Thursday, 29 September 2016

The Labour Theory of Value

The labour theory of value is considered heterodox nowadays - mostly the preserve of Marxists and anarchists - but it was central to the theories of classical liberal economists like Adam Smith and David Ricardo, albeit with variations. What this class of theories had in common was the philosophical pre-eminence accorded to labour and thus the consequent importance of ethics in economics. As Corey Robin summarises it (contrasting Smith's more progressive view with that of Edmund Burke, for whom value was merely the judgement of capitalists and therefore men of station), "What ultimately undergirds Smith’s specific claims about labor as the measure of value—and concomitant claims about the distortions wrought by capital’s power and control of the legislature—is a vision of labor as the prime mover in the world. Insofar as labor is a universal measure of value, it is also a marker of our common humanity: what we, as human beings, have to do in the world in order to secure what we want from the world".

The marginal revolution of the late 19th century, which proposed that value was a subjective reflection of the buyer's utility (i.e. use gained or pleasure given), essentially removed this moral dimension from orthodox economics. Labour was only incidentally valuable and (an idea inherited from Utilitarianism) there was no common scale of value beyond the aggregate of individual preferences. Marginalism not only deprived labour of its pre-eminence but conceptually divorced it from the production of value - i.e. you could potentially produce value that was so far removed from labour (ironically echoing Marx's thoughts on alienation) that the contribution of the latter was simultaneously necessary and negligible. The 19th century opens with Mary Shelley's Frankenstein, in which labour is reconstituted into a new form of being, and closes with H G Wells's The War of the Worlds, in which machines appear to have substituted for beings (until microbes save the day). As the 21st century opens, we are faced with the prospect of self-replicating capital: robots and dark factories.

One reason why the labour theory of value has never been wholly eclipsed (leaving aside for the moment the possibility that it is actually right) is that it is humanistic. The utility maximisers of marginalism, like the representative agents of modern mathematical models, lack humanity. While morality may have been marginalised in orthodox economics, it remained central to politics as a means of distinguishing the virtuous. Judging workers collectively as heroes or wreckers, rather than as the monads of economic theory, meant that politics conceded that value arose from the aggregate of labour. Even attempts to fragment it by appeals to individualism produced the collective categories of strivers and skivers. Economics and politics were eventually reconciled, to the satisfaction of both liberals and conservatives, through the concept of human capital, a developmental attribute of the individual (and thus the product of preference), free from the dead weight of class.

Human capital allowed value to be acknowledged as the product of individual labour and simultaneously denied to collective labour. What mattered was your ability to distinguish yourself from the herd in the competition of life. As the idea of investment in the personal brand would always have limited appeal (most people watch The Apprentice to laugh at the contestants, not identify with them), human capital theory was reinforced by the revival of the traditional idea (religious in origin) that work was central to a meaningful life. From being a chore whose gradual decline we eagerly anticipated in the postwar years, work was promoted as the primary route to self-actualisation from the late-70s onwards (at one point in the 80s, Hollywood almost convinced us that offices were glamorous). This has led to a state of affairs that would baffle earlier liberal thinkers like Keynes. As Ryan Avent of The Economist puts it, in a Guardian piece punting his book on the subject, "Work is not just a means for distributing purchasing power. It is also among the most important sources of identity and purpose in individuals’ lives".

The shift from value as an intrinsic property of all labour to value as the relative worth of the individual can be seen in two areas of contemporary concern: the rise of the robots and immigration. Avent presents "a world without work" as a forked path that might lead either to utopia or dystopia, but one where the risk of a bad choice lies in the response of labour, not the decisions of capital: "If the role of work in society is to shrink, other sources of purpose and identity will need to grow". He outlines the conventional expectation that technological redundancy will necessitate a dole: "Freeing people from work without social collapse will therefore require society to find ways other than pay for labour to channel money to those not on the job. People might come to receive more of their income in the form of state-led redistribution: through the payment of a basic income, for instance, or direct public provision of services such as education, healthcare and housing. Or, perhaps, everyone could be given a capital allotment at birth" (that last suggestion echoes some very old ideas).

The neoliberal assumption is that the state must take the lead because labour lacks a proper understanding of its own interests and an inability to organise itself. As Avent sees it, "One problem is that large-scale social overhaul takes a long time to emerge and have an effect. Another is that money for nothing is not necessarily what the displaced masses are interested in ... Tellingly, workers and trade unions seem least interested in the policies, such as a basic income, that break the link between compensation and work. This makes the building of our eventual utopia tricky; a hefty rise in the minimum wage would benefit lots of workers, but it would also discourage some firms from using the cheap labour they have been soaking up, forcing the jobless to get along in a world in which they cannot find work yet also lack the monetary means to stay out of poverty." Not only does Avent ignore the current debates on UBI among organised labour, but he ignores the possibility that making labour more expensive will boost capital investment from its currently low levels. The problem is always labour, never capital.

Avent also makes the topical link to immigration: "Those still in work might be less grumpy about funding a more generous welfare state if beneficiaries are deemed to be enough like them: fellow tribesmen, people of similar background and therefore felt to be deserving of charity. Around the rich world, it is interesting to note that it is not so much the generosity of state redistribution that is provoking societal unrest, but the fact that out groups – from Latinos to Poles to refugees –are grabbing a share". This is the saloon bar sociology that underpins the "legitimate concerns" guff of the likes of Rachel Reeves. The roots of contemporary "societal unrest" are more complicated than simple xenophobia, but this linkage serves the purpose of replicating the problematic nature of labour from the economic sphere (its failure to understand it own interests) to the social (the competition for limited resources). The solution is increased management, both to control state-led redistribution and restrain the instincts of the mob from looting the treasury or killing each other.

