The Case Against a Basic Income

The case against a universal basic income was put yesterday by two very different thinkers. Nick Boles is a well-connected Tory who since his election to Parliament in 2010 has served as Minister for Planning and now Minister for Skills (his achievements have been negligible but he remains a fixture of various think-tanks). Daniel Zamora is an academic sociologist who has made a name for himself with a critique of Michel Foucault's attitude towards neoliberalism and the welfare state (in a nutshell: too admiring of the one and too dismissive of the other). Both are against a basic income, but for different reasons. Apart from the simple coincidence of publication, I have decided to contrast their positions because of the difference in approach it highlights between UBI sceptics of the right and the left. Beyond the issue of affordability, the right tends to resort to arguments that mix old notions of the sin of idleness with newer psychological theories of self actualisation. In contrast, left sceptics question whether UBI is truly transformative, suggesting that it may simply entrench capitalism. The one is concerned with individual salvation, the other with social revolution.

Here is Boles's case in its (apparent) entirety: "The main objection to the idea of a universal basic income is not practical but moral ... Its enthusiasts suggest that when intelligent machines make most of us redundant, we will all dispense with the idea of earning a living and find true fulfilment in writing poetry, playing music and nurturing plants. That is dangerous nonsense. Mankind is hard-wired to work. We gain satisfaction from it. It gives us a sense of identity, purpose and belonging … we should not be trying to create a world in which most people do not feel the need to work". This isn't a robust argument, not least because it fails to explain why a poet, a musician or a gardener is incapable of earning a living, or why society should tolerate the idle rich. Despite it opening assertion, it fails to explain how work is moral, probably because the traditional arguments for this (essentially biblical homilies) sound ridiculous today.

Even the argument for self-actualisation is dubious. I can achieve a sense of identity, purpose and belonging by joining a criminal gang, which would hardly be moral in the conventional sense. I can also achieve those same ends by devoting myself to unpaid charitable work, which would be conventionally moral but would require financial subsidy by the community were I not one of the otherwise idle rich. The essentialist argument, that work is part of human nature, is also demonstrably untrue. We are not hard-wired to work, we are hard-wired to survive, which is why levels of labour in pre-industrial societies tended to differ across geographies, reflecting the varying demands of local environments. Beyond achieving survival and social reproduction, we work (if under no external pressure) out of self-interest and for self-satisfaction, at which point work can look a lot like play. This means that there are always two types of work: necessary labour and surplus labour. As Marx pointed out, it is the struggle for control of the latter that drives society.

Daniel Zamora makes a more coherent case in Jacobin, first of all putting the growing interest in UBI in a historical context: "Paradoxically, then, UBI seems to be a crisis demand, brandished in moments of social retreat and austerity. As politics moves to the right and social movements go on the defensive, UBI gains ground. The more social gains seem unreachable, the more UBI makes sense. It’s what botanists would call a 'bioindicator': it indexes neoliberalism’s progress. Support for basic incomes proliferates where neoliberal reforms have been the most devastating." This is interesting because it suggests an interdependency between UBI and neoliberalism. Though the idea predates both that particular style of capitalist reasoning and its political hegemony from the 1980s onwards, it is true that modern UBI advocacy often adopts neoliberal tropes, such as personal utility and human capital (the "entrepreneur of himself", as Foucault put it). That, however, should make us cautious of accepting descriptions of UBI that ignore its history (e.g. the regular misrepresentation of Thomas Paine's concept of an endowment) or claim a special relevance because of recent technological developments (them robots).

Before making his central argument, Zamora rehearses a few of the usual criticisms of UBI. First, that "No existing economy can pay for a generous basic income without defunding everything else." This doesn't automatically follow, but the claim highlights how thinking about the funding of a UBI tends to focus on the state's fiscal position (current expenditure versus revenue) rather than the nation's accumulated wealth, and thereby ignores the power of the sovereign to radically reapportion that wealth (something it can easily do, as shown by the bank bailouts and QE after 2008). A meaningful UBI would be in addition to, not instead of, the welfare state, and that necessarily means it would be funded from national wealth rather than exclusively from current income. In effect, the state would expropriate wealth now held in land, property and equities. That might sound extreme, but it is merely retroactively implementing a sovereign wealth fund along the lines of Norway or Alaska. Alternatively, a UBI can be funded out of current taxation, but just as it should be additional to current expenditure, so that taxation should come from capital assets currently privileged by the tax regime, such as land, offshore holdings and equities (this can build a fund quite quickly - consider the rapid growth of China's SWFs).

Zamora's second conventional argument is more credible: "If UBI does take shape, current power relations will favor those who have economic power and want to profit by weakening the existing system of social protection and labor market regulations. Who will decide the monthly amount and who will dictate its terms and condition? Who do today’s power relations favor? Certainly not the worker." This is very true, but that is why the question that should be asked of a UBI scheme is not "Is this affordable?" but "How will it be initially calculated and then uprated in future?", because that will tell you where the power lies. If a state adopts a sovereign wealth fund approach, then the dividend would probably be set through a transparent calculation under democratic control. As GDP grows, the fund dividend should grow likewise (if a portion were invested abroad and produced yields higher than UK GDP, the excess could be reinvested in the fund without affecting the dividend). A tax-based approach could also be geared to GDP, which in turn would encourage tax to shift from below-average growth revenue such as income to above-average growth revenue such as property and equities, which would also be more progressive.

Unlike Boles, Zamora is alert to the issue of surplus labour and thus the importance of work time, though he sees it in terms of the distributive justice of work as much as the distributive justice of income: "That’s why a universal job guarantee and a reduction in work hours still represent the most important objectives for any left politics. Collectively reducing work time is politically and socially preferable to creating a socially segmented pool of unemployed workers, a situation that would have serious consequences for the employed. It’s not hard to imagine how this situation could foster divisions within the working class — as it already has over the last several decades". A UBI and a reduction in work hours are not mutually-exclusive, indeed the best scheme would see a portion of growth remitted as reduced time, which incidentally would be a spur to productivity. Keynes saw a progressive reduction of work hours (and by implication a UBI) as the product of growth and "the power of compound interest". Zamora is right to highlight the potential for friction between the employed and the unemployed, but in doing so he omits another character in the story.

The modern dichotomy of the working class - strivers versus skivers - is not the same as the old dichotomy of the deserving and undeserving poor, even if the characters involved appear to be the same. The latter assumed a third party, the rich, whose largesse was to be apportioned sparingly, whether through charity or taxation, as a moral judgement on the behaviour of its recipients. The newer dichotomy is a product of the welfare state and the idea that the working class, as the largest part of the population, must meet its welfare needs through the collective insurance of social security. This essentially liberal design succeeded in removing the third party from the equation, leaving an increasingly bitter struggle between workers suffering compassion fatigue and a "welfare class" (or underclass), that came into sharp focus in the 80s. It was no coincidence that this period saw the emergence of the ideological demand that insurance, for loss of income as much as health, should be optional and subject to market provision. That was the rich figuratively slamming the door as they went out.

