Stumbling and Mumbling

Full employment, capitalism & regress

The Guardian is reinventing the wheel. Its leader yesterday said:

Nobody but the government can take responsibility for maintaining the total level of spending in the economy at a level that keeps the country as close to full employment as possible.

Like all the best ideas, this is not original. In fact, it’s as new as powdered eggs or Woolton pie. It echoes this from William Beveridge in 1944 (pdf):

It must be a function of the State in future to ensure adequate total outlay and by consequence to protect its citizens against mass unemployment. (Full Employment in a Free Society, p29)

Which poses the question: why has Beveridge’s thought been so forgotten that it must now be rediscovered?

The answer is that, by the mid-70s, full employment was causing inflation, industrial unrest and a squeeze on profit margins, much of which vindicated Kalecki’s famous prophecy (pdf):

Under a regime of permanent full employment, the 'sack' would cease to play its role as a disciplinary measure. The social position of the boss would be undermined, and the self-assurance and class-consciousness of the working class would grow. Strikes for wage increases and improvements in conditions of work would create political tension.

Partly fueled by this, there was an intellectual backlash against Beveridge’s Keynesianism. Insofar as full employment was a policy aim at all, many economists thought it should be pursued by the control of inflation, supply-side reforms of labour markets such as controlling trades unions and curbing welfare benefits, and giving businesses a stable environment in which to invest and grow. Although this general approach took many specific forms - monetary targets were swiftly abandoned for example – New Labour largely continued it, as did the Tories with George Osborne’s idea of “fiscal conservatism and monetary activism”.

This approach, however, has failed. Even at its low-point last year, there were 1.3 million officially unemployed, another 1.9 million out of the workforce wanting a job, and millions more not working the hours they’d like.

Which lends credence to the Guardian’s rediscovery of Beveridge’s claim.

But would this actually work?

In a sense, it’s not really ever been tried. We didn’t see much counter-cyclical fiscal policy in the post-war decades. Full employment probably owed more to the fact that the war had created a huge backlog of demand – although it’s also possible that the mere assurance that governments were committed to full employment helped sustain expectations of demand.

And it might not work this time.

If wage-led growth is to be feasible (pdf) capitalists must continue to invest in the face of incipient wage pressures in the expectation that aggregate demand would stay high.

But this is doubtful. Higher wages might not lead to proportionately higher demand. This would be the case if workers use their pay rises to pay off debt or save more, or if they buy foreign goods and services instead: some researchers have found that wage-led growth is less likely in open economies for this reason.

Also, there are two big differences between now and the immediate post-war period. Back then, capital spending and private sector hiring stayed strong because there was a backlog of innovations and a high profit rate. But as Robert Gordon and Michael Roberts have shown, these factors are now absent.

And then there’s the problem that neoliberalism is partly performative. For decades, industrialists have become accustomed to slack labour markets and a quiescent labour force. Ending this regime could in itself weaken animal spirits.

What’s more, a big section of capital would be ill-served by wage-led growth. Finance capital does well from weak aggregate demand because this cuts the interest rates on which leveraged strategies depend: Ford might have needed full employment; Goldman Sachs does not.

For these reasons, there’ll be strong capitalist opposition to a return to Beveridgeism - objections which I fear will apply just as strongly to a job guarantee. Which matters, because full employment is not merely a matter of technical know-how, but of class power. As Kalecki said:

The assumption that a government will maintain full employment in a capitalist economy if it only knows how to do it is fallacious.

But what inference should we draw from this?

It is NOT that full employment is impossible. Rather, it is that it is incompatible with capitalism.

This, of course, is not a new inference nor even a uniquely Marxist one. The monetarist/new classical backlash against Keynesianism was not the only intellectual response to the crisis of the 70s. There was another one. Some economists showed that full employment could be sustained with worker ownership: Martin Weitzman called this the share economy and James Meade wrote of labour-capital partnerships. Full employment created inflation because it fueled a “battle of the mark-ups”. But if workers and capitalists are the same people, the battle lines disappear.

Beveridge actually anticipated something like this response. In 1944 he wrote:

Whether private ownership of means of production to be operated by others is a good economic device or not, it must be judged as a device. It is not an essential citizen liberty in Britain... If…it should be shown by experience or by argument that abolition of private property in the means of production was necessary for full employment, this abolition would have to be undertaken. (Full Employment in a Free Society, p23)

This approach has, however, been almost totally forgotten – including, it would appear, at the Guardian.

So great and so total has been the intellectual regress of recent decades that our most left-wing newspaper today is far to the right of a man whose mindset was that of a nineteenth-century liberal.

Our priorities

One of the dafter genres of political writing is the offering of unsolicited advice to leaders. Nevertheless, I’d like to suggest what I would do if I were Sir Keir Starmer. You can think of this as advice if you’d like, but I’d rather regard it as a way of contrasting two different types of politics.

What I’d do is to greatly beef up the party’s National Policy Forum, giving it more resources, a much higher profile and emphasising that it is open to all. We need ongoing informal and widespread public inquiries in which experts, the public and interest groups are engaged. These should be exercises in deliberative democracy in which devices such as citizens’ juries are combined with academic research.

Connecting with grassroots is not an alternative to technocracy. The two are complements because good policy requires a detailed knowledge of ground truth.

I stress here that these are not focus groups: the party must ask not “what do you think?” but “what do you know?” And the results of this research must form policy, and not be over-ridden by the instincts of party leadership or by the search for quick headlines. Phil says that:

Labourist politics relies on mass passivity, it's an elite project where the masses vote in the politicians, and they make the changes by passing legislation.

This must change.

Here are some examples of what I mean:

 - What is global best practice? Why have some countries such as South Korea and New Zealand handled Covid much better? Why is French childcare so good and cheap? Why has Finland (until recently) had better education outcomes? Can we learn from these, or are there cultural factors that prevent us importing their success? And so on with respect to public transport, infrastructure, vocational training etc. In contrast to Tory waffle about a “world beating” test and trace scheme, Labour should have detailed empirical evidence on best practice in public services from around the world.

 - How do we put in place the right policy infrastructure for fighting recessions? This year’s events have reminded us that recessions are unpredictable. And the government’s response has been patchy, with many (especially the self-employed) not getting the financial help they need. Which poses the question of how to ensure the government or Bank of England can get support quickly to everybody in the next downturn. The means of delivering helicopter money or people’s QE must be in place.  

 - How do we reform the tax and benefit system? Yes, there’s a case for land value tax. But the details are key: how to value land, what to do about people who are asset-rich but cash-poor and so on? Ditto lots of other tax changes, such as ending the bias towards corporate debt. The same’s true of benefit reform. Whilst a basic income is appealing, can we reconcile it with wide variations in personal needs and housing costs? In these questions, the experience of benefit users is crucial: how can we make the system as simple and quick as possible, so users do not face weeks without cash, or uncertainty and harassment, and how can we ensure that the transition from benefits to work is as smooth as possible?

 - Why have real wages stagnated since the mid-00s, and how might this be reversed? The main reason is stagnant productivity rather than increased exploitation. And there are many likely causes of that stagnation. But how can we get productivity going again? Increased aggregate demand is part of the answer. So too is better training and management, stronger competition (included from overseas), more innovation and R&D and - yes- greater equality. But how to achieve these?

 - What are the links between economic growth, institutions and values? We know from Ben Friedman’s work that economic growth increases tolerance and liberalism, so we need it to reduce the right’s ability to exploit culture wars; the left will win these by economic growth, not by being dragged onto the right’s terrain. Necessary as growth is, though, this does not suffice to get us to socialism. Some believe that this requires a change in values, towards more reciprocal altruism. But what institutions might promote such values? Failing that, how might we harness self-interest to promote socialism? How far can or should we promote decommodification, for example?

