Can the European Parliament address the EU’s democratic deficit?

As I have often remarked on this blog, the European Union plays the tortoise in Aesop’s fable to the United States’ hare. The EU’s forward motion is imperceptible and it is easy to make fun of it, compared to the easy strides made by its American counterpart. And yet when reviewed over the long term, progress is dramatic. At the moment we are witnessing an ugly row in the EU about who should be the President of the European Commission. This follows a rather dramatic election to the European Parliament (EP) in which Eurosceptic and populist parties made big advances, not least here in the United Kingdom. But these apparently discouraging could mask a major advance by the parliament.

At the centre of this drama is the problem referred to as the EU’s democratic deficit. A large proportion of the member states’ laws (to say nothing of most European non-members likes Switzerland and Norway) are now derived from the EU’s federal institutions. These are led by the Commission. These laws, and the Commission itself, do not seem to be subject to the same standard of democratic challenge and accountability that people have come to expect in a democratic polity. EU laws are presented as impositions from outside from an unaccountable bureaucracy. Two EU institutions are meant to provide democratic legitimacy. Firstly there is the European Council, consisting of the heads of government of all member states. This works mainly by a system of qualified majority voting, so that laws can only be approved with substantial inter-state coalitions. Some areas require unanimity. There are two problems. First, its attention span is necessarily short, so there is a limit to the extent of any detailed scrutiny – though this is improved by delegation to more junior  ministerial meetings. A bigger problem is that the public perceive their deliberations to be wheeler-dealing: an unseemly process of stitching voters up. Prime Ministers do not have their voting records at the Council examined in the way that US Senators do, and they easily pass decisions off as not being theirs.

The second institution meant to provide democratic legitimacy is, of course, the EP. European federalists see this institution to be the forerunner of an active federal parliament, like the US House of Representatives. So far it has been a disappointment. Elections have drawn a low turnout; there is little awareness among voters about what it does; voting is dominated by national politics. There is no “European polity” that forms the basis of its legitimacy, where there plainly is an American one for the House of Representatives.

European federalists have sought to address this problem by making the EP matter more. First it was given greater legislative power; its importance has risen to such an extent that its members are now subject to extensive lobbying by commercial and other interest groups – but the public has barely noticed. Who cares about the finer points of intellectual property or bank regulation, after all? Their next idea was to give it a bigger say in the selection of the President of the Commission – the nearest thing the EU has to a Prime Minister. Their idea was that each of the transnational political groups into which MEPs are organised would select a leading candidate, referred to by the German word Spitzenkandidat. The Spitzenkandidat of the largest party would be nominated to be President. This is the way Germany picks its Chancellor, and also the way Britain picks its Prime Minister. The winner of this process turned out to be Jean-Claude Juncker, the former Prime Minister of Luxembourg.

Here in Britain this process has been observed with a mixture of contempt and disdain by the political elite. It is nonsense to suggest that voters were picking one the Spitzenkandidaten when they were voting, they say. Mr Juncker’s nomination has no democratic foundation. And besides we don’t like him. One British journalist claims that this is no better a way of running the Commission, than monetary union was for running Europe’s economy, following the British elite’s view that the Euro has been a disaster (gently skating over their own country’s own troubles outside the Euro zone). David Cameron has led the charge to dismiss this process and pick somebody else, who would be more “reform-minded”. He has at least tacit support from other party leaders here, and in a few other EU countries. But this stand is looking increasingly costly, expending Mr Cameron’s diminishing stock of political capital within the EU. He has been out-manoeuvred, and it is likely that Mr Juncker will get the job.

Much of the criticism emerging from British commentators is true. Mr Juncker does not inspire confidence as the man to take the EU forward to something that will function better. The EP does not represent the will of a European polity. The battle of the Spitzenkandidaten never took off in the election debates. But they have missed two important points.

The first is that this years’ EP elections were a major political event, right across the union. Turnout remained low, but it was actually up on the previous election in 2009. The combination of it being seen as an election whose consequences are relatively weightless, and the use of proportional representation, have made the outcome unpredictable and dramatic. The rise of populist political parties has enlivened the election, and have given electors a voice that they would have been otherwise denied. This invites a crisis of confidence in the EU, but, paradoxically, it gives the EP a greater degree of legitimacy. The election results in the UK were described as a political earthquake. No longer are the elections a sleep-inducing irrelevance, but they have become an important test of the political temperature. Some of the consequences are ugly; mainstream politicians are pandering to the populists, allowing racism to make a comeback. But it puts the EP on the political map.

The second point that British critics miss is that the argument over Spitzenkandidaten is not about the present; it is about the future. The current candidate may have no democratic legitimacy, but in order for future ones acquire that legitimacy it is necessary for us to behave as if they did. This is not about the election in 2014, but the one in 2019. The tortoise beats the hare because he focuses relentlessly on the ultimate goal, while the hare is distracted by the issues of the moment.

Should we applaud this turn of events? The EP has taken a great step forward. There may be no sign of a European polity yet, but each of the national delegations has greater democratic legitimacy with their own national polities. That is a clear step along the path. Does the EP provide the answer to Europe’s democratic deficit? Or should it be abolished? Abolition is not an option for now. And the EP may provide part of the answer.

But we should remember one thing. In order to judge the success of the EU and its institutions we must look over the long term. While currency union has endured almost unbearable stress, it is much too early to write it off as a failure. As the EU stumbles forward into unmapped ground, the same must be said for the European Parliament.

 

 

Rethinking Liberalism 2: economics

The discipline of economics pervades all reflection on public policy. This is only right, as it is this discipline that tries to reconcile supply and demand for resources, and present a rational framework for choices. But it can be pernicious. It can frame the policy debate in the wrong way. As we refresh liberal policy ideas so as to put sustainability and human needs at the heart of public affairs, this is becoming a major problem. Liberals must challenge many tenets of conventional thinking.

First of all, let me say what I’m not going to talk about. There has been much heated debate on the value of austerity policies in tackling the recent economic crisis. I have read some liberals who say that “Keynesianism” is a core liberal belief, something given added resonance by the fact the Maynard Keynes was a Liberal. These tended not to be professional economists, who are careful not to label their beliefs with the name a of a dead economist, however inspirational. And it is based on a misunderstanding that Keynesian policies implied free public expenditure at all times, rather than being a temporary measure in response to a short term crisis. The problem that I have with economics applies as much to conventional, liberal “Keynesian” economists, such as Paul Krugman, as it does to the neoclassical ideologues – though the liberals are the more pragmatic, and the more likely to support changes to the conventions of the discipline. Having said which, I am sure Keynes would have recognised the value of what I am trying to say.

The problem that I want to deal with lies at the boundary of what professionals call “positive” economics, which refers to the factual or “scientific” side, and “normative” economics, which deals with policy recommendations, and where personal value judgements play a role. Much normative economics is presented as if it positive. Policy makers have taken simplifying assumptions used in positive economics, and used them as the basis of concealed value judgements.

