Myths, Politicians and Money
My new book, Myths, Politicians and Money, was recently published in London by Palgrave Macmillan to coincide with the Labour Party conference in Brighton. It has been very well received and reviewed, and has attracted a good deal of attention. It is a comprehensive account of what I think has gone wrong for Western democracies over the last three decades; the argument is summarised in a separate posting (called Myths, Politicians and Money) of a piece I wrote for the Yorkshire Post. Find out more here.
Myths, Politicians and Money
In 1989, the American political philosopher Francis Fukuyama published a famous essay which he called “The End of History”. In celebrating what he believed to be the more or less permanent triumph of liberal democracy, he saw the “free market” and democracy as not only compatible but as mutually supportive. The market was in his view the equivalent in economic terms of political democracy, achieving the same dispersal of economic power throughout society as democracy achieved in political terms. He saw no need for democracy to act as a restraint on “free-market” outcomes, and he saw no danger that the “free market” might in some ways prove inimical to effective democracy.
He was confident that the rest of the world would flock to the democratic banner. Just over twenty years later, that expectation has been confounded. Confidence in democratic processes – both here and abroad – is at a low ebb. So, what has gone wrong?
The seeds of the problem had already been sown by the time Fukuyama published his essay. The received wisdom of the immediate post-war years – that full employment should be the prime goal of economic policy, that collective public provision was needed to guarantee basic standards of essential services, and that market excesses would have to be restrained by careful regulation – had been replaced by new ideas.
The individual, rather than society, was seen as the pivotal point of human endeavour and progress; writers like Hayek and Nozick questioned the need for or appropriateness of an extended role for government or the acceptability of meddling in “free” market solutions; redistributive taxation, the provision of taxpayer-funded benefits to the disadvantaged, and the power of organised labour came to be seen as obstacles to economic growth rather than as guarantees of an equitable distribution of wealth; economists like Milton Friedman questioned the efficacy in peacetime of Keynesian intervention and promoted the idea that macro-economic policy was really just a simple matter of controlling the money supply in order to restrain inflation; while global developments such as the oil-price shock of the early 1970s meant that inflation rather than full employment was seen as the primary issue for economic policy.
Many of these ideas had been carried into government by Ronald Reagan in the United States and Margaret Thatcher in the United Kingdom. The two leaders made common cause at the beginning of the 1980s in taking a step whose significance perhaps even they did not fully grasp at the time. The portentous decision was taken in the United States and in the United Kingdom to float their currencies and to remove exchange controls. The way was now clear not only for an explosion in international trade and foreign investment, but for a determined assault by international capital on the political power of democratically elected governments across the globe.
The ability to move capital at will across national boundaries not only meant that international investors could bypass national governments but also enabled them to threaten such governments that they would lose essential investment if they did not comply with the investors’ demands. This shifted the balance of power dramatically back in the direction of capital, and set the seal on the triumph of those “free-market” principles of economic policy that became known as the “Washington consensus”.
It became accepted that the “free market” was infallible and that its outcomes should not be challenged. Any attempt to second-guess the market would inevitably produce worse results. Everyone – it was thought – would be better off if the rich and powerful were subject to no restraint in manipulating the market to suit their own interests.
But the whole point of democracy – that the legitimacy enjoyed by elected governments allowed them to defend the interests of ordinary people against the otherwise overwhelming economic power of those who dominated the market – was thereby lost.
We see the outcomes of this shift all too clearly. Virtually the whole of the increased wealth of the last three decades has gone to the richest people in our society; poverty, even in the “rich” countries, has risen while inequality, with its attendant social ills, has widened; the rights of working people at work have been weakened; joblessness is endemic; and the “free market” free-for-all achieved its culmination in the global financial crisis.
A “Europe” imposed by an elite and constructed in the image and to suit the interests of international capital has come unstuck and flounders in recession and unemployment. The austerity demanded by Europe’s leaders makes a bad situation worse. Popular support for the European Union has nosedived. Major decisions continue to be made by big corporations and not by elected governments. Faith in government and the democratic process is at a low ebb and attempts to consult the people on Europe’s future continue to be resisted.
