Stumbling and Mumbling

Against solipsistic politics

Everybody knows the country is divided. What’s not so well appreciated is that there is also an implicit unspoken division about how we conceive the very nature of politics.

The dominant popular conception is that politics is much like ordering something from Amazon. You say what you want, expect it to be delivered, and get the hump when it isn’t. That leads to demands that politicians “just get on with it”, to talk of a betrayal of democracy, or even to demands for a “strong man” to sort things out.

There is, though, another conception. It’s that politics is not just another retail experience. It is about the conflict of interest between people: Robinson Crusoe had no politics until Man Friday pitched up. Such conflicts arise simply because we want different things. The essence of politics is to understand how to cope with this. Sometimes, others’ wants are an immutable obstacle to our own desires, so we cannot get what we want even if there is a democratic mandate for it.

At other times, though, their wants might be malleable. This might be done by persuasion, rational or not. But it can be done in other ways. Thatcher, for example, created a constituency of people with an interest in house price inflation and hostility to property taxes by selling off council houses. Blair’s expansion of universities created a more cosmopolitan, liberal cohort. And Cameron’s great achievement was to take an issue which few (pdf) people cared much about and push it so far up the agenda that it now dominates politics and has changed our political identities.

Radio 4’s Today programme gave us (inadvertently) a nice example of this difference on Friday (2’13” in). Martha Kearney claimed there was “no appetite” in Scotland for an immediate new referendum on independence. Nicola Sturgeon replied that “part of the job of leadership is to set out to people why you think change is needed.” Kearney was using the politics-as-Amazon conception, in which politicians fulfil orders; Sturgeon was using my second conception, of politics as using persuasion to manage conflict.

Such persuasion, however, cannot always be done by politicians alone. It’s a job for all of us. A good example of this is the Northern Ireland peace process. The Good Friday Agreement is perhaps the greatest example in modern times of successful delivery by politicians. And yet the architects of that success have always spoken of the peace process. And for good reason. They know that peace isn’t something that can be delivered from on high by politicians even if the vast majority of people want it. It needs constant work on the ground to persuade potential terrorists to abjure violence. The murder of Lyra McKee was a failure of this process. But the failure wasn’t one of politicians or police. And it didn’t happen when the shot was fired. It happened when someone went looking for a gun and was met with the words “I can sort you out” rather than “don’t be a twat sonny.”

Now, it’s easy for us Remainers to sneer at Brexiters for wanting something that is ruled out by others’ preferences. But the silliness is not theirs alone. Many Remainers are demanding a third referendum but giving us little clue that they’ll do a less piss-poor job of campaigning than they did in 2016. They care too much for their own desires and pay too little heed to how to influence others.

In fact, this point broadens. There are other policies we might like but which might be prevented by others’ behaviour. For example:

 - Higher taxes on the rich or on companies. Whether these can actually raise much more revenue or not depends in large part upon whether the rich regard taxes as a price to pay for living in a civilized country or just a burdensome impost which they seek to avoid. This tax morale varies from time to time and place to place.

 - Wage-led growth. Whether this succeeds depends upon how companies respond to higher wages. Do they betoken increased aggregate demand and hence a reason to invest? Or are they instead a threat to profit margins and hence a reason to cut investment? Again, the answer will vary from time to time and place to place.

These two policies are much like Brexit, in the sense that whether they can be delivered or not is not merely a matter of a democratic mandate. Their feasibility depends upon others’ beliefs and actions. Sensible politics considers what these beliefs might be, and how to shape or change them. Stupid politics, by contrast, acts like a five-year-old solipsistically screaming “I want, I want”.

The converse is also true. There’s a strong case for some policies even though the voters don’t seem to want them. For me, the case for encouraging worker coops falls into this category: they are necessary to increase equality and productivity, whether voters want them or not.

If we lived in an intelligent polity, my point here would be obvious. It’s that politics is not and cannot be another Amazon fulfilment centre. It’s not just about what you want, but about what others want too. The very essence of politics is about how we manage conflicts between different attitudes, and how we might change those attitudes – the latter being a job not just for politicians but for everybody.

