Gordon Is Right This Time
William Keegan and Will Hutton do not, I suppose, consult each other as they write their respective pieces for The Observer. If their contributions in this week’s paper are read together, however, they make for a compelling combined message, and one that Gordon Brown and his government would do well to learn and apply.
First, William Keegan’s piece laments (as I do) the opinion polls that reveal the number of voters who believe that, if they are having to tighten their belts, then the government should do likewise. I suppose it is understandable that people should feel, at a visceral level, that the government has got the country into the mess, and should therefore share in the pain that ordinary citizens are suffering. It is nevertheless disappointing that a gut reaction should take such precedence over economic literacy and common sense. It is even more disappointing, though perhaps more to be expected, that these sentiments should be encouraged by those who should know better.
The truth is that government must bear a responsibility not only for allowing the recession to develop but also for the measures needed to counteract it. Governments can and must act to correct market failure in ways that the market, left to itself, cannot. Economies are robust things. They would recover sooner or later without intervention. But – as all but the most purblind now recognise – it is the responsibility of governments to hasten the recovery process, and thereby limit the misery that recession inevitably brings about.
The reason for this is that governments, uniquely, have the ability to counter the inevitable tendency of recessions to feed on themselves. For most actors in the economy, the demands of self-interest mean that, in a recession, they spend less, invest less, cut costs, employ fewer people. Each individual decision taken by companies or businessmen may be – indeed usually is – rational and justified, but the cumulative effect for the economy as a whole is that recession is intensified.
There are those who wish to resist this line of argument. They are so hostile to the very idea of government that they are reluctant to accept that governments should ever have a special role and responsibility. They argue that governments should act (if at all) as though they were individual people or companies. According to this view, governments in a recession should also cut costs, spend less and lay people off, as though they were just like households or businesses. But, given – whether they like it or not – their importance to the level of economic activity, if governments behave like everyone else, the economy is condemned to a deeper and harsher recession than needs be. As Keynes pointed out, only governments have the capacity and the duty to defy market logic. Only governments have the resources to over-ride what would normally be market-based self-interest and to substitute for it the wider interest in getting the economy as a whole moving again. Only governments can afford to live with and fund long-term indebtedness if that is what is required to protect the interests of their shareholders – and that means everyone. You don’t need to be a Keynesian to accept this; all you need is common sense.
At this point, enter Will Hutton. He makes the point that – perhaps belatedly – Gordon Brown and his government have recognised that common sense requires them to use the power of government to fight the recession. As a result, the recession – bad as it is and will yet be – will be shallower and shorter than it would otherwise have been.
In doing this, they have opened up a clear and significant gap between their approach and that of the Tory opposition. As far as we can tell, the Tories would have done nothing, other than wring their hands at the inevitable and growing size of the government deficit – and ironically, that very inactivity is the one thing guaranteed to make the deficit bigger. A longer and deeper recession would mean yet more damage to the government’s finances; a less severe recession, counteracted by judicious government spending, would by contrast bring the deficit under control and limit its size.
Yet, as Will Hutton points out, Gordon Brown gets no credit for his courageous (and surely correct) stand on the responsibilities of government in a recession. It is his opponents who, for reasons of opportunism, prejudice and perhaps sheer ignorance, continue to make the running.
He is not, of course, alone. The right, in the United States, Europe, Australia and New Zealand, continue to exploit public sentiment in order to undermine confidence in the power of government. But surely, for Gordon Brown as for other more enlightened leaders, this is stronger ground on which to fight than the disastrous argument about which party will cut more severely.
I remember a young Gordon Brown who, with an eye for a phrase that was hardly new but nevertheless full of meaning, proclaimed that “good government matters”. That has never been more true than at the recession-ravaged present. Why not say so – again and again and again?
Bryan Gould
27 July 2009.
This article was published in the online Guardian on 27 July.
A Tale of Two Decades
Book Review for the New Zealand Listener
When the Lights Went Out by Andy Beckett: Faber & Faber
Thatcher’s Britain by Richard Vinen: Simon & Schuster
Popular wisdom has it that – in Britain as in the rest of the world – the 1970s and 1980s taken together straddled a decisive turning-point that saw the progressive disintegration of the post-war consensus on the one hand followed by a positive striking-out in a new direction on the other. Those of us who lived through the period – and especially those, like me, who were close to events – will testify to the turbulence of the 1970s and to the sense of fundamental change ushered in by the 1980s; but, as these two books in their different ways demonstrate, the history of the period is not as simple as it seems.
