Monday, 26 September 2016

Where did it all go wrong? The Labour Party after the second coming of the Messiah

As Labour MPs pick up the pieces after their battle with the left wing extremists led by their leader and his enforcer John McDonnell, it may be time to take stock and assess where to go from here.

The (second) election of Jeremy Corbyn (to his supporters, the second coming of the Messiah) demonstrates a deep shift in party politics. The question is whether this transformation of the Labour Party heralds a fundamental change in the attitudes of the wider electorate as well, signaling the long expected ‘move to the left’ once announced by Corbyn’s predecessor Ed Milliband.

There can be no doubt that societies in the developed world have undergone a significant alteration of the political radar since the economic crisis in 2008. What used to be an attitude to wealth and income inequality best described by Tony Blair as ‘relaxed’ made way to a vibrant debate on social justice. At the forefront of this debate is the issue of wage stagnation since the 1990s in the US and  as Thomas Piketty argued, the growing income inequality fuelled by rising income from assets.

Where the picture veers into the strange is when we look at the responses to the crisis by the individual parties. Centre right parties moved gradually to the centre and tried to develop policies to counter wage stagnation, broadly trusting in the power of the economy to lift everybody’s boat at some time.

The left of centre parties, many of which were in fact in power when the crisis hit, showed a staggering lack of ideas. Gordon Brown’s inaction at the moment of economic disaster was symptomatic. Tired of Brown’s dithering, his chancellor, Alistair Darling, had to take the reigns and protect the banking sector by bailing out some of the largest lenders. The next two years were largely wasted with inactivity by the Labour government. Not a single policy was launched by the Brown government to counter the growing wage gap. It was as if Labour politicians who had started their tenure in 1997 with so much gusto were frozen like rabbits caught in the headlights before the car bumps them off the road.

Following the 2010 election, the Conservatives continued to move into the centre with modest welfare reforms under George Osborne, the introduction of the national living wage and fiscal consolidation. The next five years are generally acknowledged to have been a wasted opportunity for the Labour Party. Under Ed Milliband’s leadership an endless number of policy reviews was conducted with very little outcome or impact. As the next election was nearing, Labour struggled to put a manifesto of pledges together that amounted to a coherent programme for government. Instead it opted for an oversized tombstone inscribed with several vacuous statements that prompted ridicule and laughter in the wider public.

Thus, in a sense, Jeremy Corbyn’s election to leader was actually the first proper response of the Labour Party to the economic crisis and its related problems such as wage stagnation and income inequality. And this is where the story assumes surreal proportions. Instead of embarking on a profound reassessment of Labour policies and a wider debate on how to tackle social injustice under conditions of low productivity, how to address the disappearance of low skilled jobs and the rise of the professional classes under conditions of a fiscal straightjacket that is likely to continue for the next decade, Labour members opted for a type of unrestrained sloganism, a simplistic populist left wing version of Donald Trump. The most notorious aspect of this move to populism is the striking absence of any hard thinking about policies, the slavish adherence to abstract slogans, and a determination not to let reality impinge on the simplistic worldview those slogans purport.

An important side effect of this return to the 1970s is that Corbyn’s ideas show little traction with the working class voters he pretends to represent. As so often before, the proletariat appears to refuse to play along with the Marxist leaders. Corbyn acolytes appear to be mainly young middle class voters who should have little investment in a Marxist worldview that assigns to them a diminishing political role as the proletariat ‘gains class consciousness’. But then, as so often, paradoxes abound in English Socialism, once led by an aristocrat, Tony Benn, who virulently campaigned against the very educational standards he benefited from.

Where does that leave the political landscape in England? Labour’s move to the extreme left may just open up some electoral space for moderate social democrats and liberals. LibDem’s leader Tim Farron seems to sense that when he appealed to disenchanted moderate Labour voters to join the Liberal Democrats. It is customary in the British media to write off the LibDems but the party still has a significant number of councillors and some parliamentary representation (at Westminster and in Cardiff), more than other fringe parties such as the Greens and UKIP. Councillors are usually the knights in shining armour when it comes to trudging through the English rain to deliver leaflets to potential voters or placing calls to the ‘pledged voters’ to go to the polling booths. So, the LibDems are electorally in a better position than the Greens and UKIP.

