• Labour Should Challenge Macro-economic Policy

    Stewart Wood in this week’s Guardian is right to argue that the paradoxical popular support for George Osborne’s manifestly failing policies for recovery should not mean that Labour must abandon its social democratic approach to solving the nation’s problems.

    The drive for “responsible capitalism” is of course an important aspect of such an approach, and is an area in which Labour should expect to carry greater credibility than its right-wing opponents. But focusing on that issue concedes far too much to an orthodoxy which has served us so poorly.

    Why does Labour, in addition to looking for greater responsibility from our business leaders, not espouse as well “productive capitalism” or “efficient capitalism” – in other words, a market economy that actually works? We are now into a fourth decade of Labour failure to mount any effective critique of monetarist orthodoxy, with the result that the whole area of macro-economic policy has been effectively conceded to our opponents. Yet, if ever there was an open goal, this is it.

    The monetarist approach to economic policy asserts that the only goal of policy should be the control of inflation – something that can safely be left to bankers armed with the single instrument of interest rates – and that otherwise the market, if left to its own devices, will deliver optimum results. Government should just let business get on with it.

    How well has this doctrine prepared us to face the challenges of a new world economic order in which China and India, Korea and Brazil, are making the running? The answer is that it has served us appallingly. We have continued our inexorable decline in the world pecking order – whether it be in our share of world trade, in the output of our manufacturing industry, or in comparative living standards. We do not recognise this only because we have become enured to long-term failure.

    And that failure has culminated, of course, in the global financial crisis and a threatened double-dip recession which have left this country flat on its back and apparently facing up to a decade of austerity, no growth and further decline.

    What response has Labour made to these startling failures? Nothing – other than deservedly attracting a share of the blame. Far from pointing out the nakedness of “free-market” monetarism, Labour has joined in the acclamation for the emperor’s finery, pinning its hopes when in government on the exploits of the City of London, and only narrowly avoiding the euro trap in which the ECB applies a ruthless monetarism even more extreme than the domestic variety.

    It beggars belief that – now in opposition – Labour still finds itself unable to develop its own economic policy. Far from developing a coherent critique of more than three decades of right-wing economic failure, Labour is still urged by many, even in its own ranks, to ape the Tories – to be ‘realistic’, to put forward its own alternative austerity programme, and to accept that there is nothing for it but to accept the monetarist framework.

    But for Labour to do so is to accept defeat. If the political argument is only about the degree of austerity, it is an argument Labour cannot win. The Tories will always be seen as more credible exponents of such policies.

    Nor can Labour expect to be taken seriously if – while not challenging the imperatives of monetarist policy – it simply proclaims its readiness to take on more debt so as to spend our way out of recession.

    Yet the intellectual straitjacket embraced by Labour is easily discarded. One of the prime weaknesses of the monetarist approach has been that, by identifying inflation as the over-riding – indeed, only – focus of policy, and by adopting monetary measures to combat it, we have made inevitable a literally counter-productive upward pressure on our exchange rate – and this at a time when our competitiveness in world markets was already under extreme pressure from the rise of new economic (and particularly manufacturing) super-powers.

    We tried to escape the consequences of this loss of competitiveness by pinning our hopes on the international asset and credit bubble created by the City – and when that bubble burst, we discovered that we had a much-weakened real economy to fall back on.

    It is competitiveness, not inflation, that is our central economic problem. Until we deal with it, any attempt to expand our economy will run up against a balance of trade brick wall. There will then be no alternative but austerity which, through a lower tax take from a lower level of economic activity, will simply make our debt problems worse.

    We have suffered for decades from a blind spot about the exchange rate. Yet it is the key to improving competitiveness. We have reluctantly agreed in the past to devalue only as the remedy for a loss of competitiveness that can no longer be ignored – yet the exchange rate is the most effective, quick-acting, and comprehensive means of establishing an improved competitiveness for the future that would make short-term sacrifices fair to all, while establishing a base from which we can quickly build a strong British manufacturing economy that enables us to break free from recessionary shackles and to find a route out of the austerity cul-de-sac.

    Isn’t that preferable to the stark lack of choice we now face? Why can Labour not find the courage for some new thinking?

    Bryan Gould

    10 January 2012

  • Rupert and the Rioters

    Rupert Murdoch and his News International have good reason to be grateful to the rioters. They were able to drop out of the headlines themselves, for a time at least, and to report on others making the news for a change.

    But their respite was short-lived. The apparently incontrovertible and growing evidence of cover-up and dishonesty has compounded the outrage felt at the phone-hacking revelations. They now find themselves – with the publication of Clive Goodman’s letter – back in centre stage.

