Stumbling and Mumbling

The end of evidence-based centrism

One of centrists’ great conceits is that they are rational and moderate whist the left are fanatical ideologues. New Labour for example championed “evidence-based policy-making”; Chris Leslie claimed (pdf) that they favour “evidence not ideology”: and Steven Pinker has a BBC radio show telling us how to think better. Two recent interventions remind us that all this is self-serving nonsense.

One came from David Blunkett, who told the Today programme (2"57' in) that if we let in a few refugees, “Nigel Farage might end up being Prime Minister”. That of course is mere speculation. What is evidence is that the UK does not get many asylum applications. There were only 29,456 in 2020, compared to 102,525 in Germany, 37,860 in Greece, 86,380 in Spain and 81,735 France. Lord Kerr is right: “we are not the preferred destination in Europe” for refugees. And given that the labour market impact of migration is tiny, we could easily accommodate more. The only “migrant crisis” is that of the migrants themselves: from the UK’s point of view, there is no crisis - only maladministration and cruel racism.

The other intervention came from Tony Blair. He claims that Labour “is seen as being for everyone other than the hard-working families who feel their taxes aren’t spent on their priorities.”

Seen by whom? Not by hard-working families themselves. As Ben Walker has pointed out, in the 2019 general election Labour out-polled the Tories among working-age voters living in households with annual incomes below £100,000. Labour’s problem is not with working people; it is with the retired.

Blair’s detachment from the evidence does not stop there. He goes on to claim that Labour must “push the far left back to the margins” and reject “the old-fashioned statist view of the left”. This misses the fact that the “far left” is rejecting old-fashioned statism. It is fighting against the Tories assault upon civil liberties. And the “defund the police” slogan of Black Lives Matters, whatever its merits or not, is a profoundly anti-statist sentiment.

Of course, there is an authoritarian statist tradition on the left. But it is one of which Blair himself was a big part: New Labour created over 3000 new criminal offences and greatly increased the prison population, trends which the “far left” deplore.

There’s another odd thing about Blair’s comments. In attributing statism to the left, he omits to point out that its is the Tories who are increasing the size of the state: the OBR forecasts the tax burden rising to its highest level since the early 50s.

This increase will happen because of weak GDP growth, so public services must be financed by taxes rather than economic growth.

Blair, however, makes no mention of this long-term economic stagnation. Which is no idiosyncratic omission, but rather a consistent theme of centrists. Leslie made little reference to the financial crisis and its aftermath in his Centre Ground pamphlet, and the Independent Group/CUK omitted mention of it in its launch statement.

This blindspot matters enormously. Economic stagnation is a major cause of the current state of our politics. As Ben Friedman showed in 2006, hard economic times fuel reactionary politics – hence Brexit and anti-migrant bigotry. If Blair is sincere in wanting “liberal, tolerant” politics, he needs some way of kickstarting growth.

Here, though, it is the left that is evidence-based whilst the centre is trapped by outmoded ideology. Blair says Labour needs “a new future-oriented policy agenda based on an understanding of how the world is changing.” But this is just what Corbynite economic policies offered. They were based upon the recognition that the world has changed since the 90s, being characterised by stagnant productivity, negative real interest rates and the concentration of wealth and power among the 1%. By all means, argue with their remedies, but I don’t think you can charge the left with not seeing that the world is changing.

Which brings me to a curious phenomenon. Mainstream economists acknowledge the need to kickstart productivity; the role of fiscal policy in fighting stagnation; and the fact that immigration in economically benign. Blunkett and Blair seem much less alive to these facts. The political centre is now very different from the economic centre. And it is the left, more than some centrists, that is evidence-based.

Frames, stories and political change

Sometimes, opinions change a lot even though the facts change only a little. So it seems to be with the case of MPs second jobs. Everybody knew for years that many MPs had them but most regarded it as acceptable. Until, suddenly, it is sleaze.

What’s happening here is not so unusual. We often see it in financial markets. In the mid-90s, for example, several Asian countries ran large external deficits. And for a long time, these were seen as healthy because fast-growing countries should suck in foreign investment – until, suddenly, they weren’t and we had a financial crisis. As Sushil Wadwani, a former MPC member said (pdf):

Countries with a current account deficit can have a currency that stays strong for a surprisingly long period, until, sometimes, there is an abrupt adjustment.

Similarly, in the late 90s high prices of tech stocks were seen as justified by the prospect of a new economy – until they suddenly were not. And the US housing market started to cool off in 2006, but for months nobody thought this was a problem – until suddenly it was.