The biggest threat to Conservative rule is however amy come from inside the Tories themselves, through a prime minister who ditches the moderate compassionate Conservatism that served David Cameron so well in the last 6 years. Part of the reason why Labour shifted to the extreme left was that the Conservatives firmly occupied the centre ground with progressive policies once popular under Labour, such as national minimum wage, welfare reform and the academy programme. The biggest mistake Theresa May could do is to vacate this centre ground and encourage moderate Labour politicians to formulate their own policies. Let’s hope she is a closet Cameroonian.

Monday, 29 August 2016

The moral tyranny of the free market

As the Labour Party battles out who will lead them into the next election defeat, it becomes clear that the dominant theme in the party is now one of 'nationalisation' of industries and services. Both candidates advocate taking the railways into national ownership, a call more easily made than done, as the recent Observer editorial argued.

Those were the times - Nationalisation in 1947

In a space best characterised as an echo-chamber, the rank and file of the Labour Party are competing for the most extremist positions, underpinned by what Hannah Arendt once called the 'emancipation from reality'.

However, the more interesting question is why leftists have such a visceral hatred for the market in the first place. Marx himself was by no means disinclined to let market forces do their work in the inevitable demise of the capitalist order. And Lenin himself used the free market in the brief New Economic Policy period to improve people's material lives following the deprivations of the Russian Civil War. So, why do socialists a la Corbyn have such as dislike for free markets?

Much of this appears to do less with where Corbyn and others want to take the country than with where they have been. Corbyn seems to cherish the old nationalised railways exactly because the image of British Railway branded carriages criss-crossing the country offers the certainties of old times. His and his supporters' desire to nationalise industries are motivated more by the past than any exciting vision of the country's future.

A second reason may however be a fundamental misunderstanding of the moral nature of the free market. When asked about the role of private providers in the NHS Corbyn reliably talks about profit in healthcare (conveniently denying the fact the GPs are running business as well which need to make a profit too). Corbyn does not seem to understand that profit is not the only, and often not the main motivator for people to set up businesses. The main reason why people become self-employed is because it gives them the opportunity to shape their own destiny and be in control of their lives.

Running a business is thus a fundamental manifestation of personal freedom. As people establish businesses they exercise a right which is tied up with personal responsibilities, such as making and keeping mutual promises and entering contracts. Running a business thus has a moral side as people operate in a contractual sphere which imposes civic obligations on them which in turn allows them to disclose their moral commitment to civil society. The recent focus on those who have tried to escape their contractual commitments (Philip Green e tutti quanti) only reinforces this point as they are the exception to the norm.

It is this moral aspect of economic activity that Corbyn and his left wing comrades refuse to acknowledge when they argue in favour of nationalising industries. Where such a policy would lead is clear for everyone with only a cursory knowledge of the sophisticated discussions amongst Marxists and Revisionists since the 1880s. Or, alternatively, if once prefers the Soviet Russian debate, one may look it up in Trotzky's critique of Stalinism. Nationalising an industry only achieves one thing. It puts the 'means of production' into the hands of a bureaucratic elite whilst removing the notion of personal responsibility for success and failure of economic activity from everyone. Where everyone owns everything, no one feels responsible, and the result is usually a steady but inevitable decline. Anyone remember British Leyland?

Sydney Opera House - Expressionism at its best

Sydney Opera House from the Ferry
Foto: Axel Kaehne

Modernist architecture can be as much a revelation as it is sometimes a disappointment. Most modernist building tend to be something of the latter because they fail to relate meaningfully to their surroundings. Norman Foster's IB tower in Malaysia is little more than exactly that, a very tall building without much thought about its environmental context. Zaha Hadid built impressive buildings but they never managed to link in, or indeed cared much about their neighbourhoods. And then there is the external versus the internal. Hans Scharoun's Philharmic Hall, Concert Hall and Library in Berlin are all of a kind externally, but the real wonders start once you enter the buildings.

