Labour's failure

There's agreement across the political spectrum that Osborne's Budget was good politics but bad economics. This poses the question: how can a Budget which deprives millions of the worst off of hundreds of pounds a year possibly be "good politics."

Part of the answer, of course, is that the judge of what counts as "good politics" is the Westminster bubble. This bubble is isolated from economic truth - it has convinced itself that austerity is good economics - and has also succeed in marginalizing the low-paid, by pretending that "middle England" comprises people on handsome incomes.

In this sense, the media conforms to Adam Smith's claim, that we have a "disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition" (Theory of Moral Sentiments, I.III.28).

Given this deference and distorted reality, it is no wonder that Osborne should get so many plaudits*.

There is, though, another reason why the Budget is "good politics." It's because the Labour party ceased to be the party of workers and become a party for workers. Rather than be a vehicle whereby workers can advance their own interests**, Labour became a managerialist party, offering workers just so many crumbs from the table as capitalists could spare. This has allowed Osborne to pretend to steal Labour clothes by proposing a high minimum wage.

However, the managerialist takeover of Labour wasn't just bad politics in the sense of allowing the Tories to pose as the party for working people by lifting its policies. It's lousy economics too, in two senses.

One is that the best way to raise wages is to raise productivity.And a good way of doing this is to have greater worker control of firms and less top-down management: it was - remember - the latter that contributed to the collapse of banks.

The other is that policies that increase workers' bargaining power - such as fuller employment, stronger trades unions, a citizens' income that allows workers to reject bad jobs - are surely better ways of raising wages than a mandatory "living wage."

Now, I'll concede that my scepticism about the impact of minimum wages on employment might be excessive: we just don't know. What we do know, though, is that stronger bargaining power is surely a better way of raising pay without jeopardising jobs than an NMW. The former permits wages to rise where they are due to monopsony, but tolerates them where they are due to genuinely low marginal products. A legal NMW doesn't make this distinction and so is, as Martin Wolf says, a crude "leaden-footed regulatory intervention."

Sadly, because Labour has ceased to be a party of workers, and become just another Westminster-managerialist faction, it cannot make these points and cannot distinguish itself from the Tories.

The optimist in me can see glimpses of Labour grasping this fact - for example in Liz Kendall's call for worker representation on boards. Of course, that doesn't go far enough. But it is the direction Labour must move in.  

* The BBC is complicit in this. If Osborne were to say the world if flat, Robert Peston would report that there's a debate about the shape of the world. I fear the fault here is less a personal one than an organizational one: the BBC's "due impartiality" requires it to be impartial between truth and falsehood.   

** Labour has, of course, always been split along these lines, being a coalition of middle-class do-gooders and trades unionists. It is only recently, though, that the former became so dominant.

Comments

[Neil]

Hmm, it's true that tube drivers are well paid as a result of strong bargaining power, it's also true that driverless trains work pretty well.

How do Chris's proposals enable the productivity gain from their introduction to be realised?

[An Alien Visitor]

It is interesting that driver-less trains have grown where the market is absent, i.e. where they were/are publicly run.

I guess the more workers struggle for high wages the more is the incentive to replace workers with machines. If you have a compliant workforce then this will likely slow down technological advancement.

Having said that don't expect a quick roll out of driver-less trains across the entire network. They will have to work better than "pretty well" before that project is rolled out!

Though if technology can replace train drivers I am still scratching my head why accountants and the like still exist!

[Phil]

I don't know how Osborne can talk about burden-spreading and 'broad shoulders' while actually cutting taxes on corporations and wealthy individuals - or how Kendall, Burnham and Cooper can maintain simultaneously that Labour needs to take the deficit seriously and that Miliband's proposed tax increases need to be abandoned. I don't know how they can do it, but they clearly can. It's as if there's an unspoken shared assumption, that you're only doing *serious* politics if you're kicking the poor.

[e]

I can’t help but feel the bottom line here is who cares. Who cares that Our Parliamentary system, Our Westminster bubble, is serving up a rigid, centrist politics capable of laying nations to waste; witness EZ politics vs. Greece. I always thought it was enlightenment, not empathy, upon which we depended. I’m struggling with that now.

[Dave Timoney]

Excuse the wee tangent, but ...

The introduction of driverless trains has nothing to do with the bargaining power of unions or whether the network is public or private. It has everything to do with the engineering, and thus the age, of the railway.

The Victoria line and the DLR were designed for partial automated operation from day one, though the degree of automation reflects the technology of their respective eras. The 60s-vintage Victoria line still uses a "driver" as a visual safety-check, while the 80s-vintage DLR relies on remote-control and CCTV.