The heart of Zamora's case against UBI is the deleterious effect it would have on the welfare state and thus working class solidarity: "The institutions workers established after World War II did more than stabilize or buffer capitalism. They constituted, in embryonic form, the elements of a truly democratic and egalitarian society, where the market would not have the central place it now occupies". There are obvious echoes of Karl Polanyi in this broad historical sweep, which Zamora further elaborates: "Isn’t the best way to fight against capitalism to limit the sphere in which it operates? Establishing a base income, by contrast, merely allows everyone to participate in the market". This is true, and it highlights why talk of UBI as "the consumer of last resort" (or its attractiveness to Internet companies seeking a universal monopoly) is essentially neoliberal, but the implied alternative of non-market exchange is both utopian and potentially even more socially divisive. Restricting some people's access to the market is not the same as restricting the scope of the market in all our lives.

Zamora's final argument is oddly Hayekian, imagining a new coordination problem arising because a UBI would undermine the price signal of wages: "Under capitalism, the division of labor is set in a brutal fashion, relegating large sectors of the population to jobs that are difficult and badly paid, but often of great value to society. A 'utopian' UBI, by contrast, simply assumes that in a society liberated from the work imperative, the spontaneous aggregation of individual desires would yield a division of labor conducive to a properly functioning society; that the desires of individuals newly freed to choose what they wish to do would spontaneously yield a perfectly functional division of labor. But this expectation is assumed rather than demonstrated." The assumption behind a UBI is that the increased power of workers to refuse shit jobs would increase wages for those jobs, achieving either a new equilibrium (closer to the work's true social value) or increased capital investment in automation. The point is less that people can choose what they wish to do (they would still be constrained by their ability and qualifications) but that they can more easily choose what they refuse to do.

Zamora is wise to reject the moralising that accompanies arguments both for and against a UBI and to concentrate on the way that New Labour-style poverty alleviation and the isolation of a segment of the working class serve capitalist interests: "Combatting poverty thus permits the inclusion of social questions on the political agenda without having to fight against inequality and the structural mechanisms that produce it ... both the Left and the Right want the 'surplus population' to be the problem, thereby supplanting those old, out-of-date, dogmatic ideas that placed exploitation at the heart of the social critique". However, this leads to a pessimism about the potential of UBI to directly address accumulated wealth and capitalist power: "It is much easier to imagine what a different form of social organization could look like on the basis of the more progressive elements within the welfare state than it is to start from abstract ideas that are quite often disconnected from the reality of workers. It’s always easy to imagine different worlds and communist societies in a theoretical and abstract way." This apparently pragmatic view puts a lot of weight on the persistence of those "progressive elements", but that seems equally abstract when faced with the reality of Universal Credit.

Ultimately, Zamora's case doesn't convince because he starts from a narrow, neoliberal definition of UBI, essentially because his professional interest is the neoliberal critique of welfare. This produces a rhetorical UBI that is parsimonious, funded from income tax, and that seeks to reduce the scope of the traditional welfare state. None of these are actually givens. A better UBI would be generous enough to effectively empower labour in negotiation with capital, would be funded from accumulated wealth, and would be additional to existing conditional welfare (it would also require a major investment in social housing). If Zamora exhibits a left pessimism, Nick Boles displays a conservative lack of imagination. The news that Silvio Berlusconi is trying to resurrect his political career by proposing a "dignity income" (a UBI of €1000 a month) does not mean that the Italian right is more developed in its thinking, but rather that it too is fitting the concept into existing political forms, in its case clientelism. The political problem for UBI in the UK is the right's continued reliance on moralising, the centre's antipathy to the welfare state, and the left's residual labourism. That the Labour party is showing an interest owes much to Corbyn and McDonnell's grounding in the marginalised, post-labourist socialism of the 1970s.

English Eerie

The recently finished TV series Detectorists is a story of ambition, often thwarted and often ridiculed, of malevolent outside influences, of being true to one's nature, of the community of the living and the dead, and of the consolations of fellowship. It is both dynamically conservative and organically socialist. In its material concerns, it is of an ilk with Cash in the Attic and Escape to the Country, but it rises above cupidity and entitlement not simply through the dramatisation of solidarity and the deployment of wit but by knitting its themes into the tradition of the English eerie (historical echoes, revelatory nature, symbolic animals), which is in essence a meditation on historic property rights and dispossession. For all its bucolic charm, there are links here with the rural horror of Ben Wheatley's A Field in England and the desolation of Iain Sinclair's London Orbital. It is, I'd argue, not just one of the cleverest comedies to have appeared on British television in many years, but an essential Brexit narrative, combining self-absorption, resentment and a stoic acceptance of fate. This doesn't mean that it comes down on one side or another of the debate, but that it recognises the common deficiencies as much as the common decencies.

Though there are occasional villains (Lance's ex-wife) and moments of farce (the mayor's chain lost while dogging), the central thread is the ongoing contest between the two detecting pairs, Andy and Lance and "Simon and Garfunkel". This is not merely a struggle over the control of land (detecting permissions) but a clash of language. The latter two are not only uncertain in their own names (revealed to be Peters and Lee near the end of the second series), but they frequently change their club name, employing ever more pretentious and latinate forms, from AntiquiSearchers to Terra Firma. Peters is condescending, pedantic and given to florid terminology, not to mention the flourishing of legalistic pieces of paper. Andy and Lance are sarcastic, often mock-obtuse, and prone to laying verbal traps. This is Norman meets Saxon, which has an inevitable echo in remainer versus leaver. The end of the third series sees reconciliation against a backdrop in which Andy and Lance's separate homes are secured, suggesting perhaps that we can all get over Brexit so long as we fix the housing problem.

So what exactly is the eerie and why is it particularly English? It isn't the same as horror because it isn't directly threatening. The overriding sense is of something that has disappeared but left a reproachful memory. It is a haunting without a ghost. The eerie is also different to the uncanny. The latter is disconcerting because it is ambivalent - Freud defined the Unheimlich as something that is both at once familiar and frightening, like meeting your double (the quintessential modern form of the uncanny is the android). If horror is about threats to the person from without, and the uncanny speaks of the uncertainty of personhood, then the eerie is about an absent, historical other. It is also necessary to distinguish the eerie from the psychogeographical, which is part of a different (if detourned) tradition of the ruminative traveller in an antique land. Psychogeography is about the difficulty of holding onto the past: an aestheticisation of decay and the redundancy of the built environment. The eerie is about a past that is unwilling to let go of us, but which never gets round to actually making a demand on us. If the uncanny is an expression of an imprecise anxiety, the eerie is an expression of an imprecise guilt.

Some see English eeriness, particularly when it harks back to Saxon or Roman times, as an acknowledgement that the English are a nation formed by invasions and intermingling. Others see its sensibility of place as arising from a Romantic reaction to industrialisation and the emergence of an ecological consciousness: as people became aware of their own feelings independent of traditional hierarchies and communities, so they began to think of themselves as situated in nature. If fact, all these interpretations are attempts to project a modern sensibility backwards. For example, there is a big difference between the layered history of Rudyard Kipling's Puck of Pook's Hill, which is essentially a defence of seizure and thus empire, and the modern "conquest" trope that seeks to claim the common victimhood of colonialism. Likewise, few Romantic painters or poets had any real exposure to the geographically limited early industrialisation of the late 18th century. This desire to conjure an ancient lineage is actually a postmodern technique, as seen in the inspiration that the Urn Burial of Thomas Browne (the antiquarian's antiquarian) provided for writers attuned to the eerie, such as Borges and Sebald. That both were foreigners is significant: the English eerie is about alienation, not nativist nostalgia.

