Liberal Democrats – Page 3 – thinking liberal

The European elections are a victory for proportional representation

They look like a colossal waste of effort. Elections to the European Parliament take place every five years, and turnout in Britain, as in much of the rest of Europe, is dismal. Few understand what the European Parliament is for. But last night’s debate between Liberal Democrat leader Nick Clegg and Ukip’s Nigel Farage shows that things are going in an interesting direction. These elections are contributing more and more to the wider process of politics in this country.

The most important thing about theses elections is that they are held using proportional representation (PR). Parties in practice need to get over 10% of the vote in a particular region to get represented – but that still gives parties with a broad but thinly spread appeal a much better chance than parliamentary and even local council elections. The vote share won by the two parties that dominate conventional elections, the Conservatives and Labour, is dismal. This is adding a new dimension to the political debate because it offers voters a greater choice.

The conventional way of politics in the UK is to tell the voters that the real choice is between just two parties. Which two varies depending on where the election is being held, but mostly it is between Labour and the Conservatives (though Scotland is a big outlier here). This serves to close down political debate to a few carefully chosen swing issues that appeal to marginal voters in marginal constituencies. Minority views are dismissed as being irrelevant. But this line of campaigning does not work with PR. And the European elections are the only ones held under PR for most English electors (Scottish, Welsh, Northern Ireland and London Parliament/Assembly elections are held under PR).

The most obvious beneficiaries of this have been to the Lib Dems, the Greens, and, above all, Ukip. Ukip is a right wing insurgent party that represent political views that are as far away from mine as you can get while still being a respectable political party (unlike the openly racist BNP, for example). But it speaks for an important minority of mainly English voters who feel oppressed by the current political system, and ignored by the main parties. The EU is an important focus of that discontent, as is what is seen as excessive immigration. As an aside it often draws its strongest support from areas that are relatively unaffected by immigration – but that does not stop it being a popular scapegoat. The issues are linked: free movement of people is a vital plank of the EU project.

The Conservative and Labour parties would rather these issues were suppressed. They represent inconvenient divisions within their own ranks and put their internal cohesion under stress. And that led to last night’s debate. Ukip and the Lib Dems take clear sides, and are quite happy to slug it out in public. And the public gets to hear a proper debate. That is a very important part of the democratic process. Floating voters may not have learnt much from the verbal slugging match, which I judged to be a score draw (with plenty to please both sides), but it at least would have drawn them into the issues.

Where is this heading? In the great scheme of things I don’t think the direct European Parliament elections are a great success in closing Europe’s democratic deficit. I think its original configuration as a forum for delegations from national parliaments was a better one. But for as long as it is the only national election held under PR, it is serving a useful purpose. The right answer is to use PR for national parliamentary elections, but alas that aim remains very distant. PR for local elections may be a more realistic intermediate step.

Meanwhile it will be very interesting to see if the interest stirred by these debates will affect turnout at the elections. But even if they do not (I will only believe it when I see it) they are doing something to close Britain’s democratic deficit.

Liberal Democrats: pragmatic policies – small steps to a liberal future

We ended the Liberal Democrat conference today on a high note. Nick Clegg gave one of his best conference speeches, in confident form. We are now learning what this “centre ground” strategy means in practice. Mr Clegg did not utter the dread words in his speech at all. Instead he talked freely about Britishness and liberal, inclusive values. He painted an optimistic, happy picture, to contrast with the sour, pessimistic one that dominates so much of politics now. This went down predictably well with the faithful, but it is a sensible strategy in the wider political debate too. It answers the question “What is the point of the Liberal Democrats”.

The centre ground bit came in the policy programme. In yesterday’s immigration debate, the party talked inclusive, but toned down official policy – for example dropping the idea of a path to legality for illegal immigrants. On the constitution we talked about the Single Transferable Vote, and job shares for MPs. Sweeping reform, including top-down devolution to the English regions, was dropped. The party no doubt still believes in the bigger ideas, but it realises they have to be achieved in small steps. We don’t call it centrist – we call it small steps to more liberal future. But centrist is what it actually is.

So the party’s rhetoric is firmly liberal and optimistic. It helps that Ukip has come on the scene to help define what the party is not. The idea that the real political battle in Britain (well, England) is between the liberal, optimistic Lib Dems and the fearful, pessimistic Ukip is, of course, fanciful – though not on the critical issue of Britain’s place in the wider world. But it helps give the party definition. The majority of Britons may not be liberals, but neither do they feel threatened by them; they are a good second choice. And since democratic politics is largely about compromise and coalition, second choice often comes out on top.

It is a long, long road to return to electoral success for the party. In May in reality it more a question of trying to stave off disaster. The party’s previous tendency to protest, and being all things to all people has lost it a lot of credibility, especially amongst working class voters. The media remains dominated by Labour and Conservative allies. But it is a start, and party activists left york in good heart.

