Why vote? Part 1

30 04 2010

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.

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The great social paradigms are dead, long live the next ones (whatever they are)

16 02 2010

Are we witnessing a paradigm change? I suspect not. Remember Kuhn’s assertion that a paradigm does not truly collapse until another is ready to take its place. China does provide an alternative, apparently successful, model, but it is difficult to see it succeeding in many other countries.The free market will accommodate its lessons and find a way to survive. The Chinese model will continue for some time too. I don’t see business’s Copernicus. Kuhn was probably right: lessons from the history of science are hard to apply elsewhere.

Michael Skapinker’s article, from which the above quote comes, asks whether the creation of paradigms, that is of unifying if transitional theories, which are vital to scientific development, is applicable to social and economic questions. His answer is probably not as these ‘these other areas are more fragmented’.

I would argue the opposite. The creation of  paradigms in politics and economics is vital to progress. Humans do not live by bread alone. We require an overarching view of the world within which to locate our own feeble individual efforts. This role has been played throughout human history by various religions. In more modern times it has taken the form of economo/political movements like the bourgeois individualism of nascent capitalism and the reaction against this in the form of  both romantic conservatism and the communism of Marx and Engels.

While it is true that these paradigms never became universally accepted in all sections of society at all times they nevertheless played a key role in creating a world view within which adherents could comfortably operate. Crucially they also  allowed those who believed in the paradigm to take action and make things happen which required very tough decisions and were often to the detriment of other human beings. The driving of peasants from the land in the various forms of land enclosure is one example of this. These were acts which caused enormous hardship to many, but as Marx recognised  

They conquered the field for capitalistic agriculture, made the soil part and parcel of capital, and created for the town industries the necessary supply of a “free” and outlawed proletariat

The point here is not whether these things are right or wrong, but that without the firm belief in capitalism and the market of those who perpetrated the enclosures they would not have happened.

Skapinker acknowledges that we are a bit short on political or economic paradigms today. The ‘free market’ of  Thatcher and Reagan appears discredited. Communism is extinct.Skapinker  dismisses China as a possibility, although there are those in the west,as we have noted here, who seem to aspire to a Chinese model of political concensus and more centralised state control.  How is it that we seem to have reached this paradigm free state?

The answer lies in understanding how paradigms are created. In historical terms they are the product of historical developments. The paradigm of bourgeois individualism was the product of the development of the free market and an assault on the privileges of the landed aristocracy. Social change became embodied in the person of the new middle classes. The paradigm of communism was the product of the development of the working class, free of the means of production and therefore with no stake in the existing paradigm.

Today there is no rising historical force which can embody a new paradigm. In that respect history appears to be exhausted. The paradox of this development is that in the absence of a paradigm with historical force it appears to be impossible even to imagine that one could exist. We are suffering from a failure of historical imagination about the possibilities of social change because human history has reached an impasse. That is why politics everywhere is in disarray and confusion. It is also why throwbacks like islamic fundamentalism or the religious right in the US can appeal to people who need some kind of world view to give their lives meaning.

Perhaps the only comfort here is that history, like nature, abhors a vacuum. Our individual life spans are short but seem to encompass eternity. In historical terms the period since the collapse of communism and the discrediting of its only apparent alternative is very brief. It would be a mistake to think that we have reached the end of paradigms. As with science, it is just when we think that we know everything that something new comes along to reveal a new and higher truth.





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

12 02 2010

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

3 02 2010

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





On Davos and the crisis of global leadership

27 01 2010

Even if economic issues are more central to politics than ever before, argument today is less about the nature of economic systems than about the relative abilities of different politicians to administer a system on whose basic structure all are in agreement. In both Europe and the US, party identities are not now principally defined by economic differences but by questions that always crossed class lines and economic interests – nationalism and cultural identity, social liberalism versus social authoritarianism, and religious affiliation – a list to which we might now add environmental awareness. John Kay

As the international political and business elites gather in Davos for their annual away day, John Kay neatly sums up the state of modern politics.  While politicians focus on social, cultural and environmental issues, their discussion of the economy is restricted to the management of the latest crisis.

Yet at the same time there is a palpable sense that something important is missing. The FT’s Davos feature, the World in 2010,  is full of references to the failures and weaknesses of leadership at both a global and a local level. Nearly two years after the onset of the recession the world is still grappling unsuccessfully with the problems which created the financial crisis. Just to recap, here are three key issues I identified nearly a year ago in The Three Interlocking Crises of Global Capitalism.

