Stumbling and Mumbling

The class base of bad government

Everybody from the centre-right leftwards agrees that we have been unusually badly governed for the last few years. As Ian Dunt tweeted.

Quite a thing, isn't it. Reading about someone of the stature of Alistair Darling while watching someone as minuscule as Matt Hancock. A testament to how far we've fallen.

But why have we so fallen?

There's a tendency among some centrists to attribute it merely to bad people doing stupid things; the word "cockwomble" occurs with worrying frequency. This is too superficial. It's what I've called schoolteacher politics, the notion that bad policy is mere intellectual or moral error that could be avoided if only we had better people in charge (where, of course, "better" means more like us).

Instead, bad government is endogenous. It's the product of dysfunctional capitalism allied to our unusually toxic class system.

Let's start with the rise of illiberal reaction and the Tories' perceived need to appeal to the far-right. This hasn't occurred because the British people had a bang on the head, or were fooled by media barons, or succumbed to the elegant wit Tommy Robinson. Instead, it's yet another example of what Ben Friedman pointed out in 2006:

The history of each of the large Western democracies – America, Britain, France and Germany – is replete with instances in which [a] turn away from openness and tolerance, and often the weakening of democratic political institutions, followed in the wake of economic stagnation.

His point has since been corroborated by many others. Thiemo Fezmer has shown that - at the margin - austerity caused Brexit. Markus Brueckner and Hans Peter Gruener have shown that "lower growth rates are associated with a significant increase in right-wing extremism." And Ana Sofia Pessoa and colleagues have shown how "fiscal consolidations lead to a significant increase in extreme parties' vote share." This could be because a weak economy breeds discontent with the incumbent parties; or because people look for somebody to blame and that somebody is often the outsiders and marginalized; or because bad times generate a yearning for a past, one in which minorities were quieter. Whatever the reason, Marx was right:

The mode of production of material life conditions the general process of social, political and intellectual life. It is not the consciousness of men that determines their existence, but their social existence that determines their consciousness.

The far-right has tapped into this richer seam of reaction and illiberalism.

But why have we got stagnation? Austerity is part of the story. But austerity was endogenous - a reaction to the increased public debt caused by the financial crisis. As the late Nick Crafts said, "Brexit is a legacy of the banking crisis."

And that crisis was also endogenous.

To see why, imagine that there had been an abundance of profit-making opportunities in the early 00s. The fall in real interest rates we saw then would then have led to rising capital spending and R&D and to greater productive capacity. We'd have had faster GDP growth.

Which didn't happen. Growth was actually slowing even before the crisis. There was, as Ben Bernanke said, a "dearth" of such opportunities. That meant that lower rates fuelled not faster sustainable growth but rather a boom in housing and in illiquid mortgage derivatives and stretched bank balance sheets, which led to the crash. In this sense, that crash was a symptom (pdf) of a stagnant economy, not (just) a cause.

Exactly why the economy has been stagnating since the early 2000s is a matter of debate: an ageing population; difficulty in adapting to the rise of India and China; lack of innovation; falling profit rates; and so on. For my purposes now, however, this debate doesn't much matter. The fact is that capitalism is not working as well as it once did, and this is shaping the political climate by fuelling antipathy to migrants and benefit claimants and by stoking up culture wars.

Of course, in theory such reactionary politics could be led by politicians of substance rather than the charlatans and inadequates we've actually had. But the low calibre of politicians isn't mere bad luck. It's another effect of our class system.

One reason for this is simply that high pay in the financial sector attracts talent away from politics. If we're lucky, this leaves the profession open to those with a sense of public service. If not, it attracts second-rate egomaniacs. Also, private schools inculcate more confidence than ability - people who, in the American phrase, were born on third base but think they've hit a triple. David Cameron, for example, wanted to become PM because he thought he’d be “rather good” at it - an opinion not shared by posterity. And the Covid inquiry has heard how Johnson was "bamboozled" and "confused" by statistics. Sir Patrick Valance wrote:

Watching the PM get his head around stats is awful. He finds relative and absolute risk almost impossible to understand.

Such ignorance matters. Being Prime Minister isn't like being a newspaper columnist. It's about taking decisions under uncertainty. To do that doesn't require one to be a great statistician. But it does require that one be awake to the most common ways of misunderstanding numbers, which requires a basic statistical literacy.

That Johnson thought he could be PM without such habits of mind shows his arrogant overconfidence. And that other people thought he could is another effect of class. Like attracts like. To a media dominated by public schoolboys, Johnson seemed a familiar jovial figure ("Boris") rather than someone with profound intellectual and moral defects.

Of course, this is not to say that class is the only explanation for our bad politicians. Our mechanisms for selecting them are also dysfunctional; politicians must now appeal more to a handful of cranks be they party members or journalists; the disappearance of public intellectuals has deprived us a a benign influence on the political class; our narcissistic age demands that politicians echo our own prejudices rather than display competence or independence of mind; and so on.

Even if politicians weren't overconfident inadequates, however, there'd still be a problem. The Tories have no economic offer to make to voters because to do so requires them to address difficult questions: how do we kickstart the economy when doing so requires more than the state stepping back? What if inequality is itself a barrier to growth? How do you increase growth when so many of your supporters (financiers, nimbys, monopolists, Brexiters) are opposed to it? Faced with these questions, even the ablest of Tory politicians would struggle.

That last question brings us to a further problem. A lot of powerful people have an interest in sustaining bad and corrupt government, and the power to do so. I'm not thinking only of the media here, or those who exchange for party donations for government money. Businesses also buy MPs (and regulators) through donations or the prospect of cushy jobs after leaving office. And as Michal Kalecki noted, "everything which may shake the state of confidence must be carefully avoided because it would cause an economic crisis”: one (albeit bad) justification for fiscal austerity was the fear of a bond market sell-off if debt were not being seen to be reduced.

We can put this another way. In the post-war decades government achieved some worthwhile things: full employment; a better welfare state; and decent economic growth. This wasn't merely because politicians were of greater moral and intellectual calibre back then. It was because full employment was in the interests of much of capital - mass producers needed a market for their goods whereas financial capital require low interest rates - and because capital's more rapacious instincts were constrained by powerful trades unions. In the absence of these conditions, we have what we have now.

And as if all this were not enough, Tories have also sustained in office by simple deference - the habit of mind which leads people to atrribute merit to those in power. You don't need Marxian theories of ideology to believe this (though they help!). It was Adam Smith who wrote:

We frequently see the respectful attentions of the world more strongly directed towards the rich and the great, than towards the wise and the virtuous. We see frequently the vices and follies of the powerful much less despised than the poverty and weakness of the innocent…The great mob of mankind are the admirers and worshippers, and, what may seem more extraordinary, most frequently the disinterested admirers and worshippers, of wealth and greatness.

All these things mean that the feedback mechanisms whereby bad governments are kicked out and bad policies reversed are not as strong as they might be.

My point here is simple. There's more to politics than the mere assertion of one's own moral and intellectual superiority. We must also understand why we are badly governed, and this requires us to appreciate that politics does not exist in a vacuum but instead is shaped by socio-economic conditions. You can't understand politics without understanding capitalism.

Of course, it's likely that we have only a few more months of this awful government: there are limits to how far reactionary rentiers can sustain an egregiously incompetent government in office. But many of the pressures that gave it us will still be in place: economic stagnation and the power of the media, finance, and other regressive sections of capital. And they will constrain even the most competent and best-intentioned Labour government. The idea that we can have good government if only good people were in charge is too hopeful. Centrists, at least as much as leftists, are prone to utopian fantasies.

Two types of politics

There's an under-appreciated division in politics. It's expressed in this tweet from the Sleaford Mods:

Don’t be asking me to pick sides for something I ain’t got any real idea about, at a gig. I’m a singer. My job is music. The only real thing I know about War is that I’m sick and tired of premature death like we all are. Of the murder of anyone, under whatever fucking belief grid.

Now, the thing is that the Sleaford Mods are a political band. So why are they loath to express a political opinion about Gaza?

It's because their politics arise from lived experience, of struggling to get by in crap towns. (Jason Williamson comes from Grantham and is thus an expert on the latter). Such a politics can be contrasted to that which arises from abstract thought, be it academic reading or, more often and much worse, the media. All most of us know about Gaza is what we get from the latter, which gives us only a partial picture even with the best journalists. Hence the Sleaford Mods saying "I ain’t got any real idea about" the conflict*. They are channelling Charlie Munger's wise words: "one skill is knowing the edge of your own competency."

The diametric opposite of their attitude is that of the talking heads on poshcuntstalkshit shows who spout off on all subjects (or at least all of those deemed acceptable by pro-capitalist ideologues) and whose views are drearily predictable: if you know their opinion on, say, Israel you know their view on austerity, "wokeism", Brexit etc**. The edge of their competency is a mystery to them.

We see the contrast between the two types of politics more broadly. The politics of lived experience arises from having bad jobs, stagnant wages, long waits for one's court case or difficulties in seeing doctors. The politics of abstraction, on the other hand, is that of "stop the boats" or fretting about "wokesters"; very few people outside coastal towns have actual experience of being inconvenienced by migrants arriving in small boats, and even fewer have lived experience of being seriously incommoded by "wokesters".

Of course, sometimes the same political position can arise from either. Hostility to trans people, for example, can be the result of being harassed in a changing room by a man in a dress or it might arise from theorizing about what it means to be a woman. And, of course, smarter people combine lived experience with theoretical learning.

Lived experience does not necessarily push one to the left. Much of Thatcher's support in the 70s and 80s came from people having personal experience of being inconvenienced and harassed by striking workers, or from them profiting from having bought their council house cheaply. Yes, most of the press supported Thatcher, but many didn't need to look at a newspaper to tell them to vote Tory; they only had to look at their bank balance.

