Monday, June 29, 2009

Spooked

Extraordinary claims by David Cameron today. The Labour government has a 'thread of dishonesty running through it'. Why? Because Gordon Brown has postponed the next government spending review in order to 'cover up the truth about Labour's cuts', and is suggesting that a Conservative government would savagely cut public spending. This amounts to saying that 'black is white' and shows that the government has 'lost touch with morality'.

First of all, the government's claims that the Tories would cut public spending whilst Labour would maintain spending on key public services is fundamentally dishonest. Of course Labour will have to rein back spending, if we're facing high unemployment and a double digit deficit into the near future. But, what is so surprising about a government not wanting to promise spending cuts in an election year? If Cameron is shocked by this then I think he's in the wrong job. Maybe he should have stayed in PR, where it is well known that only the whole truth is ever spoken.

OK, that's a cheap shot. But politics is a dishonest game, of course. Governments will talk about their strengths and hide their weaknesses. It's for the opposition to smoke them out. But there is a kind of taboo in British politics about accusations of lying. You only make such accusations if a political leader has, for instance, claimed to believe Saddam Hussein had WMD when he knew that wasn't true. Not when a government has tried to make the rather obvious point that Labour is more attached to high levels of public spending than the Conservatives are likely to be.

So why the hysteria? Well, because Dave knows that he will inherit a poisoned chalice if and when he wins the election. Tories don't like raising taxes, but they will have to if swingeing cuts in frontline services are to be avoided. Winning an election and then having to cut real living standards is a recipe for a one-term government. Yet Cameron's new compassionate middle-road Conservatism is also about meeting the electorate's expectations of high quality public services, especially health and education. Something will have to give, and Cameron will come under pressure during the next year to say exactly what. Hence the nerves.

This suggests that despite the government's miserable poll ratings and inevitable defeat, New Labour has rather shifted the terrain of British politics. In the early 1980s, after the previous period of Labour government, tax cuts and spending cuts were electorally popular. Now, Cameron appears to think, they are not, despite the Daily Mail insisting over the last decade that Labour was wasting huge amounts of taxpayers' money. Maybe Labour's largesse did reach middle England after all - pity the party can't figure out a way of communicating this point.

Tuesday, June 23, 2009

The Return of Depression Politics

Paul Krugman may be a permabear, but you've got to hand it to him for prescience. When I read the first edition of The Return of Depression Economics, I didn't really get it. Now, of course, his suggestion that liquidity traps could be the future looks a lot smarter, and he's fully justified in rewriting the book as The Return of Depression Economics and the Crisis of 2008. Despite appearances it is not the original book with an epilogue, but is in fact well worth the read even for those bought the first edition. Free-wheeling global finance destabilizes the world economy and opens up the prospect of depressions, rather than recessions, when things go wrong.

Economists like Krugman are having a great time pummeling those who believed in sillinesses like the 'Goldilocks economy', the 'Maradona rule' of monetary policy, the sustainability of the housing boom, and so on. But what are the politics of it?

Here, I have to admit I'm worried. For a while it looked like politics had shifted radically, with power ebbing away from neoliberals, plutocrats and speculators, whose stories about how to prosper had been simply ripped apart by events. Obama's victory pointed in that direction - and indeed, that is a very real gain for sensible progressive politics. But in Europe, things don't look so good. The left is in retreat everywhere, the radical racist right is making hay, and even the more successful parties of the moderate centre-right are drawing on superficial populism (Sarkozy), beggar-thy-neighbour fiscal conservatism (Merkel) or simple self-delusion (Berlusconi). If this is depression politics, then there really isn't much left to be optimistic about.

Why do people rush into the arms of the right precisely at the moment right-wing policies have proved their uselessness? Well, the collapse of neoliberalism (for want of a better word) may make people worried and upset, but it doesn't make them socialists. Why should it? Indeed, the solidaristic and cooperative instincts which underpin leftist thinking are in some ways harder to achieve in a crisis than in normal times. If the pie is shrinking, why would we expect people to find it easier to share the pie equitably amongst themselves? Instead in times of fear, self-preservation takes hold. In desperate times, we may long for a helping hand or a sense of shared suffering and a collective search for solutions, but if the institutions and movements needed to create them are not there, then scrabbling for survival is the only other option.

The success of the neoliberal project has been to undermine precisely those institutions which facilitated collectivist and solidaristic political action in response to social threats and problems. Take away the trade unions, left-wing political parties, and cooperative regulations that underpin collective action, and free-riding starts to look like an attractive option for fearful individuals. Then along comes a man telling you he know who is to blame, and he will sort them out for you (Jews, Muslims, Roma).

