"We've established that, madam"

George Bernard Shaw, it is said, once met an actress and asked her: “would you sleep with me for a million pounds?” “I would think about it” she replied. “Would you sleep with me for a pound?” he then asked. “No” she replied. “What sort of woman do you think I am?” He replied: “We’ve established that, madam. Now we are haggling about the price.”

We should think about policies the same way. Sometimes, it is worth establishing the principle, and then haggle about magnitudes and timing.

For example, New Labour introduced the minimum wage at a derisorily low rate in 1999. But having established the principle of a minimum it was easy to raise it, and so the UK’s minimum is now comparable to those of many other nations. Similarly, Thatcher’s privatizations began as a small-scale attempt to reduce government borrowing, but they quickly scaled up. In the same vein, this is why so many of us on the left have zero tolerance for racist or anti-immigration rhetoric and why we were repulsed by Ed Miliband’s “controls on immigration” mug. Once such discourse becomes acceptable, it leads to the hostile environment policy and the Windrush disgrace.

It’s from this perspective that we should regard debates about the policy response to Covid-19. It’s an opportunity to “establish that, madam” – to create a consensus for policy principles which we can expand or refine later.

In the case of fiscal policy, this has already happened. In borrowing to subsidize wages among other things, Rishi Sunak has established that the UK has abundant fiscal space and that the notion that there is a binding limit on the “nation’s credit card” is nonsense. As Eric says, austerity was a “fraud.”

Similarly, Spain is introducing something like a basic income. Whilst purists might worry that it is not as universal or unconditional as a true UBI, I’m not sure this much matters for now, What does matter is establishing the principle. Once a policy is in place, even in mild form, we have overcome a huge obstacle - the status quo bias. It is much easier to reform than to introduce.  

A lot else, though is up for grabs. One reason why so many Germans are opposed to the idea of coronabonds is that they would establish the principle of a euro-wide backed bond and so be a stepping stone to a fuller fiscal union and to fiscal transfers. Which of course is why so many others are pushing the idea.

Also, one thing this crisis has taught us is that we need in place the infrastructure to give support to people quickly. In this regard, whilst the current depression is almost unprecedented in speed and severity, it is not unprecedented in being unpredictable. As Prakash Loungani has shown, mainstream economists and policy-makers have failed to foresee almost all recessions. Which means that monetary and fiscal policies which operate on demand with a lag are insufficient: they might moderate the downturn and accelerate the upturn, but they can’t prevent the downturn. Hence the need for automatic stabilizers.

What I’m arguing for here is to seize the moment, to use this crisis to establish policies and institutions that are hard to reverse. Many of you think this crisis will change public opinion in favour of redistribution and greater public spending. I’ve no such confidence. We tend to project (pdf)  our current preferences too much into the future and fail to see that they’ll change. We cannot, then, rely upon the public mood staying as it is.

In this sense, I’ve mixed feelings about Frances’ claim that now is not the time for a universal basic income or helicopter money. She might be right speaking of them as technical fixes, but now is the time to establish the case for them in principle, and to lay down the plumbing to enable them to work – such as, for example, ensuring that everybody has a bank account.

Much of what I’m saying here might seem obvious, even cliched. “Thin end of the wedge” and “slippery slope” have long been conservative objections to mild social reform.

But I’m not sure it is. What I’m saying here contradicts some common views of policies. Technocrats see them as fixes of current problems whilst some naïve leftists always complain of their inadequacy. What both perspectives miss is that policy-making is not merely an engineering matter of pulling levers and fixing things. Even apparently mild policies can lead to bigger things.

We must always ask, therefore of any policy: where will this lead? Sometimes, it opens a door to further change – as with the NMW. At other times, though, it can be a dead end. New Labour’s increases in public spending died with its electoral defeat, whilst its embrace of new public management (pdf) alienated many traditional Labour supporters and failed to increase public sector productivity.

But of course, policy doesn’t merely change the intellectual climate. It also changes the material base of support for future policy change. Thatcher, for example, both destroyed the unions and – via expanding the financial sector and selling off council housing - enlarged the client base for financialization. And in expanding universities, New Labour expanded the cohort of immaterial labour with a globalist outlook: it was Blair who laid the foundations for Corbyn.

My point here is a simple one that’s often overlooked. Policy-making is a dynamic, not a static process. It is not merely a matter of getting the right technocratic fixes.