I need to get more specific. These are the sorts of things I mean:

  • Economic growth is good for a society and should be an objective of public policy.
  • High productivity, the key to economic growth, is therefore a critical policy objective.
  • Free trade promotes economic welfare and drives economic growth forward, and should therefore be maximised.
  • The more people consume the better off they are, and the healthier an economy is, provided that spending does not outreach income.

I could keep going. The issue is not that these assumptions are wrong – they have served policy makers well – it is that life is not as simple as that, and we should always question them before using them in the decision-making process. And increasingly they are taking us in the wrong direction.

To be fair, economics does not stand still. I did not put on that list that aggregated income is the critical measure of success, and how it is distributed is of secondary importance. Economists (some of them at least) are at last seeing through that idea, which had been universally accepted. Also a worship of open market mechanisms for allocating resources is coming under question. And indeed, you can have perfectly sensible conversations with professional economists in which it is clear that they understand the limitations of their discipline. But when they get back to their desks and analyse policy options, the same old things keep coming up.

The result is that policymakers are trying to push the economy in a direction that it does not want to go. Growth remains obstinately slow, distribution becomes more skewed, public services struggle for funding. We worship highly centralised, “efficient” and specialised models of business and public services that are failing to meet human needs. And we are heading in slow motion for an environmental disaster.

Economics needs to adapt to the modern world. To do so it must start to take on board ways of thinking. Consider the following, none of which are particularly wacky in terms of economic theory, but all of which undermine the conventional wisdom of public policy making.

  1. Wealth must circulate for a healthy economy. This is the main idea of George Cooper’s book Money, Blood and Revolution. If wealth is accumulated by a rich elite, it drains the life out of an economy because they don’t spend it, or don’t spend it efficiently. They save too much, and the bulk of their saving goes into unproductive assets and speculation, and not enough into productive investment. Worse, they use their accumulated wealth to skew the workings of society in their favour. This presents an economic argument for progressive taxation and the taxation of wealth – as well for trying other interventions which distort the way incomes are set.
  2. Consumption should be optimised, not maximised. Once basic human needs are met, the utility of consumption rapidly diminishes, and often gets tangled in a zero-sum game of status competition. This challenges the idea that economic growth is the be-all and end-all, as well as bringing distributional issues to the fore.
  3. Don’t confuse the acquisition of wealth with its realisation. This is a related point. The conventional wisdom, based on the gods of maximising consumption and productivity, is that we should go out in the world and work as hard as possible for the common good. But what if somebody wants to work less and consume less? Or if she prefers to consume less goods, but which are made in a less “efficient” way (organic vegetables, say rather than mass farmed ones, for example). Provided that she does not consume more than she produces, does this really matter? What is the point of piling up wealth if we can’t use it in the way that we want? Economists frown on organic vegetables as they reduce productivity, but the ability to choose such low productivity goods is a sign of a wealthy society. They are confusing the creation of wealth with its realisation. This suggests that the more developed a society becomes, the less worried it should be about productivity and income growth.
  4. Trade is a means to an end, not an end in itself. No human activity has done more to banish poverty than trade. Yes we should celebrate it, and yes protectionism usually ends badly. But there comes a point when its uses diminish. Trade between the developed world and China had economic benefits when China had a pool of very unproductive agricultural labourers who could be used to make cheap industrial goods. But these benefits diminish as China catches up, and as this happens, it is more than likely that the volume of trade (and its benefits to the developed world) will diminish. That’s economics. Don’t panic. The party was fun while it lasted. Globalisation remains key in the world of information and ideas. Trade of physical things remains is important to helping undeveloped countries to develop (though the locus of that trade is likely to be mainly with middle income countries rather than developed ones, as these bulk larger). But trade of physical things over huge distances is not so important for the sustained progress of developed economies.

Liberals should believe that an economy should develop based on free human choices, long term sustainability and a degree of human solidarity which diminishes with distance. Increasingly human preferences, technology and world development will take us away from the mass-produced, high productivity, high consumption, global trading society that policy makers favour, guided by economic conventional wisdom. It isn’t what people want (free human choices), it isn’t sustainable (carbon emissions and world resources) and it is less needed for human solidarity (developing countries are increasingly able to look after themselves, while the need for more localised solidarity grows). The discipline of economics needs to catch up.

 

Birmingham exposes the hollow heart of Conservative education policy

Britain is ill-served by its news media. There has been a growing kerfuffle about Muslim-dominated schools in Birmingham. The issues dominating this in media coverage are the extremism of some Muslims, and the explosive relations between the Education Secretary, Michael Gove, and the Home Secretary, Theresa May, which they assume is all to do with Mrs May’s leadership ambitions. This wantonly ignorant coverage is not only damaging community relations, but it failed to shine any light on the failure of the coalition’s Conservative-led education policy. This matters because this policy has been given nearly a free run in the media, and supported by papers, such as The Economist, that really should know better.

We must start with Mr Gove, who has been in post since the government was formed in 2010, and is one of the Conservatives’ big hitters. A journalist by profession, he has strong views on both education and extremism, which he has not hesitated to put into practice. Liberal Democrats have moderated some of his more extreme positions, but many suspect that the Lib Dem leadership (in contrast to its activists) sympathises with a lot of what Mr Gove is trying to do. Instead they have concentrated on their own pet policy, the Pupil Premium.

At the heart of Mr Gove’s policy is the idea that education should be run as a quasi-market, driven by parental choice, and without the need for much in the way of government direction – rather in the way the private sector does. Schools are being progressively pushed into being “Academies” independent of local authority control, and new Academies, “Free Schools”, are being established without much of the obstructive bureaucracy that would have strangled many of them at birth under the previous regime. These Academies were not subject to the National Curriculum, though they were subject to inspection by Ofsted, the schools inspectorate, which focuses on a narrow set of core subjects (literacy and numeracy – with “behaviour” thrown in to satisfy conservative prejudices). The idea was that bad schools would fail to attract pupils, and so they would end up being closed, or management changed. Competition would impose discipline on the schools, and the whole thing would be more democratic because parental choice would not be intermediated by busybody officials, elected and otherwise.

Two other themes ran alongside this. One was the idea that existing education was not based enough on factual learning, with too much emphasis on wishy-washy “skills” and mushy “values”. Mr Gove recalled the curriculum of old-fashioned private schools and selective state grammar schools, which educated most off Britain’s elite. A second was a distrust of educational experts and officials, who Mr Gove took to referring to as “The Blob”, who watered down and undermined the reform process. The “Blob” was progressively dismantled.

In this mix we should mention faith schools. The Birmingham row does not involve faith schools directly, which has led a number of, excessively defensive, faith school supporters to claim that they are a irrelevant. But they are heavily bound up in the consequences of the row. Faith schools were not a strong element of Mr Gove’s ideas. They were rather an enthusiasm of the previous Labour government, who, it must be added, started the whole process of setting up independent Academies. Britain’s state schools have always included those run by religious foundations, in particular the Church of England in (rather obviously) England. These were joined by Catholic schools. Under Labour these were extended to Jewish, Muslim, Sikh, Hindu and no doubt other foundations. The Labour Prime Minister, Tony Blair (a Catholic convert) had the idea that such faith schools gave children a solid moral grounding. Labour generally found that it helped their clientalist relationship with ethnic minority communities. These schools have been given a great deal of freedom to run themselves along their chosen lines. So long as you keep giving us good test scores and exam results, the suggestion was, we don’t care how you do it.

