What centre?

The election of Keir Starmer as Labour leader has caused some leftists to fear that the party will move to the centre. Such fears, though, miss the point – that there is no centre.

By this I don’t just mean that there are no votes there, as the LibDems and CUK (or whatever they called themselves) discovered in December. I also mean that there are no ideas there either. One feature of CUK was its utter lack of economic thinking and obliviousness to the fact that the economy has changed a lot since the 90s and so requires new policies. Almost the only substantive thought in its launch document was the notion that government has a “responsibility to ensure the sound stewardship of taxpayer’s money” – an idea that has aged as well as Rachel Reeves desire to be tough on the unemployed.

But this poses a question. Is this vacuity due merely to the inadequacy of centrist politicians? Or does it instead reflect capitalist reality?

To see what I mean, think about two contrasting ideal types of capitalism. Type one relies for its profits on a mass market in consumer goods produced by skilled workers. It has significant profit opportunities but faces a consistent risk of unforeseeable recessions. And it also faces the danger of a socialist uprising.

This type of capitalism would welcome a centrist agenda of Moderate Progress Within the Bounds of Capitalism. Policies to underpin wages would help sustain demand and profits. A decent welfare state acts as an automatic stabilizer, thus reducing capitalists’ risk of recession. The need for skilled workers means capitalists welcome public spending on education and science. High profits mean some redistribution is tolerable – and, indeed, necessary given the need to buy off discontent and so prevent socialism.

In such an environment, there’s plenty centrists can do to ameliorate the worst effects of capitalism whilst respecting the power structures of the system. Centrism should then be healthy.

Imagine instead a very different type of capitalism. Here, capitalists believe they need not a mass market but policies to increase profit margins, and so need profit-led rather than wage-led growth. It also has low profits and few profit opportunities and so resists more fiercely higher taxes, and is less supportive of expansionary macroeconomic policies that might empower workers. Facing no threat of revolution, it has less need to buy off discontent. Being more dependent on unskilled workers it needs guard labour and surveillance methods more than skills. And having a large finance and rentier sector it needs to protect its methods of extracting surplus more than means of expanding real capital. And that same financialization means it wants not a large welfare state and automatic stabilizers but simply looser monetary policy.

In this world, there’s much less room for centrist reforms. Capitalists will protect their own power and extractive institutions whilst socialists will want more radical change than centrists can stomach.

Of course, I’m talking ideal types here. Actually-existing capitalism is an admixture of the two – although post-war Fordism was close to type one. But there can be little doubt that British capitalism has shifted from type one towards type two. Hence the decline of centrism; there’s just no space for it.

This is not to say that there are no centrist ideas at all. I commend Sam Bowman and Stian Westlake and the Radix thinktank. Several of their ideas, however, would face strong opposition from vested interests – for example, the proposals to cap CEO pay, regulate finance more strongly, or introduce a land value tax.

We can imagine a world in which such opposition would be offset by support from a client base within capitalism. Type one capitalists would welcome a shift in taxes from profits onto landlords and curbs upon financial extraction: if you want to hear extreme hostility to bankers, don’t speak to me or Grace Blakeley, just ask anyone running a manufacturing business. The influence of this client base is, however, weak: the vote for Brexit told us that.

A better base for challenging this type of capitalism, therefore, is to have a large clientele opposed to the interests of rentiers and with an interest in radical reform. Corbynism activated just such a base, and it shouldn’t go away.

I’m not, therefore, very worried that Starmer can shift Labour to the centre on economics, even if he wanted to. There is no meaningful, viable centre.

Instead, I have a different concern. The media – including the BBC – is creating a climate which rules out questioning of the Dear Leader and which regards measures to support economic activity as a cost rather than benefit. I fear that Labour will become infected by this poison.  Which is why we desperately need a counterweight in the form of leftist critiques of the media – to remind Starmer that he need not be swayed by it.

There might be no intellectual pressure on Labour to shift to the centre. But it could drift there simply under media influence. Corbynistas, then, should not keep quiet.

Comments

[e]

But Starmerism is all about belief in the power of placating (or to be fair, wining votes) with words and style. It isn't banking on an informed electorate recognising the risks inherent to a networked society constituted to uphold current inequalities. Starmerism doesn't, in truth, acknowledge any change since the '90s (there's your centrism). For Starmerism Brexit happened, not because people had a say, but because people didn't have the benefit of their words and style. I consider Starmer's team and I see the media's patrician guard against any form of of leftist critique. I hope I'm wrong... or failing that, life long learning becomes something real.