The problematic nature of immigration was outlined in the same print edition of The Guardian by Stephen Kinnock: "I am resolutely pro-immigration, yet I don’t see immigration as a value; I see it as a social and economic dynamic" (eh, you what?). Kinnock is using "value" here in the sense of a virtue-signal. Where the mangled labour theory of value comes out is in the centrist advocacy of an immigration system geared to business need (which echoes the Burkean notion that value is the judgement of capitalists). Though the right have normalised the idea of a points-based immigration system, it's perfectly clear that this is insincere and intended to avoid the charge of racial discrimination (i.e. preferring white Anglo-Saxons to others). Discrimination by labour value (formalised in work permits) is acceptable, not least because it reflects individual human capital, though Kinnock appears to lean towards the purely quantitative rather than the qualitative: "Being pro-immigration means making it an economic, social and political success in the long term: as much immigration as is possible and sustainable, limited only by our ability to create the environment for all of Britain to thrive and feel valued".

For Kinnock, "The referendum had a clear message: the limitless nature of freedom of movement, despite its proven economic benefits, is not socially and politically sustainable. That’s why opposing freedom of movement isn’t the same as opposing immigration. Two key values of the society we must build are openness and non-racism. These values aren’t defined by the number of immigrants, but by the quality of experience every person has of this country". He doesn't explain how to reconcile opposition to "freedom of movement" with support for "openness", while his primary concern appears to be numbers, reflecting a pessimism about working class sophistication: "This is facing up to a human truth: nobody is born racist, but immigration that reaches levels beyond a society’s capacity to cope can lead, in extremes, to racism. That racism fuels a vicious, ugly backlash, in which there is tremendous anger in one community and tremendous fear in another. Nobody wins and everyone suffers. It sets back our ideal of an open and non-racist society".

If no one is born racist, how are racists made? Perhaps the answer has nothing to do with immigration, given that the greatest levels of anti-immigrant sentiment are found in areas with very low immigrant populations. The liberal critique of the state is not just that it is a danger to personal liberty but that democracy encourages it to pander to the working (and non-working) classes for electoral purposes. This stance allows self-interest to be smuggled in under cover of disappointment at the failings of the common herd. Before 2010, the working class was encouraged to believe, in Ryan Avent's words, in "the generosity of state redistribution", despite many of them experiencing the opposite and despite the beneficiaries of fiscal policy since the 80s being the rich. The consequence was a media discourse dominated by the utilitarianism of "unaffordable welfare" and the immorality of "benefit cheats" and "skivers". Since then, immigration has come to the fore with the result that the existential necessity of austerity has all but disappeared, along with the "chav".

Like Avent, Kinnock sees the solution in managerial terms: "While the priority is designing a transition to a system based on work permits, this requires a comprehensive approach that stretches across almost every responsibility of government, from entry requirements and integration support, to economic and public service investment to combat marginalisation. This managed balance is what makes immigration sustainable and takes us ever closer to a non-racist, open society". The apparent inability of the UK government to successfully "manage" immigration over decades (regardless of policy goals) suggests that Kinnock's confidence may be misplaced. To cap it all, he suggests that a failure to manage immigration "means we cannot show our humanity to the refugees who need us", which is not merely a non sequitor but the sort of weaselly nonsense more usually associated with Conservatives.

What Avent and Kinnock share is a belief in the declining value of most labour (not their own, obviously) and the need to carefully manage the transition to a society in which work is the pleasurable preserve of the middle classes, who can in turn be counted upon to support the continued concentration of wealth among the top percentile. What matters is not that a basic income will be parsimonious, but that its level will be set by technocrats and not biddable politicians. What matters in respect of immigration is not the interests of immigrants or natives, but that the process should be managed to the benefit of capital through the recognition of individual economic value. The common goal is to preserve the social order (the ownership of capital) while overseeing the conclusive separation of value from labour as a class, both in the political and economic spheres.

Saturday, 24 September 2016

Empire Loyalists

Douglas Carswell came in for some stick this week for his erroneous claim that the sun, rather than the moon, causes tides. While the sun does exert a weak pull on the oceans, producing the effect of spring tides when aligned with the moon, the major force behind the swell of the seas is lunar, whch is why high tides can occur at night. What has got lost in the fun is that the original point by Paul Nightingale, that the moon is dominant, was an analogy for global trade. Distance matters as much as size, hence trade with Ireland (5.5% of the UK total) is larger than trade with China (4.5%). While Carswell's critics have seen this as more evidence of the war on expertise, this ignores that while the solar system is unlikely to change in the near-term the same does not apply to trade flows. But while Carswell's argument, that an increase in global trade can substitute for a reduced relationship with the EU, may not conflict with the laws of physics, it's not clear how this new state of affairs would be achieved, even allowing that the EU share of UK trade has declined in recent years.

The underlying problem is the idea that trade is essentially a matter of government choice, a belief that has been promoted by both leavers and remainers with their emphasis on trade agreements and the scarcity value of negotiators. The uncertainty over what Brexit entails is interpreted by many as incompetence because it is thought to reflect the inability of the government to make up its mind. It would be better to see it as uncertainty over the nature of the UK economy and thus an admission of the limits of government diktat. Just as the sun can amplify the pull of the moon during a spring tide, so the state can affect trade, e.g. by tariffs or embargo, but the underlying determinant is supply and demand (a point that Liam Fox was clumsily alluding to in his criticism of "lazy" British businesses). It should also be noted that among the levers available to government to boost trade, bilateral agreements are not necessarily the most effective. Investment in technology and infrastructure, to reduce transport costs, can often be more helpful in increasing trade volumes.

