Wednesday, March 28, 2012

John Kay: did the lucky generation make its own luck?

John Kay is admirably self-critical of his baby-boomer generation in today's FT (My generation should repay its good luck). He grew up in an age of growth where the state took care of his education, the job market provided opportunities, and housing was cheaper (and mortgages quickly devalued by inflation). His generation now enjoys a comfortable retirement (notwithstanding griping about the 'granny tax'). The luckless younger generations face tuition fees, a competitive and polarized job market, higher taxes, unaffordable housing, and poor pension prospects.

All of this is well known to those who care to think about it, although remarkably absent from the political debate. But there is a reason politicians choose to ignore it: baby-boomers are, and have been, far more politicized than their children. Not only are they more likely to vote now, they are more likely to have been politically mobilized in the past: remember that today's retirees could easily have been on the barricades in 1968, on the picket lines in the 1970s, or indeed marching with CND in the 1980s. The anti-globalization movement of a decade ago is a pale imitation.

So Kay is right when he claims that:

"Most parents want to give their children opportunities to live a life better than their own. But when we act together, we aggressively pursue our own interests at the expense of our children and grandchildren: a bizarre paradox of perverse collective action."

Maybe it is more pragmatic than perverse. Baby-boomers' surest way of giving their own children opportunities is to increase their own private wealth, rather than campaigning for social democracy. This ensures that opportunities will be unequally distributed, unlike in the post-war period. For each individual family, it makes perfect sense: if you hang on to your privileges, you can hand them over to your children, without the risk that your losses could be redistributed to the children of others. Think about it: if your kids can afford to go to university, why subsidize others to compete with them for the best jobs?

Democracy is not old enough for us to have had much experience of differential mobilization amongst generations. Although collective action may come in waves, as Albert Hirschman claimed, we don't know this for sure. It may have been a unique and irrepeatable phase of our historical development, which provided the active generation with institutions that would protect them through their own lifetime. If that is the case, the young will suffer badly for their failure to stand up for their peers in the way their grandparents did.

Tuesday, March 27, 2012

Paper on party cartels

And here, finally, is the paper.

Great meeting (19th Conference of Europeanists) in Boston, the world may be in a mess but there are a lot of people out there who understand what's going on. Gives you hope.

Friday, March 23, 2012

No blogging, but a paper

I've been writing a conference paper, hence the blogging silence. Will post shortly, in the meantime here's the abstract to whet your appetite:

Abstract

This paper assesses the response of political parties in advanced democracies to the post-2007 financial and economic crisis. It suggests that the mainstream parties in western countries have yet to update their economic policy paradigms, remaining within the narrow range of policy positions considered appropriate through the 1990s and early 2000s. It then develops a theory of party politics to explain this lack of change, drawing on Katz and Mair’s concept of the cartel party. It is argued that parties form a cartel around market liberal policies as a response to their own organizational weakness, and make institutional changes to entrench this cartel. Faced with a changing political and economic environment, parties remain locked into a set of ideas, policies and discourses which responded as much to party leaders’ organizational needs as to the validity of the ideas themselves.

Tuesday, March 13, 2012

Inside the German mind

In case you're completely flummoxed as to why Germany insists on the self-defeating austerity policy, and have read too much Paul Krugman, you should really check out this great policy brief from the European Council for Foreign Relations - it explains the German economic policy paradigm and its roots in the tradition of ordoliberalism.

The conclusion: don't expect the Germans to give way on this. You have been warned.

The Tao of Neoliberalism

OK, I don't really know what a Tao is. But hear me out.

The persistence of neoliberalism's 'Zombie ideas' (see Quiggin, Crouch, Krugman) despite abundant evidence of its failure is a source of frustration for those of us on the left who never liked it even when it seemed to be working. It's also an interesting intellectual puzzle: why do ideas change, and why isn't the obvious failure of ideas a source of change?

One think strikes me as I read through Crouch's book - a divergence between any informed assessment of the record of neoliberalism on the one hand (clearly negative) and the attractiveness of neoliberalism as an idea on the other. So Crouch defines neoliberalism's dominant idea thus:

'that free markets in which individuals maximize their material interests provide the best means for satisfying human aspirations, and that markets are in particular to be preferred over states and politics, which are at best inefficient and at worst threats to freedom'.

What's not to like? Especially since you can always come up with a reason why the problem might be down to state action of some kind, given the regulatory and fiscal role of the state in advanced democracies. I guess the point is that if the idea of individual aspiration and a poor opinion of politicians are part of your world view, than the collapse of the particular variant of financialized market economy witnessed over the past 5 years is probably not enough to shake you from that belief, especially since the alternatives are widely perceived to be discredited too.