Similarly, a good portion of support for Brexit - enough to tip the balance - wasn't based on abstract arguments about the EU but upon the lived experience that things weren't going well.

The outcome of the Brexit referendum took most of the political class by surprise. That was because much of that class was detached from individuals' lived experience and better keyed into the chatter of talking heads. The rise of Corbynism was also a surprise for the same reason: journalists, politicians and "commentators" (the fact they are a thing at all is revealing) talked among themselves and under-appreciated the lived experience of young people with high debt, unaffordable housing and bullshit jobs.

Lived experience is not always articulated, or even articulable. It can take the form of what Polanyi called "tacit knowledge", a gut feel that something is wrong. Just as successful entrepreneurs can have a hunch that a new product will sell well or investors an inarticulable sense that an asset is overvalued so too can voters have a feel that things aren't right.

Which brings me to the problem with basing politics on lived experience alone. It generates only local and circumscribed expertise: people might be experts on the performance of their local GP surgery but not that of the NHS in general, or experts in how their own business is performing, but not the economy as a whole. And so on. And of course expertise in diagnosing a condition does not mean knowing the cure.

In principle, this needn't be a problem. A sensible polity would aggregate fragmentary and sometimes inarticulated particular information into genuine knowledge in the way that Hayek supposed that a well-functioning market aggregated dispersed information. Technocrats - genuine technocrats not vacuous centrists - could then get to work on solving those problems.

But of course, we don't have such a polity, which is why we have opinion polls and not fact polls. Part of the professional deformation of the political-media class is to overvalue the mere verbal fluency of people like themselves and undervalue the dispersed tacit knowledge and local expertise of outsiders. Worse still, that class exploits people's anger at their lived experience of economic stagnation and failing public services and misdirects it into support for Brexit, hostility to migrants or antipathy to the sort of "elite" which comprises youngsters who can't afford a house but not millionaire cabinet ministers or newspaper barons.

I'm not offering solutions here; there's no point writing recipes when you don't have a kitchen. I'm just pointing out what the distorted perception of many journalists and politicians doesn't see - that there are ways of thinking about politics which are not heard in TV studios.

* You might reply that you don't need especial expertise to know that bombing children or murdering teenagers at music festivals is wrong. True. This does not, however, help us solve the more difficult problem of how to stop it.

** It needn't be so. One of my friends describes his politics as Thatcherite economics and Corbynite foreign policy. This might seem odd today, but it would have made perfect sense to, say, Richard Cobden.

Management in question

Can we rebuild public services without massive extra spending? Can we really implement the new technologies necessary to get us to net zero? Can we build infrastructure projects on budget and on time? Can we increase housebuilding quickly? How can we reverse the UK's lamentable productivity performance?

These important policy issues have something in common. They all pose the same question: do we as a country have the management ability to achieve what we'd like to?

Casual evidence suggests not. We have some of the most expensive electricity in the world; water companies cannot, it seems, make a profit without polluting our waterways; trains are unreliable and overpriced; infrastructure projects cost vastly more in the UK than elsewhere; and new-build houses are of appalling quality. All of which are signs that managers just don't deliver the goods at acceptable prices and quality.

This isn't the only evidence. Nick Bloom and colleagues have shown (pdf) that there is "a long tail of extremely badly managed firms." Staffan Canback has described how diseconomies of scale often set in quite quickly, suggesting that managers can't easily overcome the inefficiencies caused by expansion. Alex Coad has shown that there's a large random element to firm growth, implying that bosses contribute less to corporate success than they claim. And Paul Ormerod and Bridget Rosewell have shown (pdf) that "firms have very limited capacities to acquire knowledge about the likely impact of their strategies", perhaps because, as Kenneth Boulding said, there is a high chance that "top decision-makers will be operating in purely imaginary worlds."

Is it really plausible that the UK's low and stagnant productivity has nothing to do with the calibre of the people running businesses?

Maynard Keynes famously said: "Anything we can actually do, we can afford." But perhaps we cannot actually do very much because we just don't have the management skill to build things, provide decent services or increase efficiency.

Why not?

One possibility is that bosses haven't had the incentives to do so. If they can make millions even from failing businesses such as Wilko, why should they bother trying to do a good job?

There's evidence for this. The internet has become enshittified not because tech bosses lack ability but because they can make more money from ad-riddled sites than from ones pleasing to their users. And Bloom says that a big reason for that long tail of poorly managed firms (around the world) is that a lack of product market competition relieves them of the pressure to up their game.

To the extent that this is the case, the policy solution is to change incentives. In the case of utilities and transport, this requires - at least - more rigorous regulation of prices and quality. In other cases, we need that other regulator, the market. I'm not just thinking here of beefing up the Competition and Markets Authority. We need also to strengthen competition by reducing barriers to entry such as lack of finance or restrictive intellectual property laws.

In this context, we should welcome falling house prices. They send the signal that if you want to get rich you should try producing goods and services rather than relying on asset price inflation, and could therefore increase the supply of entrepreneurs and managers.

There is, however, another reason for bad management. It's that the job of senior management has ceased to be what it should be - that of humble technocrats (pdf) improving corporate engineering - but has instead become a cargo cult ideology in which wannabe heroes express "leadership" and "vision".

Managerialism has, in many places eclipsed management. And there's a big difference between the two. Managerialism has a messiah complex and belief in great leaders, whereas management looks for good fits (pdf) between bosses and roles. Managerialism tries to apply the same methods everywhere, whereas management knows it is domain-specific; what works in (say) supermarkets might not work in universities. Managerialism valorises top-down control whereas management believes in listening and feedback. And managerialism speaks of vision and strategy whilst management focuses on empirical detail and ground truth.

If we are to have better management, we need to replace managerialism with management: more worker democracy might be part of this.

Now, you might or might not agree with all this. Whether you do or not, I hope you'd agree that there is at least an important issue here. But you wouldn't guess so from Westminster politics, where this question is not on the agenda at all. How often, for example, is it discussed on those poshcuntstalkshit shows that pollute the airwaves?

Whilst the management question is not discussed in mainstream politics, however, labour issues very much are. Whether it be efforts to weaken trades unions or to "strengthen work incentives", both Labour and Tory governments have for decades seen their task as ensuring an adequate supply of quiescent labour. Ensuring an adequate supply of good management, by contrast, has barely figured as an objective. In this respect, the state not so much an empirically-based solver of genuine economic problems but rather an embodiment of Marx's point: "the executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie."

In defence of Labour

There might be more to be said in defence of Labour than many on the left suppose.

True, on the face of it the party seems to be willing the ends but not the means. Rachel Reeves promises faster growth, higher investment and the creation of good new jobs around the country, but without having a detailed plan to achieve any of these and apparently oblivious to the fact that the forces of capitalist stagnation militate against faster growth. These forces aren't just the economic ones of lack of big innovations, ageing population, falling profit rates and so on but also political ones: there's a large constituency of nimbys, financiers and monopolists opposed to faster growth.

Reeves' failure to appreciate the scale of her task is however not a personal failing. Part of politicians' professional deformation is to be over-optimistic about the transformative potential of small policy tweaks, and social democrats have traditionally been over-optimistic and incurious about capitalism. We shouldn't blame Reeves for these failings any more than we should blame the elephant for having big feet: it's the nature of the beast.

She is, however, doing something right. In merely calling for faster economic growth she is facing in the right direction, which could be a preparation to moving in the right direction.

What if better planning regulations and less policy instability don't significantly improve growth? A party that is sincere about wanting this would then have to focus on other obstacles to growth. Failing high streets might require a land value tax to deter landlords from keeping premises empty. High utility bills, in light of Reeves promise to cut household bills, would require tougher regulation - perhaps to the point of driving companies into bankruptcy and the public sector. Poor transport would require harsher penalties for incompetent rail companies and more infrastructure investment. The inability of capitalism to invest might require more socialization of investment along the lines of the original green new deal. And decent trading arrangements with the EU might lead to rejoining the single market.

In these ways, simply trying to solve the problem Labour is looking at might propel the party in a sensible direction.

There's something I've left off this list - fiscal policy.

There's a good reason why the party is promising fiscal discipline. It's that it might well inherit a labour market that is quite tight - albeit not as much so as a few months ago. There's a limit, therefore, upon how much the party can fulfil its promise to create "jobs for plumbers, builders and electricians...for scientists, designers and engineers" merely by adding to demand. Beyond quite a narrow point, any attempt to do so would bid wages up which the Bank of England would see as a reason to raise interest rates. And if that happens, you can say goodbye to hopes of much more housebuilding.

"Bond vigilantes don’t exist" as a constraint on how much governments can borrow in recessionary times, such as during the pandemic, but they do exist as a constraint on how much governments can fuel inflation, as we discovered with the Truss Budget.

We all know that the question "where will the money come from?" is asinine imbecility. But "where will the workers come from?" is certainly not. More "jobs for plumbers, builders and electricians" must therefore mean fewer jobs elsewhere.

For now, Labour isn't addressing this question - understandably because it's a nasty one. Traditionally, governments have diverted labour away from some jobs is by raising taxes or interest rates. But these methods might be insufficient. Instead, we might need more radical interventions for example to reduce the bullshit jobs and guard labour arising from private sector agency failures; or the excess labour created by policy failures such as excessive tax and benefit complexity; or the jobs that owe their existence to environmental, risk or intellectual pollution; or those (such as some managers) which exist because of a mistaken ideology.

It is a crude social democratic error to identify policy radicalism with a loose fiscal stance. The truth is that fiscal conservatism is entirely compatible - at least in logic - with economic radicalism.