Finally in this background exposition, I need to mention Muslim extremism. Terrorist groups have successfully recruited a number of young British Muslims, and they have carried out a number of acts of violence both in this country and abroad, in such places as Syria. It is considered my many to be the biggest security threat the country faces. These extremists have very conservative instincts, such as believing in the veiling of women, but they tend to be converts and not very conversant with the actual teachings of Islam. Their extremism is fuelled by a general feeling of rejection and alienation.

In the public eye however, these young extremists have become tangled up with the conservative views of many Pakistani and Bangladeshi communities. These are horrified by what they see as the laxity of Western moral values, and do not want their children to be corrupted by them. They share many of the conservative instincts of their extremist co-religionists, along with an acute sense of injustice over the treatment of Muslims abroad, especially in Israel and Afghanistan; but there the similarity breaks down. Terrorism plays no part in their outlook, and certainly not in a domestic UK context – they may view Palestinian suicide bombers more sympathetically. But the extremists hover at the fringes of these communities, and that leaves the British state with a very tricky problem. They need intelligence from the established minority communities, and so to maintain good relations with them. But they are quite unsympathetic to many of their beliefs.

Into this delicate situation wade opportunistic journalists and careless politicians, Mr Gove among them. To them there is a direct line between the terrorist threat and conservative religious values. Most of the white community assume this to be the case, and happily lap up this message. Almost no politicians attempt to put a more realistic public gloss on this.

And so when allegations emerged that conservative Muslims had taken over a number of state schools in Birmingham (as part of a “Trojan Horse” plot), Mr Gove assumed that terrorism was at the heart of it, and so did most of the public. He steamed into a delicate situation, upsetting community relations and the Home Office, responsible for policing. The schools had been rated highly by Ofsted, who had focused on academic achievement, which was strong. The inspectors were sent in again with a different agenda, found evidence of  a conservative religious agenda, and, with a bit of ingenuity, ways in which these breached requirements of state-funded schools. The schools are in the process of being transferred to new management.

But the problems have only just begun:

  1. What has been alleged is that school governors, recruited from the local community, took the schools over and forced them into a conservative religious agenda. The school populations were almost entirely drawn from the local Muslim communities. But this is surely what school governors are supposed to do? They set the direction, ethos and strategy of the school. Their actions appear to have been perfectly popular with parents (though not staff). And though not faith schools, the widespread political support for faith schools would not have suggested to them that what they were doing was a bad thing. They were simply picking up the ball tossed by Westminster politicians and running with it.
  2. The actual alleged abuses are not so black and white. Segregation of the sexes? We still have 100% segregated schools. Allowing tradition Muslim dress? A lot of perfectly respectable schools do that already – and that is surely right. The same goes for making provision for prayer, which after all can be open to all faiths. A culture of intimidation? sounds a bit like my English private school education. And surely school management has a right to make the changes it wants, and this always leads to such allegations. The were, predictably, no demonstrable links to terrorist extremism.
  3. We are now told that Mr Gove wants “British Values” to be taught at all schools. Not only is defining this a minefield, but it is a step away from the “fact-based” principles that he had been so fond of espousing. And how will “real” faith schools, and not just Muslim ones, end up if judged to the same standards as those used in the second wave of Birmingham Ofsted inspections?
  4. Sorting out this mess is going to take a lot of work. Schools can’t in fact be left just to get on with it. They are going to need help, guidance and correction from an intermediate level of officialdom. A newly recreated Blob, in fact.

And so we find that parents are free to choose, provided they conform Mr Gove’s own version of political correctness. It is very easy to understand how the local Muslim community (and no so local ones) feel victimised – judged by double standards from a society that has lost its moral compass.

The government’s reforms are barking up the wrong tree. Here in London we have an outstanding example of how seemingly hopeless schools in deprived areas can be turned round. This did not need the creation of Academies; the existing local authority structures were up to the task. What it is did need was strong and credible leadership. Politicians can lead from on high, but ultimately this leadership has to come from experts who live and breath schools. The country was lucky enough to have plenty of these. But they have been side-lined and pensioned off.

Coalition policy is hollow at its heart, and the last four years have been largely wasted. Even Labour could do a better job than this.

 

Rethinking Liberalism 1: capitalism

In my last post I suggest that liberalism, and its British variant Liberalism, had lost its way. To many people it does not address the key issues of today, and looks to be a political irrelevance. I want to address this by thinking about how liberals, and British Liberal Democrats, should deal with these critical issues. In my first essay I will take on the burning issue for the political left: what to do about capitalism?

To get a flavour of how some on the left are thinking, read thus piece by David Graeber in last weekend’s Guardian: Savage capitalism is back – and it will not tame itself. Mr Graeber is a self-described anarchist, who wrote Debt: the first 5,000 years, which I reviewed last year. His view is that the capitalists are taking over the political system, and pushing everybody else into effective slavery (though he doesn’t put it quite like that). Stopping them will take more than a bit of polite political debate and a few tweaks to the tax system. He has jumped on the Thomas Piketty bandwagon, appropriating the French economist’s recent book to his cause. He says that it shows how the capitalism is reverting to it natural state whereby the wealthy accumulate the lion’s share of the riches. Mr Graeber is somebody I find extremely annoying. But he says a lot of perceptive things, and he should always be taken seriously – up the point where he runs dry and turns silly.

What do I mean by capitalism? It is best seen as the marriage of two ideas: maximising the reach of open market trade, and a system of private ownership for accumulating gains from trade. Both ideas are initially appealing to liberals.

Let’s start with markets. To many, the use of free competitive markets is the ultimate form of democracy. Consumers choose freely, and the producers must adapt themselves to consumer demand. This idea has currency on the political right, who think markets should replace many functions of government, and reached into Britain’s New Labour project under Tony Blair. There is some truth to this view, but there are limits. There are two groups of arguments against the extension of open markets: those concerning economic efficiency, and those concerning human preferences.

The arguments concerning economic efficiency are rehearsed often. Efficient markets require information and trust; these can be expensive to maintain. This gives rise to the shape of the developed economy, which is dominated by large organisations that are run using command and control methods, not market exchanges, and by strong governments that are required to maintain the institutions that allow markets to flourish, and supervise the delivery of services that markets cannot provide efficiently.

We talk less about human preferences. Market exchanges are of their nature transactional; they require very little of human relationships. Once the deal is done, the parties walk away from each other. The word “arm’s length” is often used to describe the arrangement, with the suggestion that markets will not be efficient unless transactions are conducted at arms length. Such arrangements do little to satisfy many human and social needs. People choose to limit market relationships to only part of their lives. If we lend a friend a hedge-trimmer, we don’t ask for anything in return, still less establish a fair price – because that would be inimical to friendship.

So markets are constrained by the requirements of efficiency on the one hand, and our preference for cooperative, trusting relationships on the other. But, if we allow for these important constraints, free markets are a vital part a modern, liberal society.