Who'll defend freedom?

In the last few days we’ve seen rightists attempt to bully Greta Thunberg out of the public sphere rather than engage with her arguments; Tony Blair’s demand for ID cards and that immigrants have a duty to integrate; and rightists (backfiring) efforts to shame Diane Abbott for drinking on a train. These all have something in common. They show that the right and centre are enemies of freedom*.

These are not the only examples, nor the worst. New Labour created thousands of new criminal offences, a trend continued by the Tory government such as in its ban on legal highs, its counterproductive porn block and its "hostile environment" policy. Very many Tories and Cuks voted last year against legalizing cannabis. Chuka Umunna, following the centrist Emmanuel Macron, wants to reintroduce forced labour. And of course demands to end freedom of movement and restrict immigration are by definition demands to curb freedom.

The only reference the Cuks made to freedom in their launch statement (pdf) was that: “our free media, the rule of law, and our open, tolerant and respectful democratic society should be cherished and renewed.” This looks a little like valuing the freedom of corporations more than that of individuals.

To people of my vintage, this illiberalism looks odd. In my formative years anti-leftists claimed to cherish freedom, and attacked the Soviet Union for denying it to their people.

Which poses the question: why, then, are they so opposed to liberty today?

Partly, it’s because they always have been. Many cold warriors were not sincere libertarians, but only appealed to freedom as a stick with which to beat the USSR. Many of them supported Pinochet and apartheid, and the criminalization of homosexuality. The freedom they valued was the freedom to exploit others.

Another reason is that the enemy of freedom is fanaticism. Friedrich Hayek wrote:

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....And so, when we decide each issue solely on what appear to be its individual merits, we always over-estimate the advantages of central direction. (Law Legislation and Liberty Vol I, p56-57.)

The more confident you are about your own beliefs, the more weight you’ll attach to the individual merits of any infraction of freedom and the less weight to unforeseeable actions. So you’ll be more inclined to curtail freedom. Although centrists think of themselves of moderates, this is often mere self-love: you can be a fanatical centrist just as much as you can be a fanatical leftist or rightist. Fanaticism and extremism are different things.

There’s something else. Centrists and rights have long been naïve about power. Many have been over-optimistic about the extent to which it will be used benignly, no doubt in part because it has traditionally been exercised by jolly good chaps like themselves. It is for this reason that they have long been too relaxed about the coercion that occurs within corporate hierarchies. But the same thinking – or lack thereof – extends to political power. If it is people like you who will exercise power, and minorities or working class people who’ll be on the dirty end of it, you’ll be relaxed about arrogating power to the state.

Which brings me to a forgotten fact. Before the 20^th century, freedom was a leftist ideal: think of Tom Paine, John Stuart Mill, the young Marx, Adam Smith’s jaundiced view of the “rich and great”, or the first word of the motto of the French revolutionaries.  There was a simple reason for this: they all knew that restrictions of freedom helped the rich and powerful and hurt the poor and powerless. It is time for the left to reclaim the value of freedom – because, let’s face it, nobody else will.

* Of course, rightists are quick to claim to value free speech. But Dawn Foster has a point: the infringements of freedom of which they complain are often no such thing but are instead the hitherto voiceless merely answering back.

When failure succeeds

In politics, failure sometimes works better than success. This is the message of this piece by Janan Ganesh, wherein he argues that it is in Trump’s interest to fail on his promise to control immigration, because if he does so it will remain a big issue which will attract voters to him. Janan says:

It is perverse, I know, that a president could make so little progress on his number-one priority during four years in office, only to be rewarded for it. 

Maybe not so perverse. There are other examples.

One, as he says, is Brexit. If Brexiters get their way, voters will see that it is in fact no solution to our problems. And Farage would then lose his schtick of being able to claim that the political class is out of touch with the people. If you are practicing the politics of grievance, the last thing you want is for the grievance to disappear.