Again, Labour is at least facing in the direction of sensible policies. It doesn't have a coherent fully-worked economic policy. But it has a hint of a trace of the beginnings of a clue, which is more than can be said for the Tories.

It's in this context that Starmer's support for Netanyahu makes sense. As a description of events in Israel-Gaza it is indefensible. But we shouldn't regard it as that. Nothing Starmer says will make a jot of difference to the region. Instead, he is talking to a domestic audience. Any support for Palestinians would be exploited by the Tories and the media to stoke up a culture war with which to distract attention from 13 years of failure. In supporting Netanyahu Starmer is thus keeping the focus on economics. Which is where it should be, because this might lead somewhere intelligent.

Now, you might think that in saying all this I'm ignoring the advice of my previous post because I'm failing to test my ideas against the empirical evidence. And the evidence that Labour is thinking along radical lines for its third or fourth move is lacking, which is why the pro-capital, anti-welfare Anna Soubry feels comfortable supporting Labour.

This, though, isn't necessarily a clinching argument. It shows that Starmer is succeeding in marginalizing the Tories, in reducing them to a rump of deluded fanatics detached from the real world.

And we must remember that parties never enter office with fully-worked plans. The Tories' 1979 manifesto, for example, made little reference to privatization or to using mass unemployment to smash the unions. It is possible that the clash between the desire to raise economic growth and the reality of sclerotic capitalism will push Labour in the correct direction.

One thing suggests this isn't wholly fanciful. It's Starmer's and Reeves' claims to come from modest backgrounds. Such talk isn't trivial. Your upbringing influences your sympathies, to use that great Smithian idea; this is why many people from poor families remain left-leaning even after making money. Such sympathies suggest that when the chips are down, Labour will pay more heed to the needs of the working class than the Tories would. Its "new deal" for workers rights is a genuine and important difference with the Tories.

I concede that in writing all this I might well be engaging in wishful thinking and clutching at straws, and I'm underplaying the strength of the forces of rentier capitalism opposed to pro-growth policies. What Labour offers is not so much an attractive substantive platform as the possibility of one. But options, even out-of-the-money ones, have some value. Which is more than can be said for the Tories.

On reflective equilibrium

We should all be more Rawlsian, and not merely in the conventional sense.

To see what I mean, take this suggestion from Josh Hendrickson for a cost-minimizing legal system:

More specifically, when someone is accused committing a crime, they could be given the option to admit guilt and pay a fine, the magnitude of which depends on the severity of the crime. If the person is unwilling or unable to admit guilt and pay the fine, their prosecution is determined by a dice roll with the number of sides on the die inversely related to the severity of the crime. Some die might have six sides. Other die might have thousands of sides. (You don’t actually need to use dice. Just a random draw.) If the prosecutor rolls a 1, the perpetrator is sentenced to death. Otherwise, the perpetrator is set free.

Form one perspective, there's something to this: it saves on the cost of lawyers and prisons. But as Josh says:

Of course, when we look around at various modern legal systems, none of them look even remotely like the hypothetical system. What gives? Are modern legal systems just really bad at minimizing costs? Does the system just seem crazy because it is so different than our own? Or is this discussion missing something?

What Josh is doing here is moving towards what Rawls called a reflective equilibrium. This is the process whereby we go back and forth between high theory and our everyday judgments, revising either or both until they are consonant. As Rawls said:

It is obviously impossible to develop a substantive theory of justice founded solely on truth of logic and definition.

Instead, he said, logically-derived principles must be checked against facts - in his case, the facts being "our considered judgments in reflective equilibrium" - until we have a set of beliefs that hang together.

It's not just a theory of justice for which this is true. Rawls thinking applies more generally.

In financial markets, our beliefs are marked to market - in liquid ones with transparent prices, whether we like it or not. If you lose money then no matter how clever you are you have been wrong. This is one reason why I advise young people to work in financial markets. Doing so teaches you that your best ideas are often wrong and thus might imbue humility - a virtue lacking not just in Johnson's pigheaded idea that he knew more than the experts about long Covid but also in most of the contributors to the poshcuntstalkshitshows that pass for current affairs programming.

The same thing happens in science, when it is done properly. As Richard Feynman said:

It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.

Both cases require an exercise in Rawlsian reflective equilibrium. We must check both the facts (are the experimental results actually correct? Has the stock price fallen for a merely temporary reason?) and our beliefs (Were we wrong and if so why?) until we have better consonance between the two. That's just good Bayesian updating.

It's not just in the natural and social sciences that this should happen, though. It also happens in religious orders. Lorraine Daston describes how the many strict rules for Benedictine monks are tempered by the discretion of the abbot:

No precept is so rigid that it cannot be bent if the abbot judges that circumstances warrant an exception: it all depends.

In this way, an equilibrium is reached between the theory of the ideal religious community and the demands of everyday life. And, says Daston, the point holds more generally: rules must be tempered by discretion.

This is true in creative endevaours. The last of Orwell's rules for writing is: "Break any of these rules sooner than say anything outright barbarous." Writing is a process of reaching reflective equilibrium, going back and forth between rules of good writing (not necessarily Orwell's) and what sounds right.

The same's true in music. Charlie Parker advised: "First you learn the instrument, then you learn the music, then you forget all that shit and just play." But of course, you never really forget technique and scales. Instead they become part of your muscle memory; it's not good enough to have your brains only in your head. What you play is a reflective equilibrium, a consonance between instinct and technique or between the rules of harmony and your ears with each constraining and thus enhancing each other. Freedom, wrote Arnold Schoenberg "prospers best when under control."

You might think all this is trivially obvious. It's not. There are many instances of people ignoring this.

One of my favourites was when Steve Levitt and Stephen Dubner visited then-PM David Cameron to suggest reforming the NHS:

We suggested to Mr. Cameron that he consider a similar policy in a different arena. What if, for instance... everyone were allowed to go down to the car dealership whenever they wanted and pick out any new model, free of charge, and drive it home.”

Cameron, in a rare display of wisdom, showed them the door. What Levitt and Dubner failed to do was engage in reflective equilibrium, to ask: if the NHS is so theoretically absurd, why is it so popular and why so effective (before the Tories did their worst)? They didn't equilibriate between theory and big facts. They failed to see that theories of economics, just like theories of justice cannot be "founded solely on truth of logic and definition."

And that was not untypical of a lot of economics before the (arguable) "empirical turn". Many mainstream economists over-valued theory to the neglect of real world forces. They didn't ask: "this general equilibrium; is it in the room with you now?"

Not all departures from reflective equilibrium are merely absurd, though. They can be deadly. The Chilcott report said:

Senior decision‑makers – Ministers, Chiefs of Staff, senior officials – must have a flow of accurate and frank reporting...At times in Iraq, the bearers of bad tidings were not heard. On several occasions, decision‑makers visiting Iraq…found the situation on the ground to be much worse than had been reported to them.

There was not the back-and-forth between the theories of the government and the facts on the ground, and no equilibrium between the two.

That, though, was perhaps an isolated failure by Blair. Otherwise, he did achieve an equilibrium between his two big beliefs: the desire to get elected, and to be a socially democratic government. I'm not sure the same can be said of his epigones, who are pursuing "electability" to the denial of the facts of our widespread economic failure.

A more absurd example of such a failure was the Truss-Kwarteng Budget. Their enthusiasm for tax cuts was not challenged by facts: what's the evidence that tax cuts boost growth? How long does it take for them to do so? Should we be loosening fiscal policy at a time when bond markets are worrying about inflation? Again, no back-and-forth, no equilibrium.

The Tories might have learned from that episode that they must occasionally test their beliefs against the evidence. But they haven't. Instead we saw at the party conference a further retreat from any notion of having to do so. There was talk of the need for change without asking why this was necessary after 13 years of Tory government, and utter gibberish about 15 minute cities and meat taxes.

It's easy to see why the Tories should avoid trying to reach a reflective equilibrium. For years, they've had no need to do so as the media has consistently accepted their fictions, from austerity to "£350m a week for the NHS". And what's more, if you've no ideas about reality, why not escape from it?

Which in one sense is unconservative. Edmund Burke anticipated Rawls' reflective equilibrium when he demanded that high theory meets empirical evidence:

I cannot stand forward, and give praise or blame to any thing which relates to human actions, and human concerns, on a simple view of the object, as it stands stripped of every relation, in all the nakedness and solitude of metaphysical abstraction. Circumstances (which with some gentlemen pass for nothing) give in reality to every political principle its distinguishing colour, and discriminating effect. The circumstances are what render every civil and political scheme beneficial or noxious to mankind.

Now, you might have noticed that my examples of good use of reflective equilibrium come from the arts and sciences (investing is applied social science) whilst examples of its non-use come mostly from politics. Which poses the question: why is it so easy for politicians (of all parties) to sometimes be "operating in purely imaginary worlds," to use Kenneth Boulding's phrase? What must change to enable politics to be more like fulfilling, progressive and successful disciplines? Few political partisans, however, care about such questions: all that matters to them is that their side wins. Which is part of the problem.

Being a news avoider

All professionals are vulnerable to professional deformation - a tendency, often exacerbated by groupthink, to fail to see that their training and experience has inculcated into them an incomplete and biased view of the world. So it is, I fear, with Nick Robinson's claim that the Today programme's ratings are falling because of “news avoiders” who no longer want to face the world’s problems.

What this omits is that many of us who want to face the world's problems are unhappy with the BBC's coverage thereof. This isn't merely because of partisan bias; or because of individual errors and inaccuracies; or because the corporation is impartial between truth and lies; or because it over-indulges ignorant, evasive or dishonest politicians; or because it is insufficiently attentive to who sets the news agenda.

