And the election winner is…austerity politics!!

So we now have a government that I am guessing virtually nobody in the UK who went into the polling booths actually voted for, a Con-Lib pact. To me it feels like a kind of coup d’etat, in a very polite English kind of way of course without the martial music.  This uncomfortable feeling is compounded by the announcement that a fixed term parliament of five years has been agreed. Not only did we not vote for this government but we are apparently stuck with it for five years.

Of course, there was so little between the parties in terms of policy that in practice any outcome, whether one party or a combination of the parties, would have made little difference to what is about to happen to us as a nation. As is becoming clear, all of the parties, and certainly this new government, are committed to a future of economic austerity.  Already there is talk of big tax rises, both direct through capital gains tax, and indirect, through VAT. While we are still waiting for detail on public spending , events elsewhere, such as in Ireland and Spain where wage cuts in the public sector are being implemented, are surely a harbinger of what is to come.

The almost unchallenged assumption throughout mainstream politics  is that austerity economics is the only way forward.  Much of the already pitifully small investment planned by Labour for upgrading the infrastructure of the UK has been scrapped or threatened with delays. The third runway at Heathrow will definitely not go ahead, the Crossrail project could be canned and the high-speed rail link  from London to Birmingham and beyond is in doubt.

What plans does this new government have to stimulate economic growth, which is the only alternative to austerity? There has been nothing in any of the pronouncements so far which has addressed this in any concrete sense. The focus is entirely on cutting the public spending deficit, mainly  to appease the financial markets, the same markets which were invoked as a reason why this coalition had to be put in place as quickly as it was.

Indeed the mood music is that the Liberal influence will make this government even more prone to sustainability and a green agenda than the last, another way of describing low growth expectations. Both Tories and Liberals are against state involvement in the fostering and development of new industries, something Labour’s Peter Mandelson was a late convert too.

The impression of a coup d’etat by a small, elite group of mainly upper middle class men will be reinforced once the cutting starts. One consolation is that this small group, cut off from any real social base or proper legitimacy,  may not even have the capacity to carry through a major attack on living standards.  But by the same token neither will it have the vision or decisiveness to take the steps necessary to modernise the UK economy. We are likely to be left with the worst of all worlds, an inward looking, pessimistic and unambitious elite which tries to micromanage the UK economy at time when boldness above all is required.

NB One of the main challenges for anybody who looks at the prospects ahead and recoils, is to develop an alternative approach to the economy. This means more than anything looking at why and how economic growth must be put at the centre of economic policy. Daniel Ben-Ami has put together a very helpful list of people who are trying to work in this direction. If you wish to become part of this, do get in touch with anybody on that list.

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Why vote? Part 2

So,why vote on Thursday? It certainly cannot be because of any belief that any of the parties, or any combination of them in coalitions or minority governments, has a plan to reinvigorate either the economy specifically or UK society in general. This blog is grounded in materialism and does not believe that society can be progressed outside of continued dynamic economic growth. Discussion of how to generate more economic growth has been almost entirely absent from the pre-election debates, either on television or off it. All of the parties are mired in the low expectations of sustainable development and general pessimism about the prospects of our economy becoming dynamic again.

I therefore find myself caught in a no man’s land as far as the big economic issues are concerned. Unlike the Conservatives I do think that the state has a big role to play in helping to modernise the infrastructure of society like the transport system and  the power supply, in creating an education and training regime which is suitable for a modern society and in creating favourable conditions for the development and encouragement of new industries. The market cannot, and really never has, provided these basics of modern life.

Unlike Labour I do not believe that the state should be interfering in or managing the minutiae of our daily lives. The whole apparatus of the therapeutic state should be dismantled and we should be allowed to manage our own relationships with each other, within our families and outside of them, with minimal state interference. If those aspects of public spending were taken away it would make for a far better society.

The Liberals are a kind of anti-party at present which I cannot take at all seriously. There is nothing in their economic policy anyway which makes them stand out from the other parties.

Whatever happens at this election it should be clear that we are in a transitional state, away from traditional party politics but towards what is not yet clear. There have been some valiant efforts to inject more political debate into the election campaign, from the Institute of Ideas, Spiked, Big Potatoes and To the Point amongst others, most of whose take on modern politics I agree with. Experimentation along these lines must continue in order to help the birth of whatever new political movement will replace the old.

