Sunday, 3 June 2018

Average economic statistics and how they turbocharged Brexit

A version of this post first appeared on the Radix website...

No doubt it is a sign of age, but I find myself a good deal less critical of people who vote for so-called 'populists' than I ought to be.

I put the word in inverted commas because what they actually mean is ‘rabble-rousers’, and I don't have time for them. As Thomas Frank explained in the Guardian last weekend, populism was originally a left-wing reform movement which swept the Midwest of the USA in the 1880s and 1890s (and incidentally gave us the Wizard of Oz). It may actually be part of the answer.

I find myself leaning towards a different approach which, instead of blind panic and refusal to accept the electoral verdict (like the Italian president), we advocate a broad attempt to understand why so many voters hate the centre left – and why, in particular, all those Cornish Liberals backed Brexit.

And, when you think about it – there is one economics habit, above all others, which has contributed to the reaction against conventional expertise. Averages.

Thanks partly to the boneheaded refusal of UK institutions to contemplate the existence of regional, city or local economies, official economists have been staring exclusively at the national statistics, apparently unaware that there might be any other way of doing it. Because when you average out the prosperity statistics across a relatively equal nation, then it may mean something – but across an increasingly unequal nation, it becomes increasingly meaningless. One Abramovitch skews the whole thing.

The result has been an inevitable mismatch between what people’s lives have been like in, say, Hartlepool or Ipswich, and the economic experts who tell them with confidence that actually their lives must be improving because the national statistics say so.

It is no small step forward that the Bank of England is going to collect and publish regional and local statistics as well, and that they have set up regional citizen reference panels (a recommended by the RSA). But don’t let’s undermine the cynicism that this mismatch has caused – between the experts and their statistics and people’s lived experience.

It has certainly contributed to the sense that the so-called experts don’t understand, and are not on our side. Nor is it in the least bit surprising.

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Friday, 18 May 2018

Footballers, vice-chancellors, London homes - why they all cost so much

This post first appeared on the Radix website...

I’ll tell you the answer straight away – they are all a result of too much money pushing up the prices. They are all a result of the most insane inflation.

It is peculiar, though, that – in a nation where the establishment is obsessed with inflation – we understand it so little. Nearly the entire discourse about UK house prices has been about the short supply of houses and almost nothing about the over-supply of property finance.

House prices tend to leap in periods of heavy lending, but not in periods of extreme under-supply (I’m thinking of the late 1940s). Yet for some reason, policy-makers only seem able to focus on the latter. There appears to be some kind of blockage in the English mind when it comes to interfering in the financial side of property booms. Yet there now, thanks to buyers from the Far East, appears to be an almost infinite demand.

Yet we naively think we can flatline house prices by building more. It might work better and faster if we could lend less – and limit the influx of foreign buyers.

And for some reason, we don’t see that – when the average Premier League player earns more than £50,000 a week – a similar phenomenon must be at work. We are clearly putting too much money into football.

When the average vice-chancellor pay at a Russell Group university is over £330,000, a similar phenomenon is at work. It isn’t that there are too few vice-chancellors. It is that there is too much money flooding into universities, and paid for by our children.

Something must be done.

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Tuesday, 15 May 2018

The implications for Brexit of Chamberlain and Munich

The reason I wanted to write a book about the Munich debacle of 1938 was that I heard the novelist Robert Harris talking about it on the radio - and taking a revisionist position sympathetic to Neville Chamberlain.

Having immersed myself in the subject for some months, I came to the conclusion that Harris was wrong. Yes, the Munich summit, and the two which immediately preceded it, delayed world war for a year and gave Britain, France and the Nazis time to prepare their arsenals and procedure. Yes, Hitler himself bitterly regretted the agreement too.

But there were three elements I had not been aware of before.