It's also because of another problem.

For years, much of the public has been horribly wrong about basic facts about society. Which alerts us to the likelihood that the media does not properly inform us. Such mistakes are worldwide, so the problem is much bigger than the UK media.

This happens because even the best journalism provides only a partial description of the world. Even when the news is the truth, it is not the whole truth.

To see my point, let's start with the sad story in the summer that the head-teacher Ruth Perry had taken her life after Ofsted had downgraded her school.

This highlights two things about the news. One is its focus on human interest stories to the neglect of less salient or eyeball-grabbing facts. Teachers have for years been angered, alienated and stressed out by Ofsted, but it took a suicide to drive this onto the news agenda. The other is that the story soon disappeared, long before anyone had satisfactorily answered the question of how best to regulate and improve our schools. News inherently has a short attention span and journalists are looking for the next new story, not the old one. This lack of attention span distorts politics. The government recently had a "health week" to get the media talking about healthcare in which everybody forgot that a week of chat is never going to solve the system's problems. What we had was airtime being filled to suit the government's agenda and to replace silence.

Journalists' love of human interest stories means that something gets deprioritized. That something is often statistics, which are much drier than anecdotes. My favourite example of this statistical illiteracy came from Jeremy Vine who, after a cycling accident, said: "This was the first penny farthing injury the hospital staff could remember seeing, which suggests they are normally extremely safe to ride.” Thus giving us a perfect example of base rate neglect.

His error is however not an isolated one. The BBC Trust has found (pdf) that "the BBC sometimes falls short in its reporting of statistics." We see this in (for example) reporting of attacks by XL Bully dogs. How common are these? How dangerous are such dogs? Reports of individual instances are dramatic and eye-catching but not informative. Yes, journalists' historic blindspot about statistics is being corrected by the rise of data journalism. But if we want an accurate picture of society, all journalism must be data journalism.

Which brings us to another problem. The news reports events rather than trends. It thus foregrounds politicians' words and deeds and neglects slow-moving developments such as our almost 20 years of stagnating productivity and real wages and the associated decline in real interest rates. The upshot is that, as Phil says, reporting "caresse[s] the surface of politics" by neglecting the socio-economic forces that shape it. Laura Kuenssberg, for example, said back in 2020 that the nation's credit card was "maxxed out". She was utterly wrong, because she was overly heedful of politicians' talk whilst ignoring the long-term slump in government borrowing costs. Similarly, the BBC was caught off-guard by the rise of Corbynism because it paid too much attention to MPs who disliked him and not enough to the countless young graduates who felt alienated from the system; an estate agent's window told us more about the source of Corbyn's popularity than most news reports. And it failed to see Brexit and the rise of anti-"woke" sentiments because it failed to appreciate that economic stagnation breeds both discontent and illiberalism.

Many social developments - economic stagnation, the decline in crime, fall in global poverty and so on - are emergent. They are not the product of any single individual's actions, so the journalists' emphasis on human interest causes them to neglect them and the knee-jerk question of "who's the hero or villain?" is the wrong one to ask.

This focus on events rather than trends means that journalism often produces expiring information - things that are briefly interesting but soon irrelevant: the minutiae of the Brexit negotiations, gossip about cabinet ministers' careers or day-to-day moves in share prices and so on. Which means that wider, generally applicable lessons aren't learnt.

To see what I mean, take just two cases from this week's news. One is that the police are switching off their bodycams or deleting footage from them. In response to this Jim Colwell, Acting Chief Constable of Devon & Cornwall Police, "says the vast majority of body-worn video shows good policing." This should be a good base for a discussion of selection bias. But it's not. Equally, reporting of HS2 should be a starting point for a discussion of the sunk cost fallacy. But it's not.

In both cases, viewers could learn useful lessons they could apply in everyday lives. But the news does not provide this. Instead, what we get are isolated facts presented with little context (how dishonest or not are the police? what if any errors and biases are made in decisions about infrastructure?) or inference. This doesn't happen because of bad journalism, but because of the nature of what news is.

And that's my point. Yes, we all complain, rightly, about the BBC's flaws. Even if these defects could be cured, however, the news would not properly inform us. And I'm not sure they could be wholly cured because they perhaps arise in part from the nature of journalism itself. Journalists' lack of grounding in statistics and social science makes them vulnerable to being overly influenced by fluent charlatans, especially if all they want is a soundbite; if you think this is confined to political reporting, you've not seen financial journalism.

This is an old problem. When I was growing up I saw almost every night news reports of murders in Northern Ireland by protestants, loyalists, Catholics or republicans. "What is all this about?" I wondered. But the news never told me; for that, I needed history and sociology books. As long ago as 1975 John Birt criticized journalists' "bias against understanding". Like many of us, he was better at diagnosing than curing. But the accusation he made still holds good now. It's quite reasonable, therefore, for people who are curious about the world to avoid the news.

Against politics

On my first morning of retirement I switched from the Today programme to Radio 3 and these days I never watch any politics or current affairs programmes on TV; all I know of them are the clips I see on Twitter. I'm not interested in politics*.

This seems a banal statement; millions of people share my lack of interest.

But I'm perhaps unusual among these. I was sufficiently interested in politics to want to study it at university; I was an active member of a political party for years; and I write what many of you consider a political blog.

What's more, my reasons for a lack of interest are not the usual ones. I don't think politicans are "all in it for themselves": I suspect they are no more dishonest or money-motivated than the rest of us would be in a comparable environment. And, despite Starmer's efforts, I don't think "they're all the same" ; there are important differences between the Tories and Labour for example on net zero or workers' rights.

Instead, one reason for my lack of interest is that politicians and those who report on politics are not much interested in what interests me, namely the social sciences. As Phil has pointed out, there's excessive interest in the biographies of politicians to the neglect of emergent social trends such as the rise of immaterial labour which has contributed to "wokeism"; the economic stagnation that's led to illiberal reaction or the rise of an unpropertied graduate cohort. Such neglect has caused the political class to be systematically surprised by important developments such as Brexit, Corbynism or the toxicity of Boris Johnson.

One manifestation of this ignorance is the attitude to public opinion. Both main parties believe the "customer is king" (except, obviously, when the public want nationalization or wealth taxes) wherein their only objective is to discover what opinion is. This forgets that opinion can be multi-faceted, mutable by the economic environment, media or by political activity, and a poor guide to people's well-being.

Another manifestation is the inability to see what politics even is. We need politics because there are sometimes (often) collective action problems wherein what is rational for each individual is often bad for everybody - the sort of problems that cause public goods and infrastructure to be under-supplied and public bads such as pollution and carbon emissions to be over-supplied. The government, however, has often been unaware of this - for example when Cameron urged drivers to fill up on petrol in advance of a fuel drivers' strike; or in their belief that whilst one benefit claimant might be able to find work not all will be able to.

Perhaps the costliest example, though, was Osborne's austerity which failed because of the well-known (to us at least) paradox of thrift - that if we all try to save the result is a drop in incomes and hence lower savings.

Such economic illiteracy was however not confined to then. Having tightened policy when they should have loosened it in 2010 the Tories loosened it when they should have tightened it in 2022. This is neither Keynesian nor Friedmanite but Morecombeite - playing the right notes but not necessarily in the right order.

But there are other examples. We also see it in the idea that privatization is a magic money tree, ignoring the fact that if we can't afford state pensions and healthcare then we can't afford private ones either. We see it too in much of climate policy where, as Eric Lonergan has noted, politicians use the wrong chapter of the textbook in imposing taxes and restrictions on carbon emissions rather than encouraging the use of substitutes to carbon technologies. And we also see it in utility policy, where the importance of regulatory capture is largely ignored.

The sound of political discourse is as offensive to any economist as would be an out-of-tune orchestra to a sensitive musician. Why should any of us listen to that?

Such innocence of intellectual matters is not confined to economics, however. There's pitifully litte connection between politics and philosophy. Whereas Thatcher often cited Friedman, Popper and Hayek as influences her epigones of all parties make no effort at placing themselves in any intellectual tradition. In political philosophy John Rawls is dominant. But any politician applying his difference principle - that social and economic inequalities "are to be to the greatest benefit of the least advantaged members of society" - would be so far to the left they'd be accused of antisemitism.

A lack of interest in philosophy would not be so bad if it were replaced by technocratic empiricism. But it's not. As we've seen in macro policy, the economic impact of Brexit and the possible decision to have HS2 stop in the middle of nowhere the government is heedless of empirical fact. And from Labour we rarely hear Blairite talk of evidence-based policy-making or "what matters is what works", perhaps because such principles would alert us to the fact that neoliberalism has given us two decades of stagnation and dysfunctional utility and rail industries.

Instead, what we have is a descent into simple irrationalism, as evidenced by conspiracy theories about a Whitehall blob (shared by a former PM); by Telegraph drivel about "wokesters" or by the rantings of GB News or Talk TV.

Labour is also guilty here. Its claim that Truss crashed the economy is simply false: crashed the pound and gilt prices, yes, but not the economy.

But such a claim "cuts through", as the political commentators say. Which is the problem. The media fails to filter out bad and wrong ideas and claims. And not just the billionaire gimp media but also the BBC. "Too many journalists lack understanding of basic economics" found the Blastland-Dilnot report (pdf) last year:

Too often, it’s not clear from a report that fiscal policy decisions are also political choices; they’re not inevitable, it’s just that governments like to present them that way. The language of necessity takes subtle forms; if the BBC adopts it, it can sound perilously close to policy endorsement.

Since the Brexit referendum the BBC has become impartial not just between Labour and Tories but between truth and falsehood. Instead, as Patrick Howse has pointed out, it has preferred to be in a race to be first to report the Downing Street line rather than a critical reporter of that line.