A similar thing might be happening to Boris Johnson. Everybody has known for ages that he is a lightweight comic charlatan. He has not changed, nor done anything surprising. It’s just that the same person is now provoking different feelings amongst his erstwhile supporters.

To understand what’s going on here, we must remember that we rarely see things in isolation as bald facts. Instead, we select and interpret them. As MLJ Abercrombie wrote:

The information that a person gets…depends on the context, or total situation, and on his past experience, which is usefully thought of as being organized into schemata. Human relations play an important role in perception both in that they are often a significant part of the context, and in that they have contributed to the formation, testing and modifying of schemata (The Anatomy of Judgment, p18)

This is why we are so prone to mis-readings, typos and optical illusions: squares A and B in my picture are in fact the same shade.

Facts, then, come within frames (pdf). And as Daniel Kahneman wrote in Thinking Fast and Slow, “different ways of presenting the same information often evoke different emotions.” He gives the example of how even trained doctors react differently to the statement “the odds of survival are 90%” than to “the mortality rate is 10%” even though they are different frames of the same facts. And, he adds, “your moral feelings are attached to frames, to descriptions of reality rather than to reality itself.”

Even irrelevant changes – from a 90% survival rate to a 10% mortality rate – can elicit big changes in emotions. And if irrelevant changes can do so, so too can small ones. Owen Paterson’s corruption, for example, might not be much different from that of other MPs in the past. But it has changed the frame. In the same way, small changes have tipped investors from not worrying about current account imbalances, valuations or housing markets to panicking about them.

But there’s more. Frames are created by stories. And as Robert Shiller shows (pdf) in Narrative Economics, these are like viruses: some just die whilst others spread rapidly. And as they spread, so they change the frames in which we see things. Sir Keir Starmer is trying to achieve just such a change when he says of Johnson that “the joke isn’t funny any more.”

What I’m describing here is similar to but different from Timur Kuran’s account of preference falsification. He shows how oppressive regimes can survive for years because everybody believes that everybody else supports the regime and so keeps quiet. But when, suddenly, people realize their error they rise up and topple the government. In this way tyrants such as Harvey Weinstein or Nicolae Ceausescu saw their power disappear overnight.

My account differs from his because people aren’t misrepresenting their opinions. Sure, they are going along with the crowd – peer pressure being so powerful as Robert Frank has shown – but their expressed opinions are what they genuinely believe.

But it has something in common with it too. What we have in both cases is something described by Didier Sornette and Peter Cauwels; that social structures can seem stable only to suddenly change a lot.

And we cannot predict when or if this will happen or what will cause it; the triggers often seem innocuous. Which vindicates Jon Elster’s crucial observation – that we can sometimes explain without being able to predict. All of which means we must be much more humble about our ability to foresee political change.

The decline of economics

Edward Luce writes:

Bill Clinton’s 1992 campaign watch phrase was “it’s the economy, stupid”. Today it would be “it’s the culture, idiot”.

He’s right, but this poses the question: why did this change? The question of, course, applies to the UK as well as the US.

One fact deepens the puzzle. It’s that trend growth in GDP per capita has halved since the 90s*. This should have made economic issues more important, because it’s much less obvious now that the economy can thrive without policy intervention. Back in the 90s, politicians might reasonably have thought “the economy will take care of itself as long as we don’t do anything too stupid, so let’s focus on other matters.” Today, we cannot take growth for granted.

But in fact, the opposite has occurred. As economic performance has worsened, so the salience of economics in politics has declined – so much so that, as Stian Westlake has said, the Tories “seem to have stopped talking and thinking about economics.”

I stress that word salience. There have always been clashes between cultural liberals and conservatives. For decades, however, these were generally secondary to economic debates. Today they are not.

So what changed?

The cause of the increased salience of the culture wars should by now be well-known. Events have vindicated the point Ben Friedman made in 2006 – that slower economic growth promotes illiberalism and reaction, which triggers hostility from social liberals and egalitarians.

But why has the salience of economics declined?

I don’t think it’s because politicians have accepted the advice of Dietz Vollrath or John Landon-Lane and Peter Robertson, that national policies can do little to raise long-term growth** - any more than they have heeded green calls for degrowth.

Instead, one possibility is that people just don’t want economic growth. Philip Hammond (remember him?) once said that people “did not vote to become poorer”. But they did – in 2010, 2015, 2016, 2017 and 2019. This might not be a case of adaptive preferences, of people resigning themselves to not wanting what they can’t have. An ageing population means there’s a big constituency of retired or nearly-retired people who have little direct interest in increased prosperity. And the Easterlin paradox tells us that economic growth doesn’t make us much happier anyway. One reason for this is that it is a process of creative destruction – but this brings with it uncertainty and the disruption of jobs and communities. Why want that?

