Taking Back Control

Simon Wren-Lewis asks whether two party politics is dead in the UK, which is obviously amusing if you live in Scotland, Wales or Northern Ireland. The case for the moribund is made by Peter Kellner, who at least restricts his claim to Britain. Kellner's argument is the familiar one that mixes equal parts psephological flattening and shallow sociology. In brief, the decline of heavy industry has eroded Labour's core vote bloc relative to Tory-voting non-manual workers, while the "radicalising influence of higher education" has led many of the latter to now abandon the Conservatives for more "progressive" options. The interest here is not in what Kellner says, which is banal when not fatuous: the service sector has been the largest by employment throughout the democratic era, so Labour has always relied on the "clerical, managerial or professional" too; while tagging the Liberal Democrats as "progressive" is just ancestor-worship that ignores the 2010-15 coalition government, the only reliable data-point as to that party's actual beliefs. The interest is in Wren-Lewis's interpretation of this trend, which he helpfully expands back to 1945.

He starts by reviewing Kellner's summary of the secular decline in the two main parties' share of the total vote since its peak in 1951, but not without some scepticism as to its causes: "is this really a trend or a series of step changes due to clearly defined political developments?" Where he errs, in my opinion, is in his phasing of the history around two step-changes. The first is the rise of the Liberal Party's vote from around 10% to 20% in 1974. The second is the rise of the collective "others" share of the total vote to 33% in 2024. His argument is that "these two step changes occurred when the two major parties moved away from being close to where the average voter is." To this end he endorses Kellner's transparently partisan claim about the two recent elections that bucked the trend: "Kellner argues, convincingly in my view, that 2017 and 2019 are outliers because Brexit polarised politics, and so 2024 represents a return to a falling trend for the two main party’s vote share."

While 2019 was undoubtedly the decisive Brexit election, 2017 was not, and the obvious evidence for that was the turnout, which famously surprised political commentators on the upside. Far from being a Brexit election, it was marked by the careful avoidance of the subject on the part of the Conservatives ("Brexit means Brexit") and the emphasis by Labour on the damage done by austerity and the need to address growing wealth inequalities, something that clearly chimed with the electorate. If you're trying to construct a narrative of a secular decline in the combined share of the two (traditional) main parties, to the extent of dismissing "outliers", then you also have to consider the secular change in turnout, not least because a lower turnout will almost always result in greater vote fragmentation and the advance of minor parties. This is something that we see at every local government election, after all. Rather than a steady decline in general election turnout from 1951, what we see is a sudden fall in 2001 and then a return to close to the historic norm in 2017, followed by a further fall in 2024. The narrative that best fits this pattern is the "disenchantment of politics by economics".

Wren-Lewis explains the first step-change as follows: "The 1970s brought inflation and industrial unrest, and I would suggest as a result public opinion moved away from both the union movement and a Labour party using incomes policies to reduce inflation." There's little evidence that public opinion decisively turned against trade unions, despite media propaganda, hence most people are still pro-union today. If you look at the Ipsos survey on trade unions, which they ran from 1975 to 2014, and ignore the question-begging about the influence of "extremists and militants", you find that responses to the statement "Trade unions are essential to protect workers' interests" barely changes over time from a 75-80% positive rate. You can plausibly argue that people generally felt the unions needed to be reined-in during the 1970s, but it's also plausible to argue that this was a temporary belief stimulated by more fundamental economic factors, notably the oil shocks and galloping inflation. By the mid-80s, sentiment was clearly swinging the other way, notably after the miners' strike.

Likewise, the unpopularity of Labour's incomes policy in the 70s was to be found mostly among union members, for obvious reasons, not the wider electorate. In retrospect, the period from the mid-70s to the mid-80s was one in which Labour came into conflict with the wider labour movement, and not just the union left but the right as well, which alienated its own voters as much as it energised Conservative supporters. The fundamental ideological issue crystalised in 1979 wasn't union power or incomes policy but the public ownership of industry. That was the issue that defined the politics of the second half of the twentieth century and is likely to define the first half of the twenty-first as well. But it's important to distinguish here between public ownership of public services and infrastructure, which has always commanded strong public support, and public ownership of industry, which has not, despite concerns over the strategic importance of key industries such as steel-making, to give a topical example.