[Dave Timoney]

The danger for Labour is not so much a drift to the centre as a determined attempt to catch-up with the Tories in their shift to a more nationalist register. In other words, they may simply vault the vacuum of centrist ideas and head straight for the right. In this respect the pronouncements of the new Shadow Home Secretary may be more indicative than those of the Shadow Chancellor.

[Blissex]

«I’m not, therefore, very worried that Starmer can shift Labour to the centre on economics, even if he wanted to. There is no meaningful, viable centre.»

But that seems to me to be precisely the point of Starmer and those aligned with him: to PASOKify Labour. That "There is no meaningful, viable centre" seems to be the basis of their strategy; because by "centre" you mean things like the postWW2 "butskellism" or things "cap CEO pay, regulate finance more strongly, or introduce a land value tax" which are regarded not as centrist but extreme far-left COMMUNISM. I mean not even an "aspiring genocidal dictator" like Corbyn put them in his "loony far left" maninfestos of 2017 and 2019.

The bigger point is that for the New Labourists "centrism" means "thatcherism", because that is the "sensible centre" because "There Is No Alternative".

"Centrism" in practice means "the original thatcherism of Thatcher at the beginning, when she had not yet gone ultra-thatcherite".

The overall plan is that New Labour should offer voters globalist firm thatcherism with identity politics, the LibDems globalist hard thatcherism with identity politics, and the Conservatives nationalist ultra thatcherism with some identity politics.

«a climate which rules out questioning of the Dear Leader and which regards measures to support economic activity as a cost rather than benefit. I fear that Labour will become infected by this poison.»

Well New Labour was 100% like that that, and it is back in control of the Labour party.

«leftist critiques of the media – to remind Starmer that he need not be swayed by it.»

Starmer seems to be 100% in favour of that.

«There might be no intellectual pressure on Labour to shift to the centre. But it could drift there simply under media influence.»

Again, "centre" means "globalist thatcherism with gay marriage" and after the recent leadership election and Starmer's new cabinet appointments it is already there.

My usual quote from Lance Price, "Diary", 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.”

[Blissex]

«But Starmerism is all about belief in the power of placating (or to be fair, wining votes) with words and style.»

That seems to be a bit part of it, but really it is based on the old New Labour idea that a significant minority of Conservative voters are actually globalist thatcherites instead of nationalist ultra thatcherites.

Therefore that it is possible to switch them to vote New Labour if New Labour offers a thatcherite economic programme, building a majority between them and lower middle and working class voters who don't really want to vote for a thatcherite economic programme but have nowhere else to go (but abstaining).

A very similar thinking was behind the Blair/Starmer pressure to switch Labour to reject the 2016 referendum and for a 2nd referendum: that a coalition of globalist thatcherite voters and of internationalist lower middle and working class voters would produce a landslide for New Labour or the LibDems.

[Robert Mitchell]

"financialization means it wants not a large welfare state and automatic stabilizers but simply looser monetary policy."

The linked paper treats financialization like a virus and prescribes lockdown to wipe it out. It's the same extreme response we see in the lockdown of non-virus-spreading activity such as going outside alone to exercise, in the belief that the social good of conforming to authority is more important than the nonexistent risk of solitary campers spreading virus.

Instead, we should use loose monetary policy to fund and automatically inflation-protect a basic income.

Rather than chase goals of output and employment prescribed for us by economists, we should simply pay everyone a basic income of $3000 per month in today's dollars, guaranteeing the real purchasing power of that income by monetary fiat. Then let those who want to, work. If you can't get someone to do a job yoy'll have the time to do it yourself.

[Zhou Fang]

There's lots of stuff in the centre.

1. Support for international institutions is centrist. Rejoining the EU is one example, but additional things are support for treaties with investor-state dispute mechanisms. The general idea of participating in such institutions as forums for dialogue vs ideological groups is centrist.
2. Collaboration with the private sector is centrist. The general sense that say, giving a paid talk once to some bank shouldn't be a permanent stain on one's character is a centrist idea. Generally the notion that there is some sort of idea of neutral merit that isn't merely ideological consistency is a centrist idea.
3. Support for pluralism in media is centrist. Ideological critique for media centres on the media being "unfair" to the one side or the other, a centrist critique focuses on structural ideas to do with say, concentration of power.
4. Anti-monopoly action is a centrist idea. In contrast to ideological action against enemies of the ideology, the idea of improving the function of the market by identifying companies capturing large sector of it is centrist

[Zhou Fang]

I mean, to some extent, believing that the centre exists at all is a radically centrist idea. The ideologues will have you believe that there's only the left and right and varyingly softer versions of each that can be adopted only for cynical vote winning reasons, or due to cowardice, or due to corruption. But some people believe that there's ways of framing debate differently.