What this superficially trivial issue highlights is that trade has once more become a primarily political matter, much as it was in the hundred years between 1840 and 1940. In the postwar era, trade was essentially depoliticised in Western Europe, first by the equation of "open markets" with liberty, i.e. in contradistinction to the communist regimes of the East, and then by the emergence of the EEC/EU as a technocratic project that elevated trade above domestic politics. Whereas trade was once indivisible from foreign policy, it became an apolitical fact of life during the era of globalisation, no more controversial than the weather, which was an example of neoliberal hegemony. The political salience of trade has been on the increase since the late-90s, but this has been marginalised as the concern of lefties and paranoiacs obsessed with TTIP and TPP. What the EU referendum vote has done is reintroduce trade to the mainstream of politics, but in a curiously antique form.

It has become clear that the popular understanding of trade, even among politicians who should know better, is stuck in the past, hence the ready recourse to tales of swashbuckling mercantilism and the revival of trade ties with Australia and Canada. This could be dismissed as popular prejudice, but the condition of public opinion is probably more down to ignorance about prospective growth markets for British goods and services than racism. Most Brits would guess that China is the largest country by population, because that is emphasised with monotonous regularity by the press (playing on an old fear of Asiatic hordes), but few would guess that Pakistan and Bangladesh are both in the top 10 (let alone that Indonesia is in the top 5), essentially because media coverage of those countries is largely reduced to terrorism and natural disasters, which leads us to underestimate the size of their middle class and thus their spending power.

Fewer still have are aware of the gravity model of trade - i.e. that Australia is a poor prospect because it is both far way and has a population smaller than North Korea - even though this is one of those elements of economics that precisely coincides with fabled "common sense" (unlike, for example, the fallacy of the household budget analogy). What is stronger than common sense is nostalgia, which is why the belief that we can re-establish the trade ties of an earlier era, rather than make nice with the Chinese, is a more attractive proposition to those who advocated Brexit. This is usually expressed as a revival of the Commonwealth, but it's clear that what many advocates are lusting after is the revival of the British Empire, albeit in an informal arrangement in which the City and sentimentality are favoured over the military.This is not merely an attempt to ignore the tide of history, but a denial of the reality of the historic ocean, i.e. the nature of that empire.

The colonies were not the UK's chief trading partners during "peak empire" in the late nineteenth century. Continental Europe, then as now, was a more important destination for British manufactured goods, while the Americas were far more important in terms of raw materials (e.g. cotton from the USA and minerals from the South). At the apogee of 1910, the empire accounted for only 35% of UK trade, which was little advance on the 30% it accounted for in 1820. In part this reflected the very nature of empire: raw materials, like sugar, would be imported at low cost from the colonies, processed and then sold on as finished goods to markets, like Europe, willing to pay a relatively high price. But it also reflected both the distance of the colonies, which favoured high value / low weight commodities (e.g. Australian wool), and their sparse populations, which meant relatively smaller markets for British manufactured goods. If you were going to design an optimal trading area, one where "the sun never sets" wouldn't be your first idea. Proximity, after all, was one of the compelling arguments for joining the original common market.

One reason why the myth of empire trade has proved persistent is that it has, at different times, appealed across the political spectrum. David Davis may once have fancied himself as leader of the Conservative Party, but he is ultimately more the inheritor of Cobden than Churchill and remainers are unwise to ignore the resonance of that in the appeal to leave voters. Free trade was undoubtedly beneficial to the working classes in the nineteenth century, from the repeal of the Corn Laws to the gradual reductions in tariffs combined with cheaper transport costs as the century progressed. According to one study, "almost one half of the total real wage gains recorded in Britain in the late 19th century can be attributed to the impact of international transport cost declines". The consequence of this coincidence was that many Britons accepted the propaganda that cheap food was the product of empire. In fact, Britain's prosperity in the nineteenth century owed far more to the informal empire of the Americas and the willing market of Europe than it did to any special relationship with Australia or Canada.

While free trade arguments remained central up until the 1975 EEC referendum, thereafter the emblematic role of food in politics shifted to waste (butter mountains) and bureaucracy (apocryphally straight bananas), while the middle classes lauded the availability of olive oil in Waitrose as the advance of civilisation. We are now in the era of the Great British Bake-Off's Victoria sponge, which suggests a search for the comforts of old and a hankering after the supposed certainties of "our finest hour" (when the defence of a rotten empire was elided by the fight against Fascism), which you can see peeping through the demand for a "Hard Brexit". But this ignores the lesson of the tides, that our little world is inescapably influenced by others. This is the paradox of Brexit: a desire to take back control has resulted in us relying on the comfort of strangers, but in a far more risky sense than the Canadian Mark Carney envisaged.

Friday, 16 September 2016

Hillbillies and Russians

That globalisation was stuttering before 2008 is now widely accepted, as is the belief that there are structural factors driving secular stagnation and that rising inequality is eroding public faith in conventional politics. One area where these three tendencies intersect is in the movement of labour. Though globalisation was always predominantly about the free movement of capital, the trope of the "global race" diverted attention towards foreign workers ("they took 'er jerbs!"). Likewise, ageing populations in developed nations (and precautionary saving in developing nations) have produced both a "savings glut" that has driven secular stagnation and a political shift towards xenophobic nostalgia (while true, this can be a overplayed: not all the children of the 50s and 60s grew up to be reactionaries). Modern populism has been characterised as antipathy towards refugees, foreign workers and domestic "moochers", which means that the anti-elite revolt (true populism) is little more than rhetoric that masks pro-elite policies (tax cuts for the rich, more military spending, bring back grammar schools etc).