Though eerieness has a long literary heritage, such as the ghost stories of M R James, the role of Pan in Edwardian art and literature (The Wind in the Willows, the stories of Saki etc), and the magical realism of G K Chesterton, the English variety (and it is very much Anglo-Saxon, the Celtic fringe offering a wholly different mythos and sense of place) really comes into its own during the postwar years, and is very much a product of location filming. True eeriness is audio-visual rather than textual. The foundation for this was the upsurge in sentimental interpretations of an England (and specifically the southern and eastern counties) facing imminent invasion that appeared in the early 1940s. This was a revival of the earlier invasion literature of the Edwardian era, filtered through the neo-romantic British art of the late-1930s. Though these were propaganda works directed at emphasising "what we're fighting for" (e.g. Listen to Britain) and encouraging US support by an appeal to shared heritage (e.g. A Canterbury Tale), the sense of both a demanding past and scores to be settled clearly owed much to the new salience of class (e.g. the squire's treachery in Went the Day Well) and property (e.g. the wild meadow threatened by development in Tawny Pipit).

The eerie would be given a fresh turn in the postwar years as the rebuilding of Britain encroached on the countryside in a manner far more systematic and intrusive than had occurred in Victorian times. New towns, motorways and airports radically shifted the boundaries of urban life at the same time that mechanisation depopulated the rural economy. We were simultaneously living in a collapsed past (the popularity of pageants and murals that mixed historical eras was noticeable over the century between the 1870s and 1970s, suggesting that the ahistoricity and pastiche of postmodernism had long modernist roots) and in a collapsed future (the competing claims of SF and apocalyptic literature). If the eeriness of the 40s had been nostalgic and conservative, but with an egalitarian edge, the eeriness of the 50s and 60s was uncertain and increasingly characterised by foreboding, reflecting wider social changes and a gloomy geopolitics. The tension between a nostalgic turning away from the wider world (Tolkein, White and Peake, in their varied ways) and the promise-cum-threat of high-tech modernity (from the Festival of Britain to the New Wave of SF) would be a major input to the cultural ferment of the 60s, but it also drove the reactionary and pessimistic cultural currents that would appear in a variety of forms in the 70s, from the ecological movement to the National Front.

While this tension produced much that was essentially decadent (from Dan Dare to The Silmarillion), it would also produce some genuinely memorable eerie cinema that explored the themes of social change and communal revenge, such as Quatermass and the Pit and Village of the Damned (the latter based on John Wyndham's The Midwich Cukoos). Though this was hardly avant garde (Brian Aldiss memorably referred to Wyndham's books like The Day of the Triffids as "cosy catastrophes"), it is important to remember that the English eerie is an essentially middle-brow form concerned with the eruption of ancient antagonisms in a conventional setting. Despite being about an alien invasion, and thus perhaps playing to contemporary worries over immigration, Village of the Damned centres on a generational threat and the necessity of extermination (and incidentally the destruction of the big house) to secure order. Michael Reeve's 1968 film Witchfinder General is often cited as an eerie classic, however it also marks the beginning of a turn towards an older horror tradition in which the rural is equated with ignorance and disruptions in the social order are due to a feral underclass and outside agitators. Even in a contemporary setting, "folk horror" doesn't usually speak to our times beyond a banal projection of class anxiety. The territorial concerns of the eerie are lacking.

Robin Hardy's 1973 film The Wicker Man is perhaps the last major cinematic work in the tradition of the 1940s, though it achieves its effect by going so over the top that it's impossible to imagine a credible sequel. It's power lies not just in the dramatic tension that arises from delaying the key revelation, but from the way the utter illogicality and implausibility of the plot reinforces the eeriness of the setting. It transplants an English village and squire that would not have been out of place in an Agatha Christie novel to a Hebridean island that, in its culture and climate, is as far away from the Todday of Whisky Galore as you could imagine. During the 1970s, the themes of a vengeful countryside and an increasingly dilapidated city would become little more than a parody of older Edwardian tropes about hostile natives and metropolitan decadence, such as in Straw Dogs. By the early 80s this had been recycled into both the neo-Jacobean camp of Derek Jarman's Jubilee and the gory humour of An American Werewolf in London (which owed as much to Cold Comfort Farm as Lon Chaney Jr). Eeriness in English-set films had been reduced to little more than a stylistic affectation.

Where eeriness lived on during the 70s was on British TV, a medium that was now able to technically compete with film in its presentation of the outdoors. If M R James is today considered eerie, this is largely because of the impact of A Ghost Story for Christmas, not because of an independent revival of interest in his books. While much of this output employed the usual tropes of rural mystery and an unquiet past, such as in Penda's Fen or Children of the Stones, eeriness was as likely to be found in the brutalist architecture of new towns and on apparently deserted suburban estates as within the vicinity of Glastonbury. As heavy industry started to visibly decay, rusting plant and machinery became as striking as long barrows and gnarled trees, proving that eeriness is about loss of purpose and changes in ownership (all empty houses, no matter their age, are eerie). Today, the 1970s have come to be characterised as a second Dark Age for some conservatives: an era not only of accelerated decline but of existential dread, which in turn provides a template for the pessimism of contemporary liberals. This is to misunderstand that the eerie tone of that decade reflected accelerated change: the number of kids who woke in a new bedroom in an out-of-town estate and saw alien fields outside their window.

During the 80s, the older tropes of eeriness tended to be subsumed into an increasingly commodified neo-paganism that would eventually turn into little more than a marketing channel for the music festival industry. The eeriness of deindustrialised areas was gradually over-written by retail sheds and call-centres, though these were soon to be identified as a new form of eerie in their own right via the concept of "edgelands". Beyond these, little of the old eerie remained as the 90s and 00s saw the physical and cultural distinction between town and country steadily eroded. As Nick Groom puts it: "Country towns, villages, and farming are being colonized by urban economies that create clone towns and clone countryside. The high streets of market towns are homogenized, and rural England disappears under out-of-town developments and industrialized agri-business". This artificiality has something of the uncanny about it, but it has bleached eeriness out of the landscape. Increasingly, the countryside is just an area with a lower density of housing (hence the intellectually dishonest equivalence of the Green Belt with the rural). Detectorists may herald a revival of the English eerie as a dramatic approach to the issues of property, or it might just encourage more people to move to Essex. Whichever, it was a joy to watch.