Hans Scharoun's Philharmonic Hall - Foto: Manfred Brueckels

Perhaps this lack of connectivity to the physical context is the nature of the beast, something that modernist architecture is preternaturally disposed to. This may particularly be the case with expressionism. Expressionism has mainly remained a dream confined to the drawing boards of architectural firms, presumably because the issue of fitting expressionist buildings into their environment is tricky. Where expressionism has made it into reality, the buildings tend to be in areas that have no residential or urban context in the first place, such as Berlin's Congress Hall.

Berlin Kongresshalle - Foto: Bertholt Werner

Sydney's opera house is an exception. It was built adjacent to the central business district, an area that glorifies in mainly non-descript and forgettable glass and steel buildings. However, the Sydney Opera House is at the same time slightly removed from the district by virtue of being located on the tip of a promontary. This affords it a distance to the city that was put to some extraordinary use by the architect. The individual 'shells' of the House open up towards the city which gives those standing inside the house or those sitting on its front steps a breathtaking view of the Sydney skyline.

The view from Sydney Opera House towards the Central Business District
Foto: Axel Kaehne
In the night, people leaving a performance at the opera or concert hall get the impression that the venue somehow floats on the water, like something moored in Sydney Harbour. The sense is of something holistic that works well with its surroundings to impress. Hence a rare example of expressionist architecture done well.

Monday, 22 August 2016

The gender pay gap - new evidence

This morning a new report by the Institute for Fiscal Studies on the gender pay gap is being released. It comes along some new evidence about the structural reasons for the pay gap.

The new evidence and reports make fascinating reading, not least because they attempt to identify the point at which the pay of female workers diverges from that of male workers in companies. This point appears to occur at the time of child birth when women traditionally take up child care and either drop out of employment temporarily, or work part time. Once the children reach the age of 20, women who go back to full time employment the wages of women never reach the wage levels of their male counterparts.

If this points to the need for structural changes such as providing better child care for families and/or more flexible parental leave, this is certainly not the whole story. Interestingly, even before women take up maternity leave, the wage gap to their male colleagues is already 10 percent.

Once women are working part time, their chances of progression are also significantly reduced which points to a dilemma. We know that part time workers are actually more productive compared to their full time workers, but that does not seem to translate into better pay or equal opportunities to be considered for promotion.

If this all sounds gloomy and hard to tackle, however, it is worthwhile remembering that there is some good news too. The gender pay gap itself has reduced from about 28 percent in 1993 to 18 percent to date. Much of that is due to the increasing number of women in high paying jobs. So, whilst women's pay now increases faster than men's pay in general, the gap still exists. In addition, women in low pay jobs with no promotion opportunities do not experience any pay differential to their male colleagues in similar positions, which again illustrates the critical role of promotion and progression in generating the pay gap in the first place for higher paid workers.

It seems to me that to make progress on this issue, several things need to happen. First, the government should continue to provide additional flexibility for parental leave. The cultural shift in providing child care jointly by both parents still has not materialised, but incentivising both parents to contribute to this appears essential.

Second, the legislation to compel companies to provide transparency about salary structures amongst their work force is welcome as well. It will produce additional evidence and allow boards to take a hard look at how they perform on the issue of pay.

Last but not least, progression and promotion needs to be de-coupled from the amount of time you work, and linked to productivity, which would ensure that part time workers gain opportunities to progress as well.

Legislation is unlikely to make inroads into this problem, what is required is more a cultural shift at the work place.

Sunday, 31 July 2016

The other Brexit narrative

As the new British Prime Minister intones that Brexit means Brexit, quite a few people still scratch their heads and ask themselves what it actually all means. The biggest headache for the British is now to determine where this magical nirvana outside the European Union is actually located and, once they have found it, to figure out how to get there.

Recriminations abound how we all got here and there are theories a plenty on the social media sphere, so here is, for good measure, mine, why Britain made for the exit.

On the face of it, Brexit was all about leaving Europe. However, in the midst of the campaign Nigel Farage mentioned that he would be very happy indeed to give up economic growth for better quality of life. His comment went largely unnoticed, but it shouldn't have. It was a remarkable admission by a, for good or ill, national politician for two reasons.