Which is part of a wider problem. Our "marketplace of ideas" contains many market failures: monopoly; bad incentives; unpriced externalities; and positive feedback loops wherein lies become more powerful the more they are repeated.

It's not just in selecting ideas that politics fails, however. The important fact about Truss is not merely that she was inept but that she was elected by a big majority of Tory members and cheered on by much of the press. This shows that politics fails in selecting good people. This is partly because intelligent ones are rightly repulsed by the stupidity of politics. But it's also because political parties have become less rooted in the empirical world of business and trades unions and more dominated by narcissistic cranky fanatics who demand not competence and ability but mere agreement with them.

Even if this problem could be fixed, however, another would remain. It's that politicians are unrepresentative of the rest of us simply because wanting to go into politics even for the best of motives is associated with dubious attitudes. People are more likely to become politicians if they are over-optimistic about the potential effects of policy and so fail to see that complex systems are hard to change for the better; if they are overconfident about their knowledge and ability and so under-rate the need for policies and institutions to be flexible and resilient to error; and if they over-emphasise the potential for top-down control, thus underestimating the power of individual agency whether it be expressed through markets or worker democracy.

Of course, all professions are prone to professional deformation: economists overweight the role of financial incentives and academics overweight intellectual ability, for example. But the thing is that political journalists share these distorted perspectives with the result that the political class is insufficiently self-critical. It is as unaware of these biases as fish are that they are wet.

Which brings me to another problem. There's insufficient pressure for all this to change. Most of the people who are interested in politics are simple partisans. They regard politics as our nans saw wrestling in the 70s. They cheer the heroes and boo the heels and occasionally whack the latter with their handbags but they've no interest in how to improve the quality of the game (or even in whether it is fixed). And so important questions are neglected: how to connect politicians with rational thought; how to take money out of politics and create a proper democracy wherein everyone has an equal say; or how to improve selection mechanisms so that bad ideas and egregious incompetents are filtered out.

Of course, one might come up with answers to these. But doing so is - to paraphrase Marx - like writing recipes when you have no kitchen. Why, then, shouldn't we retreat from politics and tend our own garden?

* Note to pedants. I'm defining "politics" here as the media does - as court gossip about a handful of people in Westminster. I am interested in political matters such as how power is wielded and by whom. But "politics" is this sense is very different from "politics" in the media sense.

The politics of stagnation

The government is changing the rules of the work capability assessment in an effort to push more people into work and thinking of cutting benefits. There's a link between this and those incessant scam phone calls we all get.

To see it, remember a fact which most political journalists neglect because of their focus on the minutiae of Westminster court politics. It is that the nature of capitalism shapes politics. As the man said:

The mode of production of material life conditions the general process of social, political and intellectual life. It is not the consciousness of men that determines their existence, but their social existence that determines their consciousness.

So, for example, in the 50s and 60s Fordist capitalism required a mass market for consumer goods. That gave us a Butskellite consensus between the main parties upon the need to ensure full employment. But when profit margins were squeezed (pdf) in the 70s, capitalism required labour to become more quiescent. Which gave us not just Thatcherism but years of confusion and conflict in the Labour party as it debated how to react to those new times.

Today, however, the defining feature of capitalism, and especially British capitalism, is stagnation.

This stagnation isn't merely a statistical artefact - two decades of sluggish growth in productivity, GDP and living standards. Its symptoms are all around us.

One is what Cory Doctorow has called the enshittification of the internet. Platform companies are no longer growing their customer base and so must instead monetize what used to be consumer surplus, with the result that "the surplus is handed to shareholders and the platform becomes a useless pile of shit."

Another symptom has been the housing crisis. Slower growth has led to lower real interest rates which in turn has pushed house prices out of the reach of many young people; an asset price is simply the capitalization of future cashflows and so a lower discount rate (lower interest rate) means higher prices.

Yet another symptom is our (further) retreat from meritocracy. It is faster-growing industries that create opportunities for people from poorer backgrounds: journalism in the mid-20th century; finance in the 80s; and IT in the 90s. When industries are stagnating, however, bosses don't need bright young things and so can instead hire their cronies.

And another symptom is the increase in fraud. Because it's no longer so easy to make profits honestly, more people are doing so dishonestly.

Exactly why we've fallen into this stagnation is a matter of debate: an ageing population; legacy of the financial crisis; lack of innovation; falling profit rates; and so on. For my purposes now, however, this debate doesn't much matter. What very much does matter is the fact that the economy is stagnating.

And this has numerous political effects. One is the rise of far-right views. Back in 2006 Ben Friedman wrote:

The history of each of the large Western democracies – America, Britain, France and Germany – is replete with instances in which [a] turn away from openness and tolerance, and often the weakening of democratic political institutions, followed in the wake of economic stagnation.

And Markus Brueckner and Hans Peter Gruener have shown that "lower growth rates are associated with a significant increase in right-wing extremism". Subsequent evens have proved this correct. When Suella Braverman claims that the anti-muslim views of people like Douglas Murray are "mainstream", she fails to add that, insofar as this is the case, it is because stagnation has driven some people to the right.

Brexit was another effect of stagnation. I'm not just thinking here of the fact (documented by Thiemo Fetzer) that a weak economy bolstered the Leave vote. I'm thinking also of the right's motives for wanting it. The thing is that since the 80s they had been given everything they wanted; lower taxes, privatization, weaker unions and so on. And the result was still a sclerotic economy. Rather than question their entire worldview, they looked for another scapegoat - and the EU was the obvious one. Hence talk that Brexit would lead us to "sunlit uplands".

Yet another effect is the cronyism surrounding the government's procurement of PPE during Covid. Such egregious corruption did not occur under Thatcher or Major. The change is not because people have had a bang on the head and become more dishonest. It's because it's harder for companies to make money honestly in a competitive market and so they must resort to exploiting political contacts. In the 80s, capitalists could say to governments: "give us weak unions and low taxes and we can make money". Today, they cannot say that and must use government more directly.

A further symptom of stagnation is Labour's talk of NHS reform. This is partly motivated by the trivial fact that in a stagnant economy devoting more resources to the NHS requires either tax rises or spending cuts elsewhere. These are difficult choices which the party would like to dodge by thinking that it can raise efficiency - oblivious to the evidence that two decades of reforms have done little to achieve this.

But there's another motive. Except for a few monopolies and crony businesses, capital cannot make easy profits. Boosting profitability therefore requires an expansion in the number of spheres where capital operates - in Marxian terms, it requires a larger realm of commodification. NHS privatization offers just this. It's for this same reason that the political class (though not the public) supports private ownership of utilities and railways, oblivious again to the evidence of their nugatory public benefit.

It's in this context that we should also interpret attacks on benefit claimants. The combination of near-full employment which has strengthened labour's bargaining power and an inability to raise productivity means that (outside of a few monopolies) capital cannot raise profits by increasing the exploitation of its existing workers. An alternative, therefore, is to increase the number of workers who can be exploited - which is another way of increasing the realm of commodification.

One further political effect of stagnation is the rise of culture wars. Because stagnation, as Friedman showed, promotes reaction and illiberalism, it creates a constituency amenable to whines about "wokesters." Also, though, much of the political class wants a culture war because it has no economic ideas: as Stian Westlake has said, the Tories have stopped thinking about economics.

This is not to say there are no answers to stagnation even within neoliberal thinking . The problem is that such answers require governments to attack vested interests: nimbys will fight planning reform; incumbent firms don't want tougher competition policy; lawyers and accountants will oppose tax simplification; and much of the finance sector doesn't want the higher real interest rates that would follow stronger trend growth. Pro-market - let alone pro-socialist - policies would in this context be revolutionary. Why not take the easy option instead?

In saying all this, I'm not accusing our political class of an intelligent choice of responses to stagnation. Instead, I'm saying that politics is sometimes like natural selection in biology, where the environment selects in favour of some random unintended mutations. Culture wars, cronyism, commodification and a lack of ideas that would disturb the existing order are all things for which our present capitalist environment selects.

It's commonplace to bemoan the corruption and vapidity of Westminster politics. What we must appreciate, however, is that these things are products of the state of the economy.

Thatcherism is dead: Thatcherism lives

Thatcherism is dead. It has ceased to be. It has expired and gone to meet its maker. It has kicked the bucket, shuffled off this mortal coil and joined the bleedin' choir invisible. That seems to be the obvious inference to draw from Penny Mordaunt's call for the reintroduction of national service.

Let's call this what it is - forced labour. Whereas Thatcher long and loudly proclaimed the value of freedom - so much so that the Economist's obituary labelled her a "freedom fighter"- her epigones now want to deny people the most basic of freedoms of what to do with their lives, thus rejecting Thatcher's assertion that "a man's right to work as he will" is "the essence of a free economy."

This, however, is by no means the only way in which today's Tories are profoundly anti-Thatcher.

She declared the single market to be “a fantastic prospect for our industry and commerce” which offered “complete freedom for our manufacturers, our road hauliers, our banks, our insurance firms, our professions to compete.” The Tories have of course ripped up these freedoms.

Thatcher also thought that a key role for government was to provide stability, so that companies could plan better for their futures:

An economy will work best when it is built on a framework of clear and predictable rules on which individuals and companies can depend when making their own plans. Government's primary economic task is to frame and enforce such rules.

Today's Tories, by contrast, lurched from creating years of uncertainty about Brexit to inflicting the ideological fanaticism of Truss upon the economy. "Fuck business" was perhaps the only sincere thing Boris Johnson ever said.