Comments

[Nom the Pom]

Yes, but the scary flip-side of these new economic principles is all the new coercive powers assumed by the state. Unthinkable under ordinary circumstances, uncontroversial now.

If I were a Tory government, I'd either make the return to 'acceptable' state powers conditional upon a return to 'normal' economic principles or (more likely) reverse the emergency economic measures and hang on to the additional powers.

Over-simplistic, I know. But if there's a new normal coming after Covid-19, it's as likely to be worse than the current one as better.

[D]

Typo first line second para.

Be great to get your thoughts on a wealth tax to pay for coronavirus. Or more a wealth tax to decide who pays the real costs

[Dave Timoney]

We established that the UK had abundant fiscal headspace some years ago when the cost of government borrowing stayed low despite George Osborne's serial failure to meet his own deficit targets. This wasn't some revelation chanced upon by Rishi Sunak.

The principle of a UBI can be established in one of two ways: as an upgrade to the existing benefits regime (which is what many are currently urging), or as a transformation of the relationship between capital and labour.

The former means that it would be paid for through income and purchase tax, which would encourage parsimony and the continuing division of society into "makers" and "takers"; the latter that it would be paid for by capital, through taxes on accumulated wealth, gains and dividends etc, thereby reducing inequality.

[georgesdelatour]

I’m not against UBI, but before COVID-19 changed everything I was hoping some other medium-sized OECD country would try it out first. That way, if it worked out really well we’d copy it, and if it didn’t we’d manage to dodge a bullet. Now, even if it turns out to be a bad idea, it’s a bad idea whose time has come.

In the US, right wing thinkers like Charles Murray support UBI, presumably for very different reasons to those of the average Momentum supporter in the UK. Andrew Yang advocated UBI from a soft Democrat POV in the primaries, and it led to quite a few former Trump supporters joining the Yang Gang. Clearly some people on the right see a political opportunity in UBI.

I suspect that UBI will strengthen the hand of those immigration restrictionists you have zero tolerance for. If migrant flows twist towards whichever countries have the highest UBI, the political pressure to restrict will grow. Plus, UBI will effectively put a price on national citizenship, one which everyone will know. That’s bound to affect the immigration debate.

[georgesdelatour]

Genuine question.

Just because a government can do something of limited duration in a crisis, does that prove it can do it always and forever?

Under extreme duress, mothers have managed to lift up cars singlehandedly in order to save their children. It doesn’t follow that they can therefore lift up double decker buses, and it doesn’t follow that they can repeat the feat every day before breakfast. Even if the constraints on governments are not the same as those on individual citizens, presumably there are constraints somewhere down the line.

What are they?

[Ralph Musgrave]

I’m unimpressed by Chris’s “zero tolerance for racist rhetoric”. Racism as defined in my Concise Oxford Dictionary is basically the idea that some races are better than others. Some psychologists claim, rightly or wrongly, that some races have higher IQs than others, so what do we do with those psychologists? Lock them up or something?

Plus, unlike Chris, I was not “repulsed” by “Ed Miliband’s “controls on immigration” mug. What’s wrong with limiting immigration with a view to preserving your own country’s culture and way of life?

Of course, as is 100% predictable, when people with non-white faces want to preserve their culture and way of life (e.g. Kurds, Arabs, Tibetans etc) the silence from leftie hypocrites is deafening.

[Paulc156]

Trouble is when politicians start using control on immigration as a slogan an army of xenophobes is empowered. Ed Mil was tapping into that tradition and recognising that many areas of the so called left behinds in traditional Labour voting regions were and are keen to blame foreigners for their ills rather than big business or austerity. The latter two were sacred cows in political discourse and a little harder to justify whereas every half wit gets the idea that Johnny foreigner is after their job, their women and their beer.

[Ralph Musgrave]

Paulc156, If you’re going to insult large numbers of people by calling them xenophobes, i.e. people who hate or fear foreigners, there is an onus on you to provide first class evidence to support your accusation. The nasties who write for The Guardian routinely accuse all and sundry of xenophobia without so much as the beginnings of an attempt to prove the charge. You could start by specifying whether you’re accusing said people of hate or fear.