Wren-Lewis imagines that "the centre is where the average voter is, which may change over time as voter opinion changes". He presents the history of the era since 1974 as the parties moving around a biaxial model (economics versus "social liberalism"), not just in relation to their own tactical advantage but reflecting their relative position to a shifting electorate, but all the evidence suggests that popular opinion is a lot more stable and persistent on both axes. His narrative history is summed up as follows: "Essentially the Conservatives first moved to neoliberalism, and then to right wing populism, and now Labour has moved in that direction leaving a large part of policy space empty for other parties to fill." This isn't wrong, but it ignores that the Tories have been pushing rightwing populism since the 1980s (cf Section 28 and Thatcher's "swamped" remarks), while Labour adopted neoliberalism in the early-1990s and started to move right on social policy almost as soon as it gained office in 1997. 

The history doesn't support Wren-Lewis's belief in a step-change in 1974, let alone one in 2024. The better explanation remains that 1979 was the watershed and the key change in the 1980s wasn't the defeat of organised labour but rapid privatisation, both in the sense of the state retreating from public ownership and the shift of the provision of housing from the public to the private sector. Wren-Lewis is correct to note that Labour has moved towards the Conservative's traditional space, but the change in their relative position remains slight: they have both subscribed to the Thatcherite dispensation since the late-1980s, which has ultimately put them at odds with the public. This has led both to salutary landslides, whose purpose was to "kick the bums out" (hence the turnout crash in 2001 should be seen as the result of disillusion, not the complacent satisfaction spun at the time), and to the determination of the political cartel and its media to extinguish any glimmers of democratic hope, as happened after 2017.

Let us turn now from the parochial concerns of British (or UK) politics towards the dynamics of global capitalism. Privatisation and nationalisation cannot be considered outside of cross-border ownership and capital mobility, which have been the defining characteristics of the era of globalised neoliberalism. Offshoring and deindustrialisation are just epiphenomena. The relationship between democratic engagement and capital ownership is clear. As Steve Randy Waldman puts it: "If you insist upon balance [in trade] and disfavor cross-border ownership, you restore scope for meaningful economic democracy". Waldman argues that while Trump's tariffs are misguided, the instinct to achieve a broad balance in trade is sound. He describes a "Keynesian compromise" in which economic integration (reflected in mutual trade) is moderate rather than extreme, which preserves nation states and functioning democracy within them.

In practical terms, that moderation comes about by limiting cross-border ownership through a mixture of capital controls and taxation: "If cross-border ownership is discouraged, multinational brands will prefer to license per-country franchises rather than directly hold property or plant. Then whatever 'expropriation' is embedded in a regulatory change becomes a domestic political matter rather than predation of unfairly disenfranchised foreign concerns." The consequence of this is that deficits in trade and earnings are reduced to everybody's advantage: "If countries have the tools to unilaterally prevent trade deficits and a global consensus encourages balance, then running a deficit or surplus becomes an exception that demands justification. This sharply contrasts with the fading neoliberal view, under which imbalance reflects putatively optimal market outcomes, which deserve deference." You would be justified in explaining the Trump shock in terms of worsening deficits, without fully subscribing to the US President's diagnosis or prognosis, but the driver is not consumer preferences for electric vehicles or solar panels, or even state subsidies and export "dumping", but the underlying flow of capital investment and earnings.

To return to Britain, the Keynsian compromise sounds a lot like where the "centre" of public opinion currently lies, and arguably has consistently been since the 1940s. This is not just social democratic nostalgia, and it certainly isn't the xenophobic grumblings, bordering on antisemitic tropes, about "powerful but remote interests" you hear from Blue Labour types. Balanced trade does not presume import substitution, let alone autarky, and it is perhaps unhelpful to describe it as trade, which inevitably conjures up visions of the physical movement of goods through ports. What matters is the flow of capital and its consequent earnings. And as Waldman noted in a follow-up post, the principle doesn't depend on nation states but can be applied at the level of economically integrated blocs such as the European Union. Deficits within such a bloc are fine if they reflect popular will (the EU's issue is its democratic deficit at the level of that integration). 

If British political party identification has weakened, and electoral engagement has declined, this cannot be blamed simply on the tactical misjudgements of the parties (Wren-Lewis's view) or pop-sociology (Kellner's). The former doesn't square with the history while the latter has almost no explanatory power whatsoever. There is an entire literature on how neoliberalism and globalisation have worked to neutralise politics and constrain democracy, yet too many political commentators are determined to ignore it, even as the downsides have become more prominent, from delinquent football clubs to ailing steelworks. This learned helplessness is a reflection of globalised neoliberalism and its perennial mantra of "there is no alternative". What the British electorate continues to try and articulate is the desire to take back control. But this is repeatedly diverted into self-defeating exercises in xenophobia and division, such as Brexit and "securing our borders", that only serve to keep the spotlight away from the City of London and our permissive attitude towards international capital and the sale of domestic assets, from our sewers to our clinical data.