But there are other examples. Authoritarian governments use crime, unrest or terrorism as excuses for removing freedoms. For them, failing to suppress crime works better than succeeding. Technocrats and managerialists need to maintain the prospect of further incremental improvements, which requires them to maintain a gap between the actual and the feasible best.

And rightists have sometimes accused leftist parties of wanting to create a “dependency culture” and to maintain inequality and poverty, because doing so ensures the continuation of a constituency that will vote for them. As Gilles Saint-Paul and colleagues write:

Policies that reduce the income of the poor relative to the average income, such as failing to upgrade the skills of the workers and preventing their erosion by new, skill-biased, technologies, paradoxically consolidates the political power of the Left. This is because these policies make the natural constituency of a left-wing party endogenously more dependent on it.

The converse is also true. Success can be failure. Post-war social democracy worked well in raising real wages; it was one of the greatest peacetime policy successes in history. But this helped to foster individualist consumerism which supplanted class consciousness and reduced support for collectivist institutions.  As Nye Bevan wrote in 1952, in anticipation of J.K.Galbraith’s theory of “private affluence, public squalor”:

As modern industry produces new and attractive forms of private consumption, the individual citizen is made all the more reluctant to see his income taken away from him for remote purposes. (In Place of Fear, p134 in my copy)

As Avner Offer has written more recently:

Towards the end of the 1960s, attitudes began a slow shift away from the common welfare and public services as sources of well-being, and towards private benefits…The choice to “go private”, which is widely perceived as a driver of affluence, is perhaps one of the consequences of affluence. (The Challenge of Affluence, p7-8)

In the same vein, the creation of high-quality council houses created a constituency with a strong interest in buying them cheaply from Thatcher.

In these ways, social democrats’ success was also their failure. Corbynomics might suffer the same fate. If it succeeds in the medium-term, it will enable young people to buy houses – but this will create a client base of older property-owners in future who’ll have an incentive to support the status quo.

My point here is a simple one. We flatter ourselves that we live in a meritocracy in which success is rewarded and failure punished. But in many cases, this is a myth. Sometimes we live instead in the world of snake-oil salesmen as brilliantly described (pdf) by Werner Troesken, in which it is failure that is rewarded. Our economic and political institutions are all selection mechanisms, and sometimes they select not for success but for failure.

Note: my target audience is discerning enough to understand the picture reference. 

Broad-spectrum policies

Is there a case for the Bank of England to target house prices? The debate, I suspect, highlights a difference in how we think about economic policy – between what might be called a single-issue technocratic approach versus a broad-spectrum approach.

Many of us, I suspect, agree that high and rising house prices are a cultural and economic menace. They encourage high debt which is potentially destabilizing (pdf). They divert spending towards rent and mortgage payments (and sometimes housebuilding) and away from new goods and services, thereby reducing dynamism and innovation. They encourage people to commute long distances, which increases stress and cuts productivity. And they encourage “property development” at the expense of more productive forms of entrepreneurship.

There’s therefore a case for limiting them. Equally, though, there are reasons to question whether this can be done merely by giving the Bank of England a target for house price inflation alongside its CPI target.

Granted, such a target might work simply by reducing house price expectations, thereby deflating speculative buying – especially if the target is set as low as Grace Blakeley has suggested (pdf).

There are, however, legitimate doubts about its effectiveness. The Bank’s only policy for curbing house prices would be to limit mortgage availability. But how effective would this be if overseas or shadow banks fill any gaps caused by conventional lenders withdrawing? Also, housing booms are often localized, so how would limiting mortgages in Leicester curb London’s high prices? Such restrictions would also be inegalitarian: they’d deny mortgages to young people without deposits but grant them to those who have access to the Bank of Mum and Dad. And, of course, one policy might not be sufficient to cut prices. We might need others such as taxing land, encouraging renting, changing planning laws or simply building more houses. Such policies are outside the Bank’s competence.

Ms Blakeley replied to criticisms such as these by saying, reasonably, that a house price target should be part of a radical reform of the banking system.