Also, the Thatcher government favoured a tax system that was neutral between income and capital gains, so that labour was not penalized relative to capital ownership: Nigel Lawson argued that taxing the two differently "creates a major tax avoidance industry". Today's Tories, however, regard tax-dodging as a feature not a bug, and want to encourage rentierism at the expense of real work. 

And then, of course, there's home ownership. Thatcher was smart enough to know that if you wanted people to support capitalism you had to give them at least a chance of owning property. Today's Tories have forgotten this. Which explains one massive difference between the 80s and now - that in the 1987 election the Tories actually led Labour by 39-33% among 25-34 year olds, whereas today (pdf) less than 15% of under-50s support them.

It's not just the Tories who have abandoned Thatcher, though. So too in many regards has public opinion. The majority of voters support public ownership of utilities and transport companies and a wealth tax. And many opponents of London's ULEZ plan favour vandalising cameras, which would have horrified Thatcher with her strong support for the rule of law.

Thatcher, it has been said (by John Gray, I believe), hoped to create a society of men like her father - a hard-working entrepreneur in a market society - but in fact left us one with men like her son, a talentless amoral grifter who made money by exploiting political contracts. We see evidence for this is not just in the economy's regress to feudalism in which wealth depends upon political power and asset ownership, but also in daytime TV. Programmes such as Homes Under the Hammer and Bargain Hunt show that the British public prefer to make money from rising house prices and selling tat rather than from the hard work, innovation and entrepreneurship which Thatcher lauded.

But, but, but. Despite all this. many Tories still think of themselves as Thatcherite, and many leftists believe our economy is Thatcherite. How can we explain this?

Simple. Although Thatcherism was an abject failure in terms of promoting support for widespread freedom and creating an entrepreneurial property-owning market economy, it was a success in another respect. It certainly did increase inequality. What matters here is not just income inequality, although the share going to the top 1% has risen from 6.8% to 12.7% since 1980. Inequalities of power in the workplace have increased with the smashing of trades unions and reassertion of "management's right to manage" (a now-overlooked Thatcherite slogan). And so too have inequalities of political power: whereas Labour used to be "in hock to the unions", it now defers abjectly to the billionaire-owned media.

And it is these inequalities that the right values far more than rhetoric about liberty and free markets. As Corey Robin has said, "the priority of conservative political argument has been the maintenance of private regimes of power." Or as the man put it:

The Tories in England long imagined that they were enthusiastic about monarchy, the church, and the beauties of the old English Constitution, until the day of danger wrung from them the confession that they are enthusiastic only about ground rent.

Benefits for capitalists

A recent Yougov poll found that most people think that people out of work should not be able to afford smartphones, takeaways, visits to the pub or pets. This is not just evidence of their mean-spiritedness, but also of their anti-capitalist attitudes.

I say so because of a basic economic idea - the circular flow of income. Out-of-work benefits are not so much payments to people as payments through them. They are payments to Greggs, Primark and Aldi and other places where recipients spend their money. Just as there's tax incidence, so too is there benefit incidence. The beneficiaries of benefits are those capitalists and employees who sell to the unemployed.

In this way, benefits serve several useful functions.

One is that they help to stabilize demand and cushion us from recessions. Monetary and fiscal policy cannot do this simply because, as Prakash Loungani has shown, recessions are unpredictable. The best such policies can do is hasten the recovery. To moderate the downturn we need automatic stabilizers of which out-of-work benefits are one. This matters, because stability tends to boost investment, as Nick Bloom has shown.

Secondly, such benefits subsidize and hence facilitate the creative destruction which is necessary for higher productivity. When benefits are mean we see more violent opposition to redundancy plans; less geographical mobility because people want to stay close to family and friends who could support them in hard times; and people being loath to move into potentially good but insecure jobs. In all these ways, out-of-work benefits help increase labour mobility.

To see a third benefit, imagine out-of-work benefits were increased. Recipients would probably not spend much of the extra on gas and electricity, but would do so on little treats - better food, a night out and suchlike. More spending on "luxuries" would therefore help increase the size of the competitive sector of the economy relative to the monopoly sector. It would support entrepreneurs against rentiers. That's good not only for allocational efficiency but also for dynamism and growth.

And for something else - the legitimacy of capitalism itself. An economy dominated by rentiers and monopolists is one that will struggle to justify its existence. One that can plausibly claim to give people what they want at reasonable prices has less difficulty.

In all these ways, intelligent capitalists favour reasonable out-of-work benefits. It's no accident that, in many countries, they were introduced not by leftist governments but by pro-capitalist ones.

Of course, against all these advantages must be weighed two potential drawbacks.

One is that when we are near full employment such benefits must be paid for by taxes or cuts in other parts of government spending, and those taxes would curb demand for the outputs of the competitive sector.

I'm not sure this is a grave problem though. If instead benefits were paid from a clampdown on procurement and subcontracting costs, the competitive sector would benefit relative to the extractive rentier sector. You might not like Tim Martin's politics, but a healthy economy has more Wetherspoons and less Capita.

A second possible drawback is that higher out-of-work benefits could reduce work incentives. This, however, is not a knock-down argument. For one thing, we could get people into work by making them fit to do so, for example by reducing NHS waiting lists. For another, work incentives are about the gap between out-of-work and in-work incomes. If both of these rise so that the latter remain well above the former, work incentives remain strong. And for another, a tight labour market should be a good thing as they encourage firms to economize on the use of labour by investing or improving working practices.

My point here is that you don't need to be a bleeding heart lefty to favour decent benefits for the unemployed. In fact, they are in the interests of capitalists (and people in work) themselves.

Which poses the question: why then, as that Yougov survey showed, is there such hostility to them?

One answer is overconfidence; people in work don't expect to lose their jobs, and so regard out-of-work benefits as payments to others rather than as insurance for themselves.

Another answer, I suspect, lies in reference group theory. We compare ourselves (pdf) to those around us, so many people on low incomes resent benefit claimants more than rich bosses - a resentment reinforced by our tendency to hate being thought of as mugs.

Whilst these might help explain popular antipathy to benefits it doesn't explain the Tories' hostility. Instead, this lies in a nasty fact, that there's something the right loves more than capitalism, and certainly more than free markets - hierarchy and inequality. As Corey Robin wrote:

The conservative defends particular orders – hierarchical, often private regimes of rule – on the assumption, in part, that hierarchy is order. (The Reactionary Mind, p24)

Decent welfare benefits undermine hierarchy. And for many on the right, defending inequality is more important than promoting well-functioning market capitalism.

The labour shortage "problem"

One of the tricks of bourgeois politics is to blame workers for the systemic failures of capitalism. So it is with the claim that there's a problem with increasing numbers of over-50s being out of the workforce. The Guardian, for example, says:

This is placing strain on the labour market, with many employers struggling to recruit, and is part of the reason for high inflation, the Bank of England has said.

The numbers, however, don't bear this out. There are now 3.47 million people aged between 50 and 64 who are economically inactive. Whilst this is 250,000 more than at the 2019 low-point, it is less than a year ago and less than the average in the 20 years before 2008.

Which poses the question: if 3.5 million over-50s being economically inactive was not a problem before 2008, why do the Bank of England and government think it is now?

A big reason is that we've had 15 years of flatlining productivity. We need to work harder - and have more of us doing so - because we are not working smarter.

Had GDP per worker-hour grown at the same rate since 2007 as it did in the preceding 30 years, it would now be 28% higher than it actually is. That means the average worker could be over £150 a week better off, or that all of them could take a day off a week without being worse off than they are now.

As it is, though, we are a poor country. To produce the things we want - that is, to overcome the lack of capacity which the Bank believes to cause inflation - we therefore need more workers simply to make up for our inefficiency.

One reason for this inefficiency is that many people are in the wrong jobs. There are the bullshit jobs described by David Graeber; guard labour such as supervisors, security guards and some middle managers which are needed to overcome the distrust engendered by capitalism and inequality; too many lawyers and accountants because of the complexity of the tax system; too many Border Force or DWP employees because of malevolent policy choices; and a bloated financial sector because of unpriced risk pollution and an false and ideologized perception of the fund management industry.

If bosses are "struggling to recruit" it is because too much labour is absorbed in doing things that are the product of capitalist failure.

But there's something else. Very few people have the luxury of cushy, enjoyable jobs where their employer will indulge their writing bullshit and harassing co-workers. Instead, many 50-somethings are leaving employment because it is dull or stressful - things which are often the result of rank bad management (and the public sector might be even worse than the private in this regard).
It was Adam Smith who wrote:

The man whose whole life is spent in performing a few simple operations, of which the effects are perhaps always the same, or very nearly the same, has no occasion to exert his understanding or to exercise his invention in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment.

Why wouldn't anybody who can afford to do so want to escape this fate?

This is especially the case because capitalism is the thief of time. As Marx pointed out, we must work longer than we need for our own ends because we must also work for capitalists and the state*. As we get older we appreciate that our time is running out - a point brilliantly made by Martin Hagglund's This Life - so this surplus labour time becomes more onerous.

My point here is simple. Insofar as government and capital need more people in work, it is only because of the failure of capitalism; the failure to increase productivity recently; the failure to allocate labour efficiently; and the failure to offer satisfying work. The labour problem is therefore in reality a capitalism problem. The system's lackeys and useful idiots, however, must go to great pains to deny this truth.

* We might add that many of us must also work for landlords, but this will actually keep younger people in work for decades.

Another thing. Some Tory fool says we over-50s can become Deliveroo drivers. Having been knocked off my bike yesterday by somebody who didn't realize that we drive on the left in this country, I have a lively impression of why people might choose not to do this.

The right's "woke" capitalism problem

Whatever happened to the right's faith in market forces? I ask because of their complaints about "woke capitalism" after Coutts refused Nigel Farage's custom.