    It is perhaps appropriate that they should share double billing at this point with the rioters. Perhaps the one issue is linked with the other? The search is on, after all, for an explanation of what may otherwise seem inexplicable – how could young people act with such an absence of any decent impulse? Without any thought for damage they were doing to the society in which they lived?

    The Prime Minister, no less, opines that parts of English society are “broken” and has declared a social “fightback”; but fighting back will be ineffective if the enemy remains unidentified. Punishing individual rioters may be necessary and unavoidable, but that in itself will do little to drill down into the real causes of social breakdown.

    At this point, step forward Rupert Murdoch and News international. Here, after all, are those who –through their power in the media – have arguably done more than any others to shape our society over recent decades.

    We now have a fairly accurate idea of the values and principles they have brought to that task – the evidence provided by what we now know about their own disreputable business practices. We know that they have little regard for legality or honesty, that they feel contempt for those they report on, and that they will use their power to threaten or cajole when challenged.

    They purport to hold up a mirror to society, to show people how they and others – their neighbours, their workmates – actually behave. But the mirror has been distorted. They have, in an effort to shock and titillate so as to sell more of their product, pushed back the boundaries of what is regarded as acceptable. They show, not what most people think or do, but what those at margins of society get up to – and the more outrageous the better.

    Underpinning this distortion of what is normal and responsible is the cult of celebrity. The constantly repeated and largely subliminal message is that, however despicable the behaviour, it is to be excused and even celebrated if the perpetrator is featured in the headlines. Celebrity cures all. Fame and money are all that matter.

    The result is that young people in particular are left without a moral compass. Sexuality is a commodity and selling agent. Money is the greatest desideratum, however it is acquired. Those who deserve to be admired and emulated are those whose success is measured by how much they have been able to grab, even – and especially – when it is at the expense of others. In all of this, the personal mantra of the News International proprietors is faithfully reflected.

    The Murdoch media have been major influences in creating a debased popular culture. The old social virtues of mutual support, helping one’s neighbour, have been supplanted. Little wonder that young people, with little life experience and nothing much by way of role-models to emulate or moral guidance to follow, have been especially susceptible to the message delivered to them unremittingly by the Murdoch media.

    There are of course other contenders to shoulder the major responsibility for social breakdown. Among the leading candidates would have to be the development in a recessionary climate of an economy in which unskilled labour no longer has a part to play.

    Give or take the odd millionaire’s daughter who popped up like manna from heaven for the headline writers, the young people who took their chance in the riots (manipulated no doubt by social media-savvy fomenters of trouble) saw no future for themselves because they knew they had been dismissed as worthless by the rest of society. They reasoned that grabbing what they could when the moment arrived was just the kind of behaviour that would be rewarded not just with material gain but with a brief and local celebrity.

    So, when David Cameron launches his fightback, why not look for starters at the role of Murdoch media which have been allowed – by exploiting their power with the benevolent connivance of successive governments – to exercise a disproportionate and malign influence on our young people?

    Bryan Gould

    18 August 2011

  • Do You Want The Good News Or The Bad News?

    The May election results delivered what was promised – only more so. The winners and losers were eminently predictable, but the voters’ judgments were unexpectedly savage.

    The night’s big losers were, of course, the Liberal Democrats. They certainly expected a poor showing but they must be surveying the post-election wreckage with something approaching dismay.

    The overwhelming rejection of electoral reform, and the slim prospect of its reappearance as a viable option, mean that the holy grail of Liberal politics – and the assumed pay-off for a risky coalition deal – has crumbled in their hands. They are now left as the fall guys for the disappointments of coalition government, not only with no compensation for bearing the brunt of unpopular measures dictated to them by their senior partners, but with that downside underlined by the demonstrated failure and unpopularity of their central selling proposition.

    Sadly, the mishandling of the way the issue was put to the electorate means that the UK remains saddled with an electoral system that serves the interests of adversarial politics and puts a premium on posturing rather than serious policy-making. There is, I suppose, a kind of poetic justice in the Lib Dems now finding themselves – with no salvation in sight – hoist on the petard of extreme policies that their coalition arrangement commits them to supporting.

    The Lib Dem plight is, in other words, bad news for the wider politics of the UK. A similar judgment can be made – at first sight – of the Scottish Nationalist triumph. Closer examination, however, reveals that the message may not be as depressing as it seems. Alex Salmond’s success can best be regarded as partly the result of his own merits as First Minister and partly a reflection of the poverty of the message that Labour chose to deliver to its traditional supporters.