Labour are in serious trouble

Not long ago Labour supporters seemed very confident. Their lead in the polls pointed to a comfortable majority; the electoral system was loaded against the Conservatives; they (in their own minds) had won the argument on austerity. It was a good moment to move to the political left and drop the Blairite obsession with the political centre. But now Labour’s poll ratings are sinking, and the Tories catching up. The 2015 election increasingly looks like a stalemate or worse for Labour. What can they do?

And it is not difficult to see the source of Labour’s problems: Britain’s reviving economy, and rapidly falling unemployment. This is not running to the Labour script – which was that austerity policies doomed the British economy to stagnation and misery. It used to be that Labour’s Shadow Chancellor, Ed Balls, sounded easily the most economically literate of the front-bench spokesman of either side (challenged only by the Lib Dem Business Secretary, Vince Cable). Now he sounds panicky and flustered. His arguments, that the recovery is shallow because it is based on consumption rather investment and exports, is technically correct but irrelevant. Labour’s alternative policies of fiscal stimulus were promoting an equally shallow recovery. Labour has no serious ideas on how to promote investment and exports. Meanwhile, the rising economy is giving government spokesmen more confidence: Lib Dem Treasury Secretary Danny Alexander sounded more in control of the economic arguments than he has ever been on the radio this week, managing to pick apart arguments presented by the FT’s Martin Wolf. The Tory Chancellor George Osborne, always more interested in politics than economics, is not wasting any opportunity to skewer Labour using much less sophisticated arguments.

Labour started their damage limitation strategy last Autumn by their leader, Ed Miliband: to try and change the subject. First there was the “cost of living crisis”, focusing on the failure of pay to keep up with prices. Now it is the top rate of tax, where they want to restore the 50% rate rashly reduced to 45% by the Coalition in 2012. Labour’s policy is popular, and the criticism coming in from business groups is unconvincing. These lobbyists say that reducing taxes, especially on the better off, is what is need to awaken dormant business investment. And the government has duly cut taxes (that top rate, and also the rate of company tax) without investment budging. The trouble is that Labour’s policies sound unfriendly to businesses, and therefore likely to stall growth and cause general taxes to rise.

It gets worse for Labour. The energy that drives their activists comes from opposition to austerity: fighting cuts which are seen as mean-minded and ideological. The theory was that the fighting the huge government deficit should be left until later, when the economy was growing. That “later” has now arrived. So how will Labour cut the deficit? Being specific about this, as they will have to be by 2015, will cause huge angst and disillusionment amongst their core supporters.

And in any case Britain’s electoral system is not so weighted in favour of Labour as some supposed. There is a pro-Labour bias in the distribution of seats it is true, but there is also a pronounced benefit to incumbency. When it comes to asking which seats the party will have to capture to win an outright majority it looks hard going. Battersea, the seat where I live, is a case in point. The Conservatives took it off Labour in 2010, but it looks very difficult for them to win back. In the last 3 years I have heard nothing from Labour, but regularly from the Tories; residents aren’t being given the impression that Labour are in contention. The hard fact is that modern politics, with fewer volunteer workers and high postal costs, is an expensive business. Labour surely do not have the money to capture enough marginal through trench warfare tactics in the marginals. They need a national landslide effect, such as they achieved in 1997 under the hated Tony Blair.

So what to do? A change in leadership is out of the question, especially as the most popular alternative, David Miliband, Ed’s brother, is out of contention. A ruthless reshuffle of the front bench might help, but only if it went alongside a wider change of strategy. I think promising more money for the NHS, struggling to keep up with demand, would play to their strengths. But they would have to have credible tax policies to back it up. Taxing just the very rich won’t quite cut it. But taxing a wider body of people would totally undermine their rhetoric on the cost of living. They have dug themselves into a real hole.

Their best bet may just be to keep calm and hope the Tories self-destruct. They show every sign of wanting to do so over the toxic issues of Europe and immigration. Labour’s best chance of benefiting from this tendency to suicide is to appear moderate and centrist. Not a good moment to lurch to the left.

And what of the Liberal Democrats? About half their voters at the 2010 election deserted them for Labour. The polls that show Labour sinking do not show any real benefit for the Lib Dems. But if the contradictions of Labour’s criticism become exposed in the next year or so, then they may get their opportunity. The centre ground, though treated with justifiable suspicion by many of their activists, is a sound place for them to stick to for now.