1. The handover of the Czech nation to the Nazis involved the deliberate brow-beating of the Czech president - demanding an answer from him in the middle of the night before a 6am cabinet meeting, while the UK press was kept in line by Samuel Hoare. There was a kind of snobbery in the way the UK establishment treated the Czechs which lay behind one of the most unjust interventions by British diplomats in history.
2. The Sudeten areas handed over to Hitler included some of the most sophisticated tank and weapons factories in Europe. Most of the tanks which pushed the British and French into the sea at Dunkirk in 1940 were originally Czech.
3. The German generals had agreed a sophisticated plot to kill Hitler the moment he ordered the attack on Czechoslovakia, which unravelled as soon as the news of Chamberlain's plea for a third summit to give Hitler what he wanted, as Chamberlain put it, "without firing a shot".

In fact, telling the story of the 1938 coup plot alongside the Munich story was a key element I wanted to achieve in my book Munich 1938.

Chamberlain knew of the plot, but did not take it seriously and - who knows - he could have been right. Where he was seriously deluded was in his belief that Hitler respected him and would keep his word. In fact, I found myself comparing him with Blair on Iraq as I had not done since 2003. The two situations are not parallel; the prime ministerial behaviour is.

Czechoslovakia would have fought, and probably the French and Russians would have fought alongside them, if it had not been for Chamberlain's willpower. It was the British, in a determined effort not to be involved too closely with continental Europe, who forced the betrayal of a whole nation.

In fact, I suspect that history shows that the British need to be involved in Europe willingly - or at least that Europe finds itself in greater danger without us. This is not national pride - the same would undoubtedly be so of France, Germany and Italy. We are one of the guarantors of European peace.

As the eightieth anniversary of the Munich summit approaches this autumn, it ought to be marked in some way. It is the fearsome example of what can happen to Europe when we, or any of the other main players, wriggle out of involvement there. This implies nothing about the EU, but it is a warning if we use Brexit to pretend we have no responsibilities for the continent we are part of.

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Wednesday, 2 May 2018

Time for our monopoly regulators to get off their bottoms

This post was first published on the Radix website...
The story so far goes back to the parallels between the campaign for free trade and the campaign against slavery, which realised - especially after the 1860s when the US slaves and the Russian serfs were both released and found themselves straight back in an economic slavery - that the two belong together.

That was free trade as Liberals understood it through the nineteenth century and into the twentieth. Free trade was, above all else, the antidote to slavery.

Then came Milton Friedman in 1962 and others since who argued that monopoly power was rarely a problem and transformed free trade into the mirror image of itself - not a means to protect the small and challenging against the market power of their competitors, not a solution to the problem of monopoly power but an apologia for it.

Then the Liberal forces forgot that anti-trust was the lynchpin of their economic credo. Conservatives think that free trade simply means letting market power rip. Socialists don't care about it either: they prefer dealing with big companies to small ones, because they imagine they can control them (they can't).

Now, bear with me, we are getting near the present day. The last supermarket inquiry (2007) dodged these issues and allowed the Big Four grocers to carry on virtually unhindered, though they have such a grip on the UK farmers that they have largely destroyed the sector except for the biggest.

And now we hear that another monstrous supermarket merger is about to be nodded through in the usual way - and the purpose, to escape the monopolistic power of Amazon, is because the UK and US monopoly watchdogs have allowed Amazon to build up an unassailable power so that now everybody has to be a bit bigger. And despite the promises, it inevitably means worse service, higher prices and bankrupt suppliers. It means less diversity and that is good for nobody.

The American political establishment is beginning to wake up to the peril they are in from allowing a dwindling number of players to dominate the markets. They have the new Open Markets Institute. They have new figures emerging too. In the UK, where the regulators are particularly dozy - and where the establishment still seems to believe, despite all the evidence, that big is more efficient - we are a long way behind the debate.

Consequently, the regulators here will undoubtedly set some minor conditions and then nod through the Sainsburys-Asda merger, citing the importance of economies of scale in order to stand up to the internet giants. Forgetting perhaps that they are primarily responsible for creating the climate for dysfunctional giantism in the first place.