 - How can we empower working people? We know that union membership and more autonomy improve worker’s well-being – which is great not only in itself but also because happier workers are more productive. But how can these be extended? Is a shorter working week also feasible? How else might job satisfaction improve?

 - What corporate forms should government encourage? We’ve evidence that coops can raise productivity, and that a stock market listing can reduce efficient investment. Which poses the questions: how far can cooperatives be rolled out? What form should worker control take? What are the relative merits of regulation and nationalization in dysfunctional industries (I suspect there’s a stronger case for nationalizing banks than utilities)? How can nationalized industries be put under effective and democratic control? How far should outsourcing go, and should it be dominated by the usual suspects? Can procurement policy be used to encourage coops? I’m not sure there are general answers here. Context is everything.

 - How might we best achieve value for money in the public sector? We all know that the only binding economic constraint upon fiscal policy is inflation. But there might come a time when this constraint bites. So efficient public spending matters. But how can we ensure that government procurement isn’t dominated by cronyism? How can we empower public sector workers to identify waste and improve efficiency?

 - How can we best promote green growth? We know we need it. But what are the mechanisms? How do we best encourage green R&D and innovation? What’s the role of taxes and subsidies?

You might reply here that we know some of these answers. Maybe. But politics isn’t only about ideas. It’s about what ideas get mobilized and which side-lined. The point of such an exercise is to increase the salience of these policy areas – to ensure that they, and not the passing faff of newspaper headlines, form the agenda. This requires a form of message discipline from Labour MPs - to stick to issue that matter and not respond to media froth. 

What’s more, abstract centralized knowledge of principles is not enough. We need detail and ground truth. And this comes from mobilizing not just academic experts, but local experts – those with hard experience of getting benefits, working in the NHS, setting up a small firm and so on. Hence the need for widespread, bottom-up deliberation.

This might seem technocratic stuff. And God knows we need that. But it’s a different sort of technocracy. It’s not the bullshit managerialism of New Labour, but a genuine drive to harness local expertise. Ground truth is everything.

But it’s more than that. What all this amounts to is a different way of doing politics. It sets the agenda. It says: our focus is upon real, material living standards, and we must resist distractions from this. It also says that policy is to be developed not with regard to fleeting newspaper headlines but to hard empirical evidence. Policy is not something to be pulled out of your arse or a newspaper column.

The aim of this exercise should be to marginalize the likes of Kuenssberg and Peston, as well as all those centrists and right-wingers who think that politics is about the voices in your head rather than the ground truth of living standards. The message to these should be: you are irrelevant.

Now, it should be obvious that my point in saying all this is not to offer advice to Starmer but rather to highlight how a different politics is possible, and how Westminster-centric politics is a trivial distraction from material truths. In an age of stupidity, the pursuit of expertise becomes a revolutionary act.

Farage's dangerous appeal

Nigel Farage’s effort to rebrand the Brexit party as an anti-lockdown faction poses the question: what’s the link between being pro-Brexit and anti-lockdown?

It might seem there’s none. Sure, anti-lockdowners are proclaiming the virtues of freedom. But the anti-migrant sentiment Farage stirred up during the Brexit referendum is the antithesis of libertarianism. If we put it nicely, Reform UK is an unstable coalition between cultural conservatives and libertarians. Less nicely, it’s just another toxic grift.

Perhaps, though, there is a common theme between hostility to migrants and the lockdown. It lies in something Richard Sennett wrote fifty years ago in The Uses of Disorder. Social life, he said, is a process of awkward encounters not just with other people but with a reality that is other than we’d like it to be. Many people cope with this by developing a “purified identity” that denies dissonances and discomfort:

The threat of being overwhelmed by difficult social interactions is dealt with by fixing a self-image in advance, by making oneself a fixed object rather than an open person liable to be touched by a social situation.

Such a self-identity, said Sennett, is “a fearful defence against the unknown future” which arises from “a fear of the sources of human diversity that create history.”

Farage’s reaction to feeling “awkward” on hearing foreign languages on a train exemplifies this. It was not to celebrate the freedom that people have to come to the UK, nor to wonder what benefits diversity brings. Instead, it is to resist such migration. His fixed identity must have priority over dissonant reality. (We might add that this fits Perry Anderson’s idea of “imagined communities.” As Sennett says, “the myth of community solidarity is a purification ritual.”)

In the same way, rather than see the lockdown and mask-wearing as the price we must pay to combat the virus, Farage resists it. He wants to screen out dissonance and assert the priority of his preferences over the imperfect solution to a collective action problem. This is the attitude of a narcissistic toddler throwing a tantrum because he is unable to accept that the world is not as he wants it to be.

To put this point into sharper focus, we can contrast this to two other attitudes. One is expressed in Dar Williams’ astounding song After All. “Once upon a time I had control and reined my soul in tight” she sings. This purified identity however led her to the brink of suicide. But, she continues:

Cause when you live in a world
Well it gets in to who you thought you'd be
And now I laugh at how the world changed me

Our fixed identity can jeopardize our mental health. Throwing it off and embracing dissonance enables personal change and growth – and survival.

But the hatred caused by dissonance need not always be channeled inwards. It can also be directed outwards. Noreena Hertz, following Hannah Arendt, argues that loneliness and isolation, and an inability to engage with the world as it is, fuels populism. Farage is tapping into this, and not in its most toxic form: think also of “incels” and perhaps Islamist terrorists.

My second point of contrast is with Friedrich Hayek. The thing about freedom, he said, is that we cannot foresee its benefits:

Since the value of freedom rests on the opportunities it provides for unforeseeable and unpredictable actions, we will rarely know what we lose through a particular restriction of freedom. Any such restriction, any coercion other than the enforcement of general rules, will aim at the achievement of some foreseeable particular result, but what is prevented by it will usually not be known. (Law Legislation and Liberty Vol I, p56-57.)

If we are to truly embrace freedom, with the benefits it brings (many of which are non-economic) we must therefore be prepared to tolerate some disorder, sights and sounds that some fixed identities would resist – be it foreign languages on a train or same-sex couples dancing on Strictly.

Which brings me to a paradox. The right sometimes accuse students and the left of being “snowflakes” – of having a Sennettian fixed identity which seeks safe spaces against uncomfortable interactions. Maybe this is right, maybe not - though as I am past the age of 21 student politics no longer interests me. Such an accusation, however, applies just as much to many on the right. And perhaps it does more social damage there.

"A great deal of ruin"

“There is a great deal of ruin in a nation” wrote Adam Smith in 1777, suggesting (possibly) that countries can cope with poor policies. These are wise words, in many contexts.

Take for example, the NAO’s claim that there is “likely to be considerable amounts of fraud and error” in the government’s furlough scheme and the Resolution Foundation’s estimate that the government has paid around £1.3bn to self-employed workers who in fact suffered no loss of income. No doubt this is sub-optimal, an element of ruin. But this is not in itself a decisive objection to the schemes. It was essential that people hit by the lockdown got quick support. And as the old saying goes: “Good, fast, cheap: choose two.” In choosing “fast”, the government sacrificed a little “cheap”. It incurred some ruin. But this, I think, was a reasonable choice*.

 To take another example, Tory MP Ben Bradley has claimed that free school meals vouchers are “effectively” a handout to a crack den and brothel. Even if this is true – and the evidence for it is less than overwhelming – so what? It is impossible, except at colossal administrative cost, to target help to the deserving poor and only the deserving poor. The question is what ruin do we want to incur – that of some help going to crack dealers, or that of some children going hungry? Many of us would prefer to err on the side of the former – and in an imperfect world we must err.