At first glance, the 1970s were a decade of failed British Prime Ministers – Heath, Wilson and Callaghan – each of whom was defeated in turn by a combination of economic under-performance, the loss of faith in Keynesianism, irresponsible trade union power, and increasing self-doubt about the integrity of the United Kingdom and Britain’s place in the world. This catalogue of tribulations was followed by a very different Prime Minister who grasped the situation by the scruff of the neck, faced down both her critics and the country’s problems and, as a consequence, transformed Britain (for good or ill) and made the 1980s her decade.
But, as Andy Beckett shows in his wonderfully lively reportage of the 1970s, that decade offered much more than chaos, confusion and decline. If we widen the lens to take in not just the economics and the politics, but a more complete picture of how the 1970s felt to the majority of British citizens, we see a British society that was unusually creative, surprisingly contented, and – especially towards the end of the decade – beginning to feel that many of the most pressing problems were well on the way to resolution.
Even the much-touted economic problems were, perhaps, not quite as intractable as they seemed. Growth rates may have been lower than in some of the countries the British liked to measure themselves against, but we now know that most of those countries were about to face the same problems as had troubled the British. And, despite those issues, unemployment in Britain through the 70s was at lower levels than were matched over the next thirty years.
The fortunes of the political leaders, however, seemed to tell a different story. Heath was a decent and thoughtful leader who proved – rather like a twentieth-century Gordon Brown – to be almost totally lacking in political skills or human warmth. Wilson was clearly ill-prepared – perhaps even reluctant – to take up the burdens of office again when he narrowly and slightly unexpectedly won the 1974 elections and he duly laid those burdens down within a couple years, to the surprise and discomfiture of his supporters. And Callaghan, despite his experience and calm good sense, badly misjudged a less than competent and responsible union leadership and came to grief over the “winter of discontent”. More seriously, none found a way to overcome the problems of comparatively poor economic performance while maintaining the commitment to full employment, good public services and social justice.
That is not to say that this was an impossible or even a difficult task. It was simply beyond the conventional thinking of the time. Concern about the value and role of sterling, the priority given to the interests of the City, a touching faith in the curative powers of North Sea oil which was about to come on stream, and a fatalism about the competitiveness of British manufacturing industry all combined to close off avenues that could have seen a constructive evolution of policy, rather than allowing it to be seen to hit the buffers.
Beckett is brilliant at evoking the mood of the moment (and there were many of them) and at painting the dramatis personae in full colour. His is essentially, however, a journalist’s account; there is surprisingly little analysis or exploration of issues. This is a minor quibble perhaps, but a New Zealand readership will understand the deficiency with a tiny example drawn from his account of British membership of the Common Market which resulted, he says, in New Zealand butter becoming “more expensive” – perhaps one way of putting it but not quite getting to the nub of the issue.
Richard Vinen’s study of “Thatcher’s Britain” is a different sort of book. Whereas Beckett aims at (and largely succeeds in) painting a full, even if at times superficial, portrait of the 1970s, Vinen takes a more analytical approach, lingering – as befits an academic rather than a journalist – over those aspects that interest him and not bothering too much about covering the whole waterfront. The result is a curiously partial account of Margaret Thatcher – partial in the sense both of being less than complete and of being quite opinionated.
It is perhaps a reflection of my own strong opinions on the subject that I found that I enjoyed what he has to say. He is good on both Thatcher and Thatcherism and quite properly makes a clear distinction between them. This accords with my own view, that it was one of those mysterious accidents of political life in a modern democracy that someone who seemed to have a surprisingly limited contribution to make was reckoned to have made such an impact.
Margaret Thatcher had a collection of largely conventional – and partly anachronistic – views, rather than the coherent and ground-breaking political philosophy that is often attributed to her. She saw the world exactly in the way that could be expected of someone of her limited background and experience. It is the very conventionality of that view, untroubled as it was by doubts or complications, that proved to be the source of her strength. It accorded exactly with the way the world seemed to so many of her supporters, and it was their enthusiasm for her, coupled with her own strength of personality, that gave her the confidence to push forward with her agenda.
It must not be forgotten, however, that Thatcher was a product of the particular combination of circumstances she encountered as Tory leader. As Vinen reminds us, she was a largely accidental Party leader, and a pretty ineffective Leader of the Opposition; for most of her first term, she was also an unusually unpopular Prime Minister.