But that is only one side of capitalism. But, as its very name suggests, capitalism is about much more than this. It is about wealth and capital. The profits from trade are retained by owners of businesses, capitalists. The capitalists then invest this wealth. To optimists this is a thoroughly benign process: new businesses are created, which help economies to expand and innovate, benefiting all society. To pessimists the wealth is simply used to maximise status and power. In Mr Graeber’s view an important dimension of this is the loaning of the wealth as a means of establishing power over the debtors – a dynamic that has a long history. Both optimists and pessimists have a point.

On the optimistic side, investment and laons in modern society do not lead to enslavement as they used to. Expanding economies provide many opportunities to pay debt back. Furthermore modern legal systems place severe constraints on the power of creditors. They used to be able to cart your children off as slaves, even after your death. They aren’t allowed to nowadays, and there are many ways, through death and bankruptcy, by which debts are extinguished to the loss of creditors. Furthermore, the instruments of ownership, shares and bonds, are mechanisms by which wealth, and power, can be distributed more widely through society. It is the basis on which the middle classes, who form the bulk of a developed society, maintain a degree of independence.

On the pessimistic side, there is a tendency for wealth to accumulate amongst an elite. And for the last generation, it seems that this elite is growing while the fortunes of the middle and lower classes stagnate – one of the central political challenges of our time. There four interrelated sets of problems that should worry liberals:

  1. The capitalist system is creating an elite who are gaining undue political influence, which is tending to perpetuate their own dominance.
  2. The amassing of wealth, only a small proportion of which is invested in new production, is slowly suffocating the economy as a whole.
  3. The poor, and even not so poor, are finding their market power is diminishing, reducing their overall power and control that they have over their lives.
  4. The relationship between the capitalists and their employees, and, all too often, their customers is often abusive and exploitative.

There are alternative ownership models to the capitalistic one: state ownership; cooperatives including customers and/or workers; non-profit enterprises with non-commercial aims. But each of these carries its own disadvantages; it is difficult to see how a healthy economy can work without a large component under capitalist ownership.

So what are my conclusions?

  • The capitalist system remains essential to a modern, liberal society. Without it life would spiral into even greater depths of poverty and exploitation.
  • The capitalist system is only a part of that that modern, liberal society and should be confined to those areas where it is efficient, and where people want it to be. It should be part of a diverse, pluralistic system.
  • There should be specific measures to counteract excessive power accumulated by capitalists, and protection for those vulnerable to exploitation.

So that set’s a general tone. It is different from the hard left, like Mr Graeber, that wants the capitalist system dismantled entirely. It also differs from the far right, that wants the capitalist system extended into further areas of society, and for the capitalists to be given more power over their employees and customers. But it covers a broad spectrum of views, from mainstream left to centre-right. Any distinctively liberal ideas are going to come from precisely how the problems of modern capitalism are addressed. That is where my future essays will go.

The search for a new Liberal narrative

There is a basic human need to understand the world in terms of simple stories. This is as true of politics as it is for other parts of life. Something that explains how we have got to where we are – and guides us towards what to do next.  These are referred to as “narratives” in the jargon of political marketing. A narrative is a critical part of the political “brand”, another useful piece of political marketing jargon, which refers to what the public understands to be the core elements of a political party or movement. And liberals the world over, but especially here in Britain, are adrift. Here it is brought on by the spectacular collapse in support for the Liberal Democrats since they entered coalition government in 2010, and the way the other parties are veering away from liberal policies. In the European elections only about 2.5% of the British electorate voted for the only avowedly liberal party on offer.

I particularly like this article, The not so strange death of Liberal England, by Simon Radford in Left Foot Forward. I think he articulates very clearly what many liberals are currently thinking, especially those on in the Liberal Democrat and Labour parties. I will draw shamelessly from it as I develop my own narrative of how liberals and Liberals have reached the current dark patch.

Mr Radford suggests that Liberalism (as I will call the political movement which started with the Liberal Party) started in the 19th Century when the key political battle was between landowners and tenants. The state was tilted heavily in favour of the landowners, both terms of trade (particularly the lack of free trade of food) and taxation (little or no income tax). Liberalism was the movement that took the side of the tenants, and free trade was its central organising principle. To this were added the ideas of social insurance, and the birth of the welfare state. It was a long struggle, but the Liberals won, led by Asquith, Lloyd-George and Churchill, before war struck in 1914.

But the game had already moved on. The central drama was now the battle between the capitalists and workers. Liberal policies of free trade did not address this conflict. Instead the Labour movement arose, based on organising workers and forcing capitalists to give up a more equal share of the wealth – through better wages, workers’ rights, taxation and an expanded welfare state. The Liberals faded into irrelevance between the two wars.

Then came what many mistakenly regard as a golden age, after the Second World War. The forces of technology and demographics combined to give steady growth in which the wealth of all advanced. Social democracy was the prevailing wisdom, with a large role given to labour unions. Labour had a strong enough hand to ensure that they a decent share of the gains went to the workers. Liberalism had little to add, although liberal instincts accorded well the optimistic and more tolerant ethos of the times. Many in the Conservative and Labour parties described themselves as liberals.

Then came the 1980s, when capitalists advanced and labour retreated. Some on the left see this as the result of a sinister coup, masterminded by politicians such as Margaret Thatcher, to corrupt a system that was already working well. But the social democratic system was by then collapsing under its own weight, and it did not need much of a push to send it crashing to the ground. The old liberal ideas of free markets and trade came to the fore, and brought forward economic growth, but the process was not led by liberals; state services were neglected and taxes cut. By the 1990s new technology and globalisation were adding to the mix. The hope was that the benefits of growth would spread to all.

But the public weren’t happy with the political leadership. Labour were not trusted because they were associated with the collapse of the social democratic system, in  welter of industrial disputes and stymied productivity, in the 1970s. And yet they disliked Mrs Thatcher’s Conservatives, and their rejection of social solidarity and neglect of public services. Liberalism started to revive. It offered a kinder version of the capitalist system. Tony Blair’s Labour Party managed to capture much of this liberal enthusiasm (calling his ideas a “Third Way”), which, allied with traditional Labour supporters gave him a ruling coalition which lasted from 1997 to 2010 (though he himself had been turned out by then). Although Mr Blair’s “New Labour” was the main beneficiary, the Liberal Democrats prospered too, establishing themselves as a credible third force, in a way that would have seemed unimaginable in the 1950s, 60s or 70s. And it seemed to work; the country enjoyed steady economic growth, the benefits of which were distributed widely – inequality of income may not have been reduced, but it didn’t increased either.

But then came the bust of 20008-2009. It turned out that the growth enjoyed in the Labour years was built on air. They had expanded government ahead of what the economy could sustain, and much of its new infrastructure had to be dismantled. Living standards fell, hurting especially for those on low or middle incomes, while those on very high incomes still seemed to prosper. Worse, the quality of work seemed to fall for the majority, especially for most young people entering the job market. Steady, if mindless, factory jobs were swapped for rootless service ones, often badly paid. Meanwhile the low interest rates required by the sagging economy hit the country’s growing army of pensioners, as bank deposits yielded less and annuities became more expensive. A sour political mood has resulted.