Nick Clegg is right to aim for the centre ground

This morning I got a grumpy email from the Social Liberal Forum, a left-inclined pressure group within the Liberal Democrats. It complained about the apparent support the party is giving to the Conservative policy of aiming for a balanced budget, and so a continuing diet of austerity. It criticised this idea for being economically illiterate. It went on that the policy was

Cold comfort … to the people having to choose between heating their homes and eating this Winter, to those forced to go to foodbanks to feed themselves and their children, to families struggling with the cost of living crisis

They also criticised the party leadership aiming at a “mythical place known as “the Centre ground””, and of being closer to the Conservatives than Labour.

All this illustrates the disarray on the British left on economic policy following the unexpected turn for the better the economy has taken. Previously the left could unite around the proposition that the government’s austerity policy was “too far, too fast”, causing hardship amongst society’s least well off. They took immense comfort from the support of many Keynesian economic heavyweights, who said that, in the absence of growth, the state should disregard the government deficit and stimulate the economy to get it moving – or at least stop making the situation worse through cuts. Hence the government’s supporters being “economically illiterate”. Yes they said, the government should tackle the deficit, but not until growth has been restored.

Though some might not realise it, that fox has been shot by the economic upturn. It isn’t that those economists were wrong, or that “too far, too fast” did not have economic validity at the time; it is that circumstances have changed. If the economy is growing, it is not a good idea to add further stimulus to it. And the “later” when the government should start to tackle the deficit issue has started to arrive. The awkward question that much government expenditure before the crisis was unsustainable, and would have to be cut in due course, cannot now be dodged.

In response the Labour party has changed the subject. Instead it is focusing on a “cost of living crisis” which they blame on badly behaving businesses, from energy companies to house builders. They are proposing a series of populist but economically naïve policies to change these companies’ behaviour. They appear to have no macroeconomic strategy, and the Shadow Chancellor, Ed Balls, is conspicuously floundering.

Politically, Labour’s strategy is interesting. Instead of following political conventional wisdom by chasing voters who float between the main parties (which is what is meant by the “Centre ground”) they seem to be chasing left-inclined or working class voters who will never vote Conservative, but who do not currently vote at all. Centrist voters are worried about the management of the economy, and seem to think that the Conservatives have the stronger case on that front. Instead of trying to reassure these voters by making it clear that they would continue with austerity policies to bring the deficit under control, they are chasing other voters.

What is even more interesting is that the Conservatives are also showing little interest in the Centre. Centre voters are worried about “fairness”, and the state of public services, where they trust Labour more. But instead of doing much to reassure voters here, they are stirring up headlines on immigration and the European Union, where they are proposing policies that are just as economically naïve as Labour’s. Again, quite apart from fighting off the populist challenge presented by Ukip, they seem so be after right inclined people who are not voting, but would never vote Labour if they did.

So if there is no serious contest for the Centre, and if both of the two bigger main parties are pursuing populist but foolish policies, there is surely an opportunity for the Liberal Democrats. Nick Clegg, their leader, is right to make a bid for this, which his party is doing with its “Stronger Economy, Fairer Society” slogan, which epitomises the centre ground. The critics within the party of this strategy are right to point out that this is not ideological secure space, and will do little to built the party’s weak core vote. But if the party is to hang on to its representation in Parliament it will need the support of floating voters.

And so to economic policy. George Osborne, the Conservative Chancellor, is wrong to make a fetish of budget balance – and perhaps deserves to be called economically illiterate to do so. But it is economically sensible to manage the public’s expectations on what the state can afford. It may be that some economists are right, and that a “trend rate” of economic growth of 2-3% per annum is there for the taking in the medium to long term, as everybody seemed to think before 2007. But there are good reasons to suppose that they are wrong, and that much slower growth is “the new normal”, once a bit of catch-up growth is over. If so we will have to get used to a much smaller state and a less generous benefit system. Floating voters sense this, and will not vote for the Liberal Democrats if they think that they might help the Labour party take risks by reversing austerity. Nick Clegg may or may not be economically illiterate, but he is surely right on that one.

One cheer for Ed Miliband

The focus of British politics is now clear. The prospects of the different parties at the General Election due in May 2015 dominates everything. No doubt it is with relief that the political elite and their coterie of journalists and commentators focus on this question, rather than the much more difficult one of how to make this country a better place for its citizens. The defining event of this year’s conference season so far has been Labour leader Ed Miliband’s speech. For good or ill, he seems to have set the political agenda. But does this tell us anything about whether Labour really would do a good job of running the country?

To read the commentaries, Mr Miliband has made a decisive shift to the left. He did this by focusing his ire on big business, and threatening them with government action. There were two signature policies. One was forcing energy companies to freeze their prices while the government reconfigured the regulatory regime to squeeze them more permanently. The second was forcing private sector developers to “use or lose” their land banks to build houses. All this in an attempt to reverse the decline in living standards that the bulk of the population has suffered since the economic downturn started in 2008.