Intended Consequences

The Supreme Court ruling on Wednesday that, for the purposes of the Equality Act 2010, "woman" means "biological woman" quickly led to the common recognition that this is merely the opening salvo in what is likely to be a long and vicious conflict over trans rights. It was therefore both bizarre and yet laughably predictable that the politics desk at the Guardian should greet the decision as good news for the government, on the grounds that Keir Starmer and his ministers could now avoid the wider issue altogether. According to Peter Walker and Severin Carrell, "No 10 officials believe there will be no need to tweak the Equality Act, leaving their role as little more than a neutral voice in helping organisations adjust to the new reality.". This was immediately countered in the same edition of the newspaper by a legal expert, the barrister Sam Fowles, noting that the ruling shows "that parliament urgently needs to look again at the Equality Act." In short, the law is now a mess: "The court’s decision means there are now multiple legal classes of “woman” and “man”, each of which invites a different interpretation of the act: cis women, trans women with a GRC [gender recognition certificate], trans women without a GRC, cis men, trans men with a GRC, trans men without a GRC."

The appeal to the Supreme Court came about as a result of the Scottish Parliament passing a law in 2018 to require public boards to have 50% representation for women. The For Women Scotland advocacy group asked for the law to be struck down on the grounds that this provision included trans women, which the Scottish government said was consistent with the Equality Act 2010. As Fowles notes, there were reportedly no trans women on public boards in Scotland at the time, and this week's judgement does not in any way change the rights of cis women. In short, this was an appeal made deliberately to force the law to restrict trans rights in principle, regardless of the absence of any disadvantage in practice. The noise around the case has been heightened by the usual propaganda about assaults in prison, the potential for rapes in toilets and the "advantages" of trans women in sport. One consequence of this background hum, together with the increasingly prominent claims made by gender critical (GC) activists, has been the alacrity with which some official bodies have insisted that the ruling means trans women and trans men should be treated exceptionally. 

For example, the British Transport Police have proposed that suspects be searched based on their biological sex, which would mean male officers strip-searching trans women. The opportunity for cruelty and abuse in such a scenario should be obvious, just as the likely reluctance of female police officers to strip-search trans men should be. This eagerness to stretch the meaning of the narrow judgement has been reinforced by the prompt intervention of the Equalities and Human Rights Commission, a body that is no stranger to politicised activism after its weaponisation of antisemitism against the Labour Party under Jeremy Corbyn. When asked about the media's favourite topic of going to the loo, the EHRC Chair, Baroness Falkner, suggested  that trans people should use their "power of advocacy" to ask for facilities including a "third space" for toilets. This is revealing in its assumption that the EHRC has no role in advocating for trans rights, and in the way that it echoes the wilder GC claims about a nefarious "trans lobby", but it is also revealing in its belief that a singular third option would suffice, as if trans women and trans men should share the same facilities. 

I said on Thursday that it would be interesting to see how the Guardian handled the fallout given the well-known divisions among it staff, and guessed that the editors would give the main comment gig to Gaby Hinsliff while indulging Susanna Rustin and Sonia Sodha. We'll have to wait for the Observer on Sunday to read the last of these, but with all the weary predictability that is the hallmark of the paper's commentary, Hinsliff and Rustin have both been published already. The latter's contribution was typically triumphant, demanding plaudits for the GC activists who have risked precisely nothing and suffered precisely zero harm. Her conclusion is that the campaign against trans rights has "galvanised an extraordinary renaissance of the women’s movement in Britain", which suggests that in her view it is impossible to be both a feminist and pro-trans. But her most outrageous claim is that "the absorption of these ideas into western progressive orthodoxy has been a grave error. By re-energising socially conservative opposition to shifting gender norms, roles and behaviours, this uncritical adoption of a contested belief ... has fuelled a broader backlash against human rights." This is what is known as projection. The idea that Judith Butler has contributed more to the rise of the far-right than Marine Le Pen or Georgia Meloni, or Joanne Rowling for that matter, is ridiculous.

Hinsliff has long been an exemplar of the paper's centrist equivocation on trans rights, which has led to her being excoriated by more intemperate GC voices such as Julie Bindel, but this in turn makes her a useful bellwether to indicate the stance that the paper will now take. 7 years ago she was against the exclusion of trans women from Labour Party candidate shortlists. Now she talks of the Supreme Court ruling as something to be accepted but implemented sensitively: "But though it inevitably puts a degree of separation between trans and biological women, how far that separation goes is not yet set in stone. It will be for parliament to decide in principle and for people to decide in practice how exactly we all live alongside one another, what social norms we set and how far the clock goes back." Though she suggests that this may simply be a temporary setback for the arc of progress (turning the clock back to 2010), she is quite clear that this is not a matter for civil society: we should leave it to parliament to resolve and otherwise play nice. In other words, the paper's chief concern is about the tone of the debate. This is obviously naive at best and simply craven at worst. The reactionary right see this ruling as the first step in rolling back "gender ideology". As that spectre doesn't actually exist, it is clear that many other rights are going to be trampled on instead. 