One the face of it, his admission to be willing to see less economic growth for better quality of life in Britain would be suicidal for any mainstream politician. Economic growth is the engine of progress. It pays for hospitals, schools and public services. To understand how dominant this narrative actually is look no further than David Cameron's promise to develop a 'well being and happiness strategy' of his government to replace the common indicators of national wealth which went ... exactly nowhere. Once in office, it's the treasury figures that drive everything. They determine whether departments have a bit less or more to spend, whether another school can be built or another foundation stone for a hospital can be laid.

So, why was Farage's comment not ridiculed? One may argue that he stands outside the mainstream debate anyway. But that is just lazy thinking. More likely, the mainstream was missing something out here that Farage had spotted and I believe it is the confluence of two issues. The first is the ineffectiveness of growth to translate into increases in real income for the working classes up and down the country. Britain was, up to the Brexit vote, strictly speaking, booming. Economically it was one of the most successful countries in the OECD. Yet, none of that growth meant any better life for the people in Yorkshire, Manchester or Birmingham who were on rock bottom agency pay. If the link between growth and wages had been severed however, there was little reason to pursue growth for the sake of it.

The periphery of economic growth
The second issue was linked to globalisation. The growth argument is tightly interwoven with the globalisation narrative. In an increasingly connected world, we will become ever more mobile with our portable skills moving from one employer to another when it suits us. We, the workers, in this picture, are just as rootless and transferable as the companies are. But the fact of the matter is that this only applies to a tiny minority of young professionals (mostly male) before there establish families. People do not move around like things, they cannot be put on a shipping container and send off to far away shores if things go belly up in one place. It's this discrepancy between the mobility of capital (and companies) and people's rootedness in places that creates the friction in the globalisation gearbox and Farage put his finger on it long before anybody else did.

Where the growth narrative and the globalisation narrative meets it creates some incredible wealth, with a singular dynamic (metropolitan) elite of professionals benefiting from it. Where they jar, they create some real misery like the forgotten towns and cities on the periphery. Farage's comment, as always, was prescient, rather than backward looking, as his detractors have it. He spotted the losers in the globalisation race, for whom growth does not mean better living standards. Once the link was broken, the Kaiser was naked. Why pursue growth for the sake of it?

And this is the location where some counter-narratives are meeting and producing some very odd alliances indeed. One is, rooted in the anti-growth debate of the 1970s, articulated by the left-leaning anti-globalisation campaigners who warn against the economic and ecological consequences of ever more growth. The second is that which refuses to accept the inevitability (or indeed desirability) of progress. Both counter-narratives together, go to the very heart of the capitalist system and it is ironic (London) and tragic (Stoke-on-Trent) at the same time that Britain is the battle ground on which this argument is to be had.

Thursday, 21 July 2016

Trump's 'facts and lies'

As the Republican Convention in Cleveland is getting under way, there is a lot of soul searching in the US. Some of the big beasts in the Republican Party have decided to stay away, and even some of those who attend the Convention have decided to give only half hearted support to the man who got more votes in the primaries than any candidate in the history of the Republican Party.

America and the Republican Party appear to be deeply divided about the virtue and credentials of the man who calls others 'liars', 'rapists' and 'criminals'. On one side, there are those who think Trump speaks truth to power (or 'the establishment') whilst on the other side, there are those who believe that he has irreparably damaged American democracy. So who is right? What's the problem if Trump uses harsh language, or is a loudmouth? Isn't that just part and parcel of the rough and tumble of free speech? Here is why I believe that Trump is bad for democracy.

The public debate in the US has always been throughout history a fairly robust affair. One reason is the first amendment which guarantees free speech. The right to say what you think has often been understood as a justification to say anything you want. So why should politicians not exploit the space free speech provides to the fullest extent?

There are two ways to say that you disagree with somebody. You can either say that you believe that the other person got their facts wrong, and thus appeal to an independent measure of truth, objectively (or more correctly: inter-subjectively) established. Or you can say that you think that the other person is lying. The latter is not a statement about the truth or falsehood of what somebody says. It is a statement about the motivation that person allegedly has when they say what they say. Motivations are however not subject to independent verification. Statements about what motivated somebody to say something can not be validated by an appeal to some objective (or inter-subjective) measure.

