoint.

Actually, there is a deeper problem. Free movement of labour goes to the heart of the EU’s sense of itself. It is precisely what excites most younger EU enthusiasts about the union. And it is hard to understand why the other EU governments would want to fudge it – the risks for them would be enormous. Any negotiation is practically bound to collapse or at least prove an enormous disappointment.

The opposite possibility is hard Brexit. This means that Britain would be unambiguously outside the EU, without an overarching treaty to bind it in at all.  Trade would be covered by the World Trade Organisation (WTO) framework, guaranteeing some minimum standards. This is by no means as straightforward as many Brexit campaigners claimed in the referendum campaign – it actually requires significant amounts of negotiation in its own right (as the FT explains). But it is a robust baseline, and there is much merit in making this the main focus of the UK’s rather limited negotiating resources. The UK would then need to identify a series of priority issues to negotiate with the EU to add on top. Top amongst these are the rights of residence and labour market participation of EU citizens living in Britain, and vice versa. Also there is the passporting of financial services, though this is not an issue to die in the ditch over.

There are three advantages to a “WTO plus” approach, over “EEA minus”. First is that it presents a tough negotiating position, which will help to win concessions on critical issues. Second is that it follows the picture painted by Leave campaigners most closely; in the long run it is critical to call their bluff – they are either right in their optimism – in which case the EU needs to rethink itself – or they are wrong, in which case they will be undermined as the major political force they have become. And third it helps get the bad news out of the way quickly. There remains a lot of denial about the impact of leaving the EU; the announcement of WTO-plus would administer a second shock to the system, causing further losses to the pound and inward investment. But then it should hit bottom, and the momentum might be back upwards. This would be healthier in the long run than a drawn out series of disappointments that would erode confidence in the British economy and make it look the sick man of Europe. Getting the bad news over with is something the Americans usually do much better than Europeans – and we should learn from them.

And for us EU supporters, we need to understand that freedom of movement of people is at the very heart of what we want, and we must recognise that we have, for now, lost the argument. But we must rebuild the case, using the traumas of Brexit as evidence. Meanwhile we must think about the sort of EU that we want. We are now witnessing an unholy mess as the Italian government and the EU Commission wrangle about rescuing Italy’s banks. The EU’s rules on state aid look much too restrictive.  The EU will survive, and one day Britain will rejoin it. But it will be a different Britain and a different EU. We must work to change both.

 

Subjecting MPs to party membership votes is not democratic

Yesterday the Conservative leadership election resolved itself as the final Brexit-supporting candidate’s campaign imploded, leaving Theresa May unchallenged. Labour MPs look on with envy, as their own leadership election officially got started on the same day, as Angela Eagle formally challenged Jeremy Corbyn for the job.

What both these contests had  in common is that party rules give the deciding say to a vote of party members. It is the same for all Britain’s political parties. Back in the 1970s, when I came to political consciousness, such contests would be decided by party MPs alone. The Liberal Democrats (or its predecessor parties – I can’t quite remember how this evolved) were the first to move to an all membership vote. In their case, the parliamentary party was very small, and the party outside parliament relatively much more important. Participation in the party’s policymaking and leadership processes were designed to encourage people to join. Lib Dem activists describe this membership participation as “democratic”.

As membership of all political parties went into steep decline in the 1990s and 2000s, the other parties followed suit. Labour has done this with particular enthusiasm. Not only do they now put the leadership election to a full membership vote, but they allow the public to join as temporary members to take part. This extends the franchise to hundreds of thousands of people. The result last year was that Mr Corbyn was selected in a surge of enthusiasm from party members, charmed by the apparent freshness of his approach. This was described by his supporters as “democratic”. They still do. On the radio I recently heard one of his supporters use the words “democratic” or “democracy” in pretty much every sentence.

But Mr Corbyn never had much support in the parliamentary party, and he has not succeeded in winning Labour MPs to his cause. They have rejected him in an overwhelming vote of no confidence. And yet he clings on as leader, claiming that his “democratic” mandate trumps the views of MPs. This use of the work “democracy” to assert the primacy of party memberships is an abuse.