    There are two optimistic interpretations that can be made. First, (and perhaps a little fancifully), the severity of Labour’s reverse might just persuade a timid and moribund Scottish Labour Party – and the wider Labour leadership in the UK as a whole – of just how much they have to do (in the aftermath of Blair and Brown) if Labour is to re-establish itself as the natural and accepted defender of the less advantaged and as the most convincing deliverer of a more equal and therefore more efficient economy and society.

    Secondly, it is one thing to vote SNP for the purposes of identifying an effective Scottish administration – particularly when the alternatives were so unprepossessing. It is quite another to vote for Scottish independence. There is nothing to suggest that voters are ready to take that further and momentous step. But those who want to maintain the United Kingdom have been put on notice of how little time they now have to persuade Scottish voters.

    If the messages were stark for the Lib Dems and encouraging for the Scottish Nationalists, what of the two main parties? For the Conservatives, it was a successful exercise in damage limitation. They avoided major losses in their own strong areas. They maintained a reasonable party unity and escaped the internal recriminations that a Yes vote on electoral reform would have produced. They preserved an electoral system that maximises their chances of staying in power, even on a dwindling minority vote. They have been able to use the Lib Dems as a lightning conductor for voter disaffection at the damage inflicted by government policies.

    For Labour, the message is – or should be – a sobering one. The Scottish result is a warning of the price to be paid for taking voters for granted over a long period and of wandering across the political spectrum so that voters feel they no longer know what they are asked to vote for. And, looking to the future – and a pretty immediate future at that – a consolidation of that Scottish result in future general elections would destroy any chance of a Labour government of the United Kingdom.

    Even in England and Wales, Ed Miliband now knows how much Labour needs still to do before it can translate an anti-Tory majority into an effective and well-supported government of the centre-left. It needs to be clearer, braver, more confident and distinctive. It needs to stop the ceaseless preoccupation with short-term polling, triangulation and spinning. It needs to strike out with a clear statement of a genuinely alternative and attractive option. The British people yearn to hear that voice.

    Bryan Gould

    8 May 2011

    This article was published on 9 May at http://blogs.lse.ac.uk/politicsandpolicy/

  • Good Government Matters

    Government over recent times has got itself a bad name. Politicians are of course always regarded as fair game, particularly by media whose proprietors often see themselves as competitors for power, but the critics’ task was of course made immeasurably easier by the expenses scandal. The damage suffered as a consequence of that self-inflicted wound has cleared the way for a renewed assault – by right-wing politicians and media alike – on the whole concept of government.

    The notion that government is the problem, not the solution, is of course not new, and was famously and explicitly asserted by Ronald Reagan. It has never been strictly true of course that the right have disowned government as such; what they have wanted is government that serves the narrow interests of a privileged minority rather than a wider society. So, right-wing governments (including New Labour) have generally overseen an expansion of government in areas like security, law and order, defence, and – in economic policy – maintaining the value of assets and preserving the privileges of the wealthy.

    It is nevertheless a surprise that the new coalition government should feel so clearly mandated by what was at best a confused election result to commit to smaller government as the central element in its programme. The major task faced by the coalition after all is to lead the country out of a financial crisis that, having been created by the failures of the private sector, was only just averted by the government doing what only government could do – using its authority and legitimacy to underpin the banking system and guarantee the value of the currency.

    It is surely one of the miracles of the modern world that a private sector meltdown whose malign consequences are still with us, and against which the only defence proved to be the power of government, should have led to savage cuts in the role of government.

    It is to be expected of course that – in tough times – the powerful should try to shift the burden on to the less powerful whose diminished voice means that they are less able to complain. The speed with which the lessons of the crisis have been re-interpreted in favour of less government rather than more is testament to the ability of the powerful to defend their interests. What is a surprise, however, is the readiness of other elements – including the junior partners in the new coalition government – to abandon government as the major means of achieving economic recovery and re-asserting the need for social justice.

    A loss of faith in government seems now to have infected opinion across most parts of the political spectrum. Even on the left, there is a marked tendency to look for salvation anywhere but government. It is almost as though the left has concluded that – so disappointing was the experience of being in government – there is nothing more to be gained from that quarter. Nothing more clearly demonstrates how thoroughly New Labour let down its supporters.

    Much political activism on the left now takes the form of community-based initiatives of one kind or another – whether it is support for a local currency or various forms of collective self-help or the development of local power schemes. The common factor in all of these small-scale projects is their conviction that ordinary people should take responsibility for changing society, or at least their bit of it, and that government is just another part of the conventional power structure – along with the bastions of capitalism – that has to be overturned.