OK, maybe I'm over-anxious. But Polanyi shows in The Great Transformation that removing protective social institutions (as the neoliberal project set out to do) provokes a reaction, and that reaction can be benign (the Factory Acts in 19th century Britain, for example), and it can be Germany in the 1930s. I don't think it can happen again, but the best way to make sure is to fight to protect and improve the workings of welfare capitalism, and that requires left parties with coherent discourses and a real connection with voters.

Thursday, June 18, 2009

No expenses spared (3): Cast the first stone

The latest one to tumble is Kitty Ussher, junior Treasury minister, guilty of tax avoidance on the advice of her accountant. That's right, tax avoidance, not tax evasion. Should she have resigned?

This is getting a bit silly. It may be dishonest to flip homes to avoid tax, but if Kitty Ussher could do that and not fall foul of the Inland Revenue, then my feeling is that anyone with a half-decent accountant could - and probably does - do the same. How many UK citizens could face this kind of scrutiny and come away without a single blot on their record? Between tax avoidance, welfare 'cheating', buying smuggled cigarettes, paying builders in cash and so on, we are probably left with a handful of hair-shirts and little else. I myself, in the interests of transparency, can reveal that I've just received a 100 pound fine for late filing of my tax return (I don't owe any overdue tax, but just didn't get around to filling in the form). Doubtless if I went into politics that could be dragged out by the Daily Telegraph too. Who is going to cast the first stone? David Cameron, who paid down his first home's mortgage (which he paid) and then took out a new one on his second home (which we pay)?

The problem here is nothing to do with expenses, and everything to do with public dissatisfaction with politics more broadly. Britain is a particularly striking case of the decline of public connection with the political class: in the last election, little over 20% of the electorate actually voted Labour, yet Labour limps on with a comfortable majority in parliament. Much that it pains me, there is no alternative to the alternative. There has to be a change in government to refresh people's feelings of engagement with politics. However, David Cameron is unlikely to bring this. He is opposed to proportional representation for the same reason Labour has been - because it would deny him a pliant majority in parliament. The Conservatives won only 27% of the vote in the European elections - hardly a sign of enthusiasm for the government-in-waiting.

This citizen disengagement with politics appears to be a general trend in Europe (the US is enjoying a mini-renaissance for the moment). Here are some numbers that tell the story (the data are for Western European democracies):

Party members and party identifiers (those who feel 'close to' a political party) as a share of the electorate have declined consistently. The number of voters changing their vote between successive elections (volatility) has increased (suggesting declining satisfaction with incumbents). The number of people choosing not to vote (or who simply can't be bothered) has increased consistently across Europe (and in the UK rather dramatically).


So this is not just a British problem, although the British problem is starting to look pretty acute. This is the subject of my current research (Blyth, Hopkin, Pelizzo forthcoming). You heard it here first.

Monday, June 15, 2009

Wasting a good crisis

Rahm Emanuel, Obama's Machiavellian chief of staff, famously let slip the new administration's intention to make the most of the financial meltdown: "You never want a serious crisis to go to waste. And this crisis provides the opportunity for us to do things that you could not do before."
Indeed Obama has introduced radical healthcare reform and a more redistributive tax system, progressive measures which would have been hard to get away with in normal times.

But in Europe, the crisis is going to waste, and progressive politics is on the backfoot. The European elections at best confirmed the dominance of moderate conservatives like Sarkozy and Merkel, and at worst given new momentum to nasty right-wing populists in Holland, Italy and even in the UK. The centre-left - what in the old days we called socialists and social democrats - is in retreat just about everywhere. And yet the collapse of the liberalized financial system should - should - have undermined the right, not the left. A paradox.

I'm trying to work out why, and this is what I've come up with so far.

First, the collapse of deregulated finance brought discredit on the Republican right in the US, because it was so closely associated with Bushism - although perhaps unfairly, given the Clinton administration's enthusiasm for free-wheeling finance (look at the subsequent career of Robert Rubin). But in Europe it's not so clear - continental European banking remains more regulated than the Anglo model, so it is harder to pin the blame for the crisis on the parties of the right. In the UK the situation is even worse, given that the worst excesses of finance occurred under Labour's watch.

Second, if the European right cannot be blamed for financial liberalization, the European left has trouble presenting itself as an opponent of financial excess. The reason for this is that European social democrats have, for the most part, bought into large chunks of the neoliberal orthodoxy over the past two decades. Social democratic governments in Britain, Germany, and Italy have adopted liberalizing measures in labour markets and sometimes financial and product markets too. Although these measures are not necessarily incompatible with progressive goals (see my paper with Mark Blyth here), it does make it hard to sell social democracy as being an alternative to neoliberalism.