That globalisation has been redefined from a problem of unfettered capital to a problem of labour is one of the more notable ideological developments since the Seattle protests of 1999, and probably has its roots in the management of immigration as a labour-supply issue (and asylum as a form of welfare claim) in the mid-90s. What neoliberals failed to grasp was that this framing would lead to a popular belief that the damaging volatility of international capital could be ameliorated by tougher immigration controls, which was a strand of thought that ultimately led to Brexit. While the belief that the fundamental problem of political economy is labour might appear to be a characteristic of neoliberalism (like classical liberalism), i.e. laissez-faire for capital and coercion for labour, it is at heart the fundamental conservative premise that underpinned the pre-democratic age of hierarchy and privilege: labour unconstrained by tradition and social obligation is dangerous. Liberalism is simply a rationalisation of this prejudice for the era of representative government.

This focus on labour, and in particular the need for it to follow the dictates of capital, has produced two notable strands in recent conservative thought in the US, one optimistic (labour can be cajoled) and one pessimistic (this will be traumatic), though neither is particularly original. Both have analogues in the UK, from The Economist recommending the abandonment of northern towns to the belief that Brexit was the revenge of the "left behinds". The optimistic case is advanced by Tyler Cowen, author of The Great Stagnation and Average is Over, who is arguably more of a progressive (i.e. an economically and socially liberal) Republican than a conservative, though he is unquestionably one of the right's more interesting thinkers. His view is that globalisation is not dying but shifting focus: "Globalization typically is defined as the movement of goods, services, ideas, labor and investment across national borders. But many nations lack integrated economic relations within their borders, and thus they could reap high gains from trade by opening up internally. This is happening, and its logic very much resembles that of globalization".

The examples he uses are the subcontinental-scale internal markets of China and India. There is an obvious echo here of the functionalist theories of 19th century development in the USA and Russia, which emphasised the benefits of import-substitution (i.e. tariffs) to protect national producers and grow domestic markets, combined with a laissez-faire attitude to internal capital allocation and state investment in infrastructure (e.g. railways) to exploit economies of scale. The US was a success because it repressed and dispossessed "backward" forms of capital, from Native Americans who refused to fully exploit land to the cottonocracy of the South, as much as it coerced marginal labour, while Russia failed because the aristocracy and other socially conservative forces exerted too great a dead weight on liberal progress. The consequence in the US was the Progressive Era, which attempted to ameliorate the social damage of laissez-faire and prepare US industry for integration during the first wave of globalisation. In Russia, the consequence was first bourgeois and then proletarian revolution.

Cowen naturally ignores such Trumpish policies as tariffs and walls in favour of liberal ones such as the removal of internal barriers and encouraging the Internet to create national markets, but he concedes that national economic integration will probably lead to more political nationalism, which is an echo of the functionalist orthodoxy with respect to those other coming economic powers of the late 19th century, Germany and Japan. To allay any fears, he holds out the prospect of a further internationalist turn: "these stronger and better integrated political units probably will grow in wealth and economic sophistication, and in due time that will give us more globalization yet". The problem with this hope is that the success of the USA was atypical and largely dependent on favourable geopolitics, notably its ability to supplant the UK as the financial hegemon in Central and South America after WW1 and Spain's inability to resist US expansion in Cuba and the Philippines. China and India have more challenging backyards.

What is implicit in Cowen's assessment is that labour mobility will increase within national borders even as - indeed because - it decreases internationally. We have probably passed the peak of labour mobility in Europe, North Africa and the Middle East, though perhaps not in sub-Saharan Africa or South East Asia. What is clear is that future military (or covert political) interventions in developing nations by Western powers will be more cautious because of the potential blowback in terms of refugees (this may turn out to be the chief legacy of Cameron's ill-advised Libyan adventure). The point is not the actual impact of the refugees themselves (European governments remain discreetly keen on importing youth to offset demographic ageing), but the negative impact of media coverage on domestic politics, which has steadily grown since the Balkan Wars and has now become systemically destabilising (see Brexit).

The idea that native labour needs to "get on its bike" is hardly new, but the prospective turning-off of the tap of immigrant labour has made it more politically salient for those conservatives who see the fundamental issue of political economy as the provision and control of the workforce. While the classical liberal view is that labour is innately indolent due to a lack of moral development, the pessimistic conservative view is that labour is fallen. In other words, it is naturally virtuous but has lost its way due to bad influences and its own weakness. Even though many US conservatives who adopt the latter view are evangelicals, this is an essentially Catholic interpretation in contrast to the liberal's Protestant (even if secularised) perspective. While the liberal interpretation emphasises economics and personal agency (Mill), the conservative interpretation emphasises culture and the organic nature of society (Burke). A good example of the latter, and the tensions it gives rise to, is J D Vance's Hillbilly Elegy.

The author (in a piece for The Guardian) outlines this shift in perspective: "No one doubts that globalisation and automation have disproportionately had an impact on the white working class and no responsible politics should fail to appreciate and address that fact. Yet our neighbourhoods and our communities create certain pressures and instil certain values that make it harder for our children to lead happy lives". One reason for Vance's popularity among the commentariat is the desire to locate a cultural explanation for the rise of Donald Trump. Though there is ample evidence his support is largely mainstream Republicans (older and more affluent than the average voter), there remains an appetite for tales of how the white working class, battered and bruised by globalisation and the advance of minorities, has been seduced by the Pied Piper of Queens.