Firstly;

The recession is severe, but what makes it worse is that it is happening when the coherence and the credibility of the political elites is at an historical low ebb.  The coexistence of a political with an economic crisis is what makes this recession so dangerous.

This has been born out completely. Remember a year ago Obama was in the first flush of his popularity and there was a sense in some quarters that new leadership had appeared to set the world on a different and better course. One year on and while the leadership of most western countries has struggled on in the same way, the big hope that Obama brought has been dimmed. Global leaders are still squabbling about the best way to constrain banking activity if at all, accompanied by a concerted campaign to ‘punish’ bankers for their supposed role in causing the crisis.

In the UK we are faced with an election choice between three parties which have little discernable differences. The main point of contention is over how far and how fast to cut public spending and introduce austerity measures. It is no wonder that a record number of people see voting as irrelevant.

Secondly;

The imbalance between productive economies like China and the less productive economies in the west lies at the heart of the recession…changing the way the world is run will be a tricky process as there will be losers as well as winners.

Events since then have reinforced this point. China in particular has come to the fore and its economy has proved much more resilient to the recession than any in the west. The stagnation of western economies and the growth of  China, India and others have added weight to the global political crisis, as agreement over issues such as rebalancing the world economy or tackling global warming have proved so far impossible.

The Chinese have continued to finance US consumption throughout the recession and western debt levels at a governmental and personal level have continued to grow. With all of the world’s major economies hoping for export led recoveries from the recession, as Martin Wolf has pointed out, there is much more scope for conflict over trade than has been the case before.

Thirdly;

The absence of opposition of any kind to capitalism today has contributed to a sense of drift and general loss of impetus in society in general and has also affected the political elites.

The absence of any alternative has been a mixed blessing for the economic system. There is no doubt that in the UK and elsewhere the absence of any kind of alternative vision has worked to the benefit of the status quo. It has been possible for employers to introduce wage freezes or cuts and short time working with little or no resistance. This  widespread acceptance of cuts in living standards has minimised social conflict and helped to stabilise society through a period of economic uncertainty.

But the problem remains that in the absence  of  any sense of a different way of organising society, the western world has become more and more conservative. This conservatism is increasingly taking the form of an anti -growth sentiment. It is important that we see this for what it is, at heart an abdication of the necessity for human development and the forward march of science and technology. People look at the failure of the market to be able to deliver consistent growth and improvement in living standards, and draw the conclusion that not only is it impossible to do so but it is probably the wrong objective anyway. In other words we are becoming resigned to a world of low growth and stagnation, causing negativity which then spreads out from the economic into the cultural and social spheres of life.

One commentator on the Davos meetings makes the point,

If the Davos crowd cannot identify a workable way to rebuild and reinvigorate the international system, it is hard to think where else the ideas will come from.

This is a question that all of us with pretensions to political change need to consider.





The UK needs an industrial policy, and fast

21 01 2010

‘Industrial policy’ means in essence an activist approach by the state towards support for and development of the economy. In the UK, state activism in this area was discredited in the 1970s because extensive state financial support for the defunct UK car industry failed at huge expense. In France and elsewhere state support for industry has persisted and is seen as key to economic success.

The future of the UK economy is in a state of chronic uncertainty. Having depended for so long on the success primarily of the financial sector there is now grave doubt about where economic dynamism in the UK can spring from. There is also a growing sentiment that even were the financial sector to recover, over dependence on this one area is very dangerous. This has led to calls to ‘rebalance’ the economy.

Today’s Financial Times carries an analysis of why technology businesses in the UK are not able to offer the necessary dynamism. One key reason given is lack of the necessary support and investment to turn promising small companies into large successful ones. The article points out that Business Secretary Peter Mandelson is now keen on developing an industrial policy for the UK.

So what should an industrial policy look like were we to go down this road? Firstly, what it should not be. Propping up failing businesses in order to save jobs is a waste of money. For that reason the government ‘scrappage’ scheme to enable the buying of new cars was a mistake. Were it not for the fact that the UK no longer has an indigenous car industry no doubt the government would have done what the US did through the nationalisation of General Motors in 2008. Government money should not be used to keep failing industries going.

Nor should an industrial policy be about trying to preserve UK industry in the hands of UK owners as Mandelson has argued in relation to the proposed takeover of Cadbury by Kraft. Generally speaking any foreign buyer will want to keep good businesses going. If there are loss making parts of the business they would  be closed down eventually anyway. The key issue is what new businesses are emerging and growing and that is where the problems of the UK lie.