Economic policy entails trade-offs – a fact which holds even if there is no binding constraint (yet) upon government borrowing. For example, a small welfare state might incentivize people to find work, but it also imposes greater cyclical risk upon workers and indeed businesses. Or a vibrant market economy entails economic and social instability. We cannot avoid some element of ruin. Sometimes, we must choose which type of ruin to incur.

There’s another form of ruin – ignorance. Michael Story and Stuart Ritchie describe how experts were initially wrong about Covid-19, for example in resisting the use of masks and calls for an early lockdown. Again, though, this form of ruin is inevitable: the world is complex and unknowable. We must choose which errors to make, what ruin to incur. Where we might justifiably blame the experts is not so much for being wrong but for exaggerating their knowledge.

And where knowledge is unobtainable – as it often is about the future - optimization is futile. We can only satisfice – which entails (with hindsight) waste, or ruin.

All this applies to policy-making. But it is not just states that contain a great deal of ruin. So too does the private sector – as anybody who has worked in it will know. Nick Bloom and John Van Reenen have shown (pdf) that in all countries there is “a long tail of extremely badly managed firms.” Competition does not eliminate inefficiency. Ruin remains.

This is not just because there are all sorts of obstacles to strong effective competition such as excess regulation or rent-seeking. Even where competition is strong and incentives to succeed are sharp, people fall short of optimality. We know this from the economics of sport. NFL teams have punted too much (pdf) on fourth downs; ice hockey teams don’t replace their goalminders often enough when they are trailing; and golfers don’t put as much focus (pdf) into birdie putts as par ones.

Markets are a great technology. But they are not the devices for achieving optimizing that simple-minded Econ101 tells us.

We must not, however, think that ruin is necessarily a bad thing. It’s not. There’s a trade-off between optimization and resiliency. Redundancy (ruin) can give us the flexibility to respond to crises**. Had the NHS had more beds and doctors before Covid struck, it would have coped better – but at the expense of “wasting tax-payers’ money” in normal times. As João Ferreira do Amaral wrote (pdf):

There is I think a good case for keeping a system flexible to cope with surprise even if this mean more uncertainty and less efficiency.

There is, though, another form of ruin, of imperfection – the trivial fact that there are so many idiots in the world. It’s tempting to try to engage with these. But often wrong. As Tim Harford has shown, myth-busting often doesn’t work. Mill was wrong: wrong opinions do not “gradually yield to fact and argument.” In many cases – where the opinions are those of obscure cranks – we should just ignore them. Haters are gonna hate and twats are gonna twat.

Not only is it better for the level of debate if we recognise that there is a great deal of ruin in a nation, but it’s probably also better for our mental health as well.

* In fact, it also sacrificed some good. The RF points out that lots of hard-hit self-employed got nothing. For me, this is a less forgivable error.

** The converse is also true: in 2008 banks went bust because of their "optimized" portfolios. 

The economic base of culture wars

The long boom of the post-war period gave us trades union militancy, “women’s lib”, the Black Panthers, the gay rights movement and the legalization of abortion and homosexuality. Our recent stagnation has given us Trump and Brexit – and of course the economic crisis of the 1930s yielded much worse.

Which is another way of saying what Ben Friedman wrote in The Moral Consequences of Economic Growth – that economic growth gives us liberalism and demands for equality whilst stagnation and regress give us political reaction.

This, I fear, helps explain something that is otherwise odd – that the Tory party has pretty much renounced economics. As Stian Westlake has said, “the Tories, both in government and more generally, seem to have stopped talking and thinking about economics.” Evidence for this is of course abundant. We see it in reports that Sunak is worried about government debt despite the fact that the Bank of England is buying it and gilt yields are negative; in the failure to address the fact that job creation has plummeted; in Johnson’s “fuck business” remark; and in the reckless pursuit of Brexit.

The traditional party of capital no longer has much interest in capitalism – and indeed, as David Edgerton has said, has lost its links with much of capital.

This, however, is a feature not a bug. If economic stagnation promotes populism and reaction – and history shows that it does – then a lack of growth actually serves Tory interests, because it will further bolster social conservatism. In politics, failure can sometimes work better than success. There can be positive feedback loops.

For this to work, though, requires that the culture war shifts onto fronts beyond Brexit. Hence concocted rows about the last night of the proms or the teaching of critical race theory.

This is not to say that the Tories are smart enough to be deliberately pursuing this strategy. Politics is sometimes like natural selection in biology, where the environment selects in favour of some random unintended mutations. The Tories’ lack of interest in economics is one such selected-for mutation.

Nor is it to deny that some sections of capital do benefit from stagnation. Those with close connections to government profit from outsourcing and from political favours. And the low interest rates that are the product of stagnation enrich rentiers (pdf). The more progressive sections of capital, however suffer – such as exporters who’ll be clobbered by red tape or innovators who are hindered by weak demand and an unavailability of finance (cheap money needn't mean plentiful credit). Stagnation favours those who’d otherwise suffer from creative destruction and hurts those who’d otherwise gain.

It is silly to pretend that Brexit is the result of a few disaster capitalists seeking to profit from hardship. It is the case, however, that such hardship can benefit social conservatives, spivs and rentiers.

All this is a way of saying that the left must be in favour of economic growth – albeit as green as possible. The great thing about growth isn’t that it makes us richer so much as that it promotes tolerance and egalitarianism. (Using “economicky words” also promotes an image of serious technocracy, and there might be a gap in the political marketplace for this.)

This is not a left-right matter. Yes, the left might rightly point to the need for expansionary fiscal policy, a national investment bank, more worker ownership or community wealth-building. But the right might say it’s a case for Labour being pro-business. And they’d have a point. New Labour made the mistake of equating being pro-business with being pro-boss. But this needn’t be the case. Being pro-business entails helping small business get access to finance, and shifting the tax base from profits to land.

All this, though, means something else. And it’s something I’m not comfortable saying. It means the left must be very wary of getting involved in culture wars. Of course, it is morally right to assert the case for equal rights for minorities and women (BLM and MeToo are not just leftist causes but libertarian ones) and we must resist the historic tendency of many white male leftists to prioritise economic issues over others. But such fights are ones the Tories want, so the left must pick them carefully. We must heed the advice of Sun Tzu. “He will win who knows when to fight and when not to fight” he said. “Do not swallow bait offered by the enemy.” Sometimes, there’s a distinction between what is morally right and what is tactically right.

Stealing "libertarianism"

What exactly is libertarianism? I ask because of something Janash Ganesh says about Trump:

His populism tends more to the libertarian than the repressive. The mask-spurning, the cavalier gatherings, the call to not let the virus “dominate”: it is personal freedom to which the president has shown a heedless attachment.

Now, the notion that Trump is a libertarian will come as news to the families of George Floyd or Breonna Taylor or the 829 other people killed by the American police this year. It'll also come as news to the tens of thousands of people imprisoned for trivial offences. A true libertarian would surely be more troubled by these horrific denials of freedom than they would by wearing masks.

The misuse of the word "libertarian" is however not confined to Janan's description of Trump. We see a similar thing in the UK. Opponents of enforced mask-wearing are described as libertarians. And yet one of the most prominent of these - Tory MP Desmond Swayne for example - has voted against the legalization of cannabis and has failed to oppose the bill to permit the security services to break the law. What sort of libertarian is so angry about enforced mask-wearing, but so relaxed about other, greater, infringements of liberty?