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Wednesday, 18 April 2018

If you are neither cold nor hot, I will spew you out of my mouth...

This blog first appeared on the Radix website...

Well, that is how the Book of Revelation puts it (3:16), and it may be peculiarly good advice for the Lib Dems in the local elections.

I ought perhaps to apologise for returning again to the continuing mental strife between me and my own party, but I am a Liberal and always will be. It is just that I’m not quite so confident that my party is as much as it should be.

At the beginning of the month, I posed the question here: why do voters hate the centre left. I was not just talking about the UK, but right across Europe where the trend has been the same.

I have had a number of thoughtful responses from most parts of the political spectrum. They include the strange Blairite preference for symbolic gesture over actual action, or for political correctness over concrete solutions. In fact, there was a kind of consensus, as far as it went, that the centre left seemed to have – over a generation or so – lost faith in their ability to change anything.

Worse, it was almost as if anyone who wanted to change anything in reality was almost treated as an extremist.

Strangely, there have been two contributions along similar lines in the last few days – one in the Economist, on in the Spectator – which came to similar conclusions, at least about the prospects for a new centre party, which people are discussing with surprising frequency at the moment. "Britain does not need a new centre party," says the Economist, "It needs new ideas".

There is some agreement here too, and with the line that we have mostly been taking in this blog – that a new centre party set up to defend the status quo, or existing institutions, or the position pre-Brexit and pre-Trump, is doomed to failure.

It is doomed because it would require us to paper over the cracks that have divided the world – when the poor are expected to deal with mass immigration on their own, or the way that free trade has been transformed into a kleptocratic conspiracy to make billionaires richer, or that our public services have been transformed into unresponsive, inflexible sausage machines. Do I put it too strongly? I don’t think I do.

The same lesson applies to the Lib Dems. If they simply mount a defence of the past, or become a cult dedicated to moderation in all things, then they will fade away. If they can tap into the depth of people’s indignation, accept that the world has changed, and build a platform for a participative and tolerant future, then it seems to me that there is a chance they may revive.

Above all, that means daring to get to grips with the abject failure of the current economic orthodoxy. For goodness sake, don't leave the central task to Corbyn.

Otherwise, they may just get spewn out of the mouth again.

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Thursday, 12 April 2018

Why creativity is the future for the UK economy

This is a version of a blog post that first appeared on Radix:

I have just come back from travelling around Europe by train. I wanted to show my children some of it before the re-imposition of passports and border checks (or, as I told my friends, to see Europe while it's still there!)

I suppose I have come to three rather simple conclusions as a result:
  • The trains in continental Europe are effectively run, and on time, and they are clean and affordable, and above all humane – because they re not being run by the Treasury under our bowlderised version of privatisation – beyond anything I had realised before.
  • The value of the pound made the cities we visited ruinously expensive.
  • There is a clear future role for the UK – in fact we already seem to be fulfilling it: it is to be the world’s cultural and creative engine.
Let me just step back a little before explaining what I mean. Many of our stops – Rome, Venice, Vienna – were lovely, but also the worn-out husks of former empires which have not really survived the transition.

But English culture, from Shakespeare to pop, is absolutely ubiquitous. Even the Doge’s Palace in Venice is currently hosting a John Ruskin exhibition.

We may have no future as a symbolic gesture towards an imperial past (as the Leave campaign seems to envisage) or once again become the workshop of the world (which is how I interpret Corbyn’s position) – though we do need to return to manufacturing.

But we do have an economic destiny which we are beginning to fulful despite ourselves, and helped by the enormous success of English.

The question is whether we can begin to put our still sizeable resources towards the fostering of creativity on a scale we have not seen before.

We will have to stop, for example, destroying the love of reading and writing that most children start with by giving disconnected comprehension passages and then getting to focus on adjectival clauses and other guff – thank you, Michael Gove, for that.