Populist, conservative narratives are taking hold. Globalisation is seen as the problem, and especially two obvious elements: immigration and the country’s membership of the European Union, which is blamed for loss of control over immigration, bad laws and regulations, and excessive subsidies to foreigners. This narrative is incoherent, but it is not my purpose to pick it apart. The problem is that liberals have lost confidence in their own narrative.

Capitalism is not working for all. A minority is raking off profits and amassing wealth, while most of the rest are having to put up with increasing insecurity. But how to replace capitalism, since the usual alternative, state ownership and direction, has proved such a spectacular failure under Communism? The left say that increased state power is the answer. The Labour party has come up with various ideas for forcing capitalist enterprises to behave better. But these are hardly liberal. Liberals dislike the idea of putting peoples’ fates in the hands of wise bureaucrats. And also Labour’s ideas are pessimistic. It’s all about stopping people from inflicting harm, and little about allowing people to better themselves (as this week’s Economist Bagehot column points out).

Liberals are optimistic about human nature. They want to help people to help themselves, and allow them to make their own choices. I think there is an optimistic narrative to be found. It is about taking on both big government and big corporations. Working internationally to curb multinational businesses. Developing more sustainable lifestyles which are more locally based. It means ditching an obsession with economic growth for a broader understanding of well-being.

I aim to develop these ideas further. But it is clear that such a narrative implies some hard choices. It may mean that liberals are unable to accept the compromises entailed in coalition government. But if there are no hard choices there is no credibility.

The end of an era. Now for the renewal

Rock bottom. That’s how it feels to be a Lib Dem right now. The loss of all but one our Euro MPs, including class acts like Graham Watson, Sarah Ludford and Andrew Duff, – on top of a number of wipe-outs in the London locals – is a bitter pill indeed. Only our MPs now have to face the wrath of the post 2010 electorate.

There is something else that I feel acutely, especially here in London. It’s the end of an era. That era started for me with the Lib Dem fight against Lambeth Labour council. The party came from nowhere in the 1990s to leadership of the council. There were similar dramatic successes in Islington, Southwark, Brent, Haringey and Camden. Longer established strongholds of Richmond, Sutton and Kingston also advanced to power. Now only Sutton acts as a beacon. Small groups hang on in Southwark and Haringey, and the party remains a force, albeit diminished, in Kingston and Richmond – but the rest is almost complete wipe-out. I know many excellent councillors, devoted to serving their electors, who have now been turned out for, mainly, faceless Labour party hacks. and the loss of Sarah Ludford completes the awful picture.

There are two things that strike me from a survey of this wreckage.

The first is the failure of the party’s European election strategy, to promote itself as the only strongly pro EU party, in contrast with Ukip. This was a core vote strategy, and I strongly endorsed it as the right way to approach elections held under proportional representation. Indeed the party closely followed the advice set out by this blog a year ago – after the calamity of its confused London Assembly campaign in 2012. The result was strikingly similar to that earlier disaster. Actually support for keeping the country in the EU has risen, according to the opinion polls. It wasn’t a case of the party losing the argument over membership. But pro-EU voters did not accept that as a reason for voting for the Lib Dems. They seem to have voted for Labour and the Greens (who have mollified their previous Eurosceptic stance), and even the Conservatives. It was not enough to overcome the perceived toxicity or irrelevance of the party’s brand. Optimists in the party, including me, have assumed that the party’s unpopularity was a mid-term thing that governing parties always endure. Well it is clearly much deeper.

The second thing as that the party’s decline is not uniform. In some areas the party made a powerful showing in the local elections. Sutton in London; also Eastleigh, Cheltenham, Oxford and Watford – as well as up in Cumbria. In most of the places where the party did badly, it had the air of an exhausted old guard trying to fend off newly invigorated opponents. The Labour Party in many areas, notably Islington and Lambeth, has renewed itself, learning many lessons from earlier Lib Dem campaigning. Meanwhile the Lib Dem organisation was weakening. The councillors were spending too much energy being good councillors, and no enough rebuilding the hinterland. They hoped that being good councillors was enough to ensure being re-elected; ordinarily it might be, but not against a well-organised and well-funded opposition, especially when the national tide is out. The places that succeeded had engaged heavily in renewal. They maintained dense social networks, and had strong local leadership. Sometimes (I think Cambridge would be an example) the party did all these things and it was not enough – but without them failure was certain.

So what next? Ironically the election results show that the country needs a party espousing liberal, internationalist values more than ever. Ukip is the anti-liberal party, and the Conservative and Labour parties are now being urged to ape its views on Europe and immigration to win back lost ground. Neither party was strong on liberal values in the first place, and they will now be worse. The Greens’ record on liberal values is somewhat untested – they do have some illiberal strands of opinion – but they have failed to advance beyond the margins. They don’t have the organisational oomph, and have failed to deliver popular appeal. So Liberal Democrats do not need to doubt their party’s reason to exist.

Top of the agenda for the party now should be long-term renewal. This means recruiting motivated activists and donors. The party should hone its liberal identity to show that it is the only political movement that properly stands up for modern, liberal, internationalist values, with a priority for sustainability and humanity, rather than national and class identity and gross national income. It also means concentrating remaining organisational resources on this – and especially on recruiting and sustaining supporters in the areas where it has a weak local base. A positive online presence and organisation will be key; to much is left to moribund local organisations.

There is one more act to play in the party’s coalition ordeal: next year’s general election. The party needs to hang on to as many of its parliamentary seats as it can. Local MPs often provide the local leadership that helps the party to sustain itself. But hanging on to MPs and plotting the next coalition government should cease to be the leadership’s obsession. Rebuilding the party comes ahead of that.

And what of the leadership of Nick Clegg? Many say that he has become toxic to the party’s image – representing all that they dislike about the party. He enjoys being in power too much, and, so the public thinks, he compromises too much so that he can enjoy that pleasure. He is identified with too many coalition compromises that supporters hate (on benefit reform, legal aid, NHS reform, to name a few). He does not have a deep enough understanding of the local leadership and community politics that will be required to rebuild the party. This may be so, but somehow ditching him now seems to be the wrong thing to do. It reeks of panic. There is no obvious replacement in the wings. The party needs to rethink what it is, and what it stands for, and to choose its leader accordingly. That debate can start now, but the sensible time to conclude it will be after the 2015 election. I am not supporting calls for his resignation.

I feel very bruised. But I also feel that the country needs the Liberal Democrats to be there. We can renew and rebuild the party. And in a funny sort of way, I am even looking forward to the task ahead. I want to help.

Why you should vote Liberal Democrat on 22 May

Britain, along with the rest of the EU, faces a very interesting set of elections this week, for the European Parliament. Our polling day is Thursday 22 May, when there are also local elections in many parts of the country, including London, where I live. I am not an impartial observer of these elections, but I do try to express my views dispassionately, and set aside the pure propaganda. Here is what I think of the various contenders.