The obverse of this is also a puzzle. It is mostly leftists who oppose the Covert Human Intelligence Sources (Criminal Conduct) Bill, favour cannabis legalization, are most vocal in support of Black Lives Matter: "defund the police" is a purely libertarian slogan. By any logic, it is these who should be called libertarians, not the likes of Trump or Swayne.

What's going on?

We should, I think, regard Trump and Swayne not as libertarians but as something different. What they are doing is not asserting liberty so much as denying the existence of collective action problems. Sometimes, what each individual wants to do is bad for all individuals. Not wearing masks is one such example. We'd all rather not wear them, but without them the risk of catching and spreading Covid is greater. Wearing masks thus imposes mild discomfort upon us for a greater benefit. Maskphobics such as Trump and Swayne reject this. They think their desires should over-ride others' benefit. This is not so much libertarianism as solipsistic narcissism.

Of course, this is a bastardized form of libertarianism. Better libertarians and liberals - such as Hayek - have argued for liberty and free markets precisely because they promote the collective good.

What it is instead is conservatism. One strand of Tory thinking in recent years has been the denial of collective action problems. Supporters of fiscal austerity, for example, failed to see that if enough people try to save, the results are self-defeating. Policies to make work pay might incentivize any individual to move from welfare to work, but if there aren't enough jobs these individual desires for work cannot all be fulfilled. Hostility to masks is just the latest manifestation of this denial.

But why would anybody call this "libertarianism"? It's because rightists have stolen the word. What they mean by freedom is the freedom for rich white men to oppress and exploit others. Which is why they hate wearing masks. It denies them the privilege of acting how they damn well please to the detriment of others, and so undermines their place at the top of hierarchies. This is why Cold Warriors opposed the USSR whilst supporting Pinochet, apartheid and the criminalization of homosexuality. As Corey Robin wrote:

When the libertarian looks out upon society, he does not see isolated individuals; he sees private, often hierarchical, groups, where a father governs his family and an owner his employees.

Whether the word "libertarian" can be reclaimed for more proper purposes is, however, not clear.

On feudal exploitation

“We have abolished capitalism in Poland. Now we must abolish feudalism.” So said Michal Kalecki in the 60s. I suspect that western economies today face a similar task, as feudalism is still rife.

By this, I don’t mean merely that we have the high inequality and low social mobility that characterised feudalism, nor that immigration controls are a form of feudalism in that they ensure that one’s life chances are determined at birth.

Instead, I’m thinking of modes of exploitation.

We must distinguish between capitalist exploitation as Marx understood it and feudal exploitation. The former is an economic phenomenon, arising from capital’s greater economic power over labour. The labour market, thought Marx, was “a very Eden of the innate rights of man. There alone rule Freedom, Equality, Property and Bentham.” Such apparent liberal equality facilitated and disguised exploitation and oppression.

Feudal exploitation, by contrast, is more obvious. Markets play no role in it. Instead, as Ellen Meiksins Wood wrote:

When surplus labour has been appropriated by exploiters, it has been done by what Marx called “extra-economic” means- that is, by means of direct coercion, exercised by landlords or states employing their superior force, their privileged access to military, political and judicial power. (The Origin of Capitalism, p95-96)

Exploitation of this form is still widespread – perhaps increasingly so.

Why, for example, was Dido Harding put in charge of Test and Trace? It’s not because market competition showed her to be the most competent, but because she has achieved the modern equivalent of winning the favour of the king. She’s exploiting political not economic power. As indeed, might be many other outsourcers.

Another form of feudal exploitation is simply buying political favour, as when property developers gave money to the Tory party just before Robert Jenrick changed planning regulations to their advantage.

Yet another expression of privileged access to political and judicial power is what Robert Kuttner and Katherine Stone call “a one-way seizure of private power and law by elites”. As Martin Wolf says:

The activities of companies, as lobbyists, funders of research and donors, play a decisive role in creating the rules of the political game…Corporations are not players of the game, playing according to rules set by others. They play the game according to rules they largely set themselves.

Pharmaceutical companies, for example, have in effect legalized opiate trading; banks have ensured they operate on low capital requirements, thus profiting themselves at the expense of greater risk for the rest of us. And firms generally use restrictive patent law to increase their profits.

And then there has been the use of the state to directly strengthen capital to the detriment of labour, by weakening trades unions or pursuing austerity policies. As Lance Taylor says of wage repression, “something other than the market is at work here – like power relations.”

Indeed, we can think of neoliberalism not as a simple assertion of free markets but rather as the use of the state to increase the power of bosses.

Marx famously said that “the executive of the modern state is nothing but a committee for managing the common affairs of the whole bourgeoisie.” He failed to add that this management would often be done not in a way unique to liberal democratic capitalism but in a manner which pre-capitalist monarchs might recognise.

On top of all this, there are hybrid forms of exploitation, wherein power derived from the market is exercised in quasi-political ways – as we see in the rise of guard labour, in the use of technologies such as  CCTV to control labour, or in surveillance capitalism.

But there’s something else. Another distinction between capitalist and feudal exploitation is that the former drives up productivity as capitals compete to intensify their use of labour whereas the latter occurs without much change in technical efficiency.

The stagnant labour productivity we’ve seen in the last decade is, in this sense, a feature of feudal exploitation, not capitalist.

The relation between modern feudalism and stagnation is perhaps both cause and effect. On the one hand, incumbents’ use of political power has suppressed competition and dynamism – a process described by Brink Lindsey and Steven Teles in The Captured Economy and Thomas Philippon in The Great Reversal. Also, feudal-type power relations in the workplace demotivate workers and detract from productivity. On the other hand, though, feudal exploitation can be the result of stagnation. If it’s so hard to raise productivity, why bother? Why not simply seek wealth extraction rather than wealth creation?

All this, however, brings us to a problem. In the UK (and indeed in many western economies other than the US) wage and profit shares of GDP haven’t changed much for decades. Before Q2’s Covid-induced rise, labour’s share was much the same as it was in the early 80s. And the profit share was the same as in the early 60s*. This means that if – as is likely - feudal exploitation has increased since the 1970s, it is at the expense of capitalist exploitation.

Which leads us to some nice paradoxes. From this point of view post-war social democratic economies with their institutions of countervailing power were more capitalist than are today’s economies, insofar as they delivered capitalist rather than feudal exploitation. And Thatcher was (in effect if not in intention) not so much a capitalist revolutionary as a feudalist counter-revolutionary. And it means that it is perhaps social democrats who want to restrain corporate political power who are more capitalist than are those who defend our current inequalities.

* The numbers in my chart don’t sum to 100 as I’ve excluded other incomes such as those of the self-employed, rents and taxes.

Savers, capitalism & self-interest

Do people vote in their own material interests? I ask because of the decision last week by NS&I to cut interest rates to almost nothing.

In doing so, it is only bringing its rates into line with market rates. Which tells us two big things.

One is tha the pandemic has exacerbated a long-term downtrend in interest rates.

The second is that from the point of view of savers (let alone anybody else) the government is not borrowing enough. One reason for NS&I’s decision is that it was raising more cash than the government needed – in part because the same pandemic that has raised government borrowing has also made forced savers of many of us and so raised the savings to pay for that borrowing.

From all this, savers should infer two things. One is that capitalism is serving them badly. Economists disagree upon exactly why rates have trended down. Some blame an ageing (pdf) population, others a savings glut or shortage of safe assets, whilst others blame a falling global rate of profit. What’s more, low rates reflect lower trend growth, which itself might be due to not just lower profits but declining R&D efficiency, a fear that future innovations will make today’s ones unprofitable, lower innovative possibilities, a general difficulty in monetizing the benefits of innovation, or simply an end of the things that caused growth in the first place. Whatever the explanation, the fact is that there are forces within capitalism that have clobbered savers.