“History”, in other words, has continued to unfold. Very few seem to realise how thoroughly our civilisation has been transformed by the triumph of the “free-market” ideology. They do not see that western liberalism, which has informed, supported and extended human progress for perhaps 700 years, has now been supplanted by an aggressive self-interested doctrine of the individual which leaves no room for community and cooperation. Even the victims of this comprehensive and fundamental change seem hardly aware of what has happened.
Fukuyama failed to recognise, in other words, that the threat to western democracy came from within those democracies themselves. It came from the greed and self-interest of the rich and powerful and their ability to manipulate the “free” market to their own advantage, but also from the quiescence and apathy of that much greater number who fail to understand that democracy is necessarily sidelined if the market cannot be challenged. The substance of democracy has been hollowed out, so that only the shell, the forms, remain, because we have not cherished and made a reality of what was our most valuable protection and greatest achievement.
Bryan Gould
19 September 2013
This article is based on my new book, Myths, Politicians and Money and was published in the Yorkshire Post on 20 September
Our Politicians Are Not Up To It
The revelation that Growth in a Time of Debt, the influential 2010 paper by leading economists Reinhart and Rogoff, was vitiated by basic errors has removed one of the last credible underpinnings of the contention that austerity – and reducing the deficit at all costs – is the proper response to recession.
But it is not just miscreant economists who have egg on their face; it is our political leaders too. The translation of the Reinhart/Rogoff findings into a simple ‘rule’ that a debt to GDP ratio exceeding a tipping point of precisely 90% produces a precipitate slump in economic growth has been the intellectual foundation of policies advocated and implemented by politicians across the western world. The two economists have frequently been cited as champions of austerity by Paul Ryan, the Republican vice-presidential candidate, by Olli Rehn, the European Commission’s economic chief, and by George Osborne, among many others.
How did these luminaries come to accept and implement such a literally counter-productive policy? The answer is that there are very few politicians who are competent to make their own judgments on major economic issues. What most of them do is cast around for arguments that support their own political prejudices – and that is all the easier if those arguments are offered from within the comfortable confines of current orthodoxy.
Reinhart and Rogoff were endorsed and applied (mistakes and all) because it is what political leaders wanted – on political grounds – to hear, and because it accorded with the ‘free-market’ doctrines that have dominated western economies for nearly four decades. A George Osborne, for example, found that the supposed ‘90% rule’ gave him all the scope he needed to justify and target the true aims of his policy – smaller government and ‘rolling back the state’.
The dependence of political leaders on advice – especially on economics – is not new; but it matters more than ever today as the dangers of such dependence become clearer. While the austerity message is increasingly contested on grounds of historical experience, Keynesian economics, and the need to establish the direction of causality in respect of any postulated correlation, the thinking of most people is still corralled by those powerful forces which seized control of the global economy decades ago.
There can be little surprise that advice from these quarters is extremely congenial to right-wing politicians. For most of them, economics is a simple business. They see no distinction between running a country’s economy and their own experience of running a business. Even when they think about the wider economy, their decades-long experience of monetarism leads them to believe that the essence of a successful macro-economic policy is a backward-looking insistence on stability and getting government out of the way. They are simply unfamiliar with the kind of thinking that has allowed other economies to grow and prosper.
It is less easy to explain why politicians from the left of centre have been equally unwilling or unable to think for themselves. But the sad truth is that most simply assume, like Tony Blair, that economics is a difficult and technical business that can safely be left to the bankers, and is therefore no longer their responsibility. They tell themselves that the economic process is probably immutable anyway, and that the real business of politics is in any case about other issues. They place more value on the plaudits of the powerful than on the reproaches of the dispossessed.
Even a Gordon Brown – who was widely thought for a time to be a master of economic policy – can now be seen to have been merely a prisoner of his orthodox advisers. He, at least, seems to have had the intellectual capacity to re-think his position to some extent since he left office.
The dead hand of long-established orthodoxy continues to weigh down on the current Labour leadership. Even Eds Miliband and Balls, who clearly have some understanding of what is needed, find themselves constrained by the fear that anything too overt by way of new thinking will open them up to damaging attack. They have to move cautiously; and that inhibits them from developing and advancing a fully comprehensive and coherent alternative policy.