Pro-trans articles in the Guardian have mostly been by legal experts, such as the trans woman barrister Robin Moira White. This choice doesn't reflect a subtle bias towards trans rights as evidence-based and rational, or even an indirect criticism of the Supreme Court's decision not to have any trans participants making presentations at the hearing. Instead it reflects the paper's desire that the trans rights case be constrained by expertise, civility and decorum. In contrast, GC contributions, such as Rustin's, are emotional and polemical. As many have pointed out over the last few days, the rage and vitriol of GC supporters has in no way been tempered by victory in the court. If anything, it has been further inflamed. For all the glib talk by the EHRC about respect, it is clear that a maximalist interpretation of "woman means biological woman" is going to be adopted. While lawyers may warn of the unintended consequences of the judgement, it is clear that for many GC activists the intended consequence has always been the practical erasure of trans people. If you wanted a legitimate example of a "chilling effect", the reluctance of politicians and public figures to use the phrase "trans women are women" in future would fit the bill perfectly.

In her comment piece for the Guardian, White makes the key point that gender recognition certificates are now "valueless for the purposes of the Equality Act", which clearly wasn't the intention in 2010, something that has been confirmed by Melanie Field, the civil servant who led the drafting process for the Equality Act. She also notes that the origins of the 2004 Gender Recognition Act lay in the UK losing a case at the European Court of Human Rights. Everything points to the need for parliament to intervene, yet as the well-connected Guardian political desk's immediate response suggests, the government has no intention of revisiting the issue. The question now is whether that reluctance will extend to finally withdrawing from the European Convention on Human Rights, as many on the political right have been urging for years now. It would be fittingly emblematic if the human rights lawyer propelled into Number 10 by a centrist consensus that imagined eventual reaccession to the EU should oversee the UK becoming a human rights pariah and an even more craven lackey of the USA.

Whatever Happend to Electoral Reform?

The Labour Party won the 2024 general election on only 34% of the popular vote. This translated into 411 seats, a majority of 86, or 63% of the total in the House of Commons. This is as good an example of the perversity of first-past-the-post (FPTP) as you'll ever see. The Conservative Party got 24% of the popular vote, Reform 14% and the Liberal Democrats 12%. The reason for Labour's disproportionate number of seats is no mystery. In those constituencies that traditionally lean towards the political right, the vote was split by the presence of Reform and, to a lesser extent, by the Liberal Democrats. The consequence has been a significant increase in marginality, which promises even greater volatility next time round. A small shift in the popular vote share could result in a dramatic change in the allocation of seats. This is particularly acute in the case of the seats Labour won with a narrow margin, which means that a substantial number of MPs, many of them elected for the first time, are facing almost certain ejection at the next general election.

In the circumstances - a wildly disproportionate result and the near-certainty of future volatility - you might have expected the perennial issue of electoral reform to have become more prominent. MPs, including Labour backbenchers and not just the usual Liberal Democrat suspects, are certainly sensitive to it, but it's also clear that none of the parties intend to make it a primary issue, not even the Liberal Democrats themselves. Wh byy is this? One explanation is that the Liberal Democrats are currently more focused on winning Tory seats by leveraging FPTP. In other words, they are relying on Reform to continue splitting the right-wing vote and for Labour to suffer a drop in popularity due to its record in government. This is a perfectly reasonable strategy, but the party isn't likely to improve its vote share much beyond 15%. The heady days of 23% in 2010 depended not only on a tired Labour government but on the fact that some rightwing voters preferred the Liberal Democrats to the Tories, and much of that promiscuous voting bloc has now been attracted by Reform.

The opinion polls currently suggest a three-way split between Labour, the Conservatives and Reform, at 20-25% of the vote each, with the Liberal Democrats nearing 15% and the Greens nearing 10%. It still makes sense for the Liberal Democrats to push for proportional representation, even though ironically their share of seats was pretty proportional in 2024: 11% versus a 12% vote. What they should really be drawing attention to is that Reform could be the beneficiaries of disproportion next time round, picking up a majority in the Commons on 30% of the vote should Labour and the Conservatives fall to around 25%. Even if they don't win an outright majority, and assuming they don't collapse due to incompetence and infighting in the manner of UKIP, they are likely to win a large number of seats, probably sufficient to ensure a hung parliament and perhaps even enough to become the official opposition. What this means in practical terms is Nigel Farage becoming the king-maker of British politics. We will never get him off our TV screens.