On The Spectrum

The news that Oxford Dictionaries had selected "youthquake" as its word of the year for 2017 was met with widespread incredulity, and not just because the smart money was on milkshake duck. It's the lexicographical equivalent of dad-dancing, combining a toe-curling lack of self-awareness with the impression that the publishers of the OED still rely on newspapers for their impression of popular discourse. The centrist attempt to explain the upsurge in support for Labour at the last general election exclusively in terms of the youth vote (aka the "millennial awakening") was echoed this week in the patronising claim that the Alabama Senatorial contest was won by black women. Talking of the Alabama vote, Corey Robin correctly noted that political victory usually depends as much on encouraging abstention by the other parties' supporters as it does on maximising the turnout of your own: "In an electoral democracy, the way to break your opponents – especially opponents like these – is to demoralize them, to make them feel they are a small and isolated minority, that their cause is a loser".

This observation runs counter to the prevailing orthodoxy that politics is increasingly dominated by "values" or "culture", which implies strongly-held beliefs no more likely to be shaken by evidence than by moral suasion. Much of the commentary around Brexit is still fixated on the idea that there is a fundamental division in society, represented in terms of personality types such "somewheres" and "anywheres", that the political superstructure must eventually align to. The idea of an intrinsic temperament has an ancient history in Western thought, going back at least to the four humours of Greek medical theory, and it lives on in modern marketing and self-help psychology from where it bleeds into politics. The idea that voters make judgements on values that trump material self-interest has been around since the advent of democracy (the patriotism card, the race card etc), but it doesn't really gain traction in political science until the postwar period when we start to see the traditional left-right linear spectrum of political mapping augmented by biaxial (or Cartesian coordinate) models that combine the economic with a values dimension.

One reason for this development was anticommunism, which sought to establish a common ground between Nazism and Communism centred on the denial of "personal freedom". Given the lack of social autonomy and the extent of cultural conservatism in the 1950s, which was highlighted by the "rebellion" of the 60s, this required a particular interpretation of personal freedom to achieve the desired ends. As a result, early theorists in the field, such as Leonard Ferguson and Hans Eysenck, tended to emphasise values that were politically salient, such as attitudes to abortion and religion, rather than necessarily rooted in psychological predispositions. An unintended consequence of the biaxial model was the boost it gave to both anarchists and right-libertarians (e.g. the Nolan chart) who shared an interest in extending the freedom axis beyond the simple absence of a police state. Over time, both the economic and personal axes were increasingly articulated in terms of an American conception of "liberty", reflecting the neoliberal shift in the premises of conventional political science and specifically the Chicago School emphasis on legalism and markets.

A cruder consequence of this was the emergence over the last twenty years of the centrist Horseshoe theory, which sought to reinsert the "both as bad as each other" idea into a traditional linear spectrum in which the extreme left gradually approaches the extreme right. This started out as a trope of those, like Nick Cohen and Jonathan Chait, who have built a career mapping the supposed moral equivalence of everyone who diverges from liberal orthodoxy, but it was soon adopted as a tactic by right-wing authoritarians, notably in Eastern Europe, who sought to position themselves as equidistant between the Nazis and any variety of leftism. More broadly across the West, this has fuelled the inflation of mild social democracy into an existential threat. In the UK, it has resulted not only in Tories accusing Jeremy Corbyn of being a Marxist, as you might expect, but in liberals insisting that Momentum is Militant reincarnate. An inevitable twist to this general trend was the Israeli right's insistence that the equivalence of the left and the Nazis meant that any leftist criticism of Israel must necessarily be antisemitic.

The problem with these models (and there are a lot of them) is that they seek to map the field of politics from personal opinion (or the psychoanalysis of historical figures) rather than through the interpretation of social action or institutions. They are subjective rather than objective, which means they reflect not only the prejudices of the researchers but the received wisdom of popular debate, and thus media bias. Factor analysis is used to identify the discriminating values for plotting purposes, but this often leads to begging the question (a high-profile  example of this is Jonathan Haidt's The Righteous Mind). The ideological bias isn't difficult to spot. In most biaxial schemes the economic dimension reflects the individual's attitude to the degree of state control over the economy, rather than attitudes towards the relationship of fiscal and monetary policy or workplace democracy. Likewise, the liberty dimension reflects the degree of social coercion experienced by the individual rather than the extent to which the individual profits from collective action. In this reading, working class solidarity is considered to be authoritarian and government borrowing is assumed to be left-wing.

A recent example of the problems this gives rise to was an FT article that tried to explain the lack of "Bregrets" by casting the EU referendum result as a "cultural" divide between authoritarians and libertarians. The conclusion was that "Brexit has become a form of identity politics". Leaving aside the oddity of that "become", which implies that Brexit was once something other than a matter of identity, the impression given by the chart below left is that remainers are broadly libertarian and leavers broadly authoritarian. But this only makes sense if you imagine a definition of authoritarian that excludes Tony Blair and George Osborne, or assume that a right-libertarian like Daniel Hannan is utterly unrepresentative of leaver opinion. In fairness, they are all eccentric in their own ways, but I doubt you'll get Blair to admit he is anywhere other than solidly in the middle of the remain camp, while Hannan would be justified in claiming that there is a significant number of leavers who are convinced that unilateral free trade and a bonfire of regulatory red-tape is all that stands between Britain and a restored greatness.

The juxtaposition of the chart on the left with the one on the right is misleading on two counts. First, it implies a stronger relationship between party affiliation and voting in the referendum than is shown in the data. Second, and related to this, it suggests that leave won because a pivotal chunk of Labour voters deserted. This is partly a trick of visualisation: the two zones aren't proportionate to the vote share, but you'd instinctively think they are because there is no variation in shading to reflect the density of the data-points (i.e. the individual coordinates). What the two charts don't show is the relationship of the referendum vote with other party support. Bear in mind that 33% of the vote in the 2015 general election went to parties other than Labour and the Conservatives. The implied relationship between party support and the referendum also doesn't account for habitual non-voters who were tempted out to the polling booth in 2016 for the first time in many years. The turnout between the 2015 general election and the EU referendum increased by almost 3 million, from 30.7 million to 33.6 million. Given than the winning margin in the referendum was a little under 1.3 million, and recognising that there will have been some people who voted in 2015 but not in 2016, it should be clear that leave won because it mobilised habitual non-voters, not Labour supporters.

As was evident in high leave-voting areas like Sunderland, this was a national constituency not so much of self-identifying authoritarians but of social conservatives who had become politically disengaged after the millennium. The increase in the general election turnout of 1.5m between 2015 (30.7m) and 2017 (32.2m) owed something to the "youthquake", but this was dwarfed by the number of older voters who turned out for the first time in years in 2016 and then went to the polls again this year. Remember, the Tory vote increased from 11.3m in 2015 to 13.7m in 2017, despite their poor performance among the young. I draw two implications from this. First, the 2016 referendum is probably the high-water mark for leave, not so much because their older voters will die off, but because many will retreat to non-voting as the Brexit process grinds on to a disappointing end (though I think a second referendum remains unlikely). Second, and echoing Corey Robin, Labour's chances in 2022 (or earlier) will depend on Tory voters becoming demoralised, which is likely both because of the compromises entailed by Brexit and the inevitable neglect of other policy issues. None of these dynamics are evident if you view politics through a spectrum, but they are what will ultimately matter.