There’s another way in which economic growth is undesirable. Measures to increase it would almost certainly hurt powerful vested interests. Centrist policies to improve productivity would include toughening up competition policy and shifting the tax burden from incomes to land. And that’s not to mention more radical options such as increasing worker democracy or reducing inequality. Also, faster economic growth would lead to higher real interest rates, which could reduce asset prices and deter the leverage on which the “picking up pennies” strategies of investment banks and private equity depend. There’s a powerful coalition for whom all this is a nasty prospect.

You don’t have to be a Marxist to believe that we’ve reached a point where the relations of production have become a fetter upon the productive forces. Joel Mokyr has written:

Every society, when left on its own, will be technologically creative for only short periods. Sooner or later the forces of conservatism…take over and manage through a variety of legal and institutional channels to slow down and if possible stop technological creativity altogether.

To those of us formed in the 70s and 80s, all this seems weird. We were brought up to see Thatcherite Toryism as an economic project – albeit one with the aim of achieving cultural change. So isn’t the lack of interest in economics yet another way in which the Tories have become anti-Thatcherite?

Perhaps not. Maybe Tories were not really interested in economics at all, but something else.

Their concern about the UK’s relative economic decline in the 70s might have been motivated less by a desire to raise living standards and more because they feared the UK’s loss of power and prestige on the global stage. In this context, it was the Falklands war more than economic policy than transformed self-perceptions of the UK, just as Brexit now bolsters the self-image of the UK as a strong independent “nation”.

And perhaps Thatcher’s assertion of “managers’ right to manage” was not a means of increasing efficiency but rather a desire to impose traditional hierarchies. The crisis of the 70s was not so much an economic crisis – real GDP then grew better than they have in recent years – as a political one. Workers were getting uppity, and Tories hated that.

Maybe, therefore, the rise and decline of the salience of economics within the Tory party (and the media) isn’t so strange after all. Economics was only a tool for achieving a sense of national pride and preserving inequality, and the tool could be safely returned to the shed when the job was done.

* This isn't simply the result of the financial crisis. My chart shows that rend growth was declining before then. And anyway, the crisis was endogenous.

* Note the strong correlation in my chart between UK and US growth. It is consistent with Landon-Lane and Robertson’s point that medium-term growth is the result of mainly supra-national factors.

Working less

Many people believe we need to work less if we are to avoid catastrophic climate change. We must “dramatically reduce economic activity” says George Monbiot. “We should cut working hours to save the planet” agrees Simon Kuper.

In truth, though, there are other reasons to work less, as Martin Hagglund argued in his brilliant This Life. Our most fundamental possession, he says, is time, and we can only be truly free if we can choose what to do with this scarce asset. For many of us, though, having to work long hours or for many years deprives us of this freedom.

Which runs into the objection that working significantly less would be bad for the economy.

Hagglund’s solution to this is ingenious. What we need, he says, is a “revaluation of value”. We must judge economic success not by how much we produce, but rather by how much free time we have:

To be wealthy is to be able to engage the question of what to do on Monday morning, rather than being forced to go to work in order to survive.

He believes such wealth – such freedom – is impossible under capitalism. Yes, capitalism tries to economise on labour. But it does do erratically and inequitably, by creating unemployment (with the misery it causes) alongside others who work too much.

History suggests he has a point. Working hours increased markedly during the industrial revolution, as E.P. Thompson described (pdf). And whilst they’ve fallen since the late 19^th century, the average working week is longer now than it was in the 15^th century. (I'm using Bank of England data here.) What’s more, the pace of decline in working hours seems to have slowed. In the 30 years to 2019 they dropped less than 6%, compared to an 18% fall in the 1959-89 period: this fact might be connected to the weakening of trades unions in this time.

Of course, working hours are but one measure. By another, free time has increased hugely since the early 20^th century because many of us are enjoying long retirements now. But progress here has stalled. The state pension age has risen, and young people – unable to save because of high rents - expect to work until they drop.

Which suggests Hagglund is right to say we need some radical economic changes if we are to increase free time.

Two other facts suggest as much.

One is that the smaller is the economy, the larger will be the share of government spending therein. If the economy shrinks spending on health and social care will not, so these will take up a bigger share of activity. Jason Hickel says that degrowth is compatible with increasing “people’s access to the resources they need to live long, healthy, flourishing lives.” But that means a big increase in the share of social spending in economic activity. Degrowth – for environmental or Hagglundian reasons – requires decommodification*.

