Saturday, 24 October 2015

The Bitter Tears of Michelle Dorrell

It came too late for Ed Miliband, but the realisation that the Tories are deceitful and venal appears to be spreading among the wider public, witness Michelle Dorrell's now famous tears of rage on Question Time and the unease over the visit of Xi Jinping and the ensuing frottage. The timing shouldn't surprise us. An election campaign will always produce promises that are not kept, for two simple reasons. First, governments look to enact unpopular policies early in their term of office, hoping that inevitable disappointment can be eased by the passage of time. The cuts to family tax credits fall into this category, and they also show the extent to which the Tories remain scarred by the botched implementation of the Poll Tax, which was rolled out to England and Wales late in the final Thatcher term after the bonkers decision to trial it in Scotland first (Cameron was a Tory HQ worker at the time).

Second, circumstances change. Many promises are worthless because government's have far less control over future events than the ideological frame of the media allows. If the last parliament was marked by the Tories' success in blaming Labour for the deficit, it was equally marked by Labour's inability to nail Osborne's repeated failures to meet his own fiscal targets. Paradoxically, the ideological frame also allows the government to plead powerlessness in the face of "market forces", e.g. the steel industry (I'd argue that the writing has been on the wall for steelmaking since the dismantling of the coal industry in the 1980s, which was nothing if not government intervention). To take a current example, the Tories' fiscal charter is absurd because the future is unpredictable, but the media have accepted it on Osborne's gestural terms, essentially as an article of faith.

The ideological frame of the media (and its origin in religious pamphleteering) is most clearly revealed when it oscillates between demands for politicians to prophesy future events and calls for protestations of belief. The early grilling of John McDonnell was a classic example of this, flipping between an insistence that he detail the priorities of a government taking office in 2020 and accusations that he was a capitalism-hater. This mix of clairvoyance and auto da fé means that the media too often fail to ask the necessary questions about motivation and intent. For example, the government's desire for a "golden decade" of mutually-beneficial relations with China has been discussed in terms of mercantilism (is the nation getting a good deal out of Chinese investment in Hinkley Point and HS2?) and realpolitik (will this upset the Americans?) As ever, the real question should be about who in the UK benefits, i.e. which particular interests are obscured by the cloak of "the national interest".

You don't have to be a genius to see that the emerging "Osborne Doctrine" centres on a belief (shared by neoliberals in the Labour party) that Chinese growth levels will remain relatively high by Western standards even as they decline in absolute terms, so hitching a ride makes sense; that the Chinese economy will shift more towards consumption and therefore imports; that the UK has the potential to sell a lot of services to the Chinese, matching Germany's role in manufacturing and engineering; and that offering a quid pro quo of fat profits on UK infrastructure investment greases the wheels, replaces public debt with private rents (e.g. higher electricity prices), and provides political capital to keep both the media and regional politicians on side. Osborne has made no secret of the fact that it is the City of London that will be the chief beneficiary of all this.

The City will take a cut on Chinese money coming in, both in the form of foreign direct investment and foreign exchange to buy British goods and services; it will sell its financial, legal and corporate services directly into an expanding market; and it will seek to act as the chief broker for international financial dealings with China (i.e. everybody else's forex and FDI trade), hence its alacrity in joining the new Beijing-inspired Asian Infrastructure Investment Bank. Chinese money will fan out beyond the City, but this will be heavily-weighted to the South East (property, education, culture, shopping etc). This represents a reversal of roles from the 18th and 19th centuries when we bought Chinese luxury goods, such as tea, silk and porcelain. What remains consistent is their balance of payments surplus; then the result of their unwillingness to buy British goods in return, and now the result of volume commodities that they manufacture for the world.

Back in the day, we addressed this by (among other things) getting them hooked on opium and using military might to force British goods into the Chinese market. Now we offer to recycle their surplus by providing them with investment opportunities (and thus future income hedges) as they seek to divert domestic infrastructure and property investment to consumption. At each stage the City thrives: it provided the merchant financing (essentially silver) for Chinese imports to Britain in the 18th century; it provided the capital investment and export finance for Indian tea, textiles and opium in the 19th (the first domestic Indian stock exchanges didn't open till late in the century); and it seeks to mediate the recycling of the Chinese savings glut today. That Cameron and Osborne (and Johnson et al) are looking after their own should be obvious, but the media seem reluctant to join the dots, accepting the adage that what's good for the City is good for Britain.

This confusion over motivation and intent is also evident in the response to the bitter tears of Michelle Dorrell. The central issue of tax credits is not that government incompetence in foreseeing the impact will harm the hardworking, or that the cuts are just a spiteful way of getting the poor to pay for the bailout of the banks, but that we have an economy in which an increasing proportion of the employed aren't even worth the replacement cost of their labour in the open market. Her personal circumstances also show the extent to which the self-employed and small businesses are dependent on state benefits, both directly through their own income support and indirectly through the purchasing power of their similarly-constrained customers. This is more a matter of "national interest" than the kowtowing to the Chinese, but the media and most politicians have treated it as a sentimental interlude.