An industrial policy would first and foremost require a change in the nature of political leadership. The UK government has adopted a managerial approach to the economy for the past 13 years. This worked only because the technology and financial services bubbles kept the economy growing. Now that these bubbles have burst a different approach is required. We need a political leadership which is both entrepreneurial and strategic.

Government needs to be entrepreneurial initially by changing the nature of public debate away from risk avoidance and caution, at every level, towards one of measured risk taking. There is a growing unease  in the UK that we have become stifled by regulation, both state and self regulation, in every area of life. Politicians need to give a lead away from this towards a more self-reliant and entrepreneurial approach to life in general and to the economy in particular. This should then be backed up by specific tax breaks and other incentives to encourage new business and more research and development in older businesses.

Government needs to be more strategic by taking a longer term view of the infrastructural requirements of the UK and investing more where necessary. This is a huge discussion in itself and needs to be looked at in depth. Government should also be encouraging and incentivizing those sectors of the economy which are already successful to be more successful.

I wrote recently of the NASTI approach, No Alternative STagnation is Inevitable,  which dominates current thinking around the economy in this country. For this to be transformed requires a sea change in political leadership away from cautious managerialism  and towards dynamic entrepreneurialism. The upcoming general election campaign offers an opportunity to argue for this radically different way forward.





2010-the year of living uncertainly

12 01 2010

Welcome to 2010, a year which is pregnant with doubt and uncertainty. The western world has moved from the certainty of recession to a fear and acceptance of stagnation, the ‘flat is the new up’ mentality derided by Martin Sorrell. In the UK we have a general election contested by three parties which is shaping up like a contest between weak boxers. Every time they land a punch on each other they weaken their opponent without strengthening themselves.

There is a general mood of cynicism and disgust towards the political process which means that whichever party or parties win the election then nothing can really change. Mick Hume has accurately summed up the state of modern politics as dominated by;

..the politics of fear, with many apocalyptic warnings, but little analysis of the underlying causes; the politics of behaviour, with attempts to blame the crisis of the system on the greed of individuals; and the politics of low expectations, with efforts to persuade us that the most we can hope for in the future is no/low growth in a stable/stagnant capitalism on a life-support machine of state intervention.

We  have reached the end of a political cycle which began with the collapse of communism in 1989. Just to remind ourselves, the collapse of the Soviet Union created an initial surge of optimism that history had ended with the triumph of western liberal democracy.  In the East new democracies arose. In the west the third way concensus politics of Bill Clinton, adopted by Blair and others, replaced class based politics. It is very hard now to remember the enthusiasm which accompanied the election of Blair’ s New Labour in 1997. Many people welcomed what they saw as a decisive break with the past and the opening of a new chapter in history. We can now see that the idea of a new era of peaceful and stable capitalism which dominated the twenty years since the end of communism has come to a political dead end.

The upcoming defeat of Gordon Brown in the general election here will mark the final eclipse of New Labourism in the UK. What we are left with is a severely confused and disoriented western elite which is struggling to tackle the major changes taking place in the world. During the credit fuelled  boom years of the noughties the absence of any clear economic and political blueprint for the future did not matter so much as it does now. The best that any politician can do now is to try to navigate the future without a map. On the economic front there is just as much confusion. While there are some commentators who wish to paint a rosy picture the general view is one of foreboding. The underlying problems facing western capitalism, which have been extensively debated in this blog over the past year, have not even begun to be addressed. The lack of a plan means they will fall back on restraint and cutbacks in public spending rather than bold policies for economic growth.

Elsewhere the triumph of liberal democracy is looking very hollow. The most dynamic economies in the world now pay lip service to democracy in general if at all. The recession has played its part in deepening the crisis of western politics by accelerating  both a shift in global power eastwards and by undermining the western model of (supposedly) free markets plus democracy.

All of this means that the stakes are even higher for anybody who can come up with a better idea of how to run things. The depths of cynicism amongst the elite and the general populace will prove a huge barrier to any ideas of change, but there are always some people who will not want to give in to these  widespread negative sentiments. Uncertainty can be a good thing if it leads to broader questioning and wider debate. There are those, such as Martin Wolf, who accept that we have reached a ‘hinge in history’. Whether this leads to a turn for the better or the worse is up to us.