Vance obliges: "Many in the US and abroad marvel that a showy billionaire could inspire such allegiance among relatively poor voters. Yet in style and tone, Trump reminds blue-collar workers of themselves". The emphasis on style and tone is necessary because there is no substantial identification between moderately affluent evangelicals, let alone financially stressed blue-collar workers, and the famously profane New York real estate mogul and brand-for-hire. Vance considers Trump beyond the pale, but for conservative reasons: "On the right, the party of robust American global leadership now finds itself apologising for a man who apologises for Vladimir Putin even as he scares our staunchest European allies. The Republican speaker of the house, a brilliant, respected leader, regularly repudiates some noxious statement of Trump’s even as he cannot politically repudiate the man himself". (It's worth noting that the house speaker is Paul Ryan, who Paul Krugman famously labelled a "Flimflam man", and part of the Republican establishment that encouraged the policy incoherence and anti-government anger that opened the door for Trump).

For Vance, the attraction of Trump is a mixture of both the promise of rectification (i.e. government interference, though few conservatives will admit it in these terms) and the licence given to resentment. While liberals couch the latter as the bigotry of whites losing their privileges in a multiracial society, conservatives like Vance see it as the result of the erosion of communities and their patronisation by coastal elites. The promise of rectification addresses not just unemployment and poverty but the pathologies (traditionally characterised as "black") that this gives rise to: drugs, welfare dependency and family breakdown. But, for a conservative, the solution must come from within as much as without. The contradiction is obvious, leading to Vance's own confusion: "These are tough, tough problems, but they’re not totally immune to policy interventions.  Neither are they entirely addressable by government.  It’s just complicated". His message to the right is that "we need to judge less and understand more", while his message to the left is to "stop pretending that every problem is a structural problem, something imposed on the poor from the outside".

While it doesn't come out in his Guardian piece (he crafts his work to suit the audience's prejudices), Vance is a man who believes in the transformative power of conservative institutions, particularly in cultivating self-discipline and solidarity. This mainly means the army (he was in the Marine Corps) and the church. His analysis of the role of the latter in developing working class political norms is acute: "They may watch megachurch broadcasts or join prayer circles on Facebook, but they largely avoid the pews on Sunday. Consequently, many absorb the vernacular and teachings of modern Christianity, but miss out on the advantages of church itself. This deinstitutionalization of the faith has occurred alongside its politicization ...  A Christianity constantly looking for political answers to moral and spiritual problems gives believers an excuse to blame other people when they should be looking in the mirror ... Mr. Trump, like too much of the church, offers little more than an excuse to project complex problems onto simple villains".

The fundamental issue that Vance is struggling with is the way that capitalism first creates and then destroys communities ("All that is solid melts into air"). His own family - "hillbilly transplants" - migrated from Kentucky to the steelworks of Middletown in Ohio. Once the industry declined, so too did the community. While some individuals escaped to postindustrial modernity further afield, most lapsed into what he describes as the "learned helplessness" of poverty. A corrective to this view was provided by Kevin D Williamson from further out on the political right: "Forget all your cheap theatrical Bruce Springsteen crap. Forget your sanctimony about struggling Rust Belt factory towns and your conspiracy theories about the wily Orientals stealing our jobs ... The white American underclass is in thrall to a vicious, selfish culture whose main products are misery and used heroin needles. Donald Trump’s speeches make them feel good. So does OxyContin. What they need isn’t analgesics, literal or political. They need real opportunity, which means that they need real change, which means that they need U-Haul".

The liberal capitalist strategy is to reduce labour to a mobile factor of production, which means that repairing communities like Middletown requires breaking and reforming their social relations as much as relocating them physically. Vance recognises the economic logic of this, not least because his own people moved from Kentucky in search of work, but he knows that this time round there is little chance of preserving their hillbilly culture. His elegy is not just for the steel towns of Ohio and the "hollers" of Kentucky, but also a recognition that while much of rural culture could survive transplantation into industrial towns, it faces an existential threat in the transplantation to a service economy. This is independent of the distance travelled: the service centre of Columbus is nearby but a world away, a postmodern environment in which culture is an ever-changing pick-and-mix of global commodities, like the diverse dining that Tyler Cowen favours. Vance knows that this trauma is likely to reduce his family's already degraded hillbilly essence to little more than a lingering perfume.

The conservative fear (which you can trace back to the Middle Ages in England) is that labour mobility will destabilise the natural order, destroying the social relations that produced working class conservative deference and blurring the lines to the point where there is no easily-recognisable domestic "other" to act as a unifying target. This becomes a greater risk when immigration is constrained because smalltown communities lose even more of their young under the pressure of internal migration to the big cities. As a consequence, preserving "left behind" communities, whether by "bringing back the jobs" through Trumpian fiat or subsidising marginal work through a basic income, starts to look attractive. The capitalist debate is thus being subliminally informed by two versions of nineteenth century history: the aggressive internal mobility of the US and the aggressive internal stability of Tsarist Russia. There is a reason why American conservatives are fascinated by Vladimir Putin over and above the mutual respect of authoritarians.

Wednesday, 7 September 2016

Common People

John Harris had a longform essay in The Guardian yesterday asking "Does the left have a future?". This is a question that has been repeatedly raised since the French Revolution, when the political metaphor of left, right and centre was born, which ought to be a clue as to the answer. Though he eschews the bitterness of Nick (What's Left?) Cohen, Harris is another representative of the school of liberal thought that castigates the organised left for having betrayed "the progressive cause". If Cohen takes inspiration from George Orwell's contempt for hypocrisy and muddled thought, Harris is inspired by his romantic patriotism. As the leading chronicler of Britpop, this should come as no surprise. Led astray by nostalgia, Harris's thesis suffers from the sort of muddled thinking that Cohen would take great pleasure in ridiculing. The most obvious muddle is his belief that "the left" and the Labour Party are interchangeable.