 Secondly, from this perspective, “fiscal discipline” and austerity is a menace. In depressing growth (or not raising it enough) it exacerbates the pressures for lower rates. Ten years of Tory government have thus added to savers’ pain.

And who are these savers? Moderately wealthy retired people. That’s who. It is these, therefore, that should be critical of capitalism and the Tory party.

Which, of course, most are not: instead they are the stereotypical Tory voter.

Hence my question: in supporting Tories, are older savers acting in their own material interests?

Possibly. The same low rates that destroy their incomes also push up house prices and help support shares.

But I’m not sure this is sufficient answer to my question. For one thing, unless you downsize (which many older people are loath to do) a higher house price is little use: equity release schemes are not great value. And even for landlords, years of weak growth have held down rents. And for another, many of the factors that lay behind lower interest rates have also weighed down share prices, such as secular stagnation and the falling rate of profit. Shareholders, more than most, should be alive to the shortcomings of capitalism. 

So why aren’t we seeing more discontent with capitalism and the Tories from older folk?

Part of the answer lies in a paper by David Leiser and Zeev Kril. They show that non-economists are terrible at making causal connections between economic phenomena*. They therefore just don’t connect fiscal austerity and long-term trends within capitalism to the fact that they’re incomes have disappeared.

In this, they are not helped by the media. The problem here is NOT that it has a rightist bias. Rather, it is that the news by definition under-reports slow-moving changes such as the downtrend in interest rates and the causes thereof. And the media’s concern for human interest stories means it under-reports emergent phenomena which arise without any individual’s intent. The media does not report social science.  

Which creates a vacuum to be filled by something else, as described by Phil. Retired people, he says:

are dependent on impersonal forces beyond their control for prosperity or misfortune. This antagonises the general unease underpinning the pensioner position and turns them, politically speaking, into nervous wrecks. These anxieties and fears sublimate into lashing out against things exemplifying uncertainty and change, like young people, the socially liberal trajectory of popular culture, and people traditionally positioned as outside the mainstream and used as scapegoats: sexual minorities, travellers, and immigrants. The flip side of anxiety is a longing for surety, and what provides this better than the smack of firm government?

In this way, what should be an economic debate becomes a front in the culture war. During my adulthood the Tories have performed an amazing transformation. Whereas Thatcher could credibly appeal to voters’ material self-interest, Johnson’s Tories don’t even try to do so. They have figured out – perhaps by accident – that the best response to capitalism's failures is not to talk about economics.

* This isn’t to say they are irrational or stupid. I know nothing about plumbing, so why should I expect a plumber to know about economics?

Blaming the voters

In the Times, Matthew Parris wrote: "this Prime Minister is ultimately our [the electorate's] fault." I tweeted that this was absolutely right, but got a little pushback. I should therefore elaborate.

What I and Matthew meant was that Johnson is not doing anything unexpected. He is merely living down to what everybody knew about him. As Matthew wrote:

There was never any reason for confidence in Boris Johnson’s diligence, his honesty, his directness, his mastery of debate, his people-skills with colleagues, his executive ability or his policy grip. We’d seen no early demonstration of any of these qualities but we just blanked that out.

Voters, then, are getting what they voted for. Those who voted Labour in 2001 could say of the Iraq war “I never voted for that”. Those who voted Lib Dem in 2010 could say of the tripling of tuition fees “I never voted for that.” Those who voted Tory last year, however, cannot say the same. They got what they wanted. They should own it.

There are some objections to this, most of which I find inadequate.

The first is that voters were deceived by our dishonest grifter media. There’s some truth in this. The media does have some influence, if less than its critics claim.

But people have agency. They are responsible for believing the media’s lies: the victims of conmen are not always wholly deserving of our sympathy. And voters are quite capable of being wrong without the media’s help. They are systematically mistaken about many social facts, such as how many immigrants there are. They don’t understand economics (or, I suspect, the social sciences generally). Some of their preferences – for benefit cuts and a hostile environment for immigrants - are plain vicious. And they have cognitive biases which support inequality. The media amplify these failings. But to believe they are the sole cause of them is to regard voters as childlike noble savages who are corrupted by a few billionaires. That’s just romantic twaddle.

You don’t need to believe in Marxian ideas of false consciousness (a phrase Marx never used) to accept this. Bryan Caplan and Jason Brennan have said similar things from a non-Marxian point of view.

Another objection to Parris’s claim is that the Tories got only a minority of the vote and so it is our electoral system to blame rather than the voters.

Let’s leave aside the fact that the electorate support this system: they rejected mild reform in the 2011 referendum. And let’s also leave aside the fact that it’s not just Tory voters to blame. Those who abstained or voted Lib Dem thereby allowing a Tory candidate to win in their constituency are also guilty.

And let’s also leave aside the fact those using this argument must be careful – because it will undoubtedly be weaponized by the right to delegitimize even a mildly social democratic government.

Instead, there’s another problem. If voters do have vicious, biased and ill-informed preferences – whether caused by the media or anything else – then the last thing we should want is for parliament to better reflect these. (Of course, some Labour supporters might have such bad preferences too.)

Our problem is not how to get a more representative parliament but rather how to filter voters’ preferences so they reflect the wisdom rather than stupidity of crowds.

 Traditionally, small-c conservatives have been alive to this question. It is why Edmund Burke thought that MPs’ judgment should over-ride the “hasty opinion” of their constituents. And it’s why they have prized an independent civil service and judiciary, as these too restrain hasty, silly and nasty preferences: it is no accident that populists everywhere attack such institutions.

But there is a more radical alternative – to use devices of deliberative (pdf) democracy such as citizens juries to increase our chances of getting the best rather than worst of public opinion. It is these we need more than electoral reform.

You might object here that it is futile to complain about the electorate as we must work with the world as it is, not as we’d like it.

Public opinion, however, is malleable – a fact our most successful recent Prime Ministers have recognised. Thatcher sought to change it not just by persuasion but by introducing a property-owning democracy to incentivize people to vote Tory. And Blair’s expansion of higher education has (inadvertently?) created a large cohort of liberal-minded youngsters: there’s a reason why Tories are attacking universities.

 There’s a further objection to Parris’s claim. Some of us (not enough!) voted Labour. Surely we’re not to blame?

There’s an irony here. Many people using this to exculpate themselves also believe in the idea of collective guilt – that, for example, Britons collectively were responsible for the slave trade and imperialism. But if our ancestors, many of whom never owned slaves or participated in imperialism, were collectively guilty of these crimes, mightn’t we too be collectively responsible for the Tory government?

Mightn’t even we Labour supporters be partly to blame by for example not campaigning sufficiently or sufficiently well or for making bad political choices ourselves – be they choosing a Labour leader who didn’t appeal sufficiently to voters or not accepting the Brexit referendum result?

Which brings me to another irony. Part of Johnson’s appeal is like Trump’s: it’s a backlash against metropolitan elites who think they know better than “the people”. And yet those of us who claim that (some) voters are ill-informed and vicious are making the same mistake Hillary Clinton made when she called Trump supporters “deplorables”: we’re inviting a backlash against us arrogant know-alls.

This is a dilemma. The solution to it – if there is one – is to try to separate talk about outcomes from talk about process. We must ask: what sort of processes and institutions are likely to best deliver policies that are both good (by whatever lights you want) and democratic? Few people, however, want such a debate.

Conceptions of politics

There is a great and overlooked political division today – between those who think policy matters, and those who think it doesn’t.