[jim]

Seems to me Labour has got its marketing all back to front. Indeed I suspect Labour can hardly survive at all with its current product offering.

Look at what normal people want, a reasonable job, schools, housing that is not impossibly expensive, estates that are not rat holes and if sufficient jobs cannot be found then some sort of UBI and occupation for idle hands. No one cares what you call it.

But Labour seems captured by some curious notions of what Socialism is. Labour has no credible media front and Labour's attachment to the Unions seems a two edged sword. On the one side a source of support? and money? on the other side something of a liability. The product is driven by internal obsessions and not what customers want. If starting a political party I would not start from here.

The word socialism in a UK context has a 1930s ring to it. Easily rubbished by the Right with images of strikes, depression, communism and Corbyn's hat. Sure, it can morph into a post WWII resurgence where the NHS was created. But I can't see how to achieve that even post-Covid.

A more attractive model might be an EU style social democratic model. But EU is a dirty word and the UK is stuck with an adversarial political and legal system that makes cooperation across the board room or table or green benches anathema to both sides. This leaves Labour to pick up the pieces every 15-20 years when the Tories finally screw up badly. Even that only lasts a short while before the ball gets passed back.

Poor old UK, stuck with such a terrible political setup and so far no way forward.

[George Carty]

The product is driven by internal obsessions and not what customers want. If starting a political party I would not start from here.

Indeed: surely that sea of Palestinian flags at the 2019 Labour party conference must surely have cost Labour hundreds of thousands of votes in the subsequent General Election, as it gave them good reason to believe that Labour's loyalty was not to Britain but rather to the global South.

Could anyone imagine the Tories waving any foreign flag (American? Israeli?) with that level of passion?

[georgesdelatour]

@Robert Mitchell

“…we should simply pay everyone a basic income of $3000 per month in today's dollars, guaranteeing the real purchasing power of that income by monetary fiat.”

What if the food, clothing and personal tech that UBI is supposed to purchase are mostly imports?

[Robert Mitchell]

> What if the food, clothing and personal tech that UBI is supposed to purchase are mostly imports?

Trade can still function. If you are worried about inflation, you can protect contracts with inflation swaps. Treasury Inflation Protected Securities can replace Treasuries.

In a system with one bank at the top of the hierarchy, there need be no runs because that bank produces the best money, which private firms prefer for settlement. The Fed is that de facto bank today for the world, but the unlimited central bank currency swap network allows for the possibility that another central bank currency could become the world's reserve currency. Central bank currency swap lines effectively make exchange rate risk a policy variable. They can wholly eliminate exchange rate risk, using unlimited currency swaps at away-from-market rates.

So trade can still occur because the nominal money demand of exporters can still be met, as today without a money-printed basic income.

[georgesdelatour]

This is where I admit I just don’t get MMT. It’s obviously my fault. Chris, please do a post specifically on MMT, and explain your opinion of it.

@Robert Mitchell

As I understand it, MMT advocates believe in floating currencies. I do too. I think the alternative leads to people like George Soros making billions in profits from Black Wednesday-type speculative attacks.

Here’s an example. It’s very rough-and-ready, but hopefully you can see my point:

1. Imagine Germany still has the Mark and Greece still has the Drachma and they both allow their currencies to float freely. The Greeks are buying more German cars than the Germans are buying Greek holidays. This causes the Mark to rise and the Drachma to fall. Greek holidays become cheaper for Germans, and German cars more expensive for Greeks. Eventually a new equilibrium is reached.

2. Now imagine the Greek government has a commitment to maintain Greek purchases of German cars at their pre-devaluation levels, by paying every Greek an index-linked subsidy to keep buying German cars. Won’t this cause an endless spiral of Greek devaluations? It feels as if it would be more efficient for the Greek government to pay that extra money directly to BMW or Volkswagen, maybe to make cheaper models specifically for the Greek market.

[Robert Mitchell]

@georgesdelatour

I am not an MMTer, because I hold that the consolidated private sector balance sheet balances to net worth, not zero. And private household net worth is at least $120 trillion, which is far more than government currency. Thus, I say, in contradiction to MMT theorists, that the private sector creates new net financial assets, which are backstopped as necessary by government currency.