The other is that whilst we wealthy people could easily work less and consume less, those who are working long hours just to get by cannot. One solution to this would be a cultural revalorization of work, to recognize the low-paid as being the skilled workers they in fact often are. But another would be greater redistribution, as Monbiot acknowledges.

In fact, we’ll need redistribution in another sense – from landlords to tenants. Hagglund’s democratic socialism would reduce capitalist exploitation, the fact that we work longer than necessary for the benefit of capitalists. But if we are to work less we also need to reduce rentier exploitation, the fact that we work longer than necessary to pay landlords. Otherwise, working less would mean handing over an even bigger share of one’s wages to landlords.

The inference is clear: cutting working hours and output cannot be an isolated change. It requires other big cultural and economic changes.

Which runs into a problem: how would such changes affect productivity?

You might think this irrelevant for green degrowthers. I’m not sure. Even if we are shrinking GDP we need to improve energy efficiency. And Hagglund’s vision of more time increasing our freedom requires that productivity be high. The sooner we can get our work done the sooner we can knock off, and some of us will want to spend our freer time on some activities that consume resources.

But raising productivity is a massive task even in the best of times. It requires that we overcome not just vested interests but also Baumol’s law (it’s hard to raise productivity in many services), diminishing returns, and a lack of big innovations. Indeed, it might be that it’s impossible to do so, as productivity is determined by global factors rather than those under the influence of national governments.

And shrinking output and working hours would add to these obstacles.

For one thing, it would put us on the wrong side of Verdoorn’s law, the correlation between aggregate demand growth and productivity growth. If companies are to invest in energy or labour-saving technologies they need confidence that future demand will be sufficient to cover the cost of doing so. Degrowth reduces that confidence.

And for another, technical progress and innovation require competition: a lot of productivity growth comes not from incumbents upping their game, but from new entrants and exits (pdf). But degrowth increases the share of the social sector in GDP and shrinks the share of markets.

We mustn’t be wholly pessimistic, however. We’ve decent evidence (pdf) that cutting working hours – at least moderately – can raise productivity (pdf). And socialism could remove the barriers to productivity created by inequality and managerialism, not least by encouraging worker coops.

Nevertheless, all this leaves us with a big question: how to reconcile socialism with the competition necessary (but not sufficient!) to raise efficiency? This is made all the more difficult because nobody in British politics seems to be thinking about it*.

But there’s another issue here. Working significantly less is not a change in degree but one of kind. And it’s one many of us will struggle to adjust to. As Maynard Keynes wrote in a famous essay (pdf):

There is no country and no people, I think, who can look forward to the age of leisure and of abundance without a dread. For we have been trained too long to strive and not to enjoy.

Being free from work can mean being free from roles, from meaning: think of the ennui endured by the women in Jane Austen novels or housewives such as Betty Draper in the mid-20^th century. I’ve a sense of this myself. I’m planning on retiring next year, but I approach this as my teenage self regarded beautiful girls – with desire mixed with fear.

I fear there’s a bigger danger. Recent years have confirmed what Benjamin Friedman wrote in 2006:

The history of each of the large Western democracies – America, Britain, France and Germany – is replete with instances in which [a] turn away from openness and tolerance, and often the weakening of democratic political institutions, followed in the wake of economic stagnation that diminished people’s confidence in a better future.

The biggest support for the Green party, remember, came in 1989 – at the peak of a boom.

Which provides another challenge for degrowthers: how to prevent lower GDP leading to reactionary politics?

If all this reads like a critique of degrowth, it shouldn’t. Rather, my scepticism is directed towards a particular type of politics – very often found among centrists as much as on the left - which I’ll call the “if I were king” conception. We should not think of policies as standalone interventions imposed from the top down. Instead, they are embedded in, and arise from, particular cultures and configurations of class interests. Policy is endogenous.

I don’t think this is a counsel of despair. It is to say that the left and greens must campaign for the cultural change without which degrowth is impossible. The precedent here is perhaps free market ideas in the 50s and 60s. These were marginalized, but years of often-neglected work by campaigners and thinktanks eventually led to them becoming accepted in the 80s. You can do a lot of important political work without having power.

* The papers cited in this sentence are paywalled – hence the links to scihub. Yes, there is irony in this fact.

** I am perhaps unique in believing that the decline in interest in market socialism is one of many intellectual wrong turns we have made in recent years.