The problem is that academic political economists know a lot more about the historical record than the average voter does, and there is no point in assuming that voters are going to come to the same judgement - they don't have time to read Quiggin, Crouch and Krugman (alright, a few read Krugman). Voters never understood Keynesianism, so why would they understand neoliberalism? To achieve change, we need a mythical story about social democracy that sounds as good as the mythical free market - a vehicle for aspiration of a better life. If nobody has ever explained to voters how a better life doesn't always come through a market, than we can't expect neoliberalism to die the death it deserves.

Wednesday, March 7, 2012

Trade-off or free lunch?

Not much blogging at the moment, in part because I'm writing a paper and need to focus on that. So, I'll blog about the paper. Here goes.

The paper is provisionally entitled 'Equality and Efficiency in Advanced Democracies: Revisiting the Leaky Bucket Hypothesis'. We (Mark Blyth, Seth Werfel and I) address Arthur Okun's classic book 'Equality and Efficiency: The Big Trade-off', which as the title suggests, argues that equality and efficiency are fundamentally in tension, with higher efficiency tending to imply higher inequality, and viceversa. We don't agree. A long tradition in comparative political economy suggests that not only is the trade-off not clearly visible in the data, but that the relationship may actually be the opposite, with equality and efficiency tending to move together (or 'trade in').

This paper is a follow-up to Hopkin and Blyth 2012, which just came out in the Review of International Political Economy. There we argued that rather than a straight trade-off, there is a curvilinear relationship between equality and efficiency across advanced countries: countries can combine efficiency and equality, inefficiency and inequality, or efficiency and inequality. So, for instance Northern European welfare states tend to have low inequality but also high levels of economic efficiency (what Peter Lindert calls a 'free lunch', in which equality doesn't have an apparent efficiency cost), whereas in English-speaking countries efficiency is combined with high inequality (a trade-off). Moreover, some countries, particularly the newer OECD members and the Southern European nations, manage to combine high inequality with low levels of efficiency (an expensive and lousy lunch?). In other words, there are a range of combinations to choose from, rather than a stark trade-off between equality and a good economy.

In the current paper we try to move beyond this in two ways. First, we use panel data to see whether our cross-sectional results hold over time. Second, we try to predict why increases in efficiency produce different effects in different cases. The results so far suggest that the three combinations seem to be present over time, that movements along the curve produce trade-ins and trade-offs, depending on the country's level of efficiency, and that we have a tentative explanation for why that is.

On which, more later...

Thursday, March 1, 2012

Cameron promises end to unemployment, single parenthood

That is the only plausible interpretation of this headline: No more 'languishing on the dole' after welfare reforms, says David Cameron in the Telegraph.

Well, where have we heard that before? In 1979, when Britain had unemployment of just over £1.5 million, Margaret Thatcher promised to end the 'dependency culture'. This programme was so successful that the number of welfare dependants increased astronomically by the time of her departure. Now, David Cameron promises the same thing, but unlike his predecessor, who felt that the best way to deal with dependency was to follow a stringent monetary policy that doubled unemployment, the current government will simply cap the amount a family can receive in benefits, at £26,000 a year. The reason for this number is that this is the average disposable income of a family in Britain, and no-one should receive more than this for not working. A laudable principle, on the face of it.

Until you consider the reasons why someone may be on £26,000 a year benefits. Basic unemployment support - the 'Jobseeker's Allowance' - stands at just under £70 a week. So, do the math as they say - that amounts to only £3640 a year. In other words, you can't earn an average salary on unemployment benefit, unless the government increases it by a factor of 7+.

So where might the other £22360 come from? The answer is, housing benefit - the rent subsidy the government pays to families in need - and child benefits and credits. Now we get to the crux of the matter. Benefit recipients could be invited to leave their houses, which in some high cost areas would lead to savings of something in the order of several thousands pounds a year. But the problem here is that local authorities have a statutory duty to house homeless families. The government does not apparently intend to abolish this. So councils would have to spend possibly even larger sums housing families in bed and breakfast accommodation, or, as someone suggested, in Hull (a fate worse than death to a Guardian journalist).

Finally, child benefits tend to be more generous than unemployment support, on the not unreasonable grounds that children can't be expected to go to work, and should not suffer just because their parents don't. The government has shied away from suggesting that children in poor families should share the pain, but large families could still easily find themselves up against the benefit cap. But there is an obvious solution that this family-friendly government must be aware of. A benefit cap gives poor families with many children a big disincentive to stay together. The cap, remember, applies to the household. A family of two adults and 2+ children leaving in London could avoid the cap by splitting up. The result would be that local councils would have to house more families, a net increase in expenditure. Is this likely to happen on a large scale? My guess is no, but only because welfare dependent families are not the cynical money-grabbers portrayed in the right-wing press. The rational strategy would be to maximize access to welfare by creating as many family nuclei as possible.

The coalition is about to find out that welfare may be assailed by 'irresistible forces', but it is also an 'immoveable object'. If reforming welfare was so easy, it would have been done by now. Of course, LSE students know this already.