Here are some examples of what I mean.

First, Ed Miliband’s speech on the Internal Market Bill was that of a man who thinks a consistent policy would be a good thing. He is exercised by the fact that a man who greeted the signing of the Withdrawal Agreement as a “fantastic moment” now regards it as “contradictory”. Johnson, however, seems to attach no importance to the need for a consistent policy.

Secondly, Rishi Sunak has the highest approval rating of all cabinet ministers among Tory members, even though employment is slumping: the ONS reported today that payrolls have dropped by 629,000 in the last 12 months, a trend economists expect to continue. A massive policy failure is no handicap to popularity.

 Not that indifference to the need for coherent policy is confined to Tories. Bridget Phillipson said recently that Labour must listen to voters, whilst telling us little about her own policies or philosophy other than the need for “disciplined” spending promises. To use Tony Benn’s distinction, she is a weathervane, blowing in the wind, rather than a signpost.

Which raises the question: if politics isn’t about policy, what is it about?

One conception – which Ms Phillipson is using – sees it as a form of marketing. It consists in giving voters what they want, even if their preferences are ill-informed, contradictory and endogenous.

A second conception regards it as a debased form of theatre, a form of play-acting in which appearance and presentation are everything: Sunak’s popularity owes much more to his plausibility at a podium than it does to his material achievements.

Closely related to this is the tendency to see it as a game. I don’t have to tell you that, too often, this is the media’s conception. There’s jockeying for position, gossip and backbiting in which confidence, fluency and “credibility” are prized more than actual mastery of policy or managerial skill. Although its players, and the media, like to see this as a vicious sport, it is in fact often a matey process among jolly good chaps in which the worst that can happen is to conduct a “car crash interview” and where the losers retire to overpriced sheds or sinecures with investment banks. As for the fact that politics actually costs thousands of people their lives, well who cares? They are only the little people. 

But there’s another conception, which has grown in recent years. This regards politics not as a matter of solving (or at least ameliorating) social problems with coherent policy, but rather as unifying your tribe – for example by inventing culture wars. This serves the Tory party well. Labour has always been an awkward alliance between metropolitan liberals and the working class (a point clear in, for example, Orwell’s writing), and a culture war can drive a wedge between the two.

This, I think, explains Johnson’s otherwise incoherent attitude to his own Withdrawal Agreement. He hopes that voters will see this not as a breach of international law nor as an admission that his own negotiation and commendation of that Agreement were faulty, but rather as him “standing up” to the EU.

And given that we have a media which devalues intellect, coherence and prosperity and instead celebrates posturing, he might get away with this.

The Hayek question

Thatcher was right. This is my reaction to reports that Dominic Cummings regards Brexit as a way of getting out of limits on state aid and so enabling the government to funnel cash towards the UK’s own future big tech companies.

The problem with this is that, as Thatcher said, the state cannot pick winners. Corporate growth is largely unpredictable. “The stochastic element is predominant” concluded Alex Coad in one survey. “Corporate growth rates are random” found Paul Geroski in another (pdf). “There is low predictability [of corporate earnings growth] even with a wide variety of predictor variables” found (pdf) Louis Chan, Josef Lakonishok and Jason Karceski in a third.

This fact explains why fund managers don’t beat the market. David Blake has concluded: "the vast majority of fund managers in our data set were not simply unlucky, they were genuinely unskilled." It's also why the performance of venture capital trusts has been very variable. In the last five years, one fund trebled investors’ money but two others lost half of it. A big reason for this is that, as Charlie Cai has shown, it is prodigiously difficult for companies to grow and investors often under-estimate all the obstacles to growth.

Investors cannot, then, pick winners. Success is unpredictable. And not just in the corporate sector. It’s true in films: United Artists and Universal both rejected Star Wars. It’s true in publishing: J.K Rowling and C.S Lewis saw their manuscripts rejected many times. And in music: Elvis Presley was told to go back to truck-driving and Decca famously rejected the Beatles on the grounds that "guitar groups are on the way out."

 As William Goldman said, nobody knows anything.” In particular - as my examples show - extreme success seems unpredictable.

This isn’t to say that Thatcher’s laisser-faire approach to industrial policy was right. There’s much that governments can do: fund and promote basic research; ensure that start-ups and small firms aren’t held back by a lack of finance or by the wrong intellectual property regime; ensure a good supply of skilled workers, some from overseas; and so on.

What they cannot do, though, is spot winners.

This is because Thatcher’s mentor Friedrich Hayek was right. Markets are complex processes, knowledge of which is dispersed, fragmented, tacit and not collectable by a single mind:

In the study of such complex phenomena as the market, which depend on the actions of many individuals, all the circumstances which will determine the outcome of a process…will hardly ever be fully known or measurable…[We] cannot acquire the full knowledge which would make mastery of the events possible.

The issue here is a fundamental one - what can governments know? - that should be behind many issues in economic policy. For example:

 - How can we run counter-cyclical policy, given that nobody can reliably predict recessions? For me, this is an argument for stronger automatic stabilizers such as better welfare benefits. It’s also a case for having the right policy infrastructure in place, so that (for example) the Bank of England can quickly write us all a cheque.

 - Do local authorities really have sufficient knowledge of what worthwhile things need doing, and the ability to scale these up and down, to make a job guarantee feasible? For me it is this question, rather than macroeconomic considerations, that is key to the desirability of scheme.

 - Can governments know enough about low-income families to target support to them? Many, of example, move in and out of work often and see their hours fluctuate. Can we design a benefit system that responds to such variation, or is a high citizens income a simpler alternative?

 - How best should banks be regulated? The trend has been towards increased complexity. But Andy Haldane has argued:

As you do not fight fire with fire, you do not fight complexity with complexity. Because complexity generates uncertainty, not risk, it requires a regulatory response grounded in simplicity, not complexity.

It might be that high capital requirements, or even nationalization, are simpler alternatives.

 - Can bosses know enough to control large organizations? If, on the other hand, knowledge of the organization is also fragmented, there’s a case for greater workers’ say.

Hayek’s question – what can governments know? – should then be a fundamental, ubiquitous one.

But it’s not. This, I fear, is due partly to a selection effect. Politics and opinion-mongering selects in favour of bumptious prats who over-estimate their knowledge. Which is an obstacle to good policy.

Cummings is, I think, wrong to think the state can pick winners. His error is not an idiosyncratic one, however, but rather the product of systemic dysfunction.

On press freedom

In The Enigma of Reason Hugo Mercier and Dan Sperber argue that the main use of reason is to justify and explain conclusions that we have arrived at sub-rationally. Some reactions to Extinction Rebellion’s blockading of newspaper distribution centres seem to me to illustrate their point.

For example, Culture Secretary Oliver Dowden said their action “damage[s] our democracy”. Johnson said: “A free press is vital in holding the government and other powerful institutions to account.” And Ian Murray, executive director of the Society of Editors, said that “shutting down free speech and an independent media is the first action of totalitarian regimes and dictators.”

Such fancy talk attributes to the press a sanctity it does not merit. And it’s not needed. If XR had blockaded a Cheesy Wotsits factory you might reasonably object that it was interrupting people’s right to earn a living: you wouldn’t need to argue for the gustatory merits of the Wotsit. Equally, you don’t need to attribute virtues of the press in order to defend its freedom. To do so is to seek an unwarranted justification for your priors.