Which brings me to the issue. Sometimes – often – there is no single magic bullet policy. Instead, we need a whole range of them. This isn’t true only of curbing high house prices. Here are two other examples:

 - How should we improve the bargaining power of workers? I’d advocate a range of policies: a high basic income; job guarantee (arguably); support for trades unions; and macro policies aimed at sustained (over-)full employment.

 - How to raise productivity? There are countless possibilities: better infrastructure; more vocational training; stronger competition policy; more open international trade; encouraging finance for R&D, capex and intangibles investment; shifting tax from incomes to land; better migration policy; encouraging coops; and so on.

Such a range of policies is a sensible reaction to ignorance and uncertainty. If we don’t know what’ll work we should throw lots of possible solutions at the problem in the hope that something will stick – in the way that doctors, when faced with a patient with a strange condition, might put them on broad-spectrum antibiotics in the hope that something will work.  

Of course, this is only sensible if the policies in question have little or no downside – if they are free hits (which is not true of prescribing antibiotics!). But in the examples I’m considering here, this is largely the case. Even if land taxes don’t reduce house prices much, there’s still a case for them. Similarly, most policies to raise productivity wouldn’t do much harm even if they fail. A few Harberger triangles are not a big problem: as Adam Smith said, there is a great deal of ruin in a nation.

Herein, however, lies an oddity. What I’m advocating seems inconsistent with the empirical turn in academic economics. The use of randomized control trials or other clever identification strategies give us (at best) precise answers to narrowly defined questions. In some cases, however, what we need are rough answers to big questions.

Marxism for Tories

The Tories have discovered a new boo-word. In the last few days, Iain Duncan Smith, Esther McVey and Suella Braverman have all used “Marxism” to mean a self-evidently Bad Thing. From one perspective, this is odd because in fact Tories should find some aspects of Marxism quite sympathetic.

Not least of these is an admiration for capitalism’s dynamism. Marx wrote that capitalism “has given an immense development to commerce…has accomplished wonders far surpassing Egyptian pyramids, Roman aqueducts, and Gothic cathedrals…draws all, even the most barbarian, nations into civilisation…[and has] rescued a considerable part of the population from the idiocy of rural life.” We don’t deny that capitalism has been a progressive force. We just wonder at what price this has been achieved, and whether the progress can continue.

And let’s get one obvious thing clear. Just as Conservatives no longer believe in locking up homosexuals or hounding them to death, so Marxist don’t want to send their opponents to gulags. Quite the opposite. There has always been a big libertarian strand within Marxist thought. Marx thought that the ideal society was one in which "the free development of each is the condition for the free development of all" and looked forward to the abolition of the state. The nanny state of which libertarians like Christopher Snowdon complain is emphatically not a Marxian notion.

In fact, Marxists share with Tories a scepticism about what state intervention can achieve. Whereas social democrats think that the right macroeconomic and redistribution policies can alleviate the worst features of capitalism, Marxists are not so sure. One reason why we want to supersede capitalism is precisely that we share with Tories doubts about the efficacy of piecemeal reform.

I’ve used that word “supersede” advisedly. Most Marxists no longer believe in violent revolution, or even revolution at all. If you want to find ideologues who’ll wreck the economy by imposing a  utopian fantasy upon it, you should look at Brexiteers rather than Marxists. Instead, we favour accelerationism or interstitial transformation (pdf) – finding non-capitalist forms of organization such as coops or community self-help groups (what Burke called “little platoons”) and encouraging their development.

In this sense, Marxism is empirical and anti-ideological. One reason for this is that we have no dog in lots of conventional political fights. For example: would a much higher minimum wage destroy lots of jobs? If no, then fine; we have a way of helping the low-paid. If yes, then it just shows that capitalism is incompatible with decent living standards for all. Or: can some monetary and fiscal policies prevent recessions and promote longer-term growth? If yes, we’ve got something useful. If no, then we’ve evidence that capitalism is destined for crisis and stagnation. Because we’ve no preconceived ideological answers to such questions, we can let ourselves be guided by the evidence.