At the heart of any democratic system is the participation the public, or rather, a public. This public is not defined by personal preferences, such as voluntary memberships, but by some involuntary common factor – such as where they live. Excluding people undermines democracy. This makes it a messy, rough and tumble process. Without some kind of preselection process, there will be disagreements on most things. Unanimity is near impossible on large populations. Party memberships do not fulfil any reasonable definition of being “a public”. People join voluntarily, according to some understanding of shared values; they are essentially self-selecting. They may use democratic procedures to make decisions, but that does not make them democratic. The Labour selectorate is of an impressive size compared to other political parties, but it is still tiny compared to the population at large, and in no manner representative of that population.

This is one of the paradoxes of large-scale democracy. Political parties are essential to a healthy democracy, but they are not themselves democratic. They can only claim democratic legitimacy when they subject their candidates to a public vote. And that creates a tension for publicly elected representatives between the party that nominated them and the electors that voted for them. That tension is as old as political parties. It is a tension that has to be managed rather than resolved one way or the other. If a representative (an MP, say) ignores his party, then he is disregarding one of the most important things the public knows about him. But if he ignores the broader electorate, he is holding them in even deeper contempt.

The tension comes to a head when it comes to selecting the party leader, a position of enormous privilege in our political system. The MPs have a proper democratic mandate, and their cooperation is required in order for a leader to be effective. But in order to secure the commitment of party members, also very important for an effective political party, they must be given a say. Labour’s system for selecting its leader (courtesy largely of Mr Corbyn’s predecessor, the well-intentioned but lightweight thinker Ed Miliband) is based on wishful thinking rather than hard political calculation.

To most observers, it is quite clear that Mr Corbyn should step down, as a loss of confidence amongst MPs is fatal. The Deputy Leader should take over temporarily, while an open leadership contest takes place. Instead Mr Corbyn seems to view his MPs as traitors to the political movement he represents, and is clinging on, with every reason to expect that he will see off the challenge. There is some question as to whether he should only be allowed to re-stand if he fails to find 51 MPs or MEPs supporting him. But if he does not stand, there will be a huge rift in the party at large. As it is many MPs face de-selection.

The Labour Party is in enough trouble as it is. It somehow needs to reconcile three constituencies: middle-class public and third sector workers; white working class voters; and ethnic minority working classes. The white working classes in particular were strong supporters of Brexit, and feel alienated by the other two groups. And the party’s collapse in Scotland shows that its continued strength is not an inevitable fact of politics, as it used to think. But instead of confronting this existential crisis the party will indulge in a narcissistic battle of abstract nouns (austerity, inequality, democracy, etc.). They should be engaging in the hard graft of rebuilding community relations; listening rather than shouting. The prospects for the movement do not look good.

The Conservatives, meanwhile, seem to have a much stronger grasp of political reality. There was no nonsensical talk of “democracy” concerning the abortive final vote by party members. Their parliamentary party retains formidable powers in the selection of the leader (they whittle the field down to two candidates) and in holding the leader to account (they can eject the leader in a vote of no confidence). They will be very tempted to find a way of holding an early general election to complete Labour’s rout.

The same arrogance that created disaster in Iraq is behind Brexit

It is a very British piece of political theatre. Yesterday Sir John Chilcot published the results of his enquiry into the Iraq. It is exhaustive, scrupulous, but examines events that are now ancient political history. Historians will find it useful, but in the big picture it tells us little we did not know already. It will have changed no minds. No currently active political career is affected. The US State Department spokesman sounded very puzzled over the attention the affair is getting, given the pressing challenges facing the world. No doubt that puzzlement is felt by other foreign observers. What was the point?

All I can say to that is that it is just the British way. We like to produce weighty reports that achieve little. Some people find it cathartic. It is much easier to reflect on the mistakes of the past than to consider a very messy present. I particularly enjoyed this reflection by an anti-war leftist in the New Statesman (Thank you Martha Zantides). I have always felt that moral certainties are evasions; my views on Iraq have always been ambiguous, notwithstanding the clear stand made by my party, the Liberal Democrats.