In Good Faith

The debate over whether last week's UK-EU agreement is "legally binding" is another example of British confusion between internal and external sovereignty (I'm beginning to feel like a stuck record), though on this occasion exhibited more by remainers than leavers. As a joint report to the European Council, the "agreement" provides evidence of sufficient progress for further negotiation (phase 2) to commence. This should in due course lead to the conclusion of the actual Withdrawal Agreement. However, the joint report isn't a preliminary commitment that will become a default agreement (hence "nothing is agreed until everything is agreed") but a set of promises concerning the parameters of the final agreement, notably in respect of citizens' right, money and the Irish border. It is therefore not incorrect to describe it as a "statement of intent", even if that terminology leads to accusations of back-sliding. Legally, the joint report has no real force. Politically, it obliges the UK to ensure that the commitments it made on the 8th of December are honoured in the eventual Withdrawal Agreement. If it does not do so, we will be facing a disorderly exit and can kiss the prospect of a custom trade deal goodbye. Where British politicians have been misleading is in claiming that the terms of the agreement (specifically the money) are conditional on a trade deal.

International agreements are only "legally binding" if they either include provision for legal enforcement via an intergovernmental agency or have been incorporated into domestic law. Beyond that, they are binding purely in the sense that all parties consent to be so bound, which is ultimately an expression of "good faith" (Leo Varadkar's emphatic use of this phrase in describing Theresa May's conduct during the negotiations leading up to the 8th of December is significant). Though a state may have committed to be bound by a treaty, it can still withdraw at any time, as the US has threatened to do over the Iran nuclear deal, for example. This is because external sovereignty (a concession made to another state) is trumped by internal sovereignty (the ultimate authority of a state). That is why an international treaty incorporated into domestic law by legislation can always be repealed by subsequent legislation, as will be the case when the European Union (Withdrawal) Bill supersedes the 1972 European Communities Act. Whether there are consequences when a state reneges on a treaty is a matter of realpolitik, not a matter of law.

Michael Gove made this same point: "If the British people dislike the arrangement that we have negotiated with the EU, the agreement will allow a future government to diverge." While many saw this as a nod and a wink towards the Brexit ultras, it was actually a simple re-statement of Tom Paine's axiom that no future parliament can be bound by a parliament of the past, and thus a rejection of Edmund Burke's "contract of eternal society" in which the dead constrain the living. You might have thought that remainers - many of whom have insisted that a second referendum should be held on the grounds that leavers are gradually dying off and thus the complexion of the electorate is changing - would have welcomed this rejection of conservative ideology by the Environment Minister, but most seem to have interpreted it as evidence of the Conservatives' bad faith and little else. That may not be entirely groundless, but political commentators have passed up a fine opportunity to hoist the pseudo-intellectual Gove by his own petard.

Following the misrepresentation of the joint report's implications by David Davis over the weekend, the political debate has moved on to the question of whether the UK government really is negotiating in good faith. Many people have pointed out that the disparity between what the government has agreed and what it claims in the press is only too evident to the rest of an EU political establishment that includes many English-speakers and not a few anglophiles, but this ignores that the government is, Janus-like, negotiating in two opposite directions at the same time: with the EU27 and with the British public. This is the inevitable consequence of not having secured domestic consensus on the Brexit end-state, or at least a consensus that could command a majority both in the Commons and the wider country. All along, the government has sought to avoid debate and scrutiny on the grounds that its hands could not be tied in the upcoming negotiations with the EU27, as if the parameters for those talks were not already clearly and very publicly delineated.

The political incompetence on display arises not from Davis's laziness or Gove's disingenuousness, though both are real, but from the triviality of the 2016 referendum campaign and the refusal to interrogate the result beyond otiose commentary on the ghastly white working class, Olympian essays about a supposed "kulturkamf" and the marketing-inflected typology espoused by the likes of David Goodhart. The news that the EU27 are already asking for firmer commitments from Number 10 ahead of this week's European Council meeting, and are even suggesting that the preparatory talks on the future relationship (i.e. talks about trade talks) might be deferred until March, indicates that the failure to settle the domestic side of the debate is having a real and  detrimental effect on the withdrawal negotiations. In the circumstances, the last thing we need is more constructive ambiguity, but the problem we face is that invoking Article 50 pretty much shut the window of opportunity for a debate that might have led to a consensus. That said, opposing the Article 50 bill would also have prevented a debate as the political contest would simply have reverted to the binary of "in" versus "out". What was needed was a more imaginative and less partisan administration than Theresa May could provide.

The likely result of this is not that the UK might, as some leavers suppose, "put one over" the EU27 and, in a sort of Italian Job counterfactual, escape over the border in a bus full of bullion, but that we will end up with a Withdrawal Agreement largely dictated by the EU27 and a severe shortage of goodwill for the negotiation of a future relationship, in particular the trade deal. The odds of that negotiation dragging on for years have increased as it has become clear that a transition period will have to be agreed, and it is also clear that the terms of that transition will essentially be the status quo (i.e. continued membership of the Single Market and Customs Union) less any UK say within the EU after the 29th of March, 2019. This raises the very real prospect that the increasingly elusive trade deal will not be finalised before the next scheduled general election in May 2022. I suspect that would be fatal for an incumbent Conservative administration because the outline of what is still likely to be a soft Brexit will not convince many true believers that it was worth the wait, while the majority of the electorate will be focused on the matters neglected by the government over the preceding years, building on the frustration evident in the 2017 election.

As it stands, many Tory leavers appear to be betting on a trade deal being agreed in double-quick time, though perhaps not as quick as the "one minute" suggested by David Davis, but that is only credible if you assume either a deal that is truly off-the-peg (i.e. no "pluses"), such as Norway or Canada, or a fallback to WTO defaults. The former is unlikely because of the complicating factors of freedom of movement and the needs of the financial services sector, while the latter would probably lead to a major recession. I worry that the ultras see economic decimation as an opportunity rather than a threat, both as a way of reorienting UK industry for a low-wage, free-trade future, and as a means of justifying "real" austerity. To this end, they might prefer to engineer a walk-out in 2018, with a view to riding out a recession and welcoming the first shoots of recovery around 2020. Unfortunately, many ultras remain in thrall to the myths of the Thatcher years, notably that the UK rediscovered its economic mojo after a strong purgative in the early 80s. They forget the importance of the Falklands War in securing electoral support. Or perhaps they don't, which is even more worrying. Someone is arguing in bad faith.

We Gotta Get Out of This Place

The government's attempt to find a form of words that would satisfy the EU27 and allow progress to phase 2 has run aground not on the mechanics of commercial regulation, which are as much of a mystery to most MPs as to the general public, but on the vexed issue of sovereignty. It's worth reminding ourselves at this point of the difference between internal and external sovereignty. The former concerns who has the ultimate authority within a state. That authority includes the right to pass domestic laws to accommodate the interests of foreigners in general (e.g. allowing non-citizens to own property in the UK) or other states in particular (e.g. allowing the US to operate airbases on UK soil) , but doing so does not compromise sovereignty because those laws can always be repealed or otherwise amended in the future. The ability to reject the past and impose a new regime is a defining characteristic of the sovereign. Constructively ambiguous though they may be, terms such as "no divergence" and "regulatory alignment" imply a commitment to keep domestic regulations in sync with the EU, but they do not imply submission to regulation or oversight by the EU. This is therefore an exercise of internal sovereignty.