Commentators of the right and centre, such as the Economist’s Bagehot column, interpret this as Labour vacating the decisive “centre ground” of politics, where elections are won and lost. This is the ground which the Liberal Democrats’ Nick Clegg is trying to push his party into, in spite of grumbles by older activists. The Conservatives’ David Cameron is likely to stake his claim there too, and ignore the voices of his party urging him to adopt right wing populism to fend off the threat from Ukip. They will attack Labour’s policies as unworkable, and part of a failed socialist outlook. Mr Cameron will offer tax cuts as a surer route to improving living standards; Mr Clegg will offer tax cuts too, though rather narrower ones, and something about tackling barriers to social mobility (affordable child care, better schools, etc.).

Commentators of the left, like the Guardian’s Jonathan Freedland, do not deny Mr Miliband’s leftward lurch and seem quite content. His new policies are popular with the public, and have lifted Labour’s poll ratings; there may be many more populist left wing policies, bashing bankers and big business that will go down well electorally. With a large chunk of the previous Lib Dem vote going to Labour, and the Conservatives struggling with Ukip, the next election is Labour’s to lose.

But rather than evaluate these calculations at face value, let’s pause and step back for a minute. All this looks like the narcissism of small differences. All three parties remain firmly embedded in much same policy space. Mr Miliband would have made a decisive step to the left if he had outlined a policy of increased public spending, funded by extra taxes. In this way he might be able to halt and even reverse the relentless squeeze on benefits and public services. But he has decided not to; instead his party will have to make something in the region of £26 billion of cuts in the next parliament (a number I have culled from this perceptive article by the Resolution Foundation’s Gavin Kelly in the paywalled FT). He has said nothing about where these cuts, or increased taxes, will fall. The Conservatives would be making a radical shift to the right if they were proposing to make deeper cuts to the state, which they can only do if they cut the NHS (or rather make the public pay for more of its services) and old age pensions. There is no sign of that.

And there is something else. None of the parties is embracing more than gradual or token decentralisation of power from Westminster. Instead they argue over this, that or the other centralised tax, subsidy or regulatory regime. This can be seen in the season’s signature policy ideas. Mr Clegg has announced free school meals for English school infants; all of them, everywhere, because it looks like a clever idea based on a couple of pilot schemes. Mr Miliband wants to bash energy companies through central regulation: but how does this help solve the country’s slow path to reducing carbon emissions? And what on earth is the point of the Conservatives’ tax break for married couples?

But Mr Miliband deserves credit for one thing. He, alone amongst the three party leaders that I can see, has pointed out one of the two central challenges of the British political economy. That is that the benefits of economic growth are bypassing most people. This is nothing new, but economic stagnation is making it hard to gloss over. It arises primarily from technological change, and its effect on manufacturing industry and office work, helped along by the rise of globalisation. The problem isn’t that our tax and benefit system is failing to redistribute wealth, it is that increasingly wages are too low in the first place.

But there Mr Miliband’s insight seems to end. He seems content to blame big “predator” corporations, and offer the hope that better regulation will help. He didn’t even mention the second great challenge, which is that real terms funding for public services and benefits will fall rather than rise in the years ahead. He offers palliatives rather than solutions. Britain’s right and centre are no better.

What is the solution? In my view there are three interrelated elements. Improve the education system so that skills better balance where the jobs are in future. Redesign public services and benefits so that they can be tailored to individual and community needs. Strengthen local networks to counterbalance the effect of the rise of centralised, winner takes all networks. These three require a radical decentralisation of power. How long will it take before our political classes start to realise this?

The battle the Lib Dems’ soul

On Saturday the Liberal Democrats’ main annual conference starts, this year in Glasgow. As this parliament moves from mid-term to end-game, the party’s professionals will no doubt want us to focus on the fight for survival at the next General election, scheduled for 2015. I am more worried about the party’s soul.

Being part of a coalition government has been a searing experience for the party. It remains strong in some areas, but it is much weaker through most of the country, as members, activists and supporters have drifted away. In national opinion polls the party languishes at about 10%, or about half the level it achieved in the last General Election in 2010. It used to be that the party was ignored as an irrelevance. That problem has been solved, at the cost of it coming under relentless attack from all sides: from the party’s coalition partners, the Conservatives, from the Labour opposition, and less attached observers generally. Most of this criticism is not particularly fair, but that’s politics. It is a necessary stage in the party’s evolution if is ever to be a major political force. But it is not entirely clear that the party will survive the experience. If it is to survive, the party will need to have a clear idea of what it is for: otherwise it will fail to recruit new activists and win back the people that have drifted away.