Let’s clear the decks a bit. I am thinking mainly about England; my knowledge of the politics of other parts of the UK is better than that of most English people, but that is a low bar indeed. In Northern Ireland I have a strong inclination towards the Alliance Party, because of its non-sectarian ethos. I dislike the Scottish Nationalist Party (SNP) mainly because I am a unionist. But I will say for its politicians that they put Scottish politics above Westminster politics; SNP politicians do not aspire to a place in the British cabinet. Still, this is less relevant to the European Parliament than elsewhere. I have rather more sympathy with Welsh Plaid Cymru, who tend to set out a clear social democratic, reformist agenda. But Welsh politics is messy, and I don’t feel confident talking about it.

And neither will I talk about the local elections. These should be determined by local issue and the local politicians’ records – and not the subject of a sweeping blog post like this one.

In England there are five contenders for your vote: the Conservatives, Labour, Ukip, the Greens and the Liberal Democrats. Voting for any other party is a wasted vote, even under our proportional system – since there is no system of transferable votes outside Northern Ireland. There are many other parties contesting these elections, but they simply don’t have enough traction to get up to the level needed win a seat. This is to be welcomed in the case of the BNP, who did manage to win a couple of seats last time, in 2009.

The party everybody is talking about is Ukip. The main reason offered by people for voting for them is that they are political outsiders, and that supporting them will give Britain’s established political elite a well deserved black eye. This is about the only good reason for voting for the party. They are chaotic and ill-disciplined, and they don’t take the work of the European Parliament seriously, and so their presence will damages the national interest. Inasmuch as you can detect clear views, they tend to be illiberal. If you are a Eurosceptic, there are other parties you can vote for who will do a better job of representing you and the country in this forum, which has significant political power, whether or not you accept that is a good thing.

But do our political elite deserve such a kicking? Many of the voters I have met on the streets think so; they feel let down. This is not just our newspapers stoking things up, with the rest of our media in tow. Politics has become too professional, and not enough politicians genuinely engage with voters. Focus groups and polling might be quite useful for informing politicians about what people are thinking, but they don’t help people feel involved. But will the shock of voters defecting to Ukip, or not voting at all, make them change their behaviour? There is little sign of this. I am not sure the problem is entirely soluble in a modern, developed society. But to make things better we need political reforms, not protests. These reforms need to make politicians more responsive to voters. This means changing our electoral system, and it means devolving more power to local levels where it is much easier to involve people in decisions.

The trouble is that Ukip stands for a sort of conservatism. They want political reforms, but focusing on the European level, not at the national level, where they are most needed. This sort of conservatism tends to reject useful reforms, as we saw in the debate on the Alternative Vote system (which would have been a small step in the right direction), and the soft spot so many people seem to have for our appointed House of Lords. It’s not the right kind of kicking, and it is the wrong election to do the kicking at.

Most Eurosceptics would be better served by the Conservative Party. The Conservatives have a clear view on Europe: renegotiation and a referendum. This is surely the most sensible way forward if you believe that being part if the EU is bad for the country. The European Parliament cannot deliver on this agenda – but Conservative MEPs will be taken much more seriously in Brussels than Ukip ones, and will thus do a better job of representing the country – though they would have had much more influence if they had not left the parliament’s Christian Democrat grouping.

But is a referendum right for the country? Like many supporters of the European project I dither on this. I don’t think it is a good idea for the UK to leave the EU. This is mainly because emotionally I feel a strong European identity (maybe because I have lived a short while outside Europe). But more practically, our obligations within the Union are forced on us by our economic circumstances, and leaving it would make little difference. It would be a colossal waste of political effort that should be devoted to other issues. Meanwhile the uncertainty it would create, as so many things of commercial importance are renegotiated, would blight the country exactly where it can least afford it. Many of the same arguments apply to just having a referendum on the issue – never mind actually leaving. The main argument for a referendum is that it would lance the boil and let the country move forward. I would sooner wait until the EU is forced to undertake more significant structural reform that anything the UK can force on its own.

And so to the Labour Party. Their campaign for the European Parliament is focused on the “cost of living crisis”. Regardless of the merits of this, it is exactly the sort of irrelevant focus-group based politics that has given politicians such a bad name. Their election literature mentions practically nothing about Europe or the European Parliament. This kind of cynical campaigning should be rejected. Politicians should be courageous; currently Labour only want to play safe. I can respect David Cameron for his referendum strategy on Europe, which required quite a bit of courage. Labour are running from the fight.

And the Greens? They deserve respect: their literature (at least here in London) at least talks about what they would do in the European Parliament. They don’t talk about Britain in Europe, but about the sort of Europe they want. That is what these elections should be about. I am just less than convinced about their vision. For me it is too anti-business. Good intent is no substitute for knowhow. We should be pushing Europe towards an environmentally sustainable future – but we have to take the public with us. We have to challenge big business vested interests – but also allow big business to keep people in jobs, and provide that element of economic stability people crave. I don’t think the Greens have a clear idea of how to get that balance right.

Which leaves the Liberal Democrats. The Lib Dems are the most Europhile of the parties (though quite a few Europhiles inhabit the Labour Party and the Greens). This has one particular advantage: it means that they part in the European Parliament’s processes with more enthusiasm, and so are much more influential than they would be otherwise. Liberal Democrats have held some very influential positions (such as Sharon Bowles’s chairing of the Economic & Monetary Affairs Committee). In this work they do a good job of standing up for British interests – and can actually talk about their track record in the Parliament with pride. They have also shown a lot more courage in standing up for a pro EU position – unlike the Labour Party – and unlike the party has done in previous elections to the European Parliament. You may not think all of their pro EU arguments are convincing (though the same can be said of most of the anti EU arguments), but they have done the campaign a service by talking about it.

Right through the country’s history Britain, and England before it, has never been sure about the role it should take in Europe. There have been times when the country has successfully pursued a global agenda while retaining minimal involvement in European affairs, such as in the mid to later 18th and 19th Centuries. At other times the country has been a fully fledged player, such as Waterloo in 1815 and the First and Second World Wars in the 20th Century. Right now the country’s dependence on trade leaves it no option but to be heavily involved in its European connections, whether or not the country stays in the EU. I believe that means that the country’s leaders should try to shape the EU from within. Others feel that by leaving the EU, it will be easier for the country to find the best path in the world. If you share my view, then the Liberal Democrats are the party for you. If you don’t, then you might still consider voting for the party as highly effective operators in the parliament. Otherwise think of voting Conservative or Green. Don’t vote for Labour or Ukip, whose campaigns are taking British politics in entirely opposite but wrong directions.

The complacency of salt-water economists

In his recent book on economics (reviewed by me here), George Cooper presented the discipline as being an irretrievably fracture, in need of a radical step change. There is an alternative view. This is that in fact the profession is split between two orthodoxies, with a diverse bunch of heterodox economists on the fringe, unable to get serious traction. The two orthodoxies are often given the names “salt-water” and “fresh-water”, because the former are popular in U.S. universities on the east and west coasts, and the latter with those in the Midwest – especially Chicago. This is worth picking apart.