She had the good luck, though, to enter a political battlefield which her likely opponents had either abandoned of their own volition or from which they were distracted by other, internal, preoccupations. To the gratified surprise of the Prime Minister and her supporters, she found that she could push forward without encountering much by way of opposition.
Thatcher found herself as the standard-bearer for what became known as Thatcherism; but the doctrine itself was a much more formidable construction – contributed to by a wide range of thinkers in many different fields, and assisted by opponents who had lost confidence in their own prescriptions – than her own quite simplistic political philosophy would have allowed. As so often in politics, luck and timing were almost everything, and by the end of the 1980s, they had run their course.
The two decades are not, after all, a simple parable of decline and renewal. As Enoch Powell, copiously quoted by Vinen, remarked, “All political careers end in failure.” Margaret Thatcher, along with Heath, Wilson and Callaghan, was no exception. These two books offer at least a part of the explanation of why that was.
Bryan Gould
9 July 2009
Sin and the City
Twenty three years ago, the City was excitedly awaiting the Big Bang – the moment which would usher in a new era of self-regulation of the financial services industry. I had a grandstand view of the impending arrival. The legislation to prepare for the Big Bang was called the Financial Services Bill, and I spent several intense weeks leading for the Opposition as the Bill was taken through its Standing Committee stage.
Mrs Thatcher’s government, in line with its free-market philosophy, was very clear that the City could in essence be trusted to regulate itself. They resisted all attempts to give the regulators some teeth. The next few years of what some called self-regulation but which was in reality a free-for-all saw a huge expansion in financial services, in the size of the institutions providing them, in the sums of money involved, and in the rewards “earned” by those who worked in the City.
For those of us who argued at the time that the “free” market was not infallible, and (in line with Keynes, who had warned that financial markets were peculiarly prone to excess) that the City would require substantial regulation, subsequent events have come as no surprise. Even we, however, could not have foreseen the size of the money-go-round, spinning ever faster, that produced outrageous fortunes for a few and, eventually, crash and ruin for many.
Nor could we imagine that it would be a New Labour government that would become the most enthusiastic cheerleaders for the new lords of the universe. So dazzled were Ministers by the riches generated in the City that they did not think to enquire as to how many of those they claimed to represent actually benefited from the new wealth – wealth largely gouged out of the pockets of the rest of us.
The current revulsion at City excesses – the inflated bonuses, commissions, salaries and perks – is understandable; so, too, the anger at the growing evidence that nothing has changed and that those responsible for the mess will be paid mega-bucks for (allegedly) cleaning it up.
But the reaction to the greed and irresponsibility of the financial free-for-all, while natural, is a diversion from the real point. The reason for the government’s continuing genuflection to the City is that, after 23 years of unregulated City operations, and a growing reliance on financial services to keep the economy moving forward, the collapse of the City means that there is nothing much left.
The game is given away in the Chancellor’s statement this week on his plans for future regulation of financial services. His constant references to the importance of the City to our economy should be seen, not as an endorsement of the course followed over the last 23 years, but as a confession of failure. It is an admission of how far governmental indulgence of City excesses has distorted our economy and how big has been the price that the rest of us have had to pay for the rewards that City operators have milked from that same economy.
The real damage suffered as a consequence of the City’s domination of our economy is not to be measured, in other words, only in terms of the current crash and financial meltdown. The weight given to the City’s interests over a long period has seriously distorted our economic performance – and the more successful the City seemed, the more important its earnings to our national accounts, the more other parts of the economy were allowed to wither away.
The problem is not a new one; it was Winston Churchill who, as Chancellor of the Exchequer, remarked in 1925, “I would rather see Finance less proud and Industry more content.” An excessive attachment to the interests of those who hold and manipulate existing assets, at the expense of those who want to create new wealth, is – after all – a characteristic of mature economies which have substantial assets to protect – and we have been a mature economy for 150 years.
But the era of self-regulation and the demands of the global market meant that this policy bias became magnified many times over. Economic policy as a whole was tailored over this period to serve the City’s interests – so consistently, and over such a long time, that it was no longer recognised as abnormal. There was, we were assured “no alternative”; the global market meant that if the City were not given free rein, others would muscle in on their territory.
So, monetary policy was given centre stage. The policy itself was handed over to bankers, so that it was no longer subject to scrutiny and Ministers were no longer accountable for it, but so that it could be decided for a limited purpose that – arguably – primarily served the purposes of one part only of the wider economy.