The party’s leadership, and its professional staff and advisers, seem to concentrating on another question, however. And that is the case that the party needs to present to voters in 2015. There is some clarity on this, as suggested by the party’s slogan: “Stronger Economy in a Fairer Society”. Framed positively, it is actually a double negative, contrasting with Labour’s alleged economic irresponsibility, and the Conservatives’ focus on making lifer better for the rich. This is fine as far as it goes: negative messages have a wider appeal than positive ones, and it should help the party benefit from the negative campaigns the other parties will wage on each other. But it is not enough to rally the faithful. Firstly because many are not convinced that the Coalition’s economic policies have been right, and secondly because, without spending more on public services and benefits, it is not clear to many how society is to be made fairer.

And here, I think, we come to a much wider crisis in British politics. Politics is increasingly the domain of a professional political class who have spent their entire working careers in politics or at its fringes. They pick up their ideas on policy from a series of lightweight think tanks and university politics departments. Their main concern is to compete with each other to attain the status and prestige of office. They operate within a series of assumptions about what government is and how it works: that it is about adopting the right policies at the centre of government, passing the necessary laws in parliament, and then getting the civil servants to implement them. Missing from this are two things: any clear idea of how power can or should be devolved away from central government, and practical skills in the design and implementation of policy. It seems to be quite fashionable amongst political types to blame the civil service for policy failures at the moment. And yet civil servants are often asked to implement policies that have not been thought through, and which are often contradictory. The politicians and their advisers don’t seem to see it as their problem to resolve the contradictions, as this carries political risks.

And this criticism applies to the Liberal Democrats as much as it does to the Labour and Conservative parties. The party’s MPs are mainly professional politicians with little experience in either the outside world, or even in local government. They are surrounded by like-minded professionals who want to be MPs themselves. They are charming, intelligent people – but do they really understand how to make things work? Or what motivates the army of amateur enthusiasts that the party needs to keep going?

What I think is needed is for politicians to hold a different model of government in their heads: one that pushes political power away from the centre so that local communities can solve problems for themselves. That sounds like advocating support for motherhood, but it means rejecting generations of accepted social democratic wisdom, which sees issues in terms of generic problems – crime, healthcare, unemployment, etc. – rather than people. The old Liberal Democrat idea of community politics is a very good place to start this revolution – and no other political party has a better tradition to build on. But neither the party’s national professionals, nor, I am afraid, its younger activists seem to have much idea of what this is all about.

So, in Glasgow next week, I will not be paying so much attention to the grand set-pieces – though I will still follow them with interest – but I will be looking for any signs of bigger ideas taking hold: ones that will shape the party’s soul, and offer the country at large real hope.

What does the Syria vote mean?

Last night’s vote by the UK Parliament to reject a government motion to clear the way for punitive action against Hafez Assad’s regime in Syria feels like a very important moment in British politics. It is a small but decisive step away from Britain’s centuries-old role as a Great Power on the world stage. This has good and bad aspects.

The vote itself has divided opinion among in my social network. The less political of them, including my liberal leaning but unpolitical friend at the gym this morning, are very happy. A depressing chain of events that started with Tony Blair’s joining of the Iraq war has reached an end. But many of my Lib Dem Facebook contacts are very unhappy: who will restrain President Assad’s regime now? But just as many share the views of my friend at the gym. I find my feelings very mixed. I do not want this country to take sides in this conflict; but the thought that Mr Assad’s government will take comfort from it is not a comfortable one.

But what will non-Britons make of this episode? It doesn’t seem to be all that important. The real power is with the United States; Britain’s military capacity is puny by comparison. This debate is not being had in many other countries, from the economic powerhouses of German and Japan, to other world powers such as Brazil or India. Only our French neighbours are weighing up the same issues, apart from America, and, in a different way, Russia. It all seems to be more about maintaining the status of our political elite than something that a third rank world power should be concerning itself with. It will be more difficult now for that elite to maintain its delusions of grandeur.

In one way this a good thing. The expense of the country maintaining this world status is increasingly unsustainable, as cutbacks to the armed forces show. There have been successful military interventions: in Kosovo, Libya and Sierra Leone. And places were we probably should have intervened but didn’t: Bosnia and Rwanda. But the results of the bigger interventions, Iraq and Afghanistan, are at best ambiguous. Syria looks more like the latter, though the government has been trying to limit the scope of any intervention. The judgement of our political leaders and the civil servants and military men that back them up has not proved particularly sound. And successful small interventions only encourage them to think bigger. We are now facing up to a more realistic view of Britain’s place in the world.

But there is also a dark side. It is not good if a country turns in itself, and does not want to accept the implications of being part of a bigger world. There is a strong undercurrent of this in Britain: from anti-immigrant feeling to criticism of foreign aid, as well as resistance to taking part in the European Union. But the country’s fate is more bound up than ever by what goes on in the rest of the world, and far too often this sort of isolationism leads to paranoia and conflict.