Followers of each of the orthodoxies assume that criticism of economics is directed mainly at the other orthodoxy, and not at them. The heterodox say that the whole lot is in a mess. The fresh-water school do seem be in eclipse. This school, often termed “neoliberals” outside the US, believe that free markets are the fairest way of allocating economic resources, and that government interference almost always makes things worse. Many assume that they were cheerleaders for the rampant excesses of the financial sector before the crash, and hence have had their come-uppance. This criticism is wide of the mark, however. The banking boom arose at least as much from lop-sided government intervention as it did from “light-touch” deregulation. Fresh-water economists can plausibly blame the crisis on government intervention, not its absence – and in particular the crazy desire of politicians to boost property lending to all and sundry.

In fact there are other fatal problems for fresh water economists. First is that they opposed serious government intervention once the bubble blew. This was self-evident nonsense, ignored to a greater or lesser degree by practically everybody – except where government borrowing presented a practical problems. There have been loud arguments over austerity that have been so loud, but these have been on degree of intervention (big or massive?) and on completely different territory to that advocated by non-interventionists. A second problem is posed by what is usually called “inequality” – whereby it appears that the benefits of growth in developed economies go predominantly to the rich – and that most people in the US have seen little or no benefit from decades of economic growth. It is a central facet of fresh-water thinking that distribution of wealth and income is not an important concern for economists and policymakers. They have almost nothing to say here. And people are starting to notice that in countries with minimal governments (Somalia, say), the economy tends to be in pretty bad shape. Of course fresh-water economists remain well funded, as their views provide convenient support to many vested interests, and they are not about to go extinct. But you don’t hear very much from them these days.

Unlike the salt-water types. These are popularly referred to as “Keynesians”, and are now very well entrenched right across the political establishment. Their most visible cheerleader is Nobel Laureate and columnist Paul Krugman. They were as wrong-footed by the crisis as any of them, but quickly found the groove again. They provided the intellectual heft required to support government intervention after the crisis, though they usually complain that this intervention was inadequate.

Salt-water types do not consider that the crisis showed that their thinking was seriously flawed. Consider this piece a few weeks ago by Mr Krugman. He simply suggests that salt-water economists were a bit misinformed – because they underestimated the practice of shadow banking. Shadow banking, in this context, refers to the practice of banks hiding their dodgier lending by creating off-balance sheet entities to take them. To be fair on Mr Krugman, in the run up to crisis his writing was hardly cheerleading for the supposed economic miracle – though that seemed to derive from his hatred of the then Republican establishment, and their attachment to fresh-water thinking.

I can understand some of Mr Krugman’s frustration with the so-called heterodox economists. They tend to be pretty unconstructive – picking at the orthodox modelling assumptions (incidentally, largely shared across both orthodoxies), without suggesting much that could replace them in a useful way, to give the discipline a better predictive power. The beauty of the salt-water orthodoxy is that it finds it easy to tack on new ideas and integrate them – they have done this quite spectacularly with many of Milton Friedman’s ideas (on money, inflation and unemployment), even though he is one of the spiritual fathers of fresh-water thinking. They are now trying to do so with ideas on inequality, an issue that they acknowledge. Thomas Piketty, the French economist who is making a splash on inequality, looks more like somebody extending the salt-water orthodoxy, rather than challenging it.

For me this is much too complacent. Regular followers of this blog will not be surprised to read that Exhibit A for the prosecution is thinking on monetary policy. Salt-water economists inhabit a world where the ideas of money supply, demand, interest rates and inflation interact in a relatively predictably way, to form an important way of regulating economic growth. Thus there is talk of raising inflation a bit, so that negative real interest rates can be implemented, which in turn will boost demand and get the economy growing. It is not that I think this line of reasoning is entirely mistaken, it is that it is an oversimplification that is more likely to lead to policy mistakes than insights.

Take Japan. This country is probably further down the path of accepting salt-water economics than any other. It has drastically loosened monetary policy (through a process of quantitative easing) with the aim of raising inflation, which in turn will help the process of managing interest rates and boosting sagging demand. But there is a snag: while prices are rising to a degree, wages are not keeping pace. Employers will consider giving employees a temporary bonus, but not raising basic pay. Without raising pay, all the nice things that are supposed to arise from inflation – like making debt easier to bear – will not happen. Economists simply assume that if inflation gets going in consumer prices, wages are bound to follow. But this does not seem to be true of a modern, globally integrated developed economy. There are plenty of other pitfalls in Japan’s strategy too.

The people at the heart of the salt-water school, like Mr Krugman, are a clever bunch. Heterodox economists do not seem to be unsettling their intellectual grip. Perhaps they are right that the orthodoxy must evolve rather than make a step-change. But if so it surely needs to evolve a lot faster.

 

Politics is not about policies. Why the politicians are failing.

Today the FT’s excellent Janan Ganesh writes on how the British Conservatives are failing to get the ethnic minority vote (£). Also this morning two opinion polls showed that the Labour Party had lost its poll lead to the Conservatives. We can add the Liberal Democrats and the Greens to the list of underperforming political parties in Britain, leaving the field clear for the insurgent Ukip. Mr Ganesh points to a reason for the Conservatives’ failure, that applies just as much to others (except the Greens perhaps).

Mr Ganesh says that the problem is that politicians “…think politics is about policy.” And yet voters hardly know what policies the particular parties stand for. The Conservatives note that conservative values and fear of immigration are at least as prevalent in ethnic minorities as elsewhere. So they freely talk about immigration being excessive and about the need for stronger controls. And yet all this heightens voters’ suspicions that the party is not inclusive. The Conservatives have been here before. In the 2001 election they went down to a catastrophic defeat after pushing policies (on Europe in particular, as well as immigration) that seemed to play well with voters, and yet heightened their reputation as the most toxic brand in politics. They fared little better in 2005, when they tried similar “dog whistle” tactics. Their fortunes only changed when David Cameron went to prodigious efforts to de-toxify the Tory brand by advocating policies (environmentalism, gay marriage, and so on) that could distinguish the party from their former selves. Unfortunately for them, this change did not go deep enough into the party’s inner being, and it is wearing thin.

Labour seem to be in a similar fix. They have used a lot of clever researchers to fix on a series of populist policies. These include fixing energy prices and controlling private rents. All these policies, apparently, play well with focus groups. Also they have chosen “the cost of living crisis” as their overarching theme – since many voters feel hard done by in the aftermath of the recent economic crisis. And yet their poll ratings are fading. The policies are popular but they are damaging the Labour brand – or at least doing nothing to strengthen it.

The Lib Dems find themselves in a not dissimilar predicament. Most people seem to think that their influence on the coalition government is for the good. They are associated with some popular policies, such as raising tax thresholds. And yet their poll ratings languish around the 10% mark. They are perceived as politicians no different from the others in moral fibre, who enjoy being in power a bit too much.

The paradox is that British politics has never had more sophisticated advice. Each party leader is surrounded by clever people with access to the latest evidence-based theories. and yet they are all failing – and the height of ambition seems to be to fail at a slower pace than the others. What is needed is a bit more old-fashioned nous.