Farage says:

I find it extraordinary that in modern corporate Britain, being seen to be politically correct matters more than making profits.

In theory, though, market forces should solve this problem. Imagine a business were to systematically turn away customers whose views it didn't like. Then a rival company that wasn't so fussy could serve them. This rival would expand at the expense of the "woke" one, possibly even driving the latter out of business. In a well-functioning market economy, companies have to care about making profits because if they do not they go bust.

There's an analogy here. Gary Becker claimed that this would be the fate of racist employers. Companies that discriminated against black people - that is, ones that thought that being politically incorrect mattered more than making profits - would, he said, suffer a competitive disadvantage as non-racist rivals hired good black workers or served black customers.

This isn't wholly fanciful. Becker pointed out that young industries with small growing companies were less likely to discriminate than older bigger firms where market forces weren't so powerful; in the 1920s Hollywood and Tin Pan Alley were more hospitable to Jews or blacks than less competitive banks or steel firms.

And in the 1970s black footballers were rare, partly because of racist stereotypes of them being lazy and ill-disciplined. Then West Brom manager Ron Atkinson* signed the "three degrees" and his team, inspired by them, did so well that other teams hired black players. Yes, those stereotypes persist but there are countless more black players in football now than there were when I was a kid.

The analogy is not perfect, however. Whereas racist businesses refused to hire or serve black people, "woke" ones are generally not refusing to employ Remainers or declining their custom: Coutts is closing Farage's account because it will no longer meet the criteria it imposes on all accounts, as Frances Coppola has explained.

But the point holds. If people don't like "woke" companies, there's a market opportunity. Non-"woke" companies can appeal to them and take business from the "wokesters". Competition should select against companies that pursue goals other than maximizing profits. Companies who think that "being seen to be politically correct matters more than making profits" should therefire shrink and go out of business. The market should solve the problem of "woke" capitalism, just as Becker thought it should solve the problem of racist capitalism.

Granted, it does so at a cost. Becker warned that the profit-maximizing solution would lead to racial segregation as black workers flocked to non-racist companies or served black clients rather than racist whites. But I don't see this applying to "woke" and "non-woke" firms. Yes, there are probably more Remainers in Starbucks or Prets than in Wetherspoons, but this probably reflects our big demographic divide than the professed ideology of those businesses. We're a long way from Jim Crow.

Also, it's not clear historically how far Beckerian competition caused racist companies to decline rather than the effects of legislative and cultural change. Which poses the question: could it be that the right whine about "woke capitalism" because it fears it is on the wrong side of cultural change and so cannot hope to reverse the tide of "wokeness"?

But the question remains: why hasn't the market (yet) selected against "woke" businesses?

One thing Farage has said actually sharpens the question: "they're all woke; they're all remainer". But this just means there is a bigger potential market for a non-"woke" company.

There's one answer Becker gave to this question that doesn't seem to apply. Profit-maximising employers, he said, had to consider the tastes of their customers or of other workers. They could lose business if racist customers refused to eat in the same cafes as black people, and lose staff or productivity if racist workers were unhappy to have black colleagues. And so even profit-maximizing firms might discriminate against blacks.

But this doesn't apply to "woke" companies today. Coutts is not closing Farage's account because "woke" customers refuse to bank with a firm that has him as a client. Nor are other "woke" capitalists such as Starbucks or Ben & Jerry's facing an efflux of customers who refuse to buy coffee or ice cream from companies that might occasionally sell to Brexiters.

Instead, I suspect the answer lies in a mundane fact - one that applied also to racist or sexist companies. Quite simply, the wheels of competition do not grind finely. Nick Bloom and John Van Reenen have shown (pdf) that there is "a long tail of extremely badly managed firms." If market forces don't weed out these, why should they weed out "wokesters" - especially as professing (not necessarily sincerely) political correctness might be a handy marketing strategy? There is, as Adam Smith said, a great deal of ruin in a nation.

It's easy to see why. In many industries there are big barriers to entry in the form of high capital requirements (have you tried setting up a bank?), intellectual property protection, the difficult of finding good premises, or simply the hassle to customers of switching.

Of course, lefties have pointed out such frictions for decades: that's why they were sceptical of the more optimistic interpretations of Becker's analysis.

What's odd is that the right has, implicitly, come round to agreeing. Which poses some questions. As Robert Shrimsley has asked, if the right no longer supports free markets what exactly is their mental model of the economy? And were the right ever sincere in the support for free markets, or was this support only strong when those markets were operating to weaken the working class?

* Atkinson, like many men of his time, had racist attitudes. Which shows that you don't need to be a saint to combat racism, but just someone who cares about winning football games and making money.

Fiscal conservatism, economic radicalism

Sir Keir Starmer has ruled out significant rises in public spending under a Labour government. He's partly right. What his supporters and many critics fail to appreciate, however, is that a tight fiscal stance is wholly consistent with some very left-wing policies.

First, why is he partly right?

The answer has nothing to do with "iron-clad fiscal rules". Such talk is merely to appease the nonces, imbeciles and billionaires' gimps in the media.

Instead, Labour's problem is that we are close to effective full employment; certainly, there are very few doctors or builders out of work. This means that any increase in public spending in excess of taxes would be potentially inflationary and would therefore (given the current inflation target) lead to the higher mortgage rates Sir Keir warns us of.

Just as Blairites fail to see that it's not 1997 any more, so some of Starmer's critics fail to see that it's not 2010 any more. There aren't the unemployed real resources to permit a significant fiscal expansion.

This does not, however, justify sticking with every detail of the Tories' spending plans such as the two child benefit cap. From an economic point of view, increased public spending is perfectly acceptable if it is matched by taxes which would offset the boost to aggregate demand. Sticking with the Tories' plans might be a coherent media strategy, but it is not an economic necessity.

Rigid fiscal discipline, however, by no means rules out radical policies. Here are a few Labour could follow:

Economic democracy.

It's no accident that our 15-year long stagnation in productivity and real wages followed rising inequality, because there are many channels through which inequality can depress output. Fixing this requires institutional change. As Joe Guinan and Martin O’Neill say:

The institutional arrangements at the heart of today’s British capitalism – concentrated private ownership, corporate dominance, and the overweening might of London-based finance capital – together form a powerful engine for the extraction of value and its distribution upwards. It is this basic institutional design that drives the outcomes we are seeing in terms of crumbling public infrastructure, social atomisation, environmental degradation, and a widespread sense of popular disempowerment.

Part of the solution here involves tougher regulation and tax reform, such as abolishing the carried interest anomaly - a fiscal tightening Labour should approve.

Another part requires the encouragement of more worker democracy (pdf), simply because we have evidence that this would raise productivity. As Virginie Pérotin puts it:

Worker cooperatives are more productive than conventional businesses, with staff working “better and smarter” and production organised more efficiently.

This could be done by - for example - using central and local government procurement to favour worker-owned companies or social enterprises; giving workers first refusal when a business is sold; encouraging lenders to better support coops (assuming that a National Investment Bank is off the agenda for wrong-headed fiscal reasons); or giving tax breaks to employee ownership schemes.

Tougher regulation.

Beefing up competition policy doesn't require more public spending. Nor does an attack upon regulatory capture: the revolving door between Ofwat and water companies' management shows that the former does a poor job of keeping the latter in its place.

We don't necessarily need nationalization to address this problem. We could convert water companies into franchises which bid for time-limited contracts to supply water, run sewage networks and so on.

Alternatively, the government could simply impose price caps itself on utilities rather than have captured regulators do so. The theory of the second-best shows us that where there is a market failure (such as a natural monopoly) another market "distortion" can be efficient.

Tax and benefit reform.

Taxes and benefits both need to be simplified. Reducing the conditions attached to Universal Credit, for example, would be a small step towards a basic income and would actually be "fiscally responsible" by cutting the number of administrators and work coaches.

And the goal of tax reform should be to shift towards taxing (pdf) inheritances and land rather than incomes - starting perhaps with a commercial land tax.

A maximum wage.

This is typically justified in terms of fairness, to stop executives earning hundreds of times more than their employees.

There is, however, a case for such a limit in terms of efficiency.

For one thing, big inequality can reduce an organization's efficiency as middle management spend their efforts on office politics or looking for the next job; or as they look to highly-paid bosses to give the lead rather than taking their own initiative.

Against this, you might argue that such a maximum would reduce the supply of talented bosses even more than it is currently restricted. This, however, could be a good thing: if it encourages the break-up of large firms it would decrease monopoly power.
If the maximum does not apply to companies where the CEO has a large ownership stake, it would have another advantage. It would encourage CEOs to set up their own companies. In this way, we'd get an increase in the number of talented entrepreneurs.

Now, I've not gone into detail on these because, to paraphrase Marx, there's no point writing recipes when you don't have a kitchen. Instead, I'm just saying that Labour could in principle be economically very radical even whilst having a tight fiscal policy and ruling out nationalization.

There's a strand of social democracy - I'm thinking of Polly Toynbee - which see politics largely through a tax-and-spend lens and which is therefore disappointed by fiscal restraint. Such a social democracy however works only if capitalism is healthy so that economic growth will deliver taxes. But capitalism is not healthy. We need radical supply-side measures to boost productivity.

You'll object here that the policies I've outlined are neither "practical" nor "credible".

And that's the point. Although these policies might well boost economic growth (and I've not mentioned rejoining the single market) whilst reducing inequality Labour is not offering them. Which suggests that its talk of fiscal discipline is not merely an economic policy. It is instead part of a wider message - of placating the right by showing that it is no threat to inequality and extractive capitalism. Labour is capital's second XI - and the second XI of the most backward and regressive parts of capital at that. 