External sovereignty concerns the concession of specific authorities beyond the state. Historically, that was often the result of coercion, such as by colonies in an empire or through the ceding of territorial control (e.g. by China to the UK over Hong Kong). Today, it is more likely to mean cooperation, such as intergovernmental organisations like the International Criminal Court, or collective regulation among peers, such as the EU single market. In respect of sovereignty, there is no fundamental difference between the UK's relationship with the EU and its relationship with the UN, NATO or the WTO. In all cases the UK has pooled authority in return for specific benefits. While states can always revoke concessions of cooperative external sovereignty, as the UK is now doing in respect of the EU, the reciprocal nature of those concessions entails a quid pro quo: we necessarily lose something, a point that the EU has repeatedly emphasised but some Brexiteers remain in denial about. Though it has received less media coverage than the border, the actual issue of external sovereignty that remains up in the air is the continued status of the ECJ as a final court of appeal in respect of the rights of EU citizens in the UK post-Brexit.

The government presumably hoped that their preferred wording on the Irish border would provide sufficient reassurance to the EU27 to allow progress to phase 2 of the negotiations without any concession of external sovereignty; in effect substituting the Good Friday Agreement as a guarantor in place of any EU institution. This would have been an astute move if the DUP were genuinely keen to preserve the GFA, but even a passing acquaintance with Irish politics should have alerted London to the unlikelihood of that. The DUP chose to interpret the wording both in terms of external sovereignty, as a concession to a foreign power (the Republic), and in terms of internal sovereignty, as an erosion of the constitutional integrity of the UK. Leaving aside for the moment that this integrity is illusory (not least in Northern Ireland), this shows the way that mixing the two produces a volatile combination in which matters of practical international cooperation are inflated into existential threats. The Tory ultras have done likewise, condemning the proposed wording as both a constraint on future trade deals with other nations and as an attempt to achieve a united Ireland by the back door.

Today has seen members of the cabinet provide two key insights into the British government's thinking. David Davis told the Commons Brexit Committee, "The strategy we decided way before the October council, before March, indeed before the triggering of article 50, was that we would go for an over-arching, comprehensive trade deal". For Davis, this was a reason to not bother preparing impact assessments, but it also implies that the government did not expect to have to elucidate, let alone honour, the wording in respect of the Irish border. The gamble appeared to be that a superior deal could be agreed in phase 2 that would make the wording irrelevant. However, while it wasn't unreasonable to believe that the EU27 also wanted a comprehensive trade deal, it was risky to imagine that this would be bespoke rather than off-the-peg. We know that the government can only reconcile the demands of Brexiteers with the need to maintain advantageous market access through cherry-picking, but that is precisely what the EU27 will not allow (it is also likely to fall foul of WTO rules if it is anything short of comprehensive, and a comprehensive deal with the EU would limit the potential for deals with other countries).

Of the off-the-peg solutions, the Norway option (EEA) is clearly unacceptable to the ultras because it entails the free movement of labour and continued payments to the EU, while the Canada option (CETA) would be inadequate because it doesn't cover services and would require a hard border. At the moment, the Canada option looks like the logical starting point for the phase 2 negotiations, assuming we ever get there. The omission of services would be difficult to rectify short of a comprehensive scope, which is essentially the EEA option. A more limited deal for financial services will no doubt be mooted, but that would be picking the largest and juiciest cherry, which is unlikely to meet EU27 approval unless there are major concessions elsewhere. The need for a hard border could be avoided by agreeing to align with the EU's external tariffs, but that would be identical to remaining in the Customs Union and would constrain the UK's ability to agree trade deals with others. The UK might be able to swing a financial services sector deal in combination with continued membership of the Customs Union, but that would pretty much kill the "free trade" vision of Brexit and indicate that the government's priority remains the City of London. That's not a popular look.

The second key insight came with Philip Hammond's admission that there has been no substantive discussion by the cabinet on what the Brexit end-state should be. His explanation was that this would have been premature before the end of phase 1, though it is unclear what new data or understanding has been gained over recent months that would have a material impact on any debate. Given Davis's admission that impact assessments haven't been carried out, Hammond's caution seems at odds with the general air of insouciance. One way of reconciling these two attitudes is to assume that the key players have arrived at the same conclusion from different directions, namely that Brexit will largely mean whatever the EU27 decide it means. The phrase "nothing is agreed until everything is agreed", which has replaced "Brexit means Brexit" as the stock answer to most questions, might suggest this. Rather than May, a woman not known for sunny optimism, adopting a Micawberish attitude of "something will turn up", it looks more like she is hanging on grimly in the hope that reality and the EU's own red lines will gradually persuade the cabinet to concede that the Norway option really is as good as it is going to get. Until that realisation dawns, we must continue to plod wearily through the slough of despond.

It's Always Raining Over the Border

There is a suggestion that Theresa May was trying to use the outline deal on the Irish border to bounce the cabinet into agreeing "continued regulatory alignment" of the entire UK with the EU. The political logic was that this could square the DUP by ensuring no divergence in standards between Northern Ireland and the Republic, and thus no need for a hard border, while also avoiding the North having special status or any regulatory divergence from Britain, thus maintaining the integrity of the UK. The risk is that a permanent commitment to regulatory alignment with the European Union would be indistinguishable from continued membership of the Single Market and Customs Union - the softest of soft Brexits - and would thus negate the chief economic benefits of leaving the EU, namely the ability to negotiate independent trade deals and to dispense with EU "red tape". Though the deal was being described as a form of words that would keep the specifics suitably vague until the trade talks got under way, it looked more like membership of the European Economic Area (EEA) than the basis for a bespoke, comprehensive trade deal.

This scenario looks suspiciously like a remainer fantasy. I doubt that membership of either the EEA or the EFTA (the European Free Trade Area) is likely. Theresa May clearly stated in January of this year that leaving both the Single Market and the Customs Union was an inevitable consequence of the 2016 referendum, a point she reaffirmed in her Florence speech in September. That speech also explicitly ruled out both the option of EEA membership (the Norway model) and a "traditional free trade agreement" (the Canada model), positing something unique in between. The EU27 in turn ruled out any bespoke deal: it's either Norway, Canada or no deal (Switzerland, which is in the EFTA but not the EEA, due to a referendum reverse, has a series of bilateral deals with the EU but is considered an anomaly, not a precedent). There is no doubt that the EU27 would prefer the UK to adopt the Norway model, and that many "releavers" consider this to be the least-worst outcome, however it would be a bridge too far for most Brexiteers.

Assuming the report of a continued role for the European Court of Justice in respect of EU citizens' rights is well-founded, and adding in the concession on the £50 billion "divorce bill", the decoupling process was beginning to look less like a soft Brexit than a Brexit in name only, which would obviously be unacceptable to the ultras. It was therefore critical that any deal on the Irish border was framed in such a way as to avoid the suggestion that continued membership of the Single Market and Customs Union might yet be possible. You can understand why Nicola Sturgeon and Sadiq Khan spun the news otherwise, and there are plenty of remainers in the media who were only too happy to point up the implications, but what is remarkable is how quickly the idea gained currency, causing an apparently spooked DUP to row back. Not for the first time, the UK government has shown itself to be less than tactically astute when it comes to handling negotiations, which hardly bodes well given the importance it has placed on future free trade deals with all and sundry.