On the basis of all of the above, principled abstention from this election would be an entirely respectable position to take. However, there is in my view one reason to vote and one reason only. Whatever the result of the election, this country faces a very difficult future. Within a very short period after the election the next government will be forced to take radical steps to keep the economy moving. None of the parties has created a mandate for tackling the problems we face. In this situation the least worst scenario is to have a majority government which at least can be held to account for whatever it decides to do. Minority governments and coalitions will try to evade responsibility and load it onto the shoulders of others.

We need to be able to hold our government firmly to account for what happens over the next few years. New Labour is exhausted and the Liberals not serious. Neither has any chance of forming a majority government. For that reason, and that alone , the best result of this desperate election will be a victory for a majority Conservative government. I am not a Tory by instinct or tradition, but that is what we should vote for on Thursday.

Why vote? Part 1

For idealists who believe that democracy is about informed debate, this election has to be brutally disillusioning. Martin Wolf

The final leaders’ debate prior to the General Election told us only one important thing, that the evasive approach to the UK’s economic problems which has typified political debate over the past few years will continue right up to the election itself.  The failure of the political parties to have a serious public discussion about the state of the economy will have serious repercussions for years to come.

Some commentators have interpreted the parties’ unwillingness to have an open discussion about the economy as down to a fear of making themselves unpopular in the polls. This may be true as far as quantifying public spending cuts is concerned. However, I am afraid that there is a far more serious issue than this behind their reticence. The reality is that none of them have any real idea how to solve the UK’s economic problems, in particular how to get the economy back onto a serious growth track. The media has also largely failed to put the politicians on the spot about this, focusing instead on criticising politicians for not revealing how far and how fast public spending will be cut, as if that were the only problem we face.

The question of how to get the economy growing again has been barely mentioned during the course of the election campaign. There are some populist, but essentially tinkering, supply side proposals to get the sick back to work. Noises have been made about getting the banks to lend to business, without any detail of how this could be done. But none of the parties has any serious plan for how to help create a dynamic UK economy.

There is nothing mysterious about economic growth. Capital has to be put together with labour to produce goods or services that can be sold at a profit. In the UK, as in much of the developed world, this basic process is being strangled by insufficient innovation, an unwillingness to take risk and a dearth of investment in research and development. (For a full exposition of the problems we face take a look at the Big Potatoes manifesto which explores these issues in detail). All of these factors remain unchallenged by a political culture which one foreign writer recently accurately described as banal. There is a collective failure of imagination here which needs to be overthrown if we are to keep our economy moving.

One example of this problem , round about the same time that the UK government finally got round to announcing plans for a second high speed rail line between London and  Birmingham, which was met by the usual howls of outrage from nimbys in the Cotswolds and pessimists who argued that we cannot afford it, the Chinese announced an aspiration to build a high speed rail line between Beijing and London-potentially the biggest infrastructure project in human history.

For readers of this blog, none of the above should come as any surprise.  As we have chronicled here since the financial crisis begun, public debate on the economy has been either evasive, pessimistic  or delusional. Now, in the few days before the election and looking at the pitiful attempts of the main parties to grapple with the impact of the recession, the question is, why vote, does it make any difference and if so who for? I shall return to this early next week.

Ten questions to ask your candidates about the UK economy

According to the papers today, the election focus of the main parties this week will move away from the economy and on to domestic issues. Apparently last week’s spat over 1% increase in national insurance is what the parties think constitutes a debate on the economy. If you are thinking, given  the deep problems facing the UK economy, that this is a totally inadequate level of debate on the economy then you are right. And this is what you should do about it….

If any electioneers come to your door ask them as many of the questions below as you can get in. The links in each question refer to a discussion of the topic in other parts of this website.

1. The UK economy is slowly but surely slipping down the international rankings of economic size. Do you think it is possible to reverse the UK’s relative economic decline? If so how?