    There is much talk of the need to engage “civil society” as the essential element in changing society. Government, it seems, is to be by-passed as a snare and a delusion. There is an almost romantic sense that ordinary people possess an innate wisdom and goodness that are somehow sullied and rendered ineffectual by the formal and structured processes of democratic government.

    No one, of course, who wants to see a better and fairer society could object to the impulses that drive these initiatives. But it is distressing to see the efforts of earlier generations to achieve universal suffrage and democratic government so casually set aside. Our forebears saw the power and legitimacy of representative and elected government as the essential safeguard against the overwhelming power of the capitalist and boss, the one guarantor that the interests of everyone and not just the powerful would be properly protected and advanced.

    Community-based initiatives have their value but, as a means of changing society, they are too small-scale, fragmented and dispersed to make much impact. Nothing will better serve the status quo than the concession that government should be limited to protecting the interests of the powerful and that proponents of change should look elsewhere. A new Labour opposition leader can best confront the coalition and restore the faith of Labour supporters by re-asserting that good government matters.

    Bryan Gould

    22 August 2010

  • What Is The Point of a Coalition If Only One Voice Is Heard?

    Nick Clegg’s performance in the election campaign’s televised debates promised briefly to stand election projections on their head. The voters seemed to decide when the crunch came, however, that more was required than a pleasant demeanour and a winning smile.

    Election arithmetic, though, came to his aid and gave him and the Lib Dems another chance to show what they were really made of. Sadly, he seems on course to demonstrate for a second time that there is no substitute for substance.

    Personality and personal relations do of course matter in politics; and it is certainly true that the personal chemistry- a shared social and educational background perhaps – between Clegg and Cameron seems to provide a glue that might hold the coalition together for a time. But, if the Lib Dems are to make a success of government, they need more than goodwill and a conviction that nice people will prevail. They need a searching analysis of the country’s problems and a hard-headed agenda for resolving them.

    That is especially important when they find themselves in bed with partners who are not only much bigger and nastier than they are but who have a positive surfeit of ideological conviction and a ruthless determination to make it count. Nick Clegg is simply ill-equipped to stand up to the George Osbornes of this world. He seems to have gone along with the basic strategy of cutting the deficit, come what may, without firing a shot.

    How else to explain the extraordinary spectacle of a supposedly left-of-centre party and its leader tamely endorsing a budget strategy that is positively perverse and that threatens a re-run of the global recession that similar neo-liberal doctrine produced less than two years ago? How is it that a financial crisis that failed to become a full-scale depression only because governments and therefore the taxpayers – and our government and our taxpayers in particular – bailed out the failed financial institutions has become the launching-pad for savage cuts in public spending and a punitive scaling back in the role of government?

    Why should anyone believe that throwing people out of work, and then cutting the support available to the unemployed, will somehow set the economy back on its feet? Why should anyone believe that the government’s finances – including an indebtedness massively increased by the billions spent on the bail-outs – can be restored by ensuring that tax revenues are depleted because economic activity is flattened?

    The government’s determination to give priority to cutting the deficit, at the cost of any other objective, makes sense only if economic policy is to be deliberately handed over to the perversely irrational. Our policy-makers seem to be running scared of the “bond vigilantes” – the very people whose irrationality created our problems in the first place – and to have a naïve faith on the other hand that the “confidence fairy” will work her magic. It will be interesting to see how long confidence remains in the face of this assault on common sense and economic reality.

    It is disappointing that this fairy-tale nonsense is swallowed whole by so many commentators, and that attempts to debunk it are portrayed as the ravings of the mindless and the angry. It is not – pace Guardian leader-writers – the duty of coalition ministers to close their ears to argument. There is of course a distinguished and long-standing intellectual pedigree – from Keynes to Krugman, Stiglitz to Skidelsky – for the view that government’s responsibility in our situation is to maintain the level of economic activity, so that its own finances as well as those of others are restored as soon as possible. And, those with a knowledge of economic history will know that George Osborne is all too faithfully following in the footsteps of those like Herbert Hoover who followed similar policies in 1932 and plunged us all into depression.

    That pedigree and that hard-won experience are not so easily dismissed. We might have hoped that someone who chose to lead his party into government might have been better equipped for the task. Nick Clegg is not, sadly, unique among politicians in seeming almost totally bereft of any understanding of economics but nevertheless convinced of his fitness to make major decisions about our economic future.

    The least we can expect of our senior politicians, surely, is that they will make sure they know enough to be able to reach their own conclusions on the major issues of the day. It is not enough that these issues should be debated in the columns of our best-informed journalists. They should be debated at the very heart of government. What is the point of a coalition if only one voice is heard?

    Bryan Gould

    5 July 2010

    This article was published in the online Guardian on 5 July.