Instead, this issue raises some interesting questions. One is: do we actually have a free press? Rightists say we do. Which is true in the sense of there being little state control, except for onerous libel laws (and guess who they benefit). Leftists say we don’t, as a handful of billionaires control most of it. This split reflects a general divide about the nature of freedom. The right has traditionally identified this with an absence of state intervention. The left has replied that freedom in this sense often permits too much private sector inequality – for example, in working conditions. As Corey Robin argued in The Reactionary Mind, Conservatives’ talk of freedom often disguises what is really a love of hierarchy. The issue here is what type of freedom we value rather than the nature of the press itself.

If we accept, arguendo, the rightist conception of freedom here, another question arises. How much good or harm does the exercise of this freedom do?

You might think here that I’ll object to its Tory bias. In this context, I won’t. Yes, there is some evidence that the media does boost (pdf) the Tory and UKIP (pdf) vote. But people have a right to advocate voting Tory, And the media is not the only source of ideas I believe to be mistaken. Pro-capitalist ideology can arise without the aid of the press.

Instead, there are other costs.

One is that far from embodying a diversity of opinion, the media actually narrows it down. Market forces tell us this. Since it became technologically possible, we’ve seen an explosion of blogs, podcasts and alternative online publications. This would not have happened if people had been satisfied with the range of opinion they were getting from the old media. If the media were truly diverse, you’d not be reading this.

Another is that the media systematically fosters false ideas. Simon Wren-Lewis has accused it, rightly, of promoting a false picture of economics. And the admirable Mic Wright documents many other shortcomings. These are not always matters of left-right bias. The media is also biased against the social sciences. It under-reports slow but important changes, ignores the countless unseen mechanisms that create our world; and looks too much for human agency where in fact there is emergence.

Surveys show that the public is woefully ill-informed about many social facts – albeit no more so in the UK than elsewhere. This is surely a clue that the media isn’t doing the job that its advocates claim.

There’s a further problem. Contrary to Johnson’s claim, the press does not adequately hold the government to account. This is not a new phenomenon. 25 years ago Patrick Dunleavy wrote (pdf) that:

Britain now stands out amongst comparable European countries, and perhaps amongst liberal democracies as a whole, as a state unusually prone to make large-scale, avoidable policy mistakes.

This was corroborated by Ivor Crewe and Anthony King in The Blunders of our Governments.

Which points to a longstanding failure of the press to improve the standard of government – perhaps because forensic policy analysis does not shift units.

I suspect that our democracy would work better if the mass media did not exist. In such a world, people would vote more on the basis of their local knowledge and one source of correlated opinion would disappear. The conditions required for there to be wisdom in crowds would therefore be closer to being fulfilled.

Which leads to a further problem: should anything be done about this?

One strong answer is nothing, at least legally.

Breaking up the Murdoch empire would not shift the press to the left: there are lots more right-wing billionaires who might buy up his papers.

Also, there are trade-offs between values. Perhaps we must sacrifice some good governance in order to have free speech, just as with Brexit we sacrifice some prosperity for democracy. This is especially true because it is woefully naïve to think restrictions on the press will impinge only upon the Sun and Telegraph. The law is often a weapon against the weak and marginalized. Restricting free speech would mean silencing bloggers, not the Sun.

Why not instead just let market forces and demographics do their job? Newspaper circulation is dropping, and is low among the young. They are losing relevance.

Which raises another possibility. Could we use countervailing power?

We know this can work. Capitalism was much more successful – even by its own lights – when trades unions restrained management. Might a similar thing be true of the press?

I’m not thinking here merely of XR blockades, nor even of the growing influence of new media. For me, one priority for a future Labour government would be the creation of institutions of deliberative (pdf) democracy such as citizens juries. These would provide space for people to consider policy issues on the basis of evidence provided by expert witnesses. Policy formation would then become insulated from press pressure, similar to how judges strive to ensure newspapers have no influence upon criminal trials. The press would then lose its political relevance.

Libertarian Marxists have traditionally looked forward to the state withering away. With some effort we might, more justifiably, look forward to the press doing so.

On Marxist Tories

In one respect, the right-wing conspiracy loons are right: Marxists have captured some of our major institutions – the institutions being the government and Tory party.

I say this because of the campaign to stop us working from home and to get us back into offices. Such a demand is justifiable only if you take a very dark opinion of capitalism.

Those who have faith in capitalism see upside in home-working. Andrew Sentance tweeted:

Why are so many people focussing on the negatives of working from home? It is a great opportunity to reduce transport emissions, stop spread of disease through commuting and mingling at work/in city centres, and provides a more flexible and family-friendly working environment.

To this we should add that whilst WFH does depress demand for retail businesses close to offices, it should boost it in those near where we live, and revive local high streets. The money that home-workers save on commuting and on Pret’s sandwiches can be spent nearer home.

Better still, we have quasi-experimental evidence from Nick Bloom and colleagues that WFH can boost productivity (pdf) a lot as workers face fewer distractions than in offices. Granted, not all firms who have tried WFH during the pandemic have enjoyed such gains, but it’s possible that as firms and workers learn, and if they get the right policy support, productivity will improve as these teething troubles are cured.

How then can one regard WFH as a bad thing? You can only do so if you are very pessimistic about capitalism.

For example, you’ll oppose WFH if you believe that capitalists are so lacking in entrepreneurial nous that they cannot spot new business opportunities created by home-workers. Alternatively, you might believe  they are constrained from exploiting these by financial constraints or by the inability of capital and labour to shift to new uses – even if those shifts are small (for example if sandwich-makers move from city centres to outlying areas which might well be closer to where they live).

If you believe this, they you must believe that capitalism has become stagnant and sclerotic - that capitalistic relations of production have become "fetters" on the development of our productive potential.  

You might also oppose WFH if you fear that the collapse in demand for city centre offices will crater the commercial property market and in doing so create bad loans. This requires one to accept that financialized capitalism is unstable and crisis-prone.

You’ll also oppose it if you think Kalecki was right (pdf) – that “'discipline in the factories' and 'political stability' are more appreciated than profits by business leaders.” If bosses want the sense of security and power that comes from directly overseeing their workers they’ll want people back in harness. This is perhaps what Jeremy Hunt had in mind when he said people might come to miss the “fizz and excitement you get in a good workplace.” His own employees never experienced such fizz, but perhaps egomaniacs who want to oversee an empire of minions do.

And let’s remember something else. Sarah O’Connor is right. The pre-pandemic economy was not working for millions of people. It trapped many into cramped over-priced homes and forced others into long and stressful commutes. The belief that capitalism requires such discomfort is one we Marxists can readily accept. I’m surprised, though, to see the Tory party adopt it.

There’s a devastating implication here. If you think this is what capitalism requires, then you are saying that capitalism must force people to be in places they don’t want to be. Which vindicates a point made by Peter Doyle about slavery – that capitalism denies people economic agency (pdf). As Marx put it, capitalism turns a “free” man into a mere factor of production, “one who is bringing his own hide to market and has nothing to expect but — a hiding.”  

And then, of course, there is the brute fact that dragooning people back into offices endangers their health. Which of course, vindicates Marx again:

Capital is reckless of the health or length of life of the labourer, unless under compulsion from society.

Not only do the Tories seem to believe Marx’s ideas, but they are actively striving to make them even truer.

As a Marxist myself, I find all this weird. Even I am not this pessimistic about capitalism. I suspect the economy can adjust to meet the new demands of home-workers and I’ve been pleasantly surprised by how many big employers have adopted home-working.

Now, the sight of some people being more Marxist than me is a familiar one. When I was university, several of my fellow students were. I just never suspected that Boris Johnson was one of them. But perhaps this is to give him far too much credit, and to impute to him a coherent idea where in fact there is no such thing.

Clarity - who needs it?