2. The recession appears to be over, do you believe we are inevitably now in for a long period of austerity?

3. The whole idea that economic growth is a good thing has come in for a lot of criticism, from Greens and others. Are you in favour of economic growth as an objective, or should we all permanently tighten our belts for the good of the planet?

4. For the past ten years the financial sector has been the motor of the UK economy. Do you see this continuing,if not what will take its place?

5. Is it necessary or indeed possible for the UK to revive its manufacturing industries, or should we focus on growing our services business, which already makes up 75% of the economy ? 

6.The UK manifestly needs a better transport and communications infrastructure in order to operate effectively. What should any government do to make sure that, for example, our railways, roads , energy or broadband provision, are world class? Or is this all just a job for the market?

7.  Most of the plans for job creation laid out by the main parties are based largely on supply side reforms, such as encouraging the sick to go back to work. Should government be doing more on the demand side as well, through, for example, creating favourable environments for successful forward looking industries such as bioscience,through support in taxation, policies, enterprise zones, science parks, the kind of educational and training policies we pursue etc.

8. There has been a very risk averse public response in this country to some cutting edge scientific developments, such as GM food, nuclear power and some pharmaceutical and medical breakthroughs. What would your approach to public fears around these types of issues be? Do you think government should be leading public opinion in these kind of issues or following it?

9. Should the UK be investing more in space travel?

10. What do you see as the cause of the economic crisis, greedy bankers, greedy people or the over reliance on the finance sector?

UK politics is broken beyond repair-no coalition can fix that

A recent opinion poll attracted a lot of attention because 70% of those polled agreed that Britain had a ‘broken society’. The striking figure which received less coverage was that even more, 73%, agreed that ‘politics is broken’. If you add that to the recent survey which showed only 56% of people in the UK thought it worth voting we can see what sorry depths politics has sunk to.

This nadir is also demonstrated by the fact that far from politics being at the centre of a discussion of the upcoming general election, the issue which now appears to be the main one facing the country is whether a coalition government would be a good or a bad thing. It is a remarkable demonstration of the weakness of the Conservative Party that it does not appear to be able to take advantage of the deep unpopularity of Gordon Brown’s Labour Government and win a clear majority.

Martin Wolf, writing today, makes the point that a coalition government would be a good thing because;

 ..the UK’s government has been the author of a flood of ill-considered, media-driven initiatives. Almost nothing is properly thought out. This is the result of the domination of a handful of people over the machinery of power, unchecked by party, parliament, bureaucracy or any other tier of government. Coalition government would make this change in desirable ways.

This is a case of right diagnosis, wrong medicine. Anatole Kaletsky made similiar points recently by implying that what we need is more concensus politics, like the Chinese, if we are to recover our social and economic dynamism. The cheap and shallow politics that Wolf refers to is a product of the end of big aspirational politics, which used to be ideologically framed, and its replacement by a short-term managerial approach. This short-termist approach dominates every party. Putting the parties together in to a coalition would not change this.  Politics is not petty because of the existence of different parties. It is petty because the parties have nothing else to offer except these ‘media driven’ idiocies. It is petty because of the absence in any of their programmes of any vision for a better society.

It seems we have reached the bottom or close to the bottom of a cycle of general cynicism towards politics and the political process. The question is are we condemned to bump along the bottom for a long time or will there be any reaction? There is certainly no sign of any recovery at the moment. There are some attempts to inject some politics into the general election campaign and these should be supported. It is difficult to encourage participation in a general election which is so devoid of policies which can make a difference, but the effort still has to be made. Without a democratic revival we are condemned to drift, frustration and cynicism.

The Tories shrink before our eyes

The(Tory) MP was unable to identify many points of difference between the Tory plan and Labour’s proposals to rebalance the economy and put the finances back on to a stable footing. But he stressed the contrast with the government’s economic record – a point the Tories will drive home as they seek to blame Gordon Brown for the recession and the painful corrective measures it has made necessary. Financial Times

Here we are a few months from a general election and it is increasingly obvious that on the biggest issue facing the UK, the future of the economy, the main opposition party has nothing different to offer from New Labour. The Tories are saying in essence that they would manage the economy better than New Labour, but the policies would be the same.