The UK electoral system has long been geared to the maintenance of a party duopoly, with the minor parties exercising influence only when neither of the big two has been able to command a majority. But that political dynamic was contained at Westminster, e.g. the theatrical votes by the SNP in 1979, the speed dating by the Liberal Democrats in the formation of a coalition government in 2010, and Theresa May's negotiations with the DUP in 2017. Though presented as exercises in representative democracy, these were simply the workings of the cartel being exposed to public view. Should we end up with a fragmented party system, and the volatility that FPTP almost guarantees in that situation, then British politics may descend to being little more than public horse-trading against a background of weak administrations. We will finally have become Italy. You might imagine that this would prompt electoral reform and the adoption of PR, but of course that would simply cement the new reality, not avoid it. It would also open the door to smaller parties, maybe even a socialist alternative to Labour, and for that reason the cartel would undoubtedly close ranks against it. The more likely outcome is the emergence of centre-right and right-wing electoral pacts: Labour and the Liberal Democrats vs the Tories and Reform. In other words, restricting the choice of voters.

Fascism, in the sense of a latent predisposition to anti-democratic authoritarianism, commands a hardcore of around 5% of the population, but this can be boosted to a third of the vote with the support of conservative voters (attracted by the authoritarianism) and the populist mobilisation of a fraction of the unthinking centre (attracted by the bypassing of democracy). Fascism does not require an overtly Fascist party, with a uniformed vanguard and an explicit Führerprinzip. Its success depends on acceptance and absorption by the conservative establishment. What matters is the dynamic once in power: whether Fascism breaks loose and goes on the rampage, as happened in Germany after 1933, whether conservatives abandon it when it fails, as happened in Italy in 1943, or whether the establishment manages to muzzle it, as can been seen in varying degrees from Hungary to India today. Contrary to the liberal myths that obscure its imbrication with establishment politics, Fascism normally reveals itself in power, not by an outright assault on the political order. It isn't an outsider.

In these circumstances, you might expect the danger of an avowedly populist rightwing party, many of whose supporters clearly fit the bill of either the Fascist hardcore or their willing conservative accomplices, to lead to some caution by UK liberals. Its absence suggests two possibilities. One is that Reform is considered so unthreatening by that it will eventually be welcomed into the political cartel as just another species of national conservatism. This is the "de-demonisation" strategy pursued by Marine Le Pen's Rassemblement National in France, though that has hit the buffers with her debarring from standing for office for five years, an example of the conservative establishment muzzling the far-right. That Nigel Farage has previous for defrauding the European Parliament is not considered relevant on this side of Le Manche. The other is that liberalism has been so corrupted by its obsessive misinterpretation of populism as a lack of virtue, as much as by its perennial hatred of the left, that it can no longer see the danger.

There is a third, more cynical possibility, and that is the belief that Reform can actually be used rather than tamed: that it can be compromised with, that it may even provide useful cover for a further shift of policy to the right. While the "Republican Front" remains in place in France, that is simply a product of the Presidential electoral system, which typically requires a second round run-off, rather than a determination to isolate the RN. The traditional cordon sanitaire against the far-right is fraying, and that is happening across Europe. There is no structural incentive to isolate Reform in the UK, and arguably an incentive under FPTP to cut electoral pacts, if only informally. In recent weeks the Conservative Party has taken the initiative to suggest a closer working relationship with Reform. While Nigel Farage will not unreasonably keep his distance from the Tories to maintain strategic flexibility, this simply raises the possibility that the party most likely to see advantage in cutting a deal behind the scenes, to the disadvantage of the Tories, will be Labour, whose MPs in marginal seats now consider Reform to be the main threat to their fledgling political careers.

The Trump Shock

The Nixon Shock of 1971 marked the de facto end of the Bretton Woods system of postwar exchange rate coordination. The end had been coming for a long time due to the over-valuation of the dollar, a result of its guaranteed convertibility to gold at a time of monetary expansion, combined with a steadily worsening balance of payments as other economies grew quickly in the 1950s and 60s. While the unilateral end of gold convertibility was the key change, it's worth noting that Nixon's measures also included a temporary 10% surcharge on imports between August and December of that year. In other words, an increase in tariffs. The Washington consensus, and what we might refer to as high globalisation, has been ailing since at least 2008, and arguably since the failure of the World Trade Organisation's Doha Round in 2001. Trump's tariff shock can be considered the practical change that marks its end, more so than the imposition of selective tariffs on Chinese imports during his first term. The uncertainty - "Does he know what he's doing?", "Is this just a negotiating ploy?" - is not unlike the reaction in 1971. It wasn't until 1973 that the new floating exchange rate system was fully operational, just in time for the first Oil Shock. 