The last really successful party leader in this country was Labour’s Tony Blair. He employed a lot of sophistication as well, but the secret of his success was that he understood political brand building. The rise of Labour in the 1990s under his leadership was nearly a policy-free zone. So much so that when he won in 1997, his government lacked momentum because it did not have a clear idea about what to do.

What Mr Blair realised is that to build voters’ trust you have to do things that are hard. In Mr Blair’s case, he took on the Labour left, overturning all their sacred policy shibboleths, and changing Clause 4 of the party’s constitution. It was a process of destroying polices, rather than making them. To be fair on Mr Cameron, his rebuilding of the Tory brand involved some hard things – but he chose not to be quite as radical, and left the conservatives in his party silent but undefeated.

For the Liberal Democrats, their time in government might in time come to be seen as courageous rather than self-indulgent. Their leader Nick Clegg’s firm stand on Europe is a clear step in the right direction – though as yet there is no sign of a poll boost. Petulant rows within the coalition, such as this weekend’s on schools, are probably not helpful though. Proper rebuilding of their party’s brand will have come after next year’s General Election.

That applies to Labour too. It is too late for Ed Miliband to resolve the tensions within his party, and so give voters a clear picture of what the party stands for, beyond its headline grabbling policies and slogans. For all party’s difficulties with ethnic minorities, it is perhaps the Conservatives that have least reason for discomfort, once the European elections next week are out of the way. They are failing more slowly than the others, and if they don’t panic they will recover a lot of the ground they have lost to Ukip, unlike Labour. It probably won’t be enough to win them a majority, because they failed to reform the electoral system in their favour, in spite of clear opportunity having been presented – through a combination of the Alternative Vote and boundary changes.

So here’s what I predict for 2015. The Conservatives gain some seats but fall short of a majority. The Lib Dems lose 10-20 seats, but still leaving a substantial voting block in Parliament. Labour make few advances. Ukip will pile up 10% or more of the vote, perhaps surpassing the Lib Dems,but get one seat at most – they will take most of their votes from Labour. The Conservatives will attempt a minority government.

The rise of Ukip. What should the Lib Dems do?

My heating engineer is voting for Ukip, the United Kingdom Independence Party, the reactionary insurgent English political party. This party has hit the zeitgeist, even here in cosmopolitan London. Political activists from other parties seem to have no idea how to handle this.  This should give us pause, especially in the Liberal Democrats. The party needs to rediscover its anti-establishment roots.

The typical reaction to Ukip from political insiders is annoyance. This party breaks almost every rule of political correctness. My Facebook account is bombarded by posts pointing out the various unsavoury views held by Ukip candidates, and denouncing them a as a bunch of idiots.  All this is true but irrelevant.

The perception by many voters is that the country is run by a political establishment that makes life easy for themselves and their friends. They are not interested in listening to what the public wants. My engineer says that it has always been that way, and nothing is changing. Voting for Ukip is the only way he can see of mounting an effective protest. Besides, some of their policies, like a vote on the EU, strike a chord. This feeling is especially strong amongst the white working class. This group accounts for a lower proportion of the population here in London, so maybe Ukip will do less well here. But the disillusion with politics is not confined to white working class people. Last weekend an Indian-born gentleman told me that he expected bad behaviour from Indian politicians, but he had expected better from British ones.

Meanwhile the professional politicos, and their army of hangers-on, whether or not politically affiliated, attack Ukip as if they were normal politicians. They criticise their candidates and their policies. But they do not address the disillusion from which Ukip support springs. Indeed, the more they protest, the more disillusioned voters appreciate that voting for Ukip will annoy the establishment.

This is hard for a Lib Dem. In one sense Ukip’s rise shouldn’t bother us too much. Lib Dem core voters are the least likely to defect to Ukip, since they are anti-liberal. Indeed the Lib Dem strategy of talking up Ukip for the European elections later this month is quite a sound one – as this election depends on rallying the core vote. But we used to be able to pick up the disillusioned too. We were the party locked out of the establishment, with the least stake in it, and whose mission was to shake it up. The party leader Nick Clegg conveyed this message forcefully in the General Election campaign of 2010.

But coalition government changed all that. Now the party is part of the establishment, and they seem to relish it. And the record on political reform is weak. The voting system is the same; the House of Lords is still there; the balance of powers between the local and the central does not appear to have changed radically. A U-turn on student tuition fees shows that Labour and  Conservative politicians aren’t the only ones that break promises. Lib Dems might argue this unfair: there is only so much they can do when both Labour and the Conservatives won more votes and parliamentary seats. The riposte to that, though, is: just what is the point of the Lib Dems then?

The answer to that is that lasting political change tends to happen slowly. Revolutions can happen, but they always disappoint. The Lib Dems have in fact forced some significant changes while in government, and blocked a number of illiberal moves. Even my heating engineer admits that you can’t expect people to campaign to get elected and then to refuse a share of power. So what do the Lib Dems do? I think they need to focus on three things.

First they need to consolidate their core. This means liberal internationalists, who seek a fair distribution of society’s wealth, and limits to state power. This may be rather vaguely defined, but there are clear values around which the party can rally. Without this core, nothing else is possible. The party compromises on key issues, such as Europe or human rights, at its peril.

But it is a minority pursuit. Most people aren’t liberal or internationalist by instinct. They prefer the values of identity and keeping everybody else at bay. So the second thing is that Lib Dems must keep reaching out people beyond their core. The relationship here is inevitably more transactional: specific issues and promises. The long term aim should be to listen and to build trust.

If that sounds wishy-washy it shouldn’t. It has a name and it is called Community Politics. Some Lib Dems practice it very effectively, look at Sutton in London. Most sitting Lib Dem MPs try something along these lines. For all that the implications seem to escape most modern political insiders, including younger Lib Dems. They prefer social media and clever communication strategies. Community politics is about looking people in the eye, and helping them when you can, but also explaining that you can’t compromise your core beliefs. It’s not about clever graphics, it’s about human engagement.

But a strong core and community politics is not enough for the party to progress. The party needs to convince voters that it feels their pain, and advocate real changes to the political system. In the past the party has thought too much in terms of national political reforms, and especially the electoral system. But to voters this sounds like juggling the same old rules in favour of the party, rather than promoting fundamental change. Most are sure to think that the disastrous AV referendum in 2011 should put that matter to rest for the time being.

Instead the party should focus its attention more on devolving power from Whitehall to a local level. The Coalition trumpeted localism, but lacked a clear vision of what was required. Many in the political establishment are against it, in practice, if not in theory. But there is a prospect of building up alliances across political parties. “Power to the People” is a corny slogan, but something like it needs to be the rallying cry. It has to hurt. It means confronting thorny issues like local taxation and finance, and it needs to mean job losses in Westminster ministries. It also means allowing groups of local authorities to combine to take on more responsibilities. STV for local elections should also be part of the mix, but the main deal should be about power.

Rally a liberal core. Reach out through community politics. Advocate radical devolution of power from Westminster. These will do nothing to fend of Ukip in 2014 – but in the long run they could show the voters that the Lib Dems really are different.