The Tories tried to differentiate themselves last year by saying that they were the ‘austerity’ party. Even at the time I pointed out that this would be both unpopular and also that big spending cuts would be very difficult to implement. Now that Cameron is backing away from the austerity message the Tories are revealed as having nothing to say that could not come from the mouths of Brown or Mandelson.

Why is this a problem? There are two reasons. Firstly, the UK economy is at a turning point. Business as usual cannot be the solution. The financial sector is unlikely to recover its position as the locomotive of the economy. Indeed, as populism continues to rule government’s attitude towards bankers and banking and debts remain unpaid, there may be more bad news to come from the financial sector. Short termism still rules economic policies. There is an absence of both strategic thinking about the long-term development of the UK economy and also the kind of entrepreneurial attitude which is required to lead the UK out of the hole it is in.

Sir John Rose, the CEO of Rolls-Royce, has written today about the potential strengths of the UK economy. There is much in his article to agree with. Yet Rose misses out the key element of  the lack of political leadership that is required to ensure the kind of transformation he is asking for. Which brings us on to the second problem.

In a recent study of British Social Attitudes the percentage of people in the UK who saw voting as a duty had fallen from 64% in 2000 to 56% in 2009. There has been a continuous disengagement with politics and the political process for some years. The recent scandal over MPs’ expenses was both a symptom of disillusionment with politics and a reinforcement of it.  If political parties cannot differentiate themselves on the question of the economy, which is central to everybody’s lives, then there is even less reason to vote.

Finally this seems to sum up the bankers bonus issue as succinctly as anything else I have read on it.

barroom

George Monbiot is right about one thing-we should draw the election battle lines around economic growth

Humanity is no longer split between conservatives and liberals, reactionaries and progressives, though both sides are informed by the older politics. Today the battle lines are drawn between expanders and restrainers; those who believe that there should be no impediments and those who believe that we must live within limits.George Monbiot

The debate about economic growth has a peculiar character to it. On the one hand there are the plainly anti-growth forces of the environmentalists, as embodied in the shape of George Monbiot, with their quasi mystical commitment to Gaia. On the other are those, like myself, who believe that continuous economic growth is the salvation of mankind. Then there are many who struggle to accomodate a sense of limits within a recognition that economic growth is desirable. Broadly speaking these can be characterised as being in favour of sustainable growth. I am fascinated by the interplay between the living reality of the  stagnant  economies of the advanced countries, including the UK,  and the prevailing orthodoxy of sustainable development.

Maurice Saatchi recently summed up succinctly a common view amongst the UK elite about our economic prospects

…during a recent visit to the London School of Economics. I asked if any professors thought it was possible, by an act of will, to increase the long-run trend rate of growth of UK GDP. The answer was: “It can’t be done.” Or at least that to do it would require preconditions so daunting that no realist could contemplate them — more investment, higher productivity, a different culture, a new education system, etc. That list is the dog-eared trump card of those who see such ambition as a touching illusion. For them, the growth rate of the UK economy will always be the “trend rate”. It is like the weather. You can complain, but you can’t change it.

There is a distinct convergence between the kind of people Saatchi was describing and those who believe in sustainable growth. As I have argued before, it is convenient that climate change offers both a justification for accepting what Saatchi calls ‘trend growth’ in stagnating western economies and an excuse for not looking for ways to change it. It is this pessimistic outlook which explains why so many are ready to jump on the ‘share out the misery’ response to the recession exemplified in the Tories championing of austerity.

We seem to have moved from TINA (there is no alternative to the market) to there being no alternative, stagnation is inevitable (NASTI perhaps?). There is an exhaustion of ideas at the heart of the political establishment which leads to fatalism about the economy. But we should remind ourselves that the economy is not something external to us. It is the sum product of our daily activity. It is influenced by our ideas and energy. It is what we are and who we are.

In the run up to the next election it is vital that a challenge is launched against the prevailing orthodoxy of NASTI. We should be arguing for:

*an end to negativity around economic growth. We need to create the infrastructure and support necessary to encourage a more entrepreneurial society.

*Government should be bolder in defending new technologies and scientific breakthroughs which have the potential to make us healthier and live longer.

* Government needs to play a greater role in modernising our transport and communications systems.