On being conservative

Katherine Birbalsingh recently tweeted something insightful:

"Having small c conservative values" is not political. Many lefties have them.

True. I think of myself as one of these.

The conservative disposition, wrote (pdf) Michael Oakeshott, "is averse from change, which appears always, in the first place, as deprivation." And there have been many changes in my lifetime which are indeed deprivations: the dumbing down of the public sphere and disappearance of the public intellectual; the loss of music teaching in state schools; the closure of thousands of pubs; the insertion into football of billionaire owners backed by repressive states; the loss of cleanish bathing water in our seas and rivers; the declining quality of popular music. And don't get me started on cricket.

But here's the thing. Many of these losses have been inflicted upon us by neoliberal capitalism: the privatization of water; the view that schooling (or at least state schooling) must merely prepare youngsters for labour; the opening up of English institutions to predators of all nations; and a university management which valorizes unreplicable "research outputs" over genuine intellectual work.

Not least of these impositions have been the forces that have diminished the traditional "middle-class". Financialization has led to thousands of people in professional jobs being unable to buy a house - a development which would have appalled Thatcher with her advocacy of property-owning democracy. And the professions themselves have been degraded by managerialism - hence gruelling hours and the loss of autonomy.

Neoliberal capitalism has done much more damage to the traditional English way of life than "cultural Marxism" or "wokesters" ever have.

In fact, the very use of those terms by the right is a sign of a temperament antithetical to small-c conservatism. Whereas small-c conservatism - as expressed by Burke or Oakeshott - advocates cool-headed scepticism and attention to empirical fact, talk of "wokesters" or "cultural Marxists" is that of fanatics who live in their own head or (what is just as bad) get their ideas of the world not from the evidence of their own eyes but from the scribblings of billionaires' gimps.

Not that their fanaticism stops there. Liz Truss was propelled into government by a small cult. And her belief that a tax-cutting Budget could boost growth even when the economy was close to full capacity was a denial not only of conventional macroeconomic thinking but also of Burke's conservative dictum:

Circumstances (which with some gentlemen pass for nothing) give in reality to every political principle its distinguishing colour, and discriminating effect. The circumstances are what render every civil and political scheme beneficial or noxious to mankind.

Her ill-fated premiership was at one with Brexit in this regard. The conservative, wrote Oakeshott, is "cool and critical in respect of change an innovation", preferring the tried to the untried. Brexiters, however, were the opposite of this - fanatics for change who, in most unBurkean fashion, over-estimated the capacity of government to achieve a satisfactory post-Brexit settlement.

"We tolerate monomaniacs, it is our habit to do so; but why should we be ruled by them?" asked Oakeshott, adding that goverment should "protect its subjects against the nuisance of those who spend their energy and their wealth in the service of some pet indignation."

In all these respects, therefore, the small-c conservative should be antipathetic to today's Tory party and to the neoliberal capitalism it (partially) represents.

Which leads to a puzzle. Ms Birbalsingh went on to commend National Conservatism as a grouping of small-c conservatives. Its defining features, however, seem to me to be not hostility to Brexit, Truss and neoliberalism but to migrants, "gender ideology" and "wokesters". Yes, there are complaints that policy-makers have put "the abstract goal of global free trade ahead of the economic welfare of all citizens." But the new right is defined more by culture war issues than by an antipathy to actually-existing capitalism.

Part of the reason for this is that conservatives love what they have come to know, which leads to Scruton's point*:

The disquiet over immigration [is] the result, it seems to me, not of racism, but of the disruption of an old experience of of home, and a loss of the enchantment which made home a place of safety and consolation. (England: An Elegy, p7-8)

This, however, runs into two problems. One is that migration isn't the only thing that's disrupting our old experience of home. So too (for example) is the environmental change caused by water companies and climate change. We would therefore expect anti-migration sentiments to be correlated with support for green policies. Whilst this is true in some cases, such as some nimbys or Zac Goldsmith, the opposite is more often the case: Ukip, for example, is campaigning against decarbonization policies and wants to reopen coal mines.

The second problem is that those areas that have actually experienced more immigration - and therefore one supposes more disruption of home - are more accepting of it; it was areas with low migration who were more likely to vote for Brexit, for example.

This might be because fear is worse than reality. Or it might be because of something else.

That something is that the idea of home is, for some, not merely an empirical matter of one's local area and the people and places we see every day but is instead a reified and ideologized notion. "Britain" is a bundle of symbols and myths, such as of a benign Empire or wholly heroic Churchill. And this "Britain" is identified with rich, white (and southern) people so that Russian agents are more "British" than Muslims or trades unionists. Which is a legacy of an old attitude described by C.B. Macpherson in The Political Theory of Possessive Individualism: "the poor were not full members of a moral community...They were in but not of civil society."

Such patriotism is thus a love of a cleansed and mythologized nation.

Which is paradoxical. For me, one of the attractions of small-c conservatism is its empiricism and distrust of abstractions and dreams. And yet small-c conservatives on the right too often invoke just such an abstraction - that of what Benedict Anderson called an imaginary community. This is not to say they are flat wrong: we all need myths and legends. It's just to say that we can and should separate small-c conservatism from anti-migrant sentiments. To fail to do so is to miss the many strengths of conservatism.

* Scruton went on to add that "the right of asylum is an untouchable provision of the English law", putting him to the left of today's Tories.

Inflation: a political problem

Why is inflation a problem? I ask because the common sense answer is wrong, whilst a standard answer among economists is out-of-date.

You might think the answer is obvious: inflation is making us poorer. Not so. Of course, wages haven't kept pace with prices, especially of food and fuel. But this, strictly speaking, isn't inflation. It is a change in relative prices. If utility bills were rising 17 percentage points faster than wages and food prices 12 percentage points we'd have a problem even if other components of the CPI were falling so that overall inflation were low.

Nor are higher mortgage rates a cost of inflation. They are a cost of bringing inflation down. And this is a policy decision in two senses: first to want to cut inflation; and secondly to do so through higher interest rates rather than through other means such as higher taxes or price controls.

We define inflation as a rise in the general price level, in which prices and wages rise at the same rates. What's so wrong with that?

For years, the standard view among economists was: not much, unless the inflation is unexpected. As Milton Friedman wrote (pdf):

Anticipated inflations or deflations produce no transfers from debtors to creditors which raise questions of equity; the interest rate on claims valued in nominal terms adjusts to allow for the anticipated rate of inflation. Anticipated inflations or deflations need involve no frictions in adjusting to changing prices. Every individual can take the anticipated change in the price level into account in setting prices for future trades. Finally, anticipated inflations or deflations involve no trade-offs between inflation and employment.

And in 1995 Robert Barro found that it was only high inflation - above 15% - that had a statistically significant impact in reducing economic growth.

Why, then, worry about inflation?

One answer is that it can raise taxes. If our wages rise by, say, 10% at a time when prices are rising 10% we are no better off. But that 10% rise will make us pay more tax, and push many of us into a higher tax bracket. Which is happening now. HMRC says that the number of people paying the higher rate of income tax rose by over 40% from 2020-21 to 2023-24.

I don't think this is a cost of inflation, though. It is a cost of the government's conscious decision not to index tax allowances to the rate of inflation - something which, thanks to the Rooker-Wise amendment of 1977, used to be the case.

Instead, Friedman's beef with anticipated inflation was different. Higher inflation and higher interest rates, he said, caused us to economize on holding cash; because it pays no interest it is more expensive the higher are interest rates. That in turn means that, rather than carry lots of cash on the hip, we have to make more trips to the bank which means we waste more time walking there and standing in queues. Economists called these "shoe-leather costs". In the late 90s, Bank of England economists estimated these to be significant - equivalent to £60bn at the time, which is almost £120bn in today's money.

But obviously, this is out-of-date. Many of us rarely use cash today; the quantity of notes and coins in circulation has fallen in the last two years, and many of these I suspect are sitting in vaults and jars rather than changing hands rapidly.

If shoe-leather costs are no longer so significant, then, what is wrong with inflation?

Maybe not much. Good judges have for years advocated raising (pdf) the inflation target, on the grounds that the benefits of low inflation are small and outweighed by a cost - of the risk of low inflation becoming a deflation which drags us towards the zero bound wherein monetary loses its efficacy.
I suspect, though, that there are reasons why inflation is a bad thing.

For one thing, it creates uncertainty; this is perhaps one reason why the inflations of the 70s and late 80s were accompanied by rises in the households' saving ratio.

The uncertainty here isn't just our reaction of "how much?!" when being charged £13 for a pint of beer and glass of wine at the Hornblower. It's deeper than that. Inflation enriches some at the expense of others. And it does so not on the basis of contribution to society but upon factors such as: how real interest rates move; whether one has a nominal fixed income (such as an annuity or contract to deliver goods at a given price); or - of course - one's bargaining power. As Maynard Keynes wrote (pdf):

The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the existing distribution of wealth... and the process of wealth-getting degenerates into a gamble and a lottery. Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency.

Right now, this "arbitrary rearrangement" is benefiting higher earners and larger capitalists who can exercise their greater bargaining power.

You might think this is welcome from a capitalist point of view.

Not necessarily. Capitalism requires not just favourable conditions for profit-making but also legitimacy. And inflation undermines this by reminding us that the notion that incomes depend upon marginal product is an ideologized fiction. Although discontent for now is manifesting itself only in lukewarm support for an unimaginative Labour party from mortgage-saddled former Tories, there's no assurance people will remain so passive if inflation persists. The inflation of the 70s, remember, fuelled sincere talk of a "crisis of democracy", and earlier hyperinflations in Europe had nastier effects.

From the point of view of rentiers and some larger capitalists (if nobody else!) British capitalism was working well in the low inflation era. Why risk rocking the boat?