Tim Pitt calls on the government to set out “a renewed Conservative economic philosophy.” I’m not sure this is wise. Having a clear philosophy requires you to think, which is not a self-evidently good thing in life or in politics. Worse still, it gives people something to disagree with, and so invites party disunity. Constructive ambiguity can be a good thing.

I say this because a new Conservative economic philosophy requires the party to answer loads of tricky questions. Here are a few.

Are you pro-business or pro-markets? Pro-market policies would promote competition by for example relaxing intellectual property laws, reducing planning restrictions, simplifying regulations,  expanding the British Business Bank to encourage start-ups and imposing tougher rules against mergers and monopolies.  All of these, however, would threaten the profits of incumbents.

Which leads to another issue. What should be the rules on state aid, procurement and outsourcing? These can in theory be used to promote competition by encouraging contracts from outside the usual suspects of Serco, Capita and G4S or by favouring start-ups. Or they can entrench power by giving handouts to the powerful and well-connected, as when the government spent millions on worthless PPE provided by an advisor to Liz Truss. Which is it to be?

And then there’s the question of competition versus community. We learned in the 80s that when industries collapse workers do not easily move to other jobs: as Duflo and Banerjee show in Good Economics for Hard Times, economies are stickier than Thatcherites assumed. Instead, we see the decline of whole areas. Should today’s Conservatives do more therefore to protect jobs, or to help people move jobs? What sort of regional and training policies does this require?

But there’s not just a divide between start-ups and incumbents. There’s also a conflict between landlords and businesses. More working from home and decline in the high street require that many rents be cut. Should the government facilitate this by outlawing upward-only rent reviews? Which side are the Tories on?

 Which leads to another question: what should be the tax base? There is a case for shifting tax from profits to land, because the latter cannot move. But of course, this hits landlords whilst benefiting other businesses.

Then there is the fiscal policy issue. How much should policy be tightened and how soon? If we need an early tightening, why? Why are bond markets wrong to lend to the government at favourable rates?

If you favour such a tightening, other question arise. What should be the mix of tax rises and spending cuts.  If the latter, where might the cuts fall given that local government in particular has already been stripped back so much? If the former, how much can be raised from the wealthy alone, or do we need to tax the middlingly rich whose numbers and inability to move mean they might generate more revenue? And then there’s the question: what form should the offsetting monetary loosening take? Is conventional QE sufficient? Or dual interest rates? Or do you support helicopter drops? And if you don’t favour an early fiscal tightening, what has changed since the austerity of 2010-17 that many Tories supported?

The questions don’t stop there. Another is: why has productivity stagnated since the mid-00s? We lefties can blame inequality, or fiscal austerity, or the effects of the banking crisis which itself was caused by lax regulation. It’s not so clear what a Conservative answer would be.

And yet the productivity stagnation undermines a central plank of the Conservative thinking of the 80s – a plank which New Labour inherited to a large extent. They believed that the economy would grow nicely if the state stepped back, and provided only the right framework of rules. It now looks as if this isn’t true. Kickstarting productivity might well require greater state intervention. But what would a distinctively Conservative approach to this look like?

A Conservative economic philosophy must answer other questions. One is: are we in a wage-led regime (pdf) – in which fuller employment and greater equality are necessary for growth – or are we instead in a profit-led regime, wherein growth requires the restoration of profit margins? Separately from this, where do we draw the trade-off between legitimation and accumulation? Some policies (such as Brexit?) are justifiable not because they promote growth but because they buy off discontent, or at least channel it away from capitalism. How many such policies are needed?

And then there’s the question: what role should public opinion play in this? It favours leftist policies such as more nationalization and taxes on the rich. Should Conservatism accommodate these views or argue against them. If so, how?

All of us have answers to these questions – though many of them should be tentative. But do you have answers that are coherent, evidence-based, and distinctively Conservative? That’s a much tougher one.  

The point here is that a Conservative economic philosophy requires a lot of issues to be addressed which in turn provides lots of potential to anger and alienate lots of voters and indeed Tory supporters.

And they face a massive handicap in developing such answers. There are pretty much no distinguished Conservative economists, at least in academia: Patrick Minford’s views lost their relevance at about the same time that Haysi Fantayzee split up. Whereas Thatcher could and did call upon Nobel Laureates such as Freidman and Hayek, Johnson can call upon…well, who?

If I were a Tory, I would reject Tim’s call. The party won an 80-seat majority without having to think about economics. Why jeopardize things now? Intellectual coherence is not always necessary for political success.

Tories against Thatcher

Be careful what you wish for. This old saying applies to us lefties. For years, we’ve wanted to see the end of Thatcherism. And we’ve now got it. And it’s an ugly sight.

I say this because of Johnson’s campaign to end working from home and get us back into the office. This is anti-Thatcherite in two senses.

For one thing, Johnson is contradicting two of Thatcher’s favourite principles – that “you can’t buck the market” and that managers have a right to manage. Many big employers are happy for staff to continue working from home. So why should the government say otherwise? Ryan Bourne expresses the spirit of Thatcherism when he says it is “quite frankly none of the govt’s business” to tell us what we should be doing.

Also, Johnson is motivated by a fear that city centres are becoming ghost towns. Thatcher, however, was content for large areas of the country – mining towns – to meet this fate. She thought that miners could move to better jobs. A genuine Thatcherite would think the same should be true of sandwich makers.

These, however, are not the only differences between Johnsonism and Thatcherism. There are others, even if we disregard the massive increase in state intervention triggered by Covid-19.

First, Thatcher placed great emphasis upon the importance of stability, believing this to be necessary to help businesses plan and invest:

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 preside over huge and continued instability. Since the start of 2016 policy uncertainty, as measured by Baker, Bloom and Davis, has averaged twice as much as it did from 1998 to 2015.

Secondly, Thatcher was an architect of the single market, which she saw as “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.” Johnson, of course, is destroying that achievement. And whereas Thatcher wanted to cut red tape, Johnson is imposing it at a cost of billions. Johnson once said “fuck business” – a sentiment as far from Thatcherism as you can get.

Thirdly, Thatcherism was in many ways a modernising project. She wanted to modernise industry by removing over-manning and restrictive practices – which she did in the nationalized industries before selling them, as David Edgerton points out in The Rise and Fall of the British Nation. She attacked Labour for wanting to “put back the clock” whilst celebrating “the wealth creators, the scientists, the engineers, the designers, the managers, the inventors—all those on whom we rely to create the industries and jobs of the future.”

Today’s Tories, by contrast, offer no such modernising project. Instead, their vision is an atavistic yearning for an imagined past. Whereas Thatcher offered young people hope – not least the hope of owning their own home - today’s Tories do not. Yes Thatcher wanted to achieve cultural change, but she saw economics as the means of achieving that.

Hence another stark difference between Thatcher and Johnson. Thatcherism was popular with young people. In the 1987 election, the Tories beat Labour by 39-33% among 25-34 year olds. In the 2019 election, they trailed massively. Thatcher created from young graduates a bunch of shoulder-padded, big-haired, champagne-swilling yuppies. From the same material, the Tories now have created a mass of discontent. 

In all these respects, the Tory party is now fundamentally anti-Thatcherite. In one sense, it has to be, as Thatcherism failed, and not just because it ran out of other people's assets to sell. 

And yet for all its intellectual revolutions the Tory party is still the Tory party. Just as Trigger’s broom had 17 new heads and 14 new handles but stayed the same, so the Tory party is still the Tory party. So where’s the consistency?

It lies, I suspect in the reason why Johnson wants to get us back to the office. It’s not because he cares about sandwich shop workers (many of whom are migrants) but because he’s worried about the landlords of office blocks. As Marx said in 1852:

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.