One of the problems of longform journalism is that in its search for human interest it substitutes anecdata for sociology. Earlier forms of state-of-the-nation writing, such as J B Priestley's English Journey, would sculpt human cameos to fit a didactic theme, but it was understood that this liberty would be supported by hard data (see Orwell's painstaking record of household costs in The Road to Wigan Pier). In the era of video, what we get is selectivity and soundbites. The derision of experts is not some novel invention of the right but the culmination of structural biases in the media that have elevated the personal and trivialised data. Investigative journalism is expensive and most media "data analysis" originates in marketing and PR. As The Guardian's go-to guy for video vox-pops, Harris has become notorious for his inability to find any voters happy with the Labour Party and his indulgence (in the spirit of "understanding") of ignorance.

For example, Harris tells us of a visit to Merthyr Tydfil in 2013: "Outside the town’s vast Tesco, I spoke to two retired men, who understood what had happened to Merthyr as a kind of offence to their basic values. In the past, one of them told me, 'a man wanted to be a working man: he didn't want to be in here, stacking shelves'". Stacking shelves or factory drudgery have always been more typical (if less emblematic) of working class employment than rolling steel or hewing coal, as Harris should know from the biographies of musicians (e.g. Jarvis Cocker worked in a fishmongers). His acceptance of clich├ęs is reinforced by a reluctance to challenge wonky logic: "In the bellwether seat of Nuneaton, two women told me that Ed Miliband would probably win the election because 'all the people on benefits' were going to vote for him". It doesn't seem to have occurred to Harris to ask these women how they imagine the Tories ever get elected.

Harris believes "The western left faces three grave challenges, which strike at the heart of its historic sense of what it is and who it speaks for. First, traditional work – and the left's sacred notion of 'the worker' – is fading, as people struggle through a new era of temporary jobs and rising self-employment, which may soon be succeeded by a drastic new age of automation. Second, there is a new wave of opposition to globalisation, led by forces on the right, which emphasise place and belonging, and a mistrust of outsiders. And all the time, politics rapidly fragments, which leaves the idea that one single party or ideology can represent a majority of people looking like a relic". You might think the third challenge was "fragmentation", but the sub-editorial gloss is: "the disruptive force of globalisation, the rise of populist nationalism, and the decline of traditional work". This rejigging points to the confused nature of Harris's claim as much as The Guardian's determination to yoke populism (i.e. anti-elitism) to rancid nationalism.

The idea of "traditional work" is ahistorical. Jobs are constantly changing, both substantially and incrementally. This, after all, is the orthodox reason why we shouldn't fear automation: new jobs will spring up as a result of new demands while technology (and ideology) requires everyone to "adapt or die". Rather than acknowledge his own nostalgia, Harris projects it onto the left: "Supposedly radical elements too often regard deep technological shifts as the work of greedy capitalists and rightwing politicians, and demand that they are rolled back" (he cites no examples, but the Luddite smear rarely does). On his second claim, the political right is not leading a "new wave of opposition to globalisation" but replacing the left's long-established critique of the free movement of capital with a critique of the free movement of labour. This diverts popular anger into a cul-de-sac, as can be seen in the current confusion over the meaning of Brexit. Globalisation is not impeded by xenophobia but by capital controls. Harris's third theme, fragmentation, is less of a challenge and more of an opportunity, as will be seen shortly in his prescription.

Harris's thesis rest on an apocalyptic interpretation of recent history: "an atomising, quicksilver economy ... has fragmented people and places so thoroughly that assembling meaningful political coalitions has begun to appear almost impossible". This is typical of a strand in liberal thought that over-states the revolutionary impact of capitalism in order to insist that proven approaches are no longer viable. Whatever else it may presage, the growth of the SNP and UKIP suggests that political parties as vehicles for change remain in rude health. Harris is sceptical of any political enthusiasm on the left, dismissing Podemos, Syriza, Bernie Sanders et al as "an expression of protest and dissent [rather] than a sign of the imminent acquisition of power". This attitude reflects the technocratic and elitist interpretation of politics that he elsewhere criticises New Labour for. His suggestion that nothing can be done in the political realm because of the conditions of modernity is little more than bog-standard neoliberalism. The sentence quoted at the start of this paragraph could as easily appear in a Silicon Valley pitch to upgrade democracy to crowdsourcing.

The centrepiece of Harris's thesis is that the Labour Party is a volatile alliance that is now breaking down because of irreconcilable differences (a bit like Oasis). Of course, this same rupture has been predicted ever since the party was formed. The sociological reality is that Labour's base has shifted and reconstituted repeatedly over time (and far more so than other political parties because capitalism demands greater changes of labour). Harris presents the current cycle in this process as an unbridgeable divide: "the rising inequality fostered by globalisation and free-market economics manifests itself in a cultural gap that is tearing the left's traditional constituency in two. Once, social democracy – or, if you prefer, democratic socialism – was built on the support of both the progressive middle class and the parts of the working class who were represented by the unions. Now, a comfortable, culturally confident constituency seems to stare in bafflement at an increasingly resentful part of the traditionally Labour-supporting working class".

This is a variant of the fashionable dichotomy of "cosmopolitans" and "the left behind".  It's a reductive caricature that excludes the majority of the population (who are in work and not in London) and obscures the reality that globalisation is no respecter of class. Casualisation and insecurity have affected many more than just "traditional workers" - that was the whole point of "we are the 99%". Likewise, we need to remember that many of the working class voters attracted to UKIP were previously neither trade union members nor Labour voters. We have always had working class Tories. Harris persists with The Guardian's favourite anti-Labour line of recent years, warning that "Arron Banks is said to be mulling over a new party that might capitalise on the support for Brexit in working-class Labour areas and deliver them a new political identity". Not only is he forgetting that UKIP couldn't topple Labour at its pre-referendum peak, but he is subscribing to a theory of politics as elite-managed branding ("deliver them a new political identity") that rejects working class autonomy.