Personally I would like to see Britain take further steps back from its pretension to a world role: giving up the country’s seat on the Security Council and our nuclear weapons. But I would also like the country to take part in military interventions if these are needed, especially in Europe and (perhaps) Africa. But we need new ways of going about this, and a clearer idea about when and how we go about it. I hope last night’s vote is a step along the path to a better way.

Can we learn from the 1930s?

Liberal Democrat conference goers are shaping up to a confrontation in three weeks’ time over economic policy. On the one hand the leadership wants to defend the current coalition government’s record; on the other many activists feel that this policy has been a dismal failure. This confrontation has been brewing for some years. It reflects a wider controversy in the country at large, though one senses that most people are now moving on. In this argument it does not usually take long before the government’s critics refer to the experience of the 1930s recession, or Depression, to back up their case. It’s worth unpicking that a bit.

My main source on this is a pamphlet produced by the think tank Centre Forum: Delivering growth while reducing deficits: lessons from the 1930s by Nicholas Crafts published in 2011. This concentrates on the experience of the UK. The first thing to point out is that the UK experience of the Depression is very different from the US one, though they are often conflated when people refer to the Depression now (just as the current experiences of the UK and US get conflated, especially noticeable when critics of UK policy quote U.S economist Paul Krugman in their support). The U.S. suffered a banking collapse, which then caused a catastrophic collapse in the rest of the economy, with real GDP falling by as much as 36% (hitting bottom in 1931); it only got back to its 1929 level in 1940. Behind the US collapse was a structural transfer of economic activity from agriculture to manufacturing, which it took the war economy to complete. Britain’s crisis was much less severe; it suffered a major loss of exports and economic shrinkage, but no banking collapse. The economy hit bottom also in 1931, just over 7% down from 1929 and was back to 1929 levels in 1933; by 1940 it was over 20% ahead. By comparison with the U.S. the structural move from agriculture to manufacturing was much more advanced when the recession struck. Britain was, however, struggling to adjust to a world where it could not rely on its Empire to drive its economy.

In fact, after flatlining in 1930 and losing over 5% in 1931, the UK made rather a successful recovery from the recession, as Mr Crafts (a professor of economic history at Warwick University) points out. This was achieved in spite the government cutting expenditure and raising taxes – austerity policies in today’s talk. Mr Crafts is very clear as to why: loose monetary policy. Specifically interest rates where kept low, and the authorities persuaded people that inflation would be persistent (at about 4%), giving negative real interest rates, while the pound was allowed to devalue. Something similar happened in the U.S in the New Deal era. Mr Crafts suggests that this formula should be repeated now, if the Bank of England could credibly suggest that inflation would increase to about 4% for the medium term, instead of its 2% target. This is quite topical, as this is almost exactly the strategy of the current Japanese government, the so-called “Abenomics”.

One point of interest in this is the rival claims of “Keynesians”, who advocate fiscal stimulus (extra government expenditure) and monetarists, who advocate loose monetary policy – though quite a few, like Mr Krugman, advocate both. Both groups refer back the Depression for support. In fact fiscal stimulus was not much used in the 1930s, while loose monetary policy was. Fiscal stimulus only came into its own at the end of the 1930s and in the 1940s, when it was led by rearmament and provoked by fears and then the reality of war.

I must admit that I find the parallels with the 1930s, especially in Britain, to be entirely unconvincing. The one clear lesson I would draw is that a banking collapse, as happened in the US in 1929, can be catastrophic. The world’s authorities were absolutely right to head this off in 2008-2009, even if that leaves awkward questions over how we got into the mess in the first place. That lesson was well learned, but there the lessons pretty much end. Further lesson-drawing leans on a species of macroeconomic blindness, a sort inverse of the composition fallacies that macroeconomists like to accuse their critics of. This entails taking false confidence by examining a collection of aggregated statistics, dipping down only selectively into the realities that lie behind them.

Consider some important differences between the world of the 1930s to the 2010s, for Britain in particular:

Britain’s banking sector was in much better shape in the 1930s. It was less dominated by big institutions (there was a thriving building society movement) and these institutions had not overreached in the way they had in 2008. The main barrier to borrowing was lack of demand for loans, which lower real interest rates incentivised.
There were many fewer barriers to house building in the 1930s. The main source of investment in the 1930s recovery was private sector house building. It clearly helped then that there was a severe house shortage, and inflation encouraged people to bring forward building projects. There is a housing shortage now, of course, and to be fair Mr Crafts says that barriers to house building would have to be tackled. But more than planning barriers are involved here. There is the general zeitgeist around the future direction of property prices; this is largely founded on the idea of restricted supply. Currently developers are holding back on many projects not because of finance, or lack planning permission, but because of doubts over the future direction of property prices.
Nowadays we live in a world of highly integrated financial markets and global trade. This has changed the way fiscal and monetary policy work. It is by no means certain (and in my view highly unlikely) that loose monetary policy would work itself out in such a benign way as in the 1930s. Would inflation in fact increase? If it did would wages stay ahead of prices? And if wages did not stay ahead of prices would companies invest their profits so as to boost domestic demand? (There is a fascinating aside in Mr Crafts’s pamphlet here. In the 1930s the Treasury assumed that prices would indeed run ahead of wages, boosting corporate profits, which would boost the economy. In fact wages kept pace with prices and the domestic demand was behind the growth). And bumping up inflation would quite likely cause the price of government gilts to plummet, making it harder to finance the national debt: in this day and age it is not as easy to inflate your way out of debt as many economists assume.