There is no doubt that the government was briefing on Monday morning that a deal was about to be done and that a form of words had been agreed that was acceptable to the UK and the EU27. According to an RTE leak, those words were: "In the absence of agreed solutions, the UK will ensure that there continues to be no divergence from those rules of the internal market and customs union which, now or in the future, support north-south cooperation and protection of the Good Friday agreement". Apparently, "no divergence" was then amended to "regulatory alignment". Assuming this is accurate, it indicates three things. First, that this position was envisaged to be a back-stop in the event that further terms were not agreed during the phase 2 negotiations. Second, that the scope of the rules in question was limited to those that support all-Ireland cooperation, not to the entirety of the Single Market and Custom Union. Third, that the entrenchment of the Good Friday Agreement within the framework of the EU was to be replaced by its entrenchment within the final deal between the UK and the EU27. There is ambiguity in the language, but there is also a clear acknowledgement of the island of Ireland as a special case.

It is difficult to believe that this wasn't squared with the DUP in advance, and I'm sceptical about the idea that it was kept from the likes of Michael Gove and Boris Johnson with the intention of being presented as a fait accompli later in the day, not least because David Davis and other Brexit true-believers were surely in the know. Media commentators tend to place far more weight on the concept of "constructive ambiguity" than is usually warranted, essentially to excuse their own uncertainty of interpretation, but on this occasion it does appear as if the language was sufficiently opaque to support multiple readings, up to and including continued membership of the Single Market. One explanation for this would be a desperation on the part of the UK to get to phase 2, in the hope that "something will turn up" to resolve the border issue later. Another explanation is that the British government is not sincere (Varadkar's emphasis on May "negotiating in good faith" was volunteered unprompted, which is often a sign of doubt) and that it always intended to use the threat of a semi-hard border (i.e. a minimalist interpretation of the scope of north-south cooperation) as leverage for a trade deal.

There is still a possibility that a form of words can be agreed that would allow progress to phase 2, however I suspect this will have to be far more concrete than "continued regulatory alignment", not least to avoid introducing generic elements that might be hijacked by the First Minister of Scotland or the Mayor of London. I suggested last week that a deal could take the form of a Northern Irish commitment to mirror EU regulation in specific sectors such as agriculture and energy, justified on the grounds that these are all-Ireland markets that require coordination, combined with a UK commitment to accept exports of specific goods from the entire island of Ireland without any customs control (in effect giving the Republic a bye ahead of the phase 2 haggling), which would avoid an Irish Sea border. This could be achieved by building on the foundations of the Good Friday Agreement, which already covers a number of Island-wide concerns via the North/South Ministerial Council, and might allow further matters to be quietly incorporated during phase 2. The problem is that it would require the DUP to be willing to extend the GFA and accept greater cooperation with the Republic, which is at odds with its raison d'etre.

The failure to secure common ground among all parties on Monday will have two consequences. The DUP has now retreated to its comfort zone of obdurate victimhood, in which "never" is the stock answer and the London government can be cast as untrustworthy. This was always likely at some point, and a cynic might suggest that the party deliberately led Number 10 along with this very outcome in mind (though, to be honest, I don't think they're that Machiavellian), but I can't help feeling that a more subtle operator than Theresa May, whose negotiating style also appears to be a mix of the pathetic and the obdurate, might have manoeuvred the DUP into a better space rather than simply backing them into a corner. Now, her only real option is to call the DUP's bluff by proposing a more specific compromise tied to the GFA that could potentially command support among less hard-line unionists in the North. This would leave the DUP at risk of revealing itself to be a party that prioritises weakening the Good Friday Agreement over the health of the Northern Irish economy.

The second consequence is that May herself is now vulnerable to challenge within the Conservative Party. You don't have to believe the myth that she was planning to gut Brexit to see that her solution is likely to fall some way short of the ultras' vision. They appeared to be willing to give her the benefit of the doubt over the money, but the continued role of the ECJ in respect of citizens' rights and the possibility of future EU regulations being unilaterally applied to a part of the UK represent an unacceptable compromise with their conception of sovereignty (the Leave Means Leave letter published on Friday looks like another back-stop, ruling out further regulatory alignment beyond March 2019, which might indicate that they had got wind of the proposed deal terms last week). May has managed to remain as Prime Minister, despite the General Election debacle, because no one else wants the poisoned chalice of having to sell a final deal that would disappoint almost everyone to a degree. Now, with the possibility that she might be more of a saboteur than a patsy, it becomes necessary for the ultras to unseat her before a loss of momentum leads to a demand for a second referendum. It's going to be an interesting week.

What We Talk About When We Talk About Industrial Strategy

All states intervene in the direction and management of industry, whether by providing direct funding, tax-breaks or indirect support through infrastructure and education. A laissez-faire state is no more to be found in the real world than a nightwatchman state. Where states differ is in their institutional structures and their public rhetoric. The fundamental weaknesses of the British economy relate to the former, but this is often obscured by the latter. In the UK, "industrial policy" has traditionally been limited in public discourse to heavy industry and manufacturing, while the language used has tended towards the pathological metaphor of an ailing patient. One result of this was that a dirigiste strategy to support the City of London, from the mid-80s "Big Bang" through the Jubilee Line extension to the bailout of the banks, could be passed off as something else entirely. Likewise, the concept of "innovation" in British political discourse has come to mean invention rather than application, which reflects a social bias towards research embedded within the institutions of elite education. It might seem harsh, but Stephen Hawking is part of the reason why the UK doesn't yet have universal, high-speed broadband.

In the postwar years, the legacy of large scale R&D in business, together with the need for state direction to coordinate the rebuilding of industrial capacity, led to a fashion for "national champions" in most developed countries, often in sectors with a strategic defence dimension such as aerospace or steel-making. In the UK, this gradually gave way to the more pejorative phrase "picking winners", which was both an ideological critique (you can't second-guess the market) and an attack on government competence (you keep picking losers). The incidence of primary research within business then declined, as an expanded higher education sector provided outsourcing opportunities for national firms and globalisation allowed multinationals to consolidate their efforts. This was part of a wider turn that deprecated the concept of firms as institutions, as opposed to financial assets or simple market actors, which had an obvious attraction in the era of privatisations and mega-mergers. While human capital was eulogised by Gary Becker, the firm was reduced to the boundary of administrative efficiency theorised by Ronald Coase.