Partial automation has already been extended to to Central, Northern and Jubilee lines. The challenges to full automation are visual (i.e. spotting track obstructions or passengers/items trapped in doors), which in turn reflects the architecture of the tunnels and platforms.

The "high wages" of Tube drivers essentially reflect the challenge of controlling a steampunk vehicle in a Victorian sewer. As the alternative would be billions invested in drilling new tunnels and building new platforms, the cost is actually a bargain.

Naturally the only cost-benefit analysis the media are interested in is full automation of the entire Tube network, without appreciating that this is impossible with the combination of legacy engineering and current technology.

[Danny A]

I think the negative impact of replacing of labour with machines continues to be misleading. This argument has been pushed since the agricultural revolution after all. Machines don't design themselves (yet!) This boils down to the productivity argument; better to have workers producing and improving automation methods than performing mundane rolls of operation. Furthermore the impact of automation allows more things to be done and frees up resources for novel tasks and endeavours. Again this a factor of productivity.

Then the question is whether the workers driving the productive endeavours access the gains or whether the gains are distributed to capital owners (distinct from the workers) in dividends, rents and interest.

Really, not much has changed since Marx!

[John Traynor]

Wanting Labour to be a party of workers battling against capitalism's effects is to accept that capitalism is godlike and unbeatable. If there is no desire to crush capitalism then it is hardly surprising that most workers choose the option of playing along with it, and thus voting Tory.

[Paul]

“I fear the fault here is less a personal one than an organizational one: the BBC's "due impartiality" requires it to be impartial between truth and falsehood.”

I disagree. The BBC should've fixed its problem with false balance since this: http://www.bbc.co.uk/bbctrust/our_work/editorial_standards/impartiality/science_impartiality.html and I'm afraid Robert Peston et al just don't strike me as having either the will or the intellectual strength to fight their way out of the Westminster (and City economist) bubbles they inhabit.

[Churm Rincewind]

“I fear the fault here is less a personal one than an organizational one: the BBC's "due impartiality" requires it to be impartial between truth and falsehood.”

That's just silly. How can you say that? Are you seriously suggesting that when men landed on the moon the BBC gave equivalent weight to the conspiracist theory that it never happened and the footage was artificially manufactured here on earth?

The idea is absurd.

No, what irritates Wren-Lewis, Krugman, and Portes is that in the real world their views aren't prioritised to their satisfaction. Rather like Varoufakis. And look where that got him, not to mention the people of Greece. He may well be right in his analysis, but I can't see that his interventions did anything but alienate his interlocutors with damaging results.

The world of academic macroeconomists is just as much a self-regarding bubble as Westminster or the City, and it's quite correct for Peston to point this out.

[Keith]

"The world of academic macroeconomists is just as much a self-regarding bubble as Westminster or the City, and it's quite correct for Peston to point this out."

Except that Wren-Lewis, Krugman, and Portes would say they are right; and that is because they are experts. While the formers of policy are quite happy to ignore the conclusions of academic knowledge. For reasons of class interest. Adam Smith would have made the same claim and the quote Chris has used before seems to support that conclusion.

[Blissex]

«Labour has, of course, always been split along these lines, being a coalition of middle-class do-gooders and trades unionists. It is only recently, though, that the former became so dominant.»

A large section of trade-union members are today middle-class rentiers, and in the pat they were middle-income working-class ones that become very Thatcherized in the South.

Many of both categories have safe jobs or good final salary pensions, bought houses in the 1980s and 1990s, feel quite smug about that.

From E Currie's diary quoted in "Events, dear boy, events", 1987-09-09:

«John Prescott on TV tonight that no, they knew it was unrealistic to take back shares without compensation, but that "compensation" will be the shares' original price; and Alan Tuffin (of the UCW) pointing out that nine million shareholders will vote against that won't they?»