The result is that our political establishment offers no one able and willing to break new ground, to consider, let alone advocate or act on, neglected issues that are nevertheless of great importance. Where, for example, is the debate about the need to improve competitiveness if we are to grow without running into the constraints of inflation and trade deficits? What about rejecting destructive austerity in favour of replacing – as the Japanese are doing – the banks’ monopoly over credit created for non-productive purposes with credit created by the central bank and directed – not into banks’ balance sheets – but in accordance with an agreed industrial strategy into productive investment? What about restoring macro-economic strategy as the responsibility of an accountable democratic government rather than leaving it as the preserve of an ‘independent’ central bank? And, above all, what about making full employment, on economic as well as social grounds, the central goal of policy?
Bryan Gould
24 April 2013
When A Minister’s Luck Runs Out
It is said that Napoleon, on being told of the impressive attributes of a new general, asked, “But is he lucky?”
Napoleon, it seems, understood that in war, as in politics, luck – and timing – are everything. Most politicians will ride their luck while they can but will come unstuck when their luck runs out. That is why Enoch Powell once said famously, and with only slight exaggeration, that “all political careers end in failure.”
A case in point is that of Hekia Parata. She is a politician who enjoyed a meteoric rise. The problem with meteoric rises, however, is that it is all too easy. There isn’t time to develop the calluses, the scar tissue, the thick skin, that will be needed when the going gets tougher.
Ms Parata had everything going for her. She had had a successful career outside politics. She attracted attention by fighting a skilful by-election campaign in a hopeless seat so that she was a shoo-in for a National list seat and an apparently effortless rise – after effective spells deputising for others – into the Cabinet.
In John Key’s new Cabinet, she seemed a natural for the hitherto problem portfolio of education. But just a year into her brief, she is in trouble. What went wrong?
The short answer is that her luck ran out and the attributes that had served her well on the rise were not enough to sustain her when she came under pressure. But the story is a little more complicated than that.
Such is the flak she is now taking that it is easy to forget that her predecessor, Anne Tolley, had an equally difficult time. Those tribulations afflicting two education ministers in succession reflect not so much the particular deficiencies of the individual ministers as the deep flaws in the education policy pursued by the Government as a whole.
The Key government has quite deliberately set out on a policy that flies in the face of our long and largely successful experience in creating an excellent education system in this country. The government has preferred to play upon the fears, prejudices and just plain ignorance of some parents and – in the course of putting in place policies such as national standards – defied the evidence and the accumulated expertise of education professionals and experts from both at home and overseas.
Little wonder that tensions and conflict have been the leit motiv of education policy and that education ministers have found it tough going. Hekia Parata was on a hiding to nothing, but – anxious to please – she did not have the political weight to defy the Prime Minister and avoid the obvious bear traps.
In this, she was not helped by the fact that she was saddled with a chief executive whom she had had no say in appointing. Lesley Longstone was a victim – as were we all – of a syndrome that is now well entrenched – the apparent belief that a half-way competent UK public official with little chance of reaching the top in Britain (as witness the willingness to come to New Zealand) would be good enough to do a wonderful job for us.
Never mind that knowledge of New Zealand and of our particular requirements might be lacking. The only criterion that matters, it seems, is that the appointee should have demonstrated commitment to the correct ideological positions – should (in Mrs Thatcher’s term) be “one of us”. If actual experience applying “free-market” policies could also be shown, even if that experience had demonstrated the failure of such policies in the UK, so much the better.
So, Hekia Parata found herself leant on from above and pushed further in the same direction from below. And, to make matters worse, she found herself committed by no less an educational expert than John Banks to an education experiment with so-called “charter” schools that even the Treasury has condemned as unwise.
When things turn sour, everything is seen in a bad light. When the minister ventured to hope that teachers might pronounce their pupils’ names correctly – something that, as someone whose surname is consistently mispronounced, she no doubt felt strongly about – that was seen as arrogant and inappropriate.
And, as she came under pressure, she might have done well to recall the story told by Harold Macmillan, the former British Prime Minister. As a young MP, he revealed to a senior colleague that he was extremely nervous about speaking in the House of Commons, with “the enemy” facing him across the Chamber. “But,” said the senior man, “those aren’t your enemies. They’re your opponents. Your enemies sit behind you.”