Macro-economic policy was largely abandoned. Keynes was dismissed and forgotten. Interest rates were pressed into service to maintain the value of the currency and to underpin financial assets that might otherwise have been regarded as of dubious value. Little or no attention was paid to the competitiveness of the rest of the British economy, so that any thought of following an exchange rate policy that would stimulate exports, employment and investment simply never occurred to our policy-makers; manufacturing in particular was allowed to continue its relentless decline. Most of our economic eggs were placed in the financial services basket and only City operators had access to the golden eggs amongst them.
That is why the global crisis has hit the United Kingdom harder than anywhere else. The financial meltdown has meant that we have nothing much else to fall back on. And that is why the government has gone back – cap in hand – to the authors of the great misfortune, to ask them to dig us out of the hole. There is no better hole to find.
Millions will pay the price of the financial collapse with their jobs, homes and taxes. But many more – and over a much longer period – will suffer in ways that they do not even recognise as a result of the policy priority given to City fat cats whose primary focus remains their own privilege rather than the British economy. Whether through indifference or cowardice, our politicians seem intent on perpetuating a 23 year-old error.
Bryan Gould
6 July 2009
This article was published in the online Guardian on 9 July
Tragedy
One of the fascinations of politics is that it unfolds over different time scales and at different levels. At one end of the scale are the personal and short-term; at the other, the matters of policy and principle, the history and development of ideas and of political movements.
It is no surprise – given the symbiotic relationship between the practitioners of politics and of political reporting at any given moment – that the latter should habitually focus on the human-interest immediacy of the movements in individual political (and other) fortunes as they swing up and down. A case in point, last weekend, were the reports detailing the latest turn in the career of Peter Mandelson.
The on-again off-again career of Lord Mandelson has provided much innocent entertainment for observers and a rich seam of copy for political commentators over the years. Yet, even so, it is surprising that the momentous events of recent weeks, which could herald a seismic transformation of the British political landscape, could have been viewed through such a narrow lens as was seen in the articles about Lord Mandelson’s latest transformation.
It is true that Andrew Rawnsley ended his piece by briefly taking a wider perspective. The story was not, we were solemnly assured, one of unalloyed triumph. Peter Mandelson, we were told, genuinely cared about the Labour Party; its probably imminent demise was enough to turn the moment of his greatest success into a personal tragedy.
We can readily agree that the demise of the Labour Party would be a tragedy – but surely a tragedy on a much greater scale than of one individual’s personal disappointment. It is doubtful, after all, if many tears will be shed for Lord Mandelson. Many – including all those whose allegiance to the Labour Party over recent years has been sorely tested, as well as those who have rejected Labour in favour of other promises to defend their interests – will see the noble Lord’s disappointment as being richly deserved.
This is not a tragedy in the Shakespearian mould – a fatally flawed individual being undone by his inability to deny the power of the flaw that drives him. This is a tragedy that is likely to engulf an audience of millions, not just the leading members of the cast.
Peter Mandelson is rather in the position of a ship designer whose vessel is revealed to be unseaworthy. He is consoled by observers with the assurance that they know that he did not mean it to ship water and, having arranged a lifeboat for himself, he then persuades the captain to stay on the bridge until the ship goes down.
New Labour was, after all, Peter Mandelson’s project par excellence. He signed others up for the journey, and was initially fortunate enough to engage a brilliant skipper for the project. But, when a new captain proved to be no seaman, and the ship’s design faults meant that it foundered, disappointment is hardly an adequate sentiment. Those who entrusted their lives and life-chances to the seaworthiness of the vessel are entitled to require the designer to accept responsibility for, as well as disappointment at, the loss – and at the tragedy that is theirs.
We are surely now in a position to judge the New Labour project, not according to the claims of its progenitors, but in the light of its likely final outcome. The project started, after all, with an overwhelming parliamentary majority, a popular and telegenic leader, a huge appetite for change and a real sense of excitement and anticipation in the country – all delivered by an overwhelming election victory.
What has happened in the twelve short years since then is not the familiar story of a government that gradually loses support and – having used its opportunity to best effect but nevertheless having been exhausted by its efforts – is defeated by newly revitalised opponents. The immediate future facing the Labour Party is one of virtual extinction as a party of government. It may take a generation for Labour to recover – if it does so at all. In the meantime, the effective voice of the democratic left – the most consistent and reliable generator of change and reform we have – will be stilled.
That is the real tragedy – not to be expressed in terms of individual careers – but in the destruction of one of the main forces in our democratic politics. Without it, our whole politics will be poorer. Faith in our democratic institutions and processes will be weaker.