The shape of the world "post-globalisation" has been a topic of intense debate for some time now, with many anticipating an era of regional blocs with tightened perimeter controls and free trade maintained within them. This has already suffered an obvious blow with Trump's aggression towards Canada and Mexico, though this can be read as the US demanding subservience rather than equality within the North American bloc. In Europe, the EU has already constructed tariff walls against China and will presumably do so now against the US as well. The other leading theory is that we are seeing a return to mercantilism, though this perhaps places too much emphasis on Trump's rhetorical taste for zero-sum relations (ironically described as "reciprocity") and certainly ignores that the military muscle required to enforce it is available to very few nations today (in the original mercantilist era, countries as modestly endowed as Portugal and the Netherlands could establish global empires, while even little Denmark could have colonies in the Caribbean and, topically, Greenland). Russia has shown the limits of a military-led mercantilism in the twenty first century, while even the US has struggled to enforce its will by arms in recent decades.

One useful way to think about the current moment is as an evolution of neoliberalism rather than its supersession, particularly because neoliberalism remains hegemonic domestically, not only in the US but across Europe and much of Asia. The mix of austerity, privatisation and income inequality remains dominant in all advanced economies even as globalisation is being reined in. As Branko Milanovic notes, China's rise has come about through a willingness to manage the two spheres differently: strong state control of the economy at home and the promotion of free-trade abroad. The US is now shifting towards a similar approach of managing the domestic and international spheres independently. Under Biden, there was a brief (and ultimately hamstrung) attempt to use the state to reinvigorate industry while maintaining global free trade. Under Trump, policy has flipped to the dismantling of the state's ability to intervene in the economy and the replacement of free trade with protectionism. The result is, according to Milanovic, "increased mercantilism internationally with increased neoliberalism at home — in other words, the very opposite combination of China’s policies." 

It's worth emphasising at this point that while the Chinese government has been highly dirigiste in the economic sphere it has also embraced one particular neoliberal practice domestically, which is the attraction of foreign direct investment (FDI). A lot of American (and European) capital is dependent on the success of Chinese and other Asian businesses. This has helped not only to rapidly grow Chinese industry but to transfer technology and know-how, thereby helping Chinese firms to move up the value chain (consider the symbolic rise of DeepSeek). There has been some talk about the capital dimension of Trump's tariffs, but mostly in the sense that encouraging firms to reshore in the US (particularly from Canada and Mexico) will help reduce the country's trade deficit. Less attention, as ever, has been given to the flows of capital earnings. The US net income from abroad has been in decline for some years now and mainly because the growth of FDI in the US, particularly from Europe, has increased the outflow of earnings. The issue for the US then is not the location of factories but who takes the profits from them.

It is correct that focusing on the deficit in manufactured goods ignores the larger, compensatory surplus in services and IP, but it's also true that American foreign earnings are far more susceptible to taxation than goods are, and that's because they've largely been under-taxed ever since the WTO Uruguay round was finalised in 1993. The UK's Digital Services Tax, which was introduced in 2020, is both puny and scary. Puny because it's only levied at 2% on online revenues, scary because it could easily be a lot more. And it could also be extended to other services. That this was the concession the UK government immediately suggested to ward off Trump's evil eye was illustrative of their understanding of its significance, which will have been repeatedly brought home to them in meetings with the likes of Amazon and Meta. That those companies, long seen as close to the Democratic Party, lined up to support Trump's second term is entirely down to their economic self-interest. With the US a mature market, their future earnings growth depends on expansion abroad, and that risks being undermined by taxation. A little stock market turbulence today is a price worth paying to secure those foreign earnings long-term.

It's important to remember that different fractions of capital can be in competition with each other, even to the point of apparently undermining the general interest, and this has historically been most acute in the relations of domestic capital and foreign investment (industry and the City, in British parlance). Trump has long been explicit in seeing foreign economies as ripe for extortion. "Other major economies are the “greatest profit machines ever created”, he argued way back when. “‘Tax’ these wealthy nations, not America.”" He has never made his money by manufacturing goods, as both his laughable attempts to sell steaks and suits and his naive eulogisation of American "heartland" industries make clear. He has made his money by buying cheap, often distressed, assets and then aggressively using the law and government leverage to secure super profits (Trump's plans for the real estate redevelopment of the Gaza Strip are entirely consistent with this). His use of the term "tax" as a synonym for tariff is significant. Trump isn't really trying to shield US businesses from international competition. He's seeking to run an international protection racket in which he can personally "wet his beak".

