There's a common implicit theme in two of my recent posts which I should make explicit. It's that conventional party politics, and discussion thereof, systematically excludes some important questions. The Overton window - the narrow range of subjects which are deemed fit for discussion - is surrounded by an Overton wall, which blocks lots of important questions.
I posed one such unasked question here: why should the public's preferences shape policy, when those preferences are ill-informed or downright malevolent? The answer is not that, in a democracy, public opinion must rule. There are huge areas of social life where democracy is withheld - namely in companies - even though workers' opinions on how to organize their workplaces are probably better-informed than their opinions on, say, immigration. But the question: "when should democracy exist and when shouldn't it?" is off the party-political agenda.
So too is the question I posed here: could it be that there are tighter limits upon the ability of governments to redistribute incomes or raise growth than politicians - especially social democratic ones - pretend.
Other questions are also under-emphasized, for example:
- Are secular stagnation and/or technical change a threat to people's living standards and if so what can be done? (Yes, Osborne at least showed awareness of the debate about stagnation, but his flat denial of its likelihood was both unconvincing and ignorant of the fact that policy should address not just central case scenarios but also risks, especially if these are low probability but high-cost ones).
- How should fiscal policy be set if - as I argue on p12 of this pdf - economic forecasting is impossible?
- Whilst politicians had an opinion on whether Pfizer should have taken over Astrazeneca, none seemed to pose the more fundamental question: are shareholder-owned companies with (perhaps) short-term horizons really a good way of organizing research with payoffs in the far-distant future?
Now, you might object that I'm guilty here of standard commentator's narcissism: "everyone is wrong because they are ignoring my hobby-horse". I don't think so. These issues are increasingly being discussed in the economic mainstream; when Charlie Bean says Bank rate might stabilize at 3%, he's hinting at the possibility of prolonged stagnation. And they surely direct address the important issue of people's living standards.
What's more, because they are not asked, we are left with an absurd politics which seem to think that jobs and incomes are threatened only by immigration rather than by technical change, globalization or capitalists' power, and which gives us a cult of leadership which thinks that a party's fortunes can be tranformed by changes of leadership.
It's often said that people are estranged from a political elite which is dominated by Oxford PPEists. What this misses is that some of us who are Oxford PPEists also find party politics irrelevant and alienating.
It is very nice to run across such opinionated article. I hope more people think like you: Very knowledgeable and logical. People need to speak up more and act more if we wish to bring about change in our world.
Posted by: Jeremy N | May 26, 2014 at 06:03 AM
Perhaps immigration is a useful figleaf to hide the ineffectiveness of government. Certainly technical change and stagnation and globalisation are things government seems powerless to turn to our advantage - quite the opposite. So recent election results are imho a reflection of people's frustration at the ineffectiveness of government.
In an ordinary business context ineffectiveness leads to redundancies and takeovers, neither is palatable to politicians who rely on patronage, backscratching and a hierarchical structure. So blame immigration and the EU, wrong of course but it looks good and the only game in town.
Will UKIP change much? Possibly not the way they think. One scenario is we pull out of the EU, the economy collapses and a helping hand held out by Brussels, an election and a British Euro currency - with King Charles' head on the front.
Posted by: rogerh | May 26, 2014 at 07:17 AM
What a useful concept, the Overton Wall. There are plenty of questions beyond that wall, generally relegated there because to answer them or even address them would be to render the landscape on this side of the wall fluid or even chaotic. You can't funnel wealth efficiently if there's too much fluidity, you know.
As an example, ask yourself what happens when the basal occupations, those I place in the "endurance sector," are burdened to the point of collapse? These are endeavours that are essential to a functioning society, but are underpaid and taken for granted because, even under the most dire pressures, people will do them anyway. Child rearing, education, farming, arts and music, care for family members in distress (short term or ongoing,) speaking truth, pursuing science and research, building, cleaning and repairing ... many activities fall into this class, the most basal of which is the pure persistence of staying alive.
But all these poorly supported activities, no matter how unreasonably people cling to them, require time, attention and energy. As those resources are constrained, those essential activities will willy-nilly be limited too.
Do any economists ask, what happens to a nation when its endurance sector is deeply depressed? When it's so difficult to raise children that the numbers come in below the replacement level? When farms fail by the hundreds? When suicides become common? When research, development and basic education are no longer flourishing gardens, but become dry vacant lots growing bitter, pale weeds?
Noni
Posted by: NoniMausa | May 26, 2014 at 01:45 PM
I don't think immigration is a figleaf hiding government ineffectiveness, as rogerh suggests, but it may well be a symptom of the popular recognition of that ineffectiveness.
Outside a voluble, media-friendly minority, very few politicians are blaming immigrants or the EU. The senatorial class are mostly embarrassed that the self-appointed tribunes of the people are raising the subject.