What’s more, Marxists are not moralists. We don’t think social ills are the result of bad people doing bad things. They are instead, systemic problems which emerge independently of the intentions of individuals. As Marx said, “external coercive laws [have] power over every individual capitalist.” Marx, like Adam Smith, was an early theorist of emergence.

Some Tories might also be surprised that some apparently Marxian positions are not uniquely Marxist. The labour theory of value and tendency for the rate of profit to fall were both Marx’s elaborations of the ideas of Smith and Ricardo: when Paul Samuelson called Marx a minor post-Ricardian he was saying that there’s less originality in Marx than you might think. And if you’re looking for a belief in the sort of historical determinism attacked by Popper, you should look not to Marxists but to Blair: as Will Bott has shown, his talk of globalization as an “unstoppable force” is more crudely deterministic than most of us Marxists would accept.

It should be clear from this that Duncan Smith is wrong to say Corbyn is a Marxist: that pays him too great a compliment. Labour’s 2017 manifesto was mostly mainstream European-style social democracy.

All this, though, leaves me ambivalent. On the one hand, I think the Tories are right to be scared of Marxism: it poses an intellectually coherent challenge to their class privilege in a way that centrism and much of social democracy does not. On the other hand, though, using Marxism as a merely derogatory term is to misrepresent the history of thought. It is crude philistinism. But then, perhaps that is all the Tories have nowadays.

Why rent matters

Philip Green doesn’t get much public sympathy, but he deserves our thanks for doing one thing: he is reminding us that economists have wrongly neglected David Ricardo’s theories of rent.

Mr G is fighting landlords to cut rents – as indeed are several other high street names. Which evokes Ricardo. He showed that profits can be squeezed not by worker militancy but by rising rents.

The basic idea here is straightforward. Imagine, said Ricardo, there were an abundance of fertile land. A landlord could not then charge farmers rent: the farmers would just move onto other land. As the economy and population grows, however, the best land becomes fully occupied so farmers must use less fertile land. As they do so, the owners of the best land can demand rent from their farmers. And as worse and worse land gets brought into cultivation so the difference in the output of the best and worst land increases, giving owners of the best land even higher rent. As Ricardo wrote:

By bringing successively land of a worse quality, or less favourably situated into cultivation, rent would rise on the land previously cultivated, and precisely in the same degree would profits fall; and if the smallness of profits do not check accumulation, there are hardly any limits to the rise of rent, and the fall of profit….In a progressive country…the landlord not only obtains a greater produce, but a larger share.

This isn’t just true of farmland. It also applies in retailing. Owners of the best sites – those with the highest footfall and greatest accessibility – can charge shop-owners a rent up to the difference in revenues they get between the best and worst sites. As Tim says:

Even in busy London stations coffee sellers don’t make much money because the landowner simply increases the rent. In other words, it’s the landowners via rents who make money in prime locations, not the operators of businesses. 

Retailers such as Mr Green have got the hump with this.

But it’s not just retail space of which this is true. It’s also true of housing. As Josh Ryan-Collins writes in his superb book, Why Can’t You Afford a Home?, “desirable location (typically in large cities) is inherently limited.” And Econ 101 tells us that if demand increases when supply is inelastic, we see big price rises. As Londoners get richer, everybody wants to live in Hampstead, with the result that only Russian oligarchs can afford to do so.

Historically, there has been a mitigation of this. In a lovely paper (pdf), Katharina Knoll, Moritz Schularick and Thomas Steger show that house prices were actually flat in many countries for years in the first half of the 20^th century. A big reason for this was the development of commuter train lines. The opening of the Metropolitan line, for example, allowed workers to travel easily from Neasden to central London. That reduced the monopoly which landlords in the city centre had, thereby squeezing their rents – just as cheap fertilisers would have squeezed farmland owners’ rents in Ricardo’s model.