And that’s just the start. The more you investigate and think about the rights or wrongs of different policies, the less relevant the 1930s looks. It is just as bad for fiscal policy. In the 1930s and 1940s rearmament was a useful outlet. It soaked up surplus labour quickly and led to the building of industrial capacity that, as it turned out, could be readily reassigned to more constructive and benign uses. And the threat of war was horribly real, allowing the public to be mobilised behind the dislocation of the civilian economy. I cannot see what the modern equivalent is. Rearmament now, even if you can find a wider justification, would require the wrong skills and capabilities. The building of social housing is a possibility, I think, but would be insufficient in its own right.

Indeed I think the real issue of substance that divides critics of the coalition from its supporters, among Liberal Democrats anyway, is whether there is a pool of £20 billion or so of capital projects that the government can immediately and profitably get in motion. In the 1930s and 1940s it was weapons. In the 2010s it is what?

The battle for Britain’s political centre

The idea of a centre ground in politics, where elections are won and lost, is a persistent one, especially here in Britain (and England in particular) and in the United States. Winning politicians are said to “triangulate” a political position in this centre ground; notable exemplars of this idea were Bill Clinton and Tony Blair. David Cameron is supposed to have rescued the Conservative Party from oblivion using this strategy in 2010 to turning it into the UK’s largest party, if not outright victory. Now, in Britain, there is a lot of talk about it, and what political strategy each of the three established main parties (Conservative, Labour and Liberal Democrat) should be; take this article, Both the Tory and Labour leaders need lessons in politcal geometry by Andrew Rawnsley. What to make of this?

This all starts with the idea that political views can be placed on a spectrum with the left at one end, the right at the other, and ground, the centre or middle, in between. Over the years I have repeatedly heard people claim that this idea is no longer a helpful analysis of modern politics. But it is remarkably persistent, and it appears to have been helpful to Messrs Clinton, Blair and Cameron. What seems to define the left-right spectrum is attitudes to social solidarity and the state. On the right there is a strong view that individuals are responsible for their own wellbeing, and that the state should do the minimum to help them, because such help is counterproductive. This view unites social conservatives, distrusting socialist values, and economic liberals. On the left there is a feeling that most people have little influence on their social outcomes, especially poorer people, and that they should band together, organised by the state to tilt the odds back in their favour.

And for all the talk about the differences between the political parties disappearing, it is very easy to see this fault-line separating the core followers and activists in the Conservative and Labour parties. Think of the last Labour government’s attempt to get state supervision, through Primary Care Trusts, local authorities and other agencies to take a broader role in achieving social outcomes, like reducing “health inequalities”. Compare this to Tory ministers who delight in dismantling this infrastructure in the name of austerity.

But elections are clearly won and lost by floating voters, who aren’t convinced by the true believers of either party. Appealing to these voters makes the two main parties look very similar in terms of their election promises at least. Strange then that both parties seem currently more concerned to shore up their core votes and activists, rather than make a play for the centre. By this stage before Mr Blair’s victory in 1997, he and Gordon Brown were challenging the party’s core supporters by, for example, signing up to the Conservative austerity policies and promising not to raise income tax. Similarly Mr Cameron was doing photo ops in the Arctic with huskies to show his concern for global warming well before the 2010 election.

But the political priorities have changed. Neither party has made its activists so desperate for power by being out of office for a decade that they will sign up for anything. Labour needs to nurture the anger felt its supporter by the current government’s austerity policies, especially amongst those claiming benefits and those employed, or formerly employed, in the public sector. The Conservatives are shaken by the rise of the distinctly right wing Ukip, who are stealing away its core activists, even if they are also pulling in actual votes from elsewhere too. Both parties will need its foot-soldiers when the next general election arises in 2015.