The car example leaves out currency swap lines at away-from-market policy rates. If Greece in your example can get any amount of US dollars at zero percent, rolled indefinitely, they can use those dollars to buy BMWs, because German firms want US dollars too. Most international trade includes a dollar leg.

See https://voxeu.org/article/dollar-s-international-roles

"In international trade, the dollar is widely used for invoicing and settling import and export transactions around the world."

"Many countries maintain an exchange rate regime that anchors the value of their home currency to that of the dollar."

Exchange rate risk is effectively eliminated by unlimited central bank currency swap lines. Thus we should print money for a worldwide basic income, funded on the balance sheets of world central banks.

[Blissex]

«The Fed is that de facto bank today for the world, but the unlimited central bank currency swap network allows for the possibility that another central bank currency could become the world's reserve currency. Central bank currency swap lines effectively make exchange rate risk a policy variable.»

And here the deluded foolishness roars: why ever would the central banks of countries with strong currencies do currency swaps with the central banks of countries with weak currencies? That means giving them an unlimited, never to be repaid, overdraft. That amounts to unlimited fiscal transfers.

It is an deluded foolishness similar to the Varoufakis proposal for bailing out the greek government patronage network: to give the greek government an unlimited, never to be repaid, overdraft at the ECB, that is a massive fiscal transfer to Greece, well beyond the 3.5% of GDP it gets every year from the EU, and well beyond the 40-50% debt forgiveness it got from the Eurozone countries during debt restructuring negotiations.

[Blissex]

«believing that the centre exists at all is a radically centrist idea. The ideologues will have you believe that there's only the left and right and varyingly softer versions of each»

It is hard to find a "centre" between renters and landlord who want to charge a lot more, between employers who want cheap disposable workers, and workers who want a better share of business value added and more job security, between those who have full DB pensions or bought stocks 10-20 years ago, and those who have to build DC pensions accounts with stocks at the end of a long bull market, between affluent voters who don't care about local council services because they live in affluent enclaves and "pushed behind" voters who rely very much on local council services.

"Centrism" was a real thing in the "butskellite" era, where the choice was between McMillan/Heath centre-right socialdemocracy and centre-left Wilson/Corbyn centre-left socialdemocracy.

There is no centre between thatcherism and socialdemocracy, and it is 40 years of thatcherism that have polarized politics, by polarizing the economy between a large minority of ravenous rentiers whose living standards have been booming for decades entirely at the expense of the majority whose living standards have been stagnant or more often falling.

[Robert Mitchell]

"why ever would the central banks of countries with strong currencies do currency swaps with the central banks of countries with weak currencies?"

The Fed did such swaps in 2008 and has opened up swap lines again to small countries.

The Fed gave the ECB an aggregated $8 trillion in currency swaps last recession.

The ECB was negligent in not "paying it forward" to Greece.

The excuse that "there's not enough money" should be thoroughly debunked by now. If the ECB refuses to help Greece, they should now have to say "we just don't like you" rather than use "there's not enough money". We should all acknowledge by now that there is always enough money because the Fed has a vertical supply curve on reserves, proven time and time again against market testing (in 2008 and again, now).

The more dollars there are, the stronger the dollar gets.

[Blissex]

«"why ever would the central banks of countries with strong currencies do currency swaps with the central banks of countries with weak currencies?"

The Fed did such swaps in 2008 and has opened up swap lines again to small countries.»

I knew that such a moronic point would be raised, despite there being a big difference between the Fed giving a lot of dollars to save USA banks by giving EU banks those dollars to repay their debts to USA banks and permanent fiscal transfers to the whole world. And if you look at:

https://www.federalreserve.gov/monetarypolicy/bst_liquidityswaps.htm

It becomes pretty obvious that the Fed currency swaps were not with weak currencies, but with other strong currencies (usually EU, UK, Japan, Switzerland, Canada).

«If the ECB refuses to help Greece»

Greece got massive fiscal transfers from the eurozone countries (the usual 3.5% of GDP from the EU, plus a 40-50% cut in the fraudulent debt).

But I'll add that I thoroughly despise those who mention Greece as an example of EU wickedness, because Greece was instead an example of right-wing fraud and embezzlement, and they somehow never worry about Romania and Bulgaria, where GDP per head is 1/4 of that of Greece even after the greek fraud ended.
They have a "we don't like you" attitude to Romania and Bulgaria for no reason I can think, or are just massive hypocrites.