But I think it is a good moment to reflect on the nature of political power and decision-making. The immediate concern of Chilcot is Britain’s role in Iraq. And the main point here is how the moral certainty of Tony Blair, our then Prime Minister, managed to subvert the checks and balances of institutional decision-making to throw the country behind an American project, over which British leaders had very little influence. In Mr Blair’s eyes Saddam Hussein was a vicious dictator and a threat to world peace, and needed to be removed. He encouraged the Americans to work to that end, and backed them when they took the project on. After that he and the British were helpless passengers. British military resources, also committed to Afghanistan, were overstretched and forced into ignominious retreat – a small fraction of the continuing catastrophe that enveloped Iraq. Could this sort of thing happen again? Certainly; our institutions still favour the executive – though our capacity to act, and willingness to embroil ourselves in foreign adventures, are now much diminished.

But the British dimension was a sideshow. The real disaster in Iraq reflects the US political process. This firstly led to a reckless drive towards war, and, more culpably, a massive mis-judgement of how to deal with the aftermath. Driving these disastrous decisions was group of officials and politicians with a clear, driving vision. The most notorious was the Defence Secretary Donald Rumsfeld; there was also Vice President Dick Cheney (who brought shadowy commercial interests into the picture) , and the highly influential Paul Wolfowitz, a real ideologue. Collectively these were known as the Neo-Conservatives, or Neocons.

The Neocons had a clear vision of the world and America’s role in it. They wished to push over dictatorships using US military power, and let the grateful people set up democracies and unregulated market economies in their place. They dismissed the legions of diplomatic and military types who made practical objections as being hidebound by old norms. They seized on small scraps of evidence that supported their case, and dismissed anything else. This was exploited by a group of Iraqi exiles, notably Ahmed Chalabi, who had no real political base, but told the Neocons what they wanted to hear about the country’s readiness to embrace American ways. This process, whereby an arrogant, visionary clique creates a simplified world view in the teeth of the evidence has been given a name: “groupthink”.  There are plenty of examples down through history. There are notable parallels within the ruling elites of Germany and Austria-Hungary before the First World War, for example. Democracies should not be as vulnerable as autocracies, as there should be more pluralism of thought, but Iraq showed that the US and British systems are not immune.

And in Britain we are now in the middle of another catastrophe brought about by groupthink – Brexit – though thankfully not one so threatening to human life. Amongst the supporters of Brexit in the British establishment we see the same ideological zeal, and the same unwillingness to get involved in the practical details. Chief amongst these is the Justice Secretary Michael Gove. This man is full of visionary zeal, but he seems unwilling to listen to experts. Indeed he publicly dismissed the usefulness of experts in the referendum campaign. This was evident in his stint as Education Secretary, when he dismissed the educational establishment as “the Blob”. Experts often lose the wood for the trees, and so must be open the challenge. But the answer is not to drive a bulldozer through them. Mr Gove’s term at Education achieved some good things, but was mainly a colossal waste of effort, which we are still picking up the pieces from.

Alongside Mr Gove sit, or sat, political opportunists like Boris Johnson and Andrea Leadsom, and anti-intellectual populists like Ukip’s Nigel Farage. And behind them there are a coterie of Brexit backers, a group of businessmen, financiers, think-tankers and retired officials who provide intellectual heft. These are united by a loathing of European Union institutions (admittedly not an inspiring edifice). These have created a construct of Britain outside the EU that is not dissimilar from the Neocon vision of Iraq after the US invasion. Hopelessly optimistic, and dismissive of the practical difficulties of achievement. These people are still popping up on Radio 4 to tell us all will be well after the first wobbles have been overcome. They have no concept of the pain that Brexit is inflicting on our very sense of self. It’s question of puling ourselves together and getting on with it. And if disaster ensues, it will be somebody else’s fault. Just like the Neocons in Iraq (and Tony Blair) who blame Iraq’s collapse on bad people, over whom they hold no sway.

Meaningful progress does not arrive through a visionary, revolutionary process imposed by a tiny elite. Neither does it emerge from a vacuum – the removal of the forces of order so that a new , more efficient system will emerge by market forces. It happens through a hard process of evolution, comprising a dialogue of bottom-up and top-down processes. It’s hard work and requires patience. Alas we have once more fallen victim to the impatient, who will walk away to leave others to clear up the mess.