Most people are aware (however dimly) of the major secular shifts in society, such as the disempowering nature of globalisation and the way that technology drives inequality. This is what is fuelling UKIP, over and above the racist core they've inherited from the BNP.
Equally, 30 years of neoliberal ideology (government is the problem, let the market decide) have left most people cynical about both the sincerity and capability of political parties to effect change, which has been exacerbated by the "political caste" trope (expenses, cliques, dynasties) beloved of an intimate media.
As Chris suggests, the problem is estrangement and there is little to suggest that the political establishment fears this. The alienated are either atomised by social media or drained off into marginal political channels.
UKIP won't change anything because: a) they'll never get enough votes; and b) because they aren't advocating change so much as stasis (binning their manifesto was their one stroke of genius). The "national revolution" would require the Tories to do a von Papen, and that is improbable given the stranglehold of pro-EU big capital and the City.
Posted by: Dave Timoney | May 26, 2014 at 01:46 PM
«why should the public's preferences shape policy, when those preferences are ill-informed or downright malevolent? The answer is not that, in a democracy, public opinion must rule.»
The aim of democracy is to share *accountability* for policy between elites and commoners by giving commoners the right to veto the elite factions they object to most.
Note: the second objective is to change competition among factions of the elite from violence to propaganda: the winning faction wins not by killing the losing factions, but by being least-objected by the commoners.
The above is very important especially in the aspect that nowhere it is assumed that the goal of democracy is to ensure fair government or even competent government.
In order to be accountable, the commoners must be free to vote for the elite faction they least-object to in a totally free way, as adults. If they want to make their voting choices ill-informedly or malevolently, and to least-object to an incompetent and knavish or even evil elite faction, and ruin their own country and themselves, so be it.
Accountability *in the long* run should ideally also converge to fair and competent government, if the commoners learn by their mistakes and learn to invest in being more engage in politics and wiser in their voting patterns; but if the commoners want to double down and continue to be ill-informed and malevolent, and support incompetent and knavish political factions, that's fine: they are accountable for it. It is their own country they are screwing up.
«There are huge areas of social life where democracy is withheld - namely in companies - even though workers' opinions on how to organize their workplaces are probably better-informed than their opinions on, say, immigration.»
Again here the issue is not that democracy being about better informed or competent or less evil.
The key is accountability: in theory companies are run by the faction of management least-objected to by those accountable, the investors, who stand to lose their investment if they least-object to knavish, malevolent, incompetent management.
If there is a basis for involving workers in the choice of management faction to lead the company it lies in recognizing that they are "invested" in the business too, and they are also accountable for the consequences of choice of management, even if in a different way from investors. Not that workers are better informed about their job.
Very bad things are sure to happen eventually and usually pretty soon if the break between accountability and choice is broken *either way*.
If residents of a country cannot choose their rulers but suffer the consequences anyhow, the result is not the fair, benevolent government of philosopher-kings, whether they be "centrist technocrats" or "vanguards of the proletariat".
Posted by: Blissex | May 26, 2014 at 02:01 PM
«absurd politics which seem to think that jobs and incomes are threatened only by immigration»
Surely not "only", but both Conservatives and New Labour have been extremely keen to enlarge the EU and boost immigration of young, cheap workers from the poorest countries.
Because largely their policy aim was to use massive immigration from very poor countries as a way to harm the unionized working class by making it more difficult to get jobs and by driving down wages. With the added benefits of driving up rents and house prices.
Because both Conservatives and New Labour have appealed to "aspirational" voters by which they mean a large class of petty rentiers, incumbents in some little or large property, who have been voting relentlessly for lower wages and benefits, and higher rents and property prices.
Massive imports of good from some low-wage countries and of disposable workers from other low-wage countries have been conscious, long term attacks on the jobs and incomes of the UK unionized middle income (both blue and white collar) clases.
By and large that has been the aim of the southern and older sections of those once unionized middle income classes: since they acquired some rentier wealth in the form of secure jobs with good wages and defined benefit pensions and right-to-buy buy-to-let speculative property, thanks to those unionized jobs, they have decided to pull up the ladder, and mercilessly squeeze those coming after them.
It is the "F*CK YOU! I got mine" and "Blow you! I am allright Jack" mindset.
They have been electing and cheering governments that have used as anti-union, pro-property strategic weapons the extension of the EU to very low wage countries and mass immigration from those countries.
That's not the *only* cause of the demise of the North, and of the Southern working class and underclass and "residuum", but a big part of the story.
Two million extra young, single, job competitors willing to work for much worse pay and conditions, and to live 2-4 to a room paying huge rents, may only slightly depressed wages for everybody else, but they surely boosted rents and property prices and made it much easier for employers to enjoy all the upside of productivity growth.