The media focus on tariffs and the Punch and Judy of reciprocity misses that what we are witnessing is a display of asymmetric power whose objective is to extract a rent from other economies: to impose a tax on the world so that taxes can be cut in the US. Tariffs on goods will ultimately hit US consumers, a fact that the stock markets are currently pricing-in, but the chief goal of the exercise is to increase returns on American capital abroad (which will happen automatically if the dollar weakens) at a time when it is relatively weak at home, and weak precisely because of the country's slavish adherence to neoliberal policy since 1980. The Biden administration recognised the problem but could not bring itself to reject neoliberalism, trying instead to finagle a government stimulus through the vector of national security. The capitalists who now dominate the Republican Party are not interested in reversing neoliberalism, for all their stated abhorrence of "globalism", largely because they have done so well out of it domestically. The dominant voices are no longer those of traditional heavy industry and manufacturing but of the extractive sector, notably oil and gas, and financial engineering. They are seasoned exploiters and rentiers. 

That the British establishment has settled on a policy of "wait and see", a consensus built of equal parts cluelessness and a horror at offending Washington, shouldn't distract from the government's clear-eyed understanding of Trump's demands. While the EU, China and others respond in kind, the UK knows it is powerless. Consider this opening sentence in the Guardian: "Donald Trump’s tariffs signal a new global economic era, Downing Street has said, as economists warned that the British government would probably have to raise taxes in response." Though the connection is explained as the result of a generalised recession hitting growth, this is still an admission that domestic tax policy, like policy on pretty much anything else that catches Republican politicians' fancy, from free-speech to food standards, is now going to be subject to approval by Washington. "The broad outlines of a deal have been drawn up and include concessions across a range of areas, including a lower digital services tax on US tech companies and reduced tariffs on some agricultural products. The government has not denied reports that the deal includes a commitment to review enforcement of the UK’s online safety and digital competition regulations."

The suggestion that the US should have a say in domestic UK policy isn't a premonition of our absorption as the 51st state but a straightforward continuation of the neoliberal model by which supplicant nations were dictated to by the US's proxies, then the World Bank, the IMF and the WTO. The Trump administration has bypassed that arms-length model and decided to exact tribute and make demands directly. In that sense, the Washington Consensus has certainly ended, but not because Washington is going to be any less directive and demanding. What has gone is the fiction that this was ever a consensus, rather than the expression of American power.

Fish Don't Recognise Water

My last post looked at the consistency of Labour governments over time in terms of innate bias and how this relates to policy, specifically adherence to the Treasury View ("sound money", the horror of deficit-financing, self-imposed fiscal rules etc) and the tendency to give with one hand while taking with the other (the other party to the transaction invariably being the poor). In this post I want to sketch a comparative analysis between Labour governments and those of other stripes since 1997. I've chosen that date not because there weren't clear continuities with the preceding Conservative governments but because it marks a termination point for Thatcherism in the narrow sense of the style of governance introduced in 1979 that lived on, in however debased a form, under John Major. 1997 is the point when we see a synthesis of historical trends in a new formation, the so-called "third way". Every government since then has been judged in terms of that synthesis and in particular where it sits on the axes of economic and social policy, with little attention paid to how much those axes have shortened since the 1980s to the point where you struggle to discern much difference between different administrations today. 

A good example of the liberal press's reluctance to accept this reality is Andy Beckett's intepretation in the Guardian of the current government as "an attempt to create a new political hybrid: part leftwing, part rightwing, intended to appeal to a much more fragmented, politically fickle, less generous country." Beckett is usually an astute observer of the Labour Party, but on this occasion he has bent over backwards to give the government, and specifically Keir Starmer, the benefit of the doubt in a manner that wouldn't have been out of place in a Polly Toynbee column. This means running through the usual litany of nominally leftwing initiatives, such as nationalising the railways and putting VAT on private school fees, that on closer examination turn out to be underwhelming, with the result that he cannot avoid damning the government with faint praise: "Most of these measures are on a smaller scale than their equivalent proposals under Jeremy Corbyn. But they remain more egalitarian, class-conscious and restrictive of capitalism than the policies of Tony Blair or Gordon Brown."

Beckett proceeds to undermine his case by noting that "Reeves and Starmer seem to have accepted the self-serving argument from big business and its many media champions that increasing taxes on the rich is both impractical and undesirable". This leads to the depressing conclusion that this "toughened-up Labour party prioritises “working people” over the poor, the arms industry and the City of London over the wider economy, and traditional patriotism over more nuanced expressions of British identity. Rather than confront rightwing populism, the government tries to co-opt some of its arguments, for example about the danger of “open borders”. More and more of Labour’s current policies seem designed to appeal to actual or potential Reform voters." All pretty leftwing, I think you'll agree. While there is harmless fun to be had pointing out the gulf between theory and practice, this is another example of the tenacious delusion that tomorrow Labour will reveal its true social democratic colours.