Harris finally gets to the point when he considers the prospects of electoral success: "There is a rising recognition, among both former followers of Blair and alumni of the traditional left, that Labour’s old majoritarian dreams are probably finished – and that it should finally embrace proportional representation and build new alliances and coalitions. This change would probably trigger a split between the party’s estranged left and right, and thereby bring Britain into line with the rest of Europe, where the left’s crisis is highlighted by a tussle between traditional social democrats and new radicals". Once more he undermines his own case, citing "the 1930s, when the aftershocks of an economic crash saw the left pushed aside by the politics of hatred and division". In the UK, Labour was marginalised by the MacDonald split (the hatred came after) and the National coalition. In Germany, proportional representation split the left while conservative miscalculation handed power to the Nazis. The idea that PR is the solution is both naive and underwhelming.

What we can deduce from Harris's confused essay is that liberals still haven't come to terms with 2008. They remain wedded to the neoliberal idea that the market is the best mechanism for making decisions, even if it must be created and expertly managed (much as the London music press cultivated Britpop). The resulting political belief is that democracy must be governed by an enlightened elite who can resist populist pressure to bypass the market's logic. This is not because liberals are in denial about the market's "imperfections" but because they accept (in private) that wealth inequality, economic redundancy and social atomisation are a price worth paying for the preservation of the liberal order. All 2008 has done is strip away the messianic enthusiasm of "high neoliberalism" to reveal the underlying conservative pessimism about human nature. Nowhere is this more evident than in the liberal patronisation of the Labour Party, resting as it does on the twin beliefs that the working class is a foolish mob and that anti-establishment party members are driven by malice or delusion. This has been the essential critique of popular politics (and the role of "agitators") since the Putney Debates.

The institutional purpose of the Labour Party has always been to restrain the wider Labour movement, usually by exploiting the "realities" of the Parliamentary system to moderate demands, and to channel autonomist initiatives into the safe embrace of state control. So long as workers seek to organise, there will be a Labour Party, and that means an ongoing struggle between the more radical "shopfloor" and the managerial class. The "Corbyn phenomenon" reflects two developments, but ones that suggest a further evolution of this relationship rather than a terminal rupture. First, the ongoing disruption of the workplace (the decline of unions and the growth of precarity) and the erosion of civil society by the market (e.g. local authority privatisation) means that the party is increasingly the only medium through which workers can organise for political ends. What is sociologically significant about the membership growth is not the return of "old Trots" but the arrival of young workers, even if they are dismissed as "cosmopolitans" enraged by tuition fees and mortgage affordability.

Second, the failure of the PLP and the party executive to bin the New Labour model of a technocratic vanguard and a neutered membership has undermined their ability to moderate the emboldened CLPs. The doubling-down of authoritarianism, no less than the hysteria over antisemitism and misogyny, is symptomatic of an intellectual void. It is as counterproductive as it is absurd (a party that refuses to accept converts). There is much irony here. The UK's first-past-the-post parliamentary system has ensured that the left insurgency has been channelled into conventional politics and traditional parties, despite the calls for a wider "movement". In this sense, Corbyn is a sign of the system's resilience. His tendency to invoke social democracy's greatest hits -  i.e. things proven to work, like a nationalised railway system - has meant that attacks have avoided policy and focused on the ad hominem, but this only obscures the relative modesty of the left's ambitions and means that policy shortcomings aren't interrogated.

The historian Charles Maier makes a good point about the collision of social and institutional change: "although Marxist political economy argued there were long-term social classes generated by capitalism, we live in a world where coalitions of interest form and reform; they are fluid and evolve. How can we coherently discuss the conflicting interests in the economic system if we see no social agents incorporating those interests? The sociology underlying political economy must be one of processes, not unchanging populations". John Harris's fundamental failing is that he cannot envisage the Corbyn phenomenon in process terms, as evidence of the evolution of conflicting interests rather than institutional dissolution. He cleaves to an antiquated image of the British working class as an unchanging population of formerly-skilled workers laid low by deindustrialisation and social conservatives suspicious of outsiders and elites. Just as Britpop tried to reimagine the 60s, so Harris (more so that Corbyn) seems determined to view the present through the prism of the 80s.

Thursday, 1 September 2016

The Sound and the Fury

The sight of the Irish government furiously rejecting a potential windfall equivalent to 28% of its annual tax revenue is bizarre enough, but the horror of the American government at the prospect is even more amusing when you consider its repeated chiding of corporations like Apple for holding profits offshore, beyond the reach of the US tax authorities. The explanation for the former is simple enough: Ireland's fear that upsetting Apple would be bad for business. The explanation for the latter is more interesting: that Apple (along with other companies) has been in talks with the US government over the repatriation of profits for some time and the European Commission's intervention risks queering the pitch. This is less about the EU grabbing tax revenues that would otherwise accrue to the US Treasury (fines by foreign states can be offset against US tax) and more about the PR laurels. Given that the EC's Apple ruling will be appealed, and could take years to resolve, the fury was clearly about the timing of the announcement.

According to Tim Cook today, "We provisioned several billion dollars for the U.S. for payment as soon as we repatriate it, and right now I would forecast that repatriation to occur next year". Apple aren't in the habit of making up policy on the hoof, so it is fair to assume that discussions were at an advanced stage but embargoed until after the November presidential election. While it is likely these discussions have been bi-partisan for form's sake, I suspect the expectation is that a Democrat will take the White House, so the deal - presumably to reduce or partially exempt the Federal corporate tax rate of 35% -  has probably been cut with friends of Hillary. This is embarrassing for a candidate who has struggled to convince voters that she prioritises Main Street rather than Wall Street, and may even prove too tempting an opportunity for Trump to ignore ("I'd've got a better deal"), which might really queer the pitch for Cook et al.