Far as I know, UKIP and BNP members go on foreign holidays just like everyone else, thus the idea that they hate foreigners is risible. As for fear in the sense of “Muslims trying to displace UK culture with their own culture”, that is exactly what Muslims have been doing for the last thousand years: i.e. reducing other cultures to Dhimmi status. So I suggest “fear” is to a significant extent justified.

[Nick Drew]

What georgesdelatour said.

Wartime measures can achieve impressive and often unexpected things. We knew that. So what?

Wartime measures bring about all manner of other things, too. "We've established that ..." the man-in-the-street can be trained to run a man through with a bayonet; drop an atom bomb on a city; hang someone for treason - etc etc.

The ability to turn away from extremes, when conditions allow, and back to normality (with all the forgetting and denial and doublethink this involves) is part of a healthy human and societal makeup. Let Cincinnatus return peaceably to his plough

[Paulc156]

@ Ralph Musgrave.
Between a third and a quarter of people will admit to being racially prejudiced.
Fully a third of leave voters describe themselves this way. So my wild guess would be BNP members might poll a little higher than that. There are it seems strong positive correlations between increasing age, male gender and lower levels of educational qualifications on the one hand and more racist attitudes on the other.
http://natcen.ac.uk/news-media/press-releases/2017/september/new-report-uncovers-extent-of-racial-prejudice-in-britain/

Geographically some areas are worse than others. West Midlands(the left behind) much worse than London, for instance.
They are self admitted racists. I wouldn't want to be so condescending as to tell them their self professed racism is merely justifiable fear masquerading as hostility.
They routinely express views along the lines of certain races being naturally less intelligent or less hard-working. ie. Born that way.

So yes, when you engage in dog whistle politics there's a pretty big demographic to aim at.

As for clash of civilisations arguments 're Muslims. There's quite a few on the far and even the centre right who strongly support that hypothesis but there are a host of strong arguments refuting it. One problem with it seems to me that the harder one pushed that line the more likely that it becomes a self fulfilling prophecy. (which may or may not be a problem for those doing the pushing)

[Blissex]

«so the UK’s minimum is now comparable to those of many other nations.»

Only because every increase, up to a point, transfers a chunk of the cost of tax credits from the state budget to businesses; and quite obviously the reaction by businesses has been to turn their employees into fake contractors, something that recent governments have strongly supported because it keeps down unemployment statistics at low cost.

[Robert Mitchell]

"Just because a government can do something of limited duration in a crisis, does that prove it can do it always and forever?"

The Fed's emergency balance sheet increase after 2008 was supposed to be temporary. Now they're looking to double that "temporary spike" by the end of this year.

Money is artificially kept scarce as a proxy for assumed natural resource scarcity. But Peak Oil was a myth ...

[Blissex]

«Money is artificially kept scarce as a proxy for assumed natural resource scarcity. But Peak Oil was a myth ...»

Peak oil did happen some years ago, we now have a complementary production of non0oil "condensates" that are far more expensive.

The price of oil has not blown up because demand has been suppressed, despite much greater demand from China, I guess to avoid the situation of the 1960s-1970s in which much increased demand from Japan adding to more slowly rising demand from "the west" did blow up the price. I also suspect that most of the motivation behind the "carbon footprint" campaign is also to suppress demand for oil.

My usual graph of electricity consumption per head seems rather telling to me:

https://www.google.co.uk/publicdata/explore?ds=d5bncppjof8f9_&met_y=eg_use_elec_kh_pc&idim=country:DEU:ITA:GBR:FRA:ESP:GRC:CHN:JPN:KOR:MYS:THA:BRA:MEX:URY:TUR:IRL:SGP:IND:ISR:USA

There is another aspect to "peak oil", which is also very important: the diffusion and improvement of oil based machinery and techno«Money is artificially kept scarce as a proxy for assumed natural resource scarcity. But Peak Oil was a myth ...»

Peak oil did happen some years ago, we now have a complementary production of non0oil "condensates" that are far more expensive.

The price of oil has not blown up because demand has been suppressed, despite much greater demand from China, I guess to avoid the situation of the 1960s-1970s in which much increased demand from Japan adding to more slowly rising demand from "the west" did blow up the price. I also suspect that most of the motivation behind the "carbon footprint" campaign is also to suppress demand for oil.