Third, why do people vote for the right when markets fail? Karl Polanyi has the classic economic history take on this: people crave protection, markets destroy protective institutions, and the main political forces offering strong discourses about protection are the extreme left and the extreme right. This is how he interprets the 1930s, at any rate. Given that the recent events have been constantly paralleled with the 1930s, this analysis is worth taking seriously. Clearly, some things have changed: the extreme left is completely discredited by the failure of the Soviet model, and not surprisingly has not gained much from the crisis. The moderate left - social democracy - has been so successful that no-one challenges the fundamentals of the welfare state anymore, so socialist parties have trouble monopolizing the welfare capitalism option.

That leaves the extreme right, which blames everything on immigrants. The extreme right is basically exploiting the instinctive human tendency towards xenophobia, but it is also challenging one of the key concepts of the neoliberal age: globalization, and the free movement of goods, services, and ultimately people, across borders. One of the consequences (perhaps largely unintended) of the push for globalization since the 1980s is that flows of labour have vastly increased too, allowing the perception to develop that workers' interests are threatened by immigration. In part of course they are, since an increase in the supply of unskilled labour will exert downward pressure on wages, although up to now it is not clear how strong this effect has been in a Europe of strong welfare states. But aggressive campaigns against immigration also pick up discontent at the increased competition facing lower skilled labour in the world economy more generally. Socialist parties, which quite rightly prefer to defend the rights of immigrants and oppose xenophobia, find themselves exposed and outflanked by right-wing populism.

So the left is perceived as promoting globalization and liberalization, ignoring social problems relating to immigration, and offering little more than the continuation of welfare capitalist policies which are broadly accepted by all the other parties anyway. More on this in a day or two.

Monday, June 8, 2009

Hell, handbasket, European Parliament...

This blog is of course a place for sober, objective analysis of political events, drawing on decades of rigorous thought by political scientists, sociologists and economists.

But part of me today simply wants to ask: has everyone gone nuts?

The British electorate, in its fury at our MPs' light touch expenses regime, has rewarded the UK Independence party, led by Nigel Farage, with the second highest vote share of the British parties. Farage cheerfully claimed to have ripped off the European taxpayer to the tune of 2 million euros in expenses during his mandate in the European Parliament. Italians, in their consternation at the sordid scenes at Silvio Berlusconi's Sardinian villa, responded by giving the old letch 2.7 million personal preference votes. Hungarians decided to blame their troubles on Roma (the minority not the Italian football team), while the Dutch (or at least the 15% of them who voted for Geert Wilders) think it's all the Muslims' fault.

The kind of collective hysteria has been given a name by political scientists: second order voting. This is the well documented phenomenon whereby voters use elections they regard as less important - local, regional and European polls usually - to cast a vote of protest against the incumbent government, and perhaps mainstream politics in general. These results are therefore an example of the electorate letting off steam, but we can expect them to return to the fold in the 'real' elections.

I'm not so sure.

There's evidence a plenty - I've just been writing about it, in a chapter for a book in Palgrave's Developments in European Politics series - that European electorates are more and more likely to vote in the same rebellious way in national elections. Voters are less likely to join or identify with political parties, more likely to change their vote between elections, and - ominously - more likely to support fringe, extremist parties, than at any time since the 1950s. Right-wing populist parties hostile to immigrants and (for those in the EU) the European Union are winning sizeable shares of the vote in the Netherlands, Denmark, Austria, Italy, France, Belgium, Norway, and Switzerland.

Oh, and now, in the UK too. It's no joke if the BNP can win two seats in the European Parliament with an electoral system that tends to work against small, marginal parties. The mainstream elites probably think that the BNP and UKIP leadership are oddballs and fanatics incapable of holding political office. They are right. But this doesn't mean that we can ignore these results. If people are angry enough to vote for these people, it means politicians have to start taking people's problems a bit more seriously.

It's probably no coincidence that the two BNP MEPs have been elected in industrial areas of the north of England. These areas were abandoned by the Conservatives 30 years ago, and abandoned by Labour 15 years ago. New Labour deliberately cultivated middle England, assuming 'old Labour' had no option but to vote for Blair anyway. Now middle England has deserted Labour, and the heartlands are edgy too.

Labour cannot really recover in time for the next election, but the work of rebuilding has got to start if progressive politics is going to survive in Britain. And that means two things: identifying a social coalition the party can represent, and identifying ideas and policies to deal with the problems that social coalition perceives it has. In other words, Labour needs to become a political party again.

Deja vu all over again

A financial meltdown following by deflation and rocketing unemployment, scapegoating of minorities, and political success for far-right extremists.
Haven't we been here before?