Those who rise quickly will inevitably arouse less than generous feelings in those whom they overtake. As Hekia Parata‘s bubble has burst, it is equally inevitable that there should be some schadenfreude on the part of others and perhaps less disposition to help and support her.
So, the minister is pretty much on her own. Politicians, whether going up or down, don’t usually attract much sympathy. But they are, after all, human. As Shakespeare might have observed, if you prick them, do they not bleed?
Bryan Gould
23 December 2012
This article was published in the NZ Herald on 26 December.
What the Hekia Doing?
John Key enjoyed his first term as Prime Minister. It all seemed so easy. But now, in his second term, it’s not so much fun.
The rot began to set in even before the last election, with the ill-fated storm in the John Banks teacup, and the Epsom MP has continued to give him nightmares ever since. But it is not just the Prime Minister’s inability to take decisive action to purge his government of a toxic element that has hurt him; the perception is growing that he is not as good as he should be at running an effective government.
Too many of his ministers seem to lack proper direction; too many do and say things that surely cannot have been approved by Cabinet. When he looks at his education minister’s recent record, for example, with ill-judged initiatives followed by embarrassing backdowns on class sizes and Canterbury school closures, he could be excused for exclaiming “What the Hekia doing?”
And how close an eye does he keep on his Foreign Minister, who used his speech to the UN General Assembly to promote New Zealand’s candidature for a seat on the Security Council in 2014, but at the same time has virtually destroyed our proud record as an active member of UNESCO, of whose founding document we were the second country to step up to sign in 1946? Is that the way to demonstrate that we are a good UN citizen?
Even his most senior ministers seem to be laws unto themselves. Bill English, with whom he seems to have an increasingly tetchy relationship, seems not to have bothered to keep the Prime Minister in the loop over one of his main responsibilities while acting as PM during John Key’s absence overseas. And the Prime Minister himself seems to have a pretty cavalier attitude to those same responsibilities, declaring that a barely believable mistake by the spy agencies for which he is responsible minister – and one that was absolutely central to the performance of their prime functions – was nothing to do with him.
Little wonder, then, that the Prime Minister now displays the unmistakable symptoms of a familiar second-term syndrome. Prime Ministers often get tired of the continued pressure and criticism they encounter on a daily basis in domestic politics. They begin to yearn, and then actively to look for, the respite they gain from overseas trips, whether necessary or manufactured.
How pleasant it must be – after all the trials and tribulations of dealing with an ungrateful public – to go abroad to be feted and flattered, to be treated as an honoured guest, to enjoy the attention of uncritical media. But it is always a bad sign when, in any walk of life, someone doing an important job is happier away from it than actually doing it.
The Prime Minister enjoys – and why not – overseas travel. The opportunities to travel – particularly to the United States, whether to watch his son play baseball or to tour Hollywood studios – seem, however, to be coming with increasing frequency.
His latest foray to Hollywood is not just to collect a couple of autographs from some minor Hollywood celebrities. It has, we are assured, a serious purpose; but that serious purpose does not necessarily make us feel any happier about it.
His latest engagement with the major film moguls, after all, calls to mind his last involvement with them, when a handful of Warner Bros executives rolled into town, told the Prime Minister what they wanted, and left shortly afterwards with major tax concessions (that is, gifts) in their pockets and having forced a change in our labour laws that reduced the rights of New Zealand workers. And we must bear in mind that John Key’s usual response to powerful overseas corporations, from mining interests to purchasers of our assets, is “The answer’s yes, now, what’s the question?”
The Prime Minister assures us that he does not intend to make any further offers on this occasion – and short of handing over our powers of self-government, it is hard to know what more he could do to ingratiate himself with them. But what is the Prime Minister doing there at all?
According to his own account, he is there as a salesman – and that raises another set of questions. The Prime Minister’s special expertise, as a foreign exchange dealer, was as a deal-maker; but, given the whole range of responsibilities he has to shoulder and the many pressing problems demanding his attention, is this the best way he can find to spend four days in his busy schedule? And, if the government really does need to softsoap Hollywood, does he not have a trade minister to do that?
Do we really want or need a Prime Minister whose first and perhaps only thought is sell off whatever he can lay his hands on? And should those assets he seems so ready to sell include his – and our – self-respect as well?
Bryan Gould
2 October 2012
This article was published in the NZ Herald on 4 October.