Donald Trump - in conversational mood.

That makes statements about other people's motives statements of belief, rather than statements of facts. And questioning the moral commitment of your opponent strikes at the heart of their legitimacy to contribute to the public debate. Suspecting somebody to be morally corrupt disputes their right to be heard. It resembles the claim that somebody is 'un-American' which tore apart the democratic fabric of the US in the 1950s. And remember, questioning the motivation of somebody is not something that can be verified or refuted by a fact. It pits one statement of belief against another.

Thus, saying that somebody is lying, i.e. willingly, out of moral degeneracy, puts the debate beyond public verification and therefore beyond forms of public reason. No fact checking will ever formally establish whether Hilary Clinton is a wicked person or not. Nor can any fact checking ever establish whether or not she was animated by evil motives when she was not as forthcoming about her use of the private email server as she should be. Contrast this with the argument that Clinton may or may not have known that the use of her private email server was improper. That is something that an investigation may establish as a fact, if evidence exists.

The difference between the two types of arguments above is that the latter is one that can be decided within the realm of facts, and is therefore located within politics, whereas the former is firmly anchored in questions about morality, something that is impervious to political argument.

Trump has made it clear that he wants to engage in shadow boxing in the realm of moral rectitude, clearly in the knowledge that questions about politicians' motives cannot be decided either way. He hopes that if he only repeats claims about the alleged lack of moral rectitude of his opponents often enough, something will stick. His strategy is to drag political debate where it cannot be fact checked. But a democracy that leaves behind its measures of what constitutes truth and reality is lost at the sea of moral claims. It's is where meaningful debate ceases and public reason as an arbiter in political discussion dies.

Sunday, 17 July 2016

Why more taxes on the rich may be a dead end

The debate about inequality has reignited the discussion on taxes. The picture emerging from any analysis of tax revenues is a stark one indeed. Essentially there are two disparities that stand out. The first is the widening gap between the taxes paid by small and medium sized enterprises and those paid by multi-national companies. Figures for the US illustrate this point well. The effective tax rate multinational companies in the US paid on their profits has been 24 percent in 2015 (The Economist, 9th July 2016), yet the official tax rate stands at 39 percent. This means that small enterprises which do not have the advantages of being able to move their profits into low tax havens or to use tax loopholes to shield their profits from tax are effectively paying a higher rate on their profits than the largest top 50 firms.

The second area which contributes to a sense of injustice in tax matters is personal income tax. This debate has been galvanised by the revelations about the superrich hiding their assets in tax havens through tax avoidance or tax evasion, depriving governments of legitimate tax income. So far, the UK government has tried to tackle the disparities in the tax system by taking people at the bottom of the income scale out of tax altogether, raising the income tax allowance.

Whilst reducing the tax burden of the poorest is welcome there are signs that the increasing income and wealth gap creates some limits on what can be achieved through tax policy on its own. The danger is that lowering the reliance of the government's income tax base on tax payers at the bottom of the scale whilst increasing its reliance on top tax payers creates unacceptable volatility in tax revenues in the long term. Take the example of California. On paper, income tax policy in the sunshine state is one of the most radical in the West. The rate of income tax stands at 13.5 percent (on top of federal levy of 39.6 percent). That makes income tax levels in California one of the highest in the Western world, something to be celebrated in the books of campaigners for equality.

However, it also means that about 45 percent of all income tax revenues are now coming from a very small number of superrich people who happen to have their tax base in California. The top 1 percent of tax payers pay almost half of all income tax in the state. Since other taxes are subject to strict regulation and cannot be changed easily, California's lawmakers have little room for manoeuvre when things go belly up. If only a few of the top 1 percent of tax payers decide to leave the state, this creates a considerable gap in the government's coffers rippling through to education and welfare policies with a vengeance.

High dependence levels on very few tax payers, whilst welcome in terms of creating more equitable levels of income, thus looks like a poor mechanism to create stable and effective government revenue streams, which in turn are essential for public services and infrastructure investment. Narrowing the tax base may therefore increase volatility at the expense of tax revenue certainty which is so important for long term strategies to tackle inequality. It seems the debate on how to best address inequality needs a few more ideas.