My usual graph of electricity consumption per head seems rather telling to me (keep in mind Jevon's Effect):

https://www.google.co.uk/publicdata/explore?ds=d5bncppjof8f9_&met_y=eg_use_elec_kh_pc&idim=country:DEU:ITA:GBR:FRA:ESP:GRC:CHN:JPN:KOR:MYS:THA:BRA:MEX:URY:TUR:IRL:SGP:IND:ISR:USA

There is another aspect to "peak oil", which is also very important: the diffusion and improvement of oil based machinery and technology, which I think has driven 90% of productivity improvements since the 1920s, has slowed down considerably after 1970.logy, which I think has driven 90% of productivity improvements since the 1920s, has slowed down considerably after 1970.

[Robert Mitchell]

> much increased demand from Japan adding to more slowly rising demand from "the west" did blow up the price.

But Saudi Arabia was never short of oil. They simply turned off taps for political reasons. There was no peak oil. There was a scarcity of knowledge about how really oil was not as scarce as economists assumed it must be. Economics assumes scarcity everywhere. If oil isn't really scarce, that's a big problem for their model.

Electricity is way overproduced. See https://flowcharts.llnl.gov/content/assets/images/charts/Energy/Energy_2019_United-States.png

Two-thirds of electrical energy generated is rejected. Since electricity generation is pretty efficient, that means that most electricity generated is going to ground because it's not needed.

Looking at historical oil prices in http://chartsbin.com/view/oau, and considering that since the last year in that graph (2009) oil has again risen a bit then fallen to current levels back near $10 or $20 per barrel, I find support for Fischer Black's claim in "Noise":

"we might define an efficient market as one in which price is within a factor of 2 of value, i.e., the price is more than half of value and less than twice value. The factor of 2 is arbitrary, of course. Intuitively, though, it seems reasonable to me, in the light of sources of uncertainty about value and the strength of the forces tending to cause price to return to value. By this definition, I think almost all markets are efficient almost all of the time. “Almost all” means at least 90%."

In other words prices are far more arbitrary than economists traditionally allow. 300% inflation could be due to noise alone (if oil went from $50 to $25 to $100). And 10% of the time prices are even more arbitrary.

[Scratch]

"Between a third and a quarter of people will admit to being racially prejudiced."

Crikey, that sounds like a recipe for a future resembling a series of multipolar Ulsters, The creation of which through various colonial expedients as mass population movement, granting of privileges along racial lines and shonky border drawing might be our bourgeoisie's most significant uh, gift to the planet.

"Geographically some areas are worse than others. West Midlands(the left behind) much worse than London, for instance.
They are self admitted racists."

Really? If it's any consolation you're much better at hating gays it seems.
https://www.independent.co.uk/news/uk/home-news/london-is-more-homophobic-than-the-north-10120844.html I'm a little suspicious of their squeaky cleanness regarding the rest of the raft of contemporary taboos (plus antisemitism and class hatred) too.

[georgesdelatour]

“Between a third and a quarter of people will admit to being racially prejudiced.”

And what about the remainder? Are they dissimulating?

If you look at people’s revealed behaviour, many apparently nice liberal progressive non-racist whites still tend to separate out, especially when it comes to schooling their children. For instance, only 25% of under-18s in London are “White British”. But their distribution in the school system is very skewed. They wind up either in schools where they’re the overwhelming majority, or where they’re a vanishingly small minority (<3%). This heavily bimodal distribution can’t be explained by the varied demographics of individual London boroughs. It’s clear many white parents are gaming the system to avoid putting their kids in a school where they’ll be a minority. Some even choose to leave the capital altogether. 600,000 whites left London between the last two censuses. Obviously they didn’t all do it just to avoid sending their kids to majority non-white schools. But it’s still a very large exodus, and something is going on.

I don’t know if these whites, by refusing to send their kids to majority non-white schools, fit your definition of racist. Maybe they want their kids to experience the ethnic distribution of the country as a whole, not the parts of London where they live (so they’d maybe accept a 10-15% Islamic milieu for their kids, but not 50% plus). Maybe it’s simply that no-one really likes being a minority, especially if they have very recent lived experience of being the majority.

In living memory Lebanese Christians, Kosovar Serbs and indigenous Fijians all experienced a rapid shift from majority to minority, and in all three cases the shift led to bitter civil conflict. Is it racist or anti-racist to build your immigration policies on the assumption that white Brits have - uniquely - transcended that kind of clannishness and tribalism? More to the point, is it prudent?