In the Financial Times, Stephen Bush sought to diffrentiate between the Starmer and Blair iterations of Labour government by reference to the economic/social axes, but ended up simply reinforcing the point that everyone is clustered around an imaginary centre: "Both governments are in a sense “centrist” but the accommodation Blairism represented was between rightwing economics and leftwing social policy, while this Labour party is reaching for leftwing economics and a traditionally rightwing approach to social policy." This obviously doesn't chime with the history. The national minimum wage and working tax credits were not examples of rightwing economics, or at least not in the narrow sense of the Thatcherite legacy. Likewise, the Blair years were marked by a "tough on crime" approach that ended up delivering the spiteful authoritarianism of ASBOs, and by the ramping up of hostility towards asylum-seekers. The idea that the Starmer government is "reaching for leftwing economics" is absurd given the nature of its self-imposed fiscal rules, while the cosying-up to business has precluded genuinely leftwing economic radicalism such as industrial democracy and nationalisation (the railways really aren't a counter-argument), let alone higher taxes on wealth.

Bush's attempt at pop-sociology involves the invention of a "type" that could only exist in the mind of an FT reader: "Starmerite centrism is about making the party the natural home for working age voters who feel economically insecure themselves but are uneasy about what they believe to be overly generous spending on support for the poorest, at home or abroad. They care most about Labour’s election promises to fix the NHS and not to raise income taxes, value added tax and national insurance." This is a chimera. There are obviously some voters who are economically insecure and blame the poor and foreigners as a result, but they mostly vote Reform or Tory anyway. That bloc can only be a tiny fraction of the Labour vote, even under the depressed circumstances of 2024's 34%, so it hardly makes sense as a strategy to be appealing to it. In reality, the electoral pressure for parsimony at home and obliviousness abroad comes from the comfortably well-off and is articulated via their preferred media, i.e. the rightwing press such as the Times, Telegraph and Daily Mail.

The confusion over what kind of beast the current government is (I'm assuming that neither Beckett nor Bush is being disingenuous) highlights the difficulty in discerning any clear difference between the governments endured by the UK since 1997. There are of course contingent differences: their reaction to events, such as the great financial crash and the pandemic. But a closer examination shows little evidence of choices made outside the neoliberal consensus. Thus austerity didn't start with George Osborne but with Alistair Darling, while the unpreparedness of the state in the face of Covid-19 was the result of many governments habitual unconcern, the steady erosion of public health capabilities through local government cuts, and the belief that the NHS's capacity constraints should be addressed by marketisation and recourse to the private sector. All governments since 1997 have accepted the frame of the Thatcher dispensation, hence the hostility to public ownership, the prioritisation of private property over social housing, and the belief that business knows best.

One result of this homogeneity has been that major political divisions in society, such as Brexit, have had to find a non-parliamentary route for their initial expression, often only entering the formal political domain at the latest possible moment, with predictably disruptive results. Even when one party adopts a social movement or interest in an attempt to differentiate itself, as the Conservatives finally did over "leave" and are currently attempting to do over "net zero" and "wokeness", the other parties have quickly shifted their own position to adopt much the same stance. In the case of Labour, ruling out any compromise on Brexit and turning against trans rights have both been rationalised as an attempt to woo small-town conservatives, but this is pretty obviously a top-down manoeuvre driven by the press, not an organic development feeding up through constituency parties. The latter have been ringing the alarm bell about the alienation of Labour supporters since the earliest days of this government, over such issues as the two-child benefit cap and the winter fuel allowance, all to no avail.

The popular contempt for politicians of all stripes is not simply due to their failure to do what they promised once in office but springs from a sense that they don't really have any fixed beliefs and are mere opportunists, whether in respect of the management of the economy or the receipt of free concert tickets. Starmer's claim that he isn't ideological - that "There’s no such thing as Starmerism and there never will be" - isn't greeted warmly as evidence of his grown-up pragmatism, as many dim centrists imagine. Instead it prompts the suspicion that he is a slippery chancer. In reality, Starmer has a very particular ideology, as has been made clear this week by the decision to cut public spending rather than raise taxes, it's just that it is the ideology shared by almost the entire political class. Fish don't recognise water. Both Beckett and Bush have a professional interest in claiming that politics is more varied, even that governments may be inscrutable, but all the evidence suggests that we are living through an era of little ideological differentiation and almost no variety in governmental practice.