From T Blair's famous speech:

www.britishpoliticalspeech.org/speech-archive.htm?speech=202
«I was canvassing in the Midlands on an ordinary suburban estate. I met a man polishing his Ford Sierra, self-employed electrician, Dad always voted Labour. He used to vote Labour, he said, but he bought his own home, he had set up his own business, he was doing quite nicely, so he said I’ve become a Tory. He was not rich but he was doing better than he did, and as far as he was concerned, being better off meant being Tory too.»

www.lrb.co.uk/v09/n19/tony-blair/diary
«Post-war Britain has seen two big changes. First, and partly as a result of reforming Labour governments, there are many more healthy, wealthy and well-educated people than before. In addition, employment has switched from traditional manufacturing industries to a more white-collar, service-based economy. The inevitable result has been that class identity has fragmented. Only about a third of the population now regard themselves as ‘working-class’. Of course it is possible still to analyse Britain in terms of a strict Marxist definition of class: but it is not very helpful to our understanding of how the country thinks and votes. In fact, of that third, many are likely not to be ‘working’ at all: these are the unemployed, pensioners, single parents – in other words, the poor. A party that restricts its appeal to the traditional working class will not win an election.»

[Keith]

Also are you comparing experts on macroeconomics with mad conspiracy theorists on the internet or right wing American TV shock jocks? Are you of the view that being a professor at Oxford and a fellow at one of its colleges or lecturing at Harvard are just as much a qualification to have views on these issues as being an ignorant fuckwit? That puts tuition fees in a new light.

Varoufakis and his party have been foolish. You can only escape austerity by leaving the euro and restoring an independent monetary policy with default of your debts if necessary. They should have been planning for that from day one. It still means years of low living standards but then so does staying in the euro and having your policy set by German Tories. Tony Benn would say I told you so...

[Jonathan da Silva]

Strikes me analysis of last election misses the 25% who voted Conservative represent in large measure the pensioners given free money and a host of benefits given in some cases by Labour but guaranteed by this Govt with added savings interest. Farmers given endless subsidy including paid to launch pointless Badger hunts in the face of most expert views. People with expensive houses supported by economic policy which they can pass to their offspring. Oil workers handed bns in subsidy. Senior figures in large corporates and Banks handed lots of backhanded subsidy. Help to buy beneficiaries. Those who suffer the illusion of rising house prices.

Seems to me no one attacks the (Tory word) sponger economy created. Indeed the real tax raise in budget was for small businesses who take wages as dividends. The strivers pay for it all! to use another Tory term. It amazes me Labour cannot enunciate against this but it is I guess why many use the catch all term neo Liberal as they are just extensions of their policies?

People miss in the 70s which no one would argue was a great decade people could afford 3 kids without much state assistance or to live in London and go drinking - how many journos could afford the Lunchtime O Booze lifestyles say? Again Labour still stuck believing its 97-10 Govt achieved something for people.

[Magnus Carlsen]

Chris you neglect to really address the thorny issue of why the workers tolerate this demonstrably regrettable state of affairs.

[Blissex]

«People miss in the 70s which no one would argue was a great decade people could afford 3 kids without much state assistance or to live in London and go drinking»

The same people who started families in the South in the 1970s then bought properties in London via right-to-buy, or in the suburbs in the 80s, had safe union jobs, retired on well funded final salary pensions, and now only care that their property prices go up.

They are totally tory in the "Blow you Jack, I am allright" sense, which is the toriest :-).

[Donald]

Could bargaining power jeopardise jobs in the long run? (eg UK industries losing competitiveness if unions resist technological change or discourage investment)

Can the minimum wage improve bargaining power?

Could minimum wage costs be more short term market adjustment type costs?

[Bill Posters]

One neglected aspect of the discussion on wages is public sector pay. If public sector pay and employment are rising the private sector must compete. Public sector pay sets a floor.

By capping public sector pay Osborne has put downward pressure on all pay. With the other hand he tries to increase pay with the NLW.

He doesn't know what he is doing.

[andrew curry]

@ An Alien Visitor: Accountants exist because accounts are an "opinion" that they are "true and fair", because there's no single way to present a company P&L/balance sheet, and because the way it does get prepared has legal and financial ramifications which can be hugely significant.

[Blissex]

BTW as to the switch of the Labour voting base from being labour to being tories and the adjustment that the party had to make another two quality diary entries quoted in that fascinating "Events, dear boy, events" collection:

From Lance Price, 1999-10-19:

«Philip Gould analysed our problem very clearly. We don’t know what we are. Gordon wants us to be a radical progressive, movement, but wants us to keep our heads down on Europe. Peter [Mandelson] thinks that we are a quasi-Conservative Party but that we should stick our necks out on Europe. Philip didn’t say this, but I think TB either can’t make up his mind or wants to be both at the same time.»$

From Giles Brandreth, 1994-05-18:

«Blair is way out front. *We* want Beckett or Prescott of course. Brown might be best for *them* long-term; he’s the one I find most approachable, most human and he seems blessed with a touch of socialist zeal. However they seem to be setting their hearts on the Young Conservative»