While some "compassionate Conservatives" have held Dorrell up as an example of the hardworking voter that the party should instinctively protect, some on the left have berated her as a dupe who deserves her fate for having been stupid enough to vote Tory. Both positions focus on just desserts - the calibre of the individual - rather than the structural context of the policy. The first suggests that the targeting is awry, not that it is wrong to punish the poor. In other words, Dorrell is simply a victim of friendly fire. The second suggests that voting is self-interested and that she has therefore shot herself in the foot. This fails to recognise that some people vote for what they consider to be the wider interests of the nation, or their self-ascribed class, even when these may conflict with their personal interest. To believe that all voters are selfish is to accept the ideology of calculating utility maximisers.

The Conservatives have shown with their commitment to a "National Living Wage" that they are quite happy to play fast and loose with British businesses outside the City (where the wage is perceived as a trivial issue, not least because the cleaners are outsourced). Though some see this as a quid pro quo for historic and promised corporation tax cuts, this clearly doesn't stand up in the case of SMEs and the self-employed who don't make enough profit to pay tax. From the perspective of the City, a steelworks in Redcar and a nail-bar in Folkestone are of an ilk. There is no strategic dimension, no "national interest" in one or the other. The only interest that matters is the profitability of the City itself, and that has been an international interest for a very long time.

Cameron and Osborne won't reverse the tax credit cuts, though they'll no doubt trumpet various modifications to satisfy the backbench demand for ameliorative gestures, possibly including an increase in the NIC lower threshold (but not the removal of the upper). They've got four years to sit this out and can be confident the media will tire of the issue long before then. The harping on about the offset of the NMW and increased tax-free allowances is clearly meant to obfuscate rather than provide a genuine rationale. By 2020 we will be halfway through the "golden decade" and the hymn-sheet will major on the boomtime to be seen in the City and the ever-greater prospects of Chinese sales and inward investment. Neither Redcar nor Folkestone will figure.


  1. And parts of the Labour Party will help. I couldn't help but observe that Cruddas' latest intervention - that Osborne is more in tune with the north of England than Labour - was so typical of the kind of person who lives within the Westminster/media bubble, rather than in the real world. I mean of course Osborne is making a big rhetorical play of this, and Labour is not covering itself with glory. But does he actually believe anything that exist Osborne's mouth is anything other then pure policitics? [The policy is transparently one of expecting the devolution of northern cities to be more about devolution of blame for cuts than the development of real economic progress viz, Redcar and Scunthorpe] Does he actually talk to anybody in the north about what they think about Osborne's rhetoric? Somehow I doubt it.

  2. Cruddas appears blind to the contradictions of his own assessment: "Labour is stuck in an unpopular, outdated politics of taxing and spending and using state control ... It has got us into a situation in which a Tory chancellor looks more in tune with our Labour councils in the north than the Labour party itself".

    This ignores that Northern Labour councils have traditionally been (and remain) very receptive to tax and spend, not to mention state control. The idea that they have shucked off their social democratic legacy and become centres of entrepreneurial dynamism is just romantic nonsense. We should be grateful that limited space prevented him from banging on about graphene and the Neville/Giggs recipe for property development with a social conscience.

    The current warmth of Northern councils towards Osborne is driven purely by the prospect of money. One of the lesser noted features of the incipient "golden decade" is that FDI will remain tightly under the control of central government, obliging local government to kowtow to London in the way that Westminster must kowtow to China. In trying to paint Labour's new leadership as London-centric, Cruddas is whitewashing the dynamic between central and local government.

  3. Exactly, councils and councillors have hit absolute rock bottom when it comes to profile and influence, even the leaderships are practically unknown and they have got to the stage where they don't even get a great deal of blame unless they do something completely stupid.

    The Northern 'devolution' process must really be seen for what it is- an attempt by councillors and council buureaucrats to claw back some limited decision-making functions in order to raise some publicity for their roles and for their careers. There is practically no popular support for this as the public are either sceptical or scornful about the abilities of politicians, or understandably cynical about the government's motives for handing out powers to anyone.

    Given that 'entrepreneurialism' (marketing cultural, industrial or geographical heritage), or simply offering cheap labour, are the only options for councils under the present and proposed arrangements, it is understandable that local Labour elites are willing to try and cut a deal with Osborne rather than planning for a massive raft of grants and subsidies they can spend on social facilities. In that sense I don't think it is about 'money'- they won't be getting any more of it- but more about an enhanced civic profile.