If there is a defense of immigration *from the EU* it is not that it has not harmed jobs and income *growth* and the cost of living for UK workers, because it has; it is that EU immigration rules are reciprocal, and just as there is over a million EU immigrants in the UK, there is over a million of UK emigrants to the EU.
English culture is practical, and the value of reciprocity is easy to see: in the UK it is legal for someone to emigrate from Sunderland to Bristol because it is also legal to emigrate from Bristol to Sunderland.
Sure, the lure of the reciprocal right of emigrating to Bulgaria or Romania is not as valuable as for Denmark or Italy, so I think that phase of expansion was unwise economically...
But perhaps in 50 years time Poland, Bulgaria and Romania will be booming and millions of poor emigrants from places like St. Albans and Sevenoaks will be emigrating to live four to a room in Krakow or Timisoara, counting themselves lucky to earn minimum wage in hard currency after the crash of the Southern UK economy after the end of oil and the collapse of the City under a mountain of debt... :-)
Posted by: Blissex | May 26, 2014 at 02:32 PM
«UKIP won't change anything because: a) they'll never get enough votes; [ ... ] the Tories [ ... ] improbable given the stranglehold of pro-EU big capital and the City.»
So the only hope for the UK must be Nick Clegg and the liberals :-).
I have a completely different reading from the above and:
* The UKIP vote is mostly a protest vote, based on either job/rent issues, or property price issues, which are ultimately contradictory: some UKIP voters feel screwed because wages are low and rents and property prices are high, some because rents and property prices are low and wages are too high. Neither care very much about the EU.
What they share is a nostalgia, common to those who restore steam trains or old valve computers, for the times when Britannia Ruled the Waves, and the fantasy that in that period everybody was well taken care of (except they still remember as those horrid subhumans in the tenements of Glasgow, London, Manchester, ...).
* The UKIP leadership and donors care very much about the EU, in the sense that the City badly wants to exit the EU and turn London into even more of a new Switzerland or Monaco or Singapore or Hong-Kong or Ireland, in particular into a money-laundering tax-haven for the predatory classes of the EU and other continents. With the secondary goal of turning the rest of the UK, including the South, into a pool of cheap hired help for their country mansions. The UKIP leadership and donors and the City are the Toriest tories.
* The Conservative party has a plurality of members and MPs (technically the same thing...) that are completely aligned with the UKIP goals of exiting the EU and turning London into a "free port" and pauperizing the "uppity" commoners of the South, reducing them as they have reduced the insufferably uppity ones of the North. But the party is sponsored not just by the City, but by Big Corporates, that still have some investment in the UK and want to stay in the EU to maximize their value.
* The strategic goal of the UKIP and their sponsors and the City is to condition the Conservatives and not the illusion of winning elections outright: it is to split the tory vote between Conservatives and UKIP so as to largely neuter the Conservatives and undermine the legitimacy of UK politics, until the corporate sponsors of the Conservatives relent and consent to the plan of turning London into a sharper, nastier version of Zurich or Hong-Kong.
Posted by: Blissex | May 26, 2014 at 03:09 PM
@Blissex,
The City doesn't want to exit the EU. Its threats to steer the good ship UK into the open ocean are just manoeuvring to limit EU regulation and maintain its privileges. Since the Eurodollar market of the 1960s, the City has exploited its half-in/half-out position.
If we left, European capital markets would decamp to Frankfurt. Euro funds seeking tax-havens would divert to Amsterdam. London consultancies and law firms would lose their EU business. Global customers seeking access and advice would divert to Paris, etc.
When the chips are down, finance capital and big capital will trump small capital, which is why the Tory party will ultimately vote for "in" (with face-saving renegotiations) rather than "out".
There are plenty of chauvinists and xenophobes in the City, but few who would cut off their nose to spite their face.
Posted by: Dave Timoney | May 26, 2014 at 06:34 PM
«The City doesn't want to exit the EU. [ ... ] the City has exploited its half-in/half-out position.»
The message from UKIP and their allies in the Conservatives is that 3/4 out, that is membership of the EEA like Norway or Switzerland, is good enough, and would free the City from any annoying duties of cooperation with anti-laundering, anti-evasion authorities in other EU countries; and that in any case the EU is a waning customer base.
«Its threats to steer the good ship UK into the open ocean are just manoeuvring to limit EU regulation and maintain its privileges.»
I agrees that this is part of the game, but I think that it is a fall-back position and that most of the City really reckons that EEA status is good enough for their purposes, and anyhow they have reason to think that this is unrealistic:
«If we left, European capital markets would decamp to Frankfurt. Euro funds seeking tax-havens would divert to Amsterdam. [ ... ]»
What the City knows is that their competitors in Switzerland (EEA) are doing fine, and those in the Isle of Man, Channel Islands, Bermuda, Caymans, etc. are doing very well, and they are wholly outside the EU.