But there may also be a bit of a problem for those chasing votes in the centre: the centre itself is fragmenting. This is suggested by some survey work reported in The Economist a couple of weeks ago, here. On the one side are those whose living standards are being squeezed (one definition of the “squeezed middle” of which much has been talked). These people are not just those in the direct line of fire of cuts, but those who were not particularly well off, and are now finding that their income is frozen while prices keep going up. These voters are open to Labour’s rhetoric about the government’s failed economic policies, and ideas for kick-starting it with things such as a temporary cut in VAT. A second group of centrist voters are not badly affected in their personal living standards, and are much more convinced by the government’s line that austerity is a necessary evil, following the irresponsible profligacy (by both government and individuals) that occurred under the last government. Each side seems to be doing a reasonable job of appealing to one of these two groups, but not headway in appealing to both. This does not add up to a winning majority for either party.

The big unknown is how the economy will be faring in 2015, as this could influence the balance between these groups. The Conservatives hope that the current fragile recovery continues, inflation falls and people feel that things are getting better; they will then be less willing to risk any change in economic policy. If economic stagnation predominates, Labour narrative might get stronger, though. No doubt both parties are keeping their powder dry to see how things shape up. The Conservative fall back will probably be to persuade the squeezed middle that Labour’s policies will mean higher taxes for them. Labour might do a Blair and say that they will adopt the government’s current spending plans except for some carefully chosen minor exceptions, and so reassure the better off middle. Of these I think the Conservatives will be the more credible, and combined with Mr Cameron’s politically well crafted policy on Europe, the party will do much better than people currently expect.

And what of the Liberal Democrats? They do not have a heartland in either left or right, but it is wrong to suggest, as Nick Clegg is prone to, that it has an ideological affinity to centrist voters, as the centre is not a coherent ideological group. The big problem for them is that they are very much on the government side of the economic debate, and will struggle to appeal to the squeezed middle, though banging on about raised income tax thresholds is meant to neutralise this. But the collateral damage that the Labour and Conservative party’s do to each other in the campaign could help them. They can try to develop the idea that centre voters are better off backing a centre party, which moderates the left or right through coalition, rather than trusting the main party ideologues to stick to their manifestos. So far though, that line of argument seems to be getting little traction.

As aqua fades, should the Lib Dems drop Helvetica?

Today British political commentators are absorbed by the 2013 Budget. I don’t believe in the value instant comment, and my commentary on the 2012 Budget proved way off the mark anyway. So I will talk about graphic design instead.

In the run up to the 2010 the Liberal Democrats launched a new house style, featuring a new colour palette and a new font, Helvetica Neue, in three weights (light, medium and heavy) and with an “italic” (which sloped rather than really italic). This was all part of the party’s new, professional image. Getting a political party’s activists to stick to a house style is a pretty hopeless task, but this time the party did quite well. The central campaigns department stuck to the new principles, and centrally produced literature still does. The picture comes from the conference agenda for this March in Brighton.

The most conspicuous part of the new house style was extensive use of the colour aqua, a hue on the blue side of turquoise. At times this even seemed to replace the traditional gold (an orangey yellow) as the party’s main colour. This was certainly new, but not very popular with the activists: too similar to Tory blue. Conference sets have now returned to almost exclusive gold, with aqua relegated to contrast work, alongside a dark red.

What about the font? Political fonts are meant to be boring, and Helvetica certainly fulfils that objective. You see it about a lot (I’m looking at a set of Marks & Spencer vouchers printed in that font as I write this). Graphic design types don’t like it, but I think it works well enough if there isn’t too much text: on posters and title pages and so on. Having three weights makes it a bit more flexible than the very similar, and free, Arial which just comes in normal and bold – though I really don’t like the Helvetica heavy. In text blocks, though, it is much less happy. It reminds me of marketing brochures which are meant to be seen rather than read, and where anything interesting in the text has been edited away long ago as a hostage to fortune. Unlike marketing guff, political text should have content and it should be read.

There is another problem, which will bother only a few. It’s a cheap font without lower case numbers (or “old-style” numbers, contrasting with upper case or “titling” figures). This is a bit of problem because the style guide recommends avoiding the upper case where possible. You can see this in the date “saturday 9th march” in the picture. The number 9 sticks out horribly – compare it with the one in the text of this blog (where lower case numbers, unusually, are standard). Unfortunately being cheap is no doubt one of critical features for any Lib Dem standard font. Probably easier to drop the advice about avoiding upper case letters: the text above would look much better if day and month had the normal initial capitals.

An alternative to dropping Helvetica is adopting a text font to work alongside it, perhaps a serif one. There are many cheap ones available, though the commonest, Times New Roman, is probably too over-exposed.

Will the Lib Dems adopt a new house style for the 2015 campaign, to reflect the fact that the political context has completely changed? A new image for an older and wiser party – and distancing itself from the rash pledges of 2010? Or will it want to emphasise continuity – like the keeping of the pledge on personal allowances. I would prefer the former. After all the centrally directed campaigns in 2010 did not work that well in the end: the party lost seats, especially where fresh candidates tried to get away with contentless campaigns with lots of house style. I’m not holding my breath though.