This domestic US political context has largely been ignored in the European reporting of the issue. In the UK, Brexit has inevitably fouled the air. In The Telegraph, Ambrose Evans-Pritchard produced a masterpiece of paranoid resentment: "Behind the shadow boxing is a strong suspicion that powerful forces in the EU are trying to use state aid probes to break the global dominance of America's technology giants, vainly hoping to nurture its own 'Silicon Valley' behind a digital wall ... The US has in the past played down the episodic outbursts of anti-Americanism, but patience is wearing thin and the strategic calculus is shifting ... Others question ever more loudly exactly why the US should continue to guarantee the EU's eastern border against Vladimir Putin's Russia if Brussels is behaving in such an unfriendly fashion". I'm only surprised he didn't accuse the French of hating American films and being crap at Rock-and-Roll ("Johnny Hallyday? Pah!").

In Ireland, the concerns are understandably parochial, ranging from the stability of the new coalition government to the "suggestion" by the EC that any windfall be used to pay down the national debt rather than drop a couple of grand of helicopter money on each Irish citizen. Michael O'Leary of Ryanair has predictably taken the populist low road and suggested that rather than appeal the ruling the Irish government should just tell the European Commission to "Fuck off". This is a man whose entire business is dependent on the single market and the prevention of disguised state aid to national carriers. For all this, there is little serious concern that the ruling will jeopardise Apple's presence in the Republic (this line is mostly pushed elsewhere in Europe). As The New Yorker noted, the country's tax regime is attractive enough without a sweetheart deal, not to mention its other advantages: "Ireland’s primary global sales pitch was that the country offered multinational firms a twofer: you can get your tax avoidance and a qualified, English-speaking workforce all at the same time".

The basis of Apple's and the Irish government's criticism of the Commission is that it has exceeded its competency by interfering in a member state's tax policy. This is ironic because the Commission's case is that the Irish state has exceeded its competency by employing tax as a means of favouring a specific corporation, so undermining the single market. For many, this points to the dispute being part of the ongoing tussle for power between national states and the federalists of Brussels: "Although it catches the headlines, the US’s spat with the EU is a sideshow. This is another instalment in the fight for supremacy between the EU institutions and the member states". This is a view that is more popular in the UK than elsewhere, and little more than a polite liberal form of the Telegraph's bonkers argument ("It is a reminder of why Britain must remove itself entirely and forever from the clutches of this Caesaropapist construction" - Evans-Pritchard may not be au fait with Borgen but he evidently remembers I, Claudius and the 80s version of The Borgias).

In fact, the struggle is a more fundamental one between capital and the state in an era when the latter must increase tax revenues from capital or face civil unrest in the face of the pincer movement of median wage stagnation and increasing welfare bills. Capital has had a long period of dominance in the political economy of the West, benefiting from the breaking of organised labour in the early 80s, the taming of inflation, the leverage of financialisation and the scale economies and arbitrage of globalisation. But the consequence is that the state is running out of ways to raise revenue as the tax receipts from personal income and consumption decline relative to demand (exacerbated by precarious employment and ageing). This is why corporate tax avoidance and wealth taxes have moved back onto the agenda since 2008. It is not dangerous lefties who are arguing for this but centrists who recognise that "shrinking the state" is a pipedream and that austerity is counterproductive.

The strategies that were employed in the postwar era to reconcile capital and democracy have now run out of steam, leading to a palpable friction. The reason increased public debt is not attractive at negligible interest rates is because the state has traditionally relied on inflation to erode the capital value (without this, a time of unsustainable repayments will eventually arrive). The reason further financial deregulation (or proxies like helicopter money that deliver a monetary as opposed to a fiscal stimulus) is not attractive is because a precedent was set in 2008 that the financial sector will be bailed out, so prudential lending cannot be relied on. Reversing anti-union legislation will help some groups boost wages, but the structural change in the economy since the 80s means it will help too few to boost incomes generally. Globalisation is slowing, not just in terms of the free movement of people but the movement of goods, services and capital. Part of the rationale for Apple repatriating their profits is that they lack sufficient investment opportunities abroad.

This brings us to the underlying issue of distribution. As Jolyon Maugham notes: "what Ireland has been doing is giving a subsidy to Apple’s shareholders with other people’s money ... taxes that would have been paid elsewhere in the single market". In other words, the Irish government's tax policy (for which it claims national competency) affects tax revenues beyond its own border. Specifically, it disadvantages taxpayers in the EU countries where Apple sells goods and services but pays little or no tax. Those citizens have to make up any shortfall in national revenues through higher income tax or VAT. This is ultimately to the advantage of Apple shareholders, many of whom are wealthy non-EU citizens. One could go further and point out that Apple's outsourcing of production to China has allowed a greater share of profit to accrue to capital than labour. When we talk about growing inequality, we talk about maldistribution and the abuse of power.

Globalisation rather than political conviction has been the chief driver in shifting the burden of taxation from corporate income to personal income and consumption. While the shift reflects both ideology (that business owners should be encouraged as "wealth-creators") and the relative ease of raising tax from pay and sales compared to business profits, the key factor has been the expanded opportunities offered by the free flow of capital, goods and services. It is the successful WTO rounds and the construction of the EU single market, combined with the explosive growth of digital markets, rather than the genius of the tax-avoidance industry or the connivance of politicians that has delivered superior benefits to Apple and Ireland. The European Commission's intervention (like that planned by the US Treasury) will not reverse this, but it will target egregious abuse both to increase tax revenues and assuage electoral anger lest a more fundamental redistribution gains popularity. Ultimately, this is a spat over political credit.