There is also a big faction in the City, championed by the UKIP, that says that EU business is a decreasing share of the global pie, and what matters is getting business from Asia, and the EU customer based is not that important.
They may be even right that this vision, equally shared by Nick Farage and Boris Johnson (and probably George Osborne), is the most realistic as to the future.
But even so the main objections are:
* As to feasibility they are assuming to have a good chance of capturing a chunk of the Asian (plus Brazilian, Russian, ...) money laundering and tax evasion business; but there are hungrier competitors. Singapore is there too, and Hong-Kong has an enviable half-in/half-out status wrt China. Plus Tokyo is also largely unregulated.
* As to desirability their vision is only about the faction of the elites associated with the City, the elites in the rest of the country may object to a plan in which City spivs continue to live in stupendous luxury thanks to even greater skimming some cream off international dirty money flows, and the rest of the UK becomes a bucolic retreat for them and a source of cheap servants. I doubt that there are few people in the remaining upper classes in the North that have forgotten how the Southern and London Conservatives did not care about screwing them over as collateral damage of reducing the insufferably uppity workers of the North.
There is a major sign that "saving the City by taking it outside the EU" is the plan in a famous recentish article by The Economist about preserving the City as the only "cluster" in the UK:
www.economist.com/node/21542417
«the thrust of many of the proposals coming out of Brussels looks harmful. [ ... ] Mr Cameron's stand-off with his European partners [ ... ] has now given London's rivals the excuse to hamstring the City.»
«Britain will one day wake up to discover that it has lost one of the world's most successful business clusters, and the best hope the next generation has of earning a decent living.»
This is a strong worded story: envious EU members want to sabotage the City, which is the best hope for (a small minority of) UK workers to get a good job.
The Economist and the interests they are aligned with have in effect already discounted Big Corporates as irrelevant; they are fully resigned to the notion that Big Corporates will leave the UK behind to move all their production activities to cheaper countries, and or will be obsoleted by new Big Corporates headquartered in those cheaper countries.
In the vision of the UKIP, The Economist and large parts of the Conservatives the only future hope for the the UK elites (a few thousands to a few dozen thousands of "decent livings" for the inheritors of the elites) can only be in an extractive entertainment industry that lives off commissions from handling dirty money and yet still loses capital overall over the cycle and gets recurrent welfare handouts of hundreds of billions of pounds to replenish their capital directly from the Treasury or more often disguisedly via Bank of England gifting them enormous spreads as the expense of ordinary suckers thanks to unlimited loans to insolvent banks against toxic collateral at near zero interest rates, just as Bagehot recommended :-).
Posted by: Blissex | May 27, 2014 at 01:47 PM
@Blissex, the size of a financial centre reflects the volume of monetary flows through it. London is on a totally different scale to Zurich and Geneva (Bermuda, the Caymans etc are extensions of London). It is in the global premier league, along with New York and Hong Kong. It has a geographical advantage, midway between Asia and America, but so too does Frankfurt et al. Its differentiator is regulation, which takes two forms.
The first is institutional privileges, notably the Corporation of London and British Overseas Territories (London's tax haven annex). Being a semi-detached member of the EU provides a conduit for European capital to avoid tax and oversight.
The second is foreign regulatory arbitrage, i.e. London's role in shielding the deposits of foreign concerns that want to avoid domestic tax or possible confiscation. For example, the original Eurodollar market arose because the USSR wanted to hold its oil revenue, in Dollars, outside the US. Today, US companies hold huge profits offshore (via London) to avoid US corp tax.
London is the chief offshore market for the Euro, and is trying to become the same for the Renminbi. This in turn makes it the chief market for inward investment to the EU and for Euro derivatives. If the UK left the EU, the EU would restrict Euro trades. A major chunk of capital flows would disappear from London, as would a number of banks (BNP, DB etc).
London would then lose its attractions for non-EU depositors. EU companies needing Dollars for trade would go to Frankfurt, Amsterdam, Dublin etc. This would push up interest rates (i.e. the price of Dollars), attracting US funds to those markets.
London could still offer the tax haven conduit, but this, together with a shrunken domestic investment market, would demote it to the level of Zurich (NB: Switzerland is not in the EEA but has a special deal, essentially a cover-up re dodgy Nazi-era and Mafia money).
UKIP, despite Farage's previous as a stockbroker, represents small capital, i.e. employers who are more worried about the EU Working Time Directive than the Financial Transactions Tax. They want to grow profits by repressing labour. The City is a middleman, operating a sophisticated toll-booth, so it depends on privileged access. It wants to be where the money is.
Posted by: Dave Timoney | May 28, 2014 at 02:53 PM