The old order is crumbling - what comes next?

This post first appeared on the Radix website...

I went to the Social Liberal Forum conference last weekend and found it completely transformed – no more endless whingeing but real debate about big ideas for the future. They really had made the transition, as the Greens used to say, from opposition to proposition.

Anyone who has read my political blogs will know is how I believe the left needs to gear itself up: concentrate on the ideas; cut out the off-putting rage. See also John Harris on this.

I was there to talk about tackling monopoly and the future of liberal economics. It was refreshing. For me, at least.

But I have also been wondering, over the past week, how the transition I have been predicting for some reason would come about.

I’ve argued before that there is a four-decade cycle of central ideas in the UK. We had to change policy suddenly in 1940 when we withdrew spectacularly from the French alliance at Dunkirk, but the body of economic ideas which we needed to adopt were there waiting patiently, thanks as much as anyone else to Keynes.

Then came 1979 and another shift. If you read the cabinet papers of the period (as I have), it is clear that Margaret Thatcher herself had few ideas about what she wanted to do apart from helping homeowners (read more in my book Broke), but the revolution had been brewed by Nigel Lawson and Geoffrey Howe and their young apparachiks, meeting in Howe’s flat in Vauxhall every Tuesday evening for some years before.

So, thanks to Trump and Brexit, the old order is now staggering again, and is probably fatally wounded, but neither administration in the USA or UK appears to have much idea about what to do instead. So where, I am asking myself, is the new philosophy going to emerge from?

There is no body of knowledge, or techniques, waiting in the corner of the Treasury ready to be picked up and enacted. As far as I know. Nor do we have long. Yes, there are ideas - but the Treasury's waiting room is empty.

It seems likely that the markets will crash again in October (you read it here first, though the latest issue of Fortune carries the headline ‘The end is near!’). Trump is too backward to know what to do. So is the current UK government.

Otherwise, there is the exhausted remains of market fundamentalism, residing at the IEA and Cato Institute. There is the equally exhausted reheated thinking from 1945 wafting about. Neither is really going to cut the mustard, as they say.

Probably the only internationally recognised body of economic ideas which would stand the scrutiny are the ideas around inclusive growth – but these have mainly taken root in cities on both sides of the Atlantic, rather than governments.

It maybe that radicals and centrists would serve the future better, not by endlessly refighting the Brexit argument – but by making sure we have a body of ideas ready for when the roof falls in, sometime next year I expect. As I say, we don’t have very long.

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The collapse of party government

Apologies for such a long gap, spent getting my head around the privacy business of GDPR. This post first appeared on the Radix website...

It has been de rigueur in certain middle class circles to complain about the baleful effect of political parties in government, but nobody appears to be complaining now they have all but disappeared in the chaos that now seems to be overtaking what used to be known as the UK government.

The collapse of ideological demarcations is most obvious in the Conservative Party, because current divisions go to the heart of the great split that runs through conservatism: nationalism versus trade - and even Jacob Rees-Mogg has been gargling with the way Robert Peel divided the party over free trade in 1846 to save the country.

A similar division opened out before the 1906 landslide victory for the Liberals over imperial preference. One close colleague of prime minister Arthur Balfour described himself as "nailing his colours firmly to the fence".

It is worth remembering that divisions had reached such a bitter impasse by 1913 that leading Conservatives were working closely with Ulster Unionist to ferment armed rebellion. So if we take these historical parallels too seriously, we need to watch out. It is not impossible to see the circumstances where this history might repeat itself.

Nor are the Tories the only former ideology divided on the Brexit issue. Labour is managing to hold together via a number of increasingly messy compromises. The Lib Dems only appear united because they have entirely lost their Eurosceptic wing in the celtic fringes.

I have to say I feel increasingly frustrated, not just the failure of the Conservative Party to provide leadership, but any of the three wings in the Brexit (stay in, hard and soft) to understand anything of each other's points of view.

One side believes the European Commission is a malevolent organisation, bent on undermining UK interests, and that we therefore need to make economic sacrifices to escape their clutches. The other side believes they are saints, and that the European Union is a force for peace and harmony in the world, despite appearances to the contrary, and the only thing that matters is that we stay inside.

There is a third position which suggests that the UK economy is so vital that we have to bind ourselves for the foreseeable future to European rules which we have no say over at all (Theresa May's current position).

All three of these positions are impossible. The only way out, if there is one, is for the three sides to make a bold leap of imagination. In short, we need someone who can formulate a way forward - not a compromise: it is too late far that - but something the nation might unite around.

Unfortunately, we have bred a political elite who don't think beyond the game they believe that politics is. I hope that the time will come, when we have crawled away from this with the watershed behind us, when the electorate will take a terrible revenge on the political generation that brought us to what increasingly looks like a national humiliation.

Once the damage has been done, and we have cleared out the politicians who caused it - or failed to take adequate measures to prevent it - then perhaps we can then do what the nation does best: exhaustingly and expensively dragging victory from the jaws of defeat. Because, if it is Dunkirk all over again, the old guard has to go pretty quickly...

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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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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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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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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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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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