Is there a political party capable of making that intellectual leap? Both Labour and Conservative have attracted a combination of support from people who are both angry and backward-looking which doesn’t bode well.

Which leaves the Lib Dems. And I speak both as a Lib Dem and a free marketeer (in its original Liberal sense) when I say how frustrated I am. My fear is that the party has transformed itself from its central purpose (the radical devolution of power) to a limp version of itself, committed to compromise in all things. Except possibly on the EU, which is hardly about devolution.

They have not yet grasped, any more than Labour has, how the world has changed. And if we are going to avoid an authoritarian future, they will have to take the lead in unravelling the hand-wringing, do-nothing cult dressed up as economics, which has led us to this impasse. I mean the idea that anything about the market is objectively true and unavoidable.

When Joseph Chamberlain seized Birmingham for the Liberals in the 1870s, he first had to eject those who had run the city – a group of councillors dedicated to spending as little as possible, and calling themselves ‘The Economists’.

It is time we ejected them again and persuaded the voting public, not just than something can be done after all, but that it also will be done.

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Friday, 30 March 2018

Why do voters hate the centre left?

A version of this blog post first appeared on the Radix website...

What is a progressive these days? I find myself asking this question constantly for a range of reasons which those who know me will understand. It isn’t that I don’t know the conventional answers. It is that I’m not sure why I find them now so annoyingly familiar.

It could be something to do with turning sixty shortly, were it not for the fact that it clearly isn’t just me.

I look at the rise of intolerant forces. Then I look at the progressive political forces ranged against them, using the same old language they have always used, and the political defences for civilisation don’t seem very strong or convincing.

These are urgent questions now that every set of conventions, economic and political, seem to be in a state of flux.

The problem appears to be that, facing voters, there is no political force so battered and defeated across Europe as the centre left. For some reason, voters have turned their back on them without mercy. They are still in power in Sweden but hardly anywhere else.

Why? We badly need an answer. They have hardly been responsible for the shape of the economic doctrines that have dominated politics for the past four decades. It isn’t their fault – or is it? Here are my very tentative answers:

  • They compromised fatally with the vacuous and technocratic economic orthodoxy which has been allowed to undermine communities and lives.
  • They led the charge for the New Public Management of targets and other tacit forms of centralisation, which have hollowed out our services and institutions and set them against us (if you doubt me, try applying for benefits, attending an obesity clinic or phoning HMRC – just not at the same time…).
  • They have led a kind of handwringing style of politics that prefers symbolic gestures to real solutions that will actually change anything – not because they are cynical, but because they no longer believe in the practical possibility of change.
  • They abandoned families to their fate by embracing zero hour contracts just to bring down the unemployment figures – and remain stuck in a Fabian attitude that nothing business does matters very much as long as they burnish the welfare state.
  • Centre left political types are mainly behind the scourge of political correctness, which seems to have developed as a kind of language for the cognoscenti - again it is a substitute for effective action (take down the statues of historic slave-owners because you can't touch the modern ones).
Is that an adequate explanation? No, it isn’t, but it goes some way to explaining my own feelings at least.

The real problem emerges when I start to wonder what we can do about it, given that the centre left is in free fall. Because it implies a huge pressure on the fissure inside the Lib Dems.

My party represents a merger between Liberals and the very forces that are in free fall. It isn’t an answer to say that the differences between the two ideologies of social democracy and liberalism have now disappeared, because that is precisely the problem. Three decades after the merger, the party speaks social democrat very well – it is easier, after all – and has begun to forget how to speak liberal.

I wrote a blog about the continuing distinction between them here (I was told by one correspondent that I was ‘off message’, which I was quite proud of).

Over recent years of blogging, I have tried to set out a little of what being a Liberal now needs to mean, but I’m not sure I have had the slightest influence.

It is now getting late and urgent that they remember their radical roots, and slough off some of the old technocratic Fabianism which is dragging them down – before the waves finally close over the centre left.

I hope they do.

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