This effect, however, was only one-off – at least it will be until we invent teleportation. And it has been replaced by another more powerful effect – financialization. Credit liberalization in the 1980s removed the constraint upon house prices imposed by current incomes by allowing people to borrow more. The upshot is that there has been a strong correlation between house prices and interest rates: as the latter have fallen, house prices have risen relative to earnings.

For this reason, as Ryan-Collins explains, high house prices are due in large part to financialization. This, he believes, means that there is a case for banking reform and a land value tax.

The point here, though, isn’t just about policy. It’s also about how economists approach their discipline. As Ryan-Collins writes:

Land and money are two of the most neglected concepts in economic theory. Land is immobile, irreproducible and appreciates in value over time due to collective investment – none of these features apply to capital goods. Yet modern economics and national accounts treat them as one and the same.

Herein lies one reason (of several!) why economists should study the history of economic thought. Doing so can show that classic economists knew things which modern ones have forgotten.

The rise of moral simplicity

One of my best friends here in Rutland is a keen Brexiter. I fear, though, that our hysterical political times are jeopardizing such cross-divide friendships. Instead, as Dorian Lynskey has said, many people have fallen into a “childlike moral binary: only people who hold the all correct positions merit empathy or respect.”

Dorian is speaking of Momentum telling us not to feel sorry for Nick Boles. But I think the point generalizes. Not only do Remainers and Leavers have little mutual understanding, but much of the left persists in the “evil Tories” meme whilst some on the Right seem to think that anyone to the left of Tom Watson wants to reopen gulags. We see a similar thing in the debate about whether Michael Jackson’s music should still be played: the urge for simplistic moral binaries stops some people seeing (despite many historical examples) that a man can be both a criminal and a great musician.

What interests me is: why do so many people fall into such childlike binaries?

One reason, I suspect, is a simple cognitive bias – a version of the halo effect. We tend to believe that people who have one quality have others, so that if they agree with us on an important matter they must also be intelligent and kind-hearted. The converse of this is that if they disagree with us then they are stupid or evil.

A second reason is that – for psycho-political reasons I don’t fully understand – we have lost what Richard Rorty called liberal irony (pdf). Many people are no longer “always aware of the contingency and fragility of their final vocabularies, and thus of their selves”. Instead, our political beliefs have become important part of who we are. The debate about Brexit is not a dry technical matter about our relationship with the EU. It has become just another form of identity politics. This might be a symptom of what Ben Friedman pointed out back in 2006: hard economic times, he showed, produce intolerance and fanaticism. I’m not sure, though, that this is the only explanation.

Related to this is something Richard Sennett described in 1970. People, he said, want to create “purified identities” for themselves, “making oneself a fixed object rather than an open person liable to be touched by a social situation.” One way they do this, he said, was by denying the reality or legitimacy of dissonant experiences or opinions.

I suspect that there are also sociological factors at play. It’s easy for many of us to stay in intellectual ghettos and only meet those with like-minded opinions: how many Brexiters does the typical academic meet? This is reinforced if you are a political activist who spends his/her leisure time with fellow partisans.

Perhaps, though, the media is also to blame. If my only exposure to Brexiters came from the BBC I would believe that Brexiters are arseholes because this is what the likes of Rees-Mogg, Johnson and Francois seem to be.

In fairness to them, this might be because we see all political interviewees out of context, separate from any evidence of any wit, self-doubt or decency they might have. Just as footballers often wrongly come across as stupid because we only see them answer simple questions when they are tired, so perhaps politicians are also systematically misrepresented by the very nature of interviews.

Or maybe there’s something else. The media select for gobshites, egomaniacs and fanatics. It’s these that push themselves forward. And the interviewee who says “I dunno, it’s complicated” makes for lousy  TV or radio.

I concede that this list of reasons is vague and incomplete. But in a sense, this is the point. Some people are calling for a gentler, more understanding politics. What this misses, though, is that there are powerful sociological and psychological mechanisms driving us towards a morally simplistic mutually hostile politics.