It is an outcome, a tragic outcome, that is the inevitable and predictable consequence of deliberately removing Labour from its value base and from its supporters. It is the direct result of treating power as an end in itself, of seeking power for the purpose of simply perpetuating it. New Labour not only failed to take a once-in-a-century opportunity; it turned its back on the idealism and creativity that, under President Obama, is reinvigorating American society and politics. This is the end result by which Peter Mandelson should be judged. You bet it’s a tragedy.
Bryan Gould
15 June 2009
It Has Come To This
So, it has come to this. In twelve short years, New Labour has travelled from the exultation and boundless optimism of the 1997 election victory and of a movement whose time had come to a craven pursuit of self-preservation by frightened MPs.
And even then, it is a self-preservation that can only be pro tem. So narrow have horizons become, so short-term the perspective, that the interests of party and country will be sacrificed for a few more miserable months in a crippled parliament and a dying government.
Let no one be deceived into thinking that the decision to soldier on under Gordon Brown’s leadership was taken in the wider interests of the party or the country. Nor was it a signal of affection or respect for their leader, or even just loyalty. This was every man for himself. The only calculation that seems to have mattered was the one that said that the pay packet could be kept coming for a few more months. For who could doubt that the warning from Lord Mandelson, with his unerring instinct for the baser motivations of political life, that to change leaders would inevitably mean an early general election, was enough to stop many potential rebels in their tracks?
This, then, is the end game of the New Labour project. To the extent that history ever makes final judgments, we can begin to see where it has led – not to a long period of Labour hegemony, as was so confidently foreseen, but to the real danger that Labour will have destroyed itself.
Let us remind ourselves of the course pursued by New Labour strategists. The catalyst for that strategy was the 1992 election defeat, although its seeds probably go back to 1987. The Mandelsons, Blairs and Browns concluded in the wake of those defeats that Labour was unelectable and that the Thatcherite hegemony could not be successfully challenged. They decided that the greater part of Labour’s analysis of what was needed to reform Britain should be abandoned, and that the Thatcherite agenda should in essence be adopted.
In this, they were surely wrong. Of course Labour needed to modernise, and to adapt its principles to new and continually evolving challenges. But the Thatcherite revolution had largely run its course. Mrs Thatcher herself had been rejected by her own party, which proceeded – under John Major and his successors – on an increasingly uncertain course. By 1997, the Labour alternative under almost any leadership would have defeated the Tories. The sacrifice of Labour’s central values in favour of a callow and unsophisticated acceptance of the market’s infallibility was simply unnecessary.
By then, however, the New Labour style and purpose had been fully developed. The project developed its own ideology. What mattered was the winning and keeping of power, rather than actually doing something with it. Power, once achieved, should be used for its main purpose – to perpetuate itself. New Labour would be all things to all men, taking the pain and hassle – and even the politics – out of politics. It would occupy the centre ground, careful not to offend the powerful. It would thereby force other contenders to the margins, and usher in a long period of unchallengeable dominance.
The simplicity of this goal and this strategy meant that the Labour Party itself could largely be ignored, both as an organisation and as a source of ideas and analysis. New Labour leaders and tacticians could appeal directly to the voters, through the media, and through spinning the message, and could thereby free themselves from the need to take the party with them. The loyalty of the ambitious could be guaranteed since they would quickly recognise that the path to power lay through New Labour.
It hasn’t quite worked out that way. The voters quickly tired of spin. They intuitively recognised the unattractive limitations of pursuing power at any cost. They were repelled by the contortions produced by the absence of principle and strong values. But most of all, they were brought in time to make an ever harsher judgment of policy failures.
Those failures were partly the result of hubris – on the part of a leader who was so persuaded of his moral infallibility that the country could be led into an ill-judged invasion of another country on no greater foundation than his own say-so – and partly the consequence of a sickening obsequiousness in the face of the rich and powerful. And, while New Labour could just about be held together by a brilliant front man, there was nothing else to fall back on when the voters tired of him and when his successor was revealed as totally lacking in political – not to say human – skills.
So, the voters look certain to reject New Labour. A whole generation of Labour leaders who could and should have stood for something more than simply hanging on to power will close the New Labour chapter by – appropriately enough – doing just that for a few more months. It will be a long and hard road back if a renewed (please not “New”) Labour Party is to rise from the ashes.
Bryan Gould
9 June 2009