The classic UK example of this was the car industry. Its prewar firm and brand fragmentation had been preserved by wartime and the seller's market of the immediate postwar years. This meant too many models, antiquated organisation (e.g. the reliance on piece rates), which in turn encouraged craft union fragmentation and poor industrial relations, and self-satisfied management. Though belated efforts were made to rationalise the industry and consolidate production, notably with the creation of BLMC in 1968, this was never pursued aggressively enough. The eventual nationalisation of the industry in the form of British Leyland in 1975 was twenty years too late. Though the political wind then turned against state ownership, government continued to support the sector directly while urging further rationalisation, which laid the foundations for foreign direct investment by the likes of Nissan in the 80s. As the UK's continued success with marquee brands such as Land Rover, Jaguar and Mini proved, the problem wasn't a lack of R&D or skills among the workforce, but a failure to apply these capabilities more widely due to poor organisation and management.

If the industrial strategy of the 60s and 70s tended towards the vertical, focused on particular sectors and the selection of large firms for preferential treatment, the strategy of the 80s and 90s was more horizontal, seeking to create a level playing field for the market to select winners through the free movement of factors of production, not just nationally but internationally, such as in the case of the EU Single Market. Though this shift was successful in many respects, it had two problems. The first was the wrenching effect of the transition, which in the UK saw the disruption of specialist supply chains tied to the old national champions, contributing to the steady decline of manufacturing as a proportion of GDP. The second problem was the tendency for pro-business policies to protect poorly-performing companies that survived the transition. Had the British government been less dogmatic in the early-80s, and less obsessed with lowering the tax burden on business thereafter, the underlying productivity growth of British industry, which was flattered by North Sea oil and financial services between 1988 and 2008, might not have been so weak.

The publication on Monday of the government's industrial strategy white paper comes at a significant time, given both the clear evidence that austerity doesn't work in its own terms, so future deficit reduction must depend on stimulating growth, and the debate over the UK's future trading relationships (ironically, Brexit has made the idea of national champions politically salient once more, and not just on the left). But these political imperatives are ignored by the white paper in favour of generic environmental factors, described as "Grand Challenges": AI & data economy, clean growth, future of mobility and ageing society (like MBA bumf the world over, the paper has a lot of abstract nouns and pious verbs but a shortage of definite articles). The key policies are grouped into five "foundations of productivity": ideas, people, infrastructure, business environment and places. Like the challenges, their generic nature indicates that there is little that is distinctive about the analysis or the proposed solutions, while some of the specifics point to longstanding institutional flaws that aren't about to be addressed.

An example of the latter is the continued segregation of technical and elite education. The paper commits to "Establish a technical education system that rivals the best in the world to stand alongside our world-class higher education system". UK universities routinely appear in the top 10 of global ranking tables. By contrast, Germany, France and Japan rarely make it into the top 50, but those countries are clearly superior to the UK in terms of productivity. This isn't simply because their efforts tend to be directed more towards technical education and away from elite establishments, but because there is actually little connection between pure research (let alone elite status) and the application of technology by industry. That, after all, is why we've traditionally had a "brain drain" and a reputation for being good at coming up with ideas and poor at making money out of them. Rather than privileging research, a better industrial strategy would focus on disseminating and applying existing technologies to SMEs. As the Japanese experience in the 60s and 70s showed, absorbing innovations made in other countries will actually create the institutional infrastructure necessary to then incubate native inventions. Rather than case studies about thriving UK businesses, the white paper would have done better to include case studies of successful state intervention by other countries.

History suggests that jumping on the bandwagon of emerging technologies, such as robotics or batteries, can lead you up a blind-alley (consider the trajectory of the UK's semiconductor industry, particularly in light of last year's sale of ARM Holdings to Japan's SoftBank). Many other countries will do likewise, which reduces the prospect of any comparative advantage, while the presence of a home market is usually crucial to success. A country with a sizable manufacturing base, an ageing population and a well-developed electronics sector is more likely to succeed in the area of robotics, which is why much of the early running has been made in Japan. More generally, a focus on a general purpose technology (GPT), like steam-power or IT, will only deliver advantage during the early-adoption phase. Once the technology becomes ubiquitous, that advantage largely disappears or is overwhelmed by more fundamental factors such as geography. The strength of the German car industry has less to do with the pioneering work of Carl Benz and Gottlieb Daimler and more to do with the proximity of large markets in all directions. One obvious trend over time is the quickening pace at which GPTs become ubiquitous. Today, a productivity-enhancing change in software can be disseminated globally in a few days. Seeking first-mover advantage is increasingly a fool's errand, which partly explains the growing reluctance of business to invest in R&D.

Like its weak productivity growth, the UK's low R&D rate (1.7% of GDP compared to the OECD average of 2.4%) is partly a reflection of the dominance of the services sector (and financial services in particular), but it also reflects the financialised turn of the last 30 years. The problem with capital allowances and R&D credits is that they are of limited effectiveness if the tax regime makes the distribution of free cash via dividends more attractive. To increase the proportion of profits reinvested in industry, you need to make taking the money out of businesses (or its use in share buybacks) less attractive. You also need to address the persistence of zombie firms: the long tail of low-productivity and lifestyle businesses that survive by dint of low wages and a tax regime that indulges private owners. An industrial strategy should concern itself not just with facilitating market entry but also with encouraging market exit. Given that the paper considers the high level of firm formation (one every 75 seconds) to be something to crow about, ignoring that the vast majority of these are micro-businesses that won't survive beyond 5 years, I doubt the promised "review" of this area will seriously grasp the nettle.

Overall, the white paper looks like a holding operation. There are old initiatives rehashed, more promised reviews and commissions, and the usual lip-service to devolution and innovation. More fundamentally, it does not represent a departure from the horizontal policy adopted since the 1980s, despite talk of "sector deals". As with Theresa May's commitment to addressing inequality, there is little here beyond a change in tone. A serious analysis would start by considering the strengths and weaknesses of the economy. This doesn't just mean identifying comparative manufacturing advantage, but looking at institutions and regulatory arbitrage. The UK's current status depends on three things: a hybrid relationship with the EU (inside the Single Market and Customs Union but outside the Eurozone); London's role as a global financial entrepot (and tax haven gateway); and our ability to leverage the English language (through business services as much as media). Given that we are in the process of degrading the first of these, and habitually omit the second from strategic consideration, the white paper was never going to offer more than liberal references to our "creative industries". The doctor's report still reads "poorly".

---

Note: Due to sheer incompetence on my part, this post was accidentally deleted. I restored it shortly afterwards on 20-Nov-2020 (13:30). Unfortunately, there's no way of recreating the comments in their original form, so I've tacked them on below.

-----------------------------------------------------------

> Hugo Evans - 29 November 2017 at 18:12

Do you mean comparative advantage or absolute advantage in the three you mentioned: EU/Global Wealth concierge/English? Given the ubiquity of certain technologies, do you think there are any candidates for reshoring within a comparative advantage type of argument?

> David Timoney - 30 November 2017 at 15:40

Viewed separately, the UK has a comparative advantage in each of the three. Others, such as Norway and Switzerland, have a hybrid relationship with the EU, but nowhere near as good as the UK's. Others can provide the financial markets and wealth services, but none has as developed an institutional structure as the UK by virtue of the City's history and the convenience of its overseas territories. The UK's comparative advantage in English is weakening at the global level, but it remains dominant in Europe.

If you take all three together, then the UK has an absolute advantage as no other European country offers more than two, and this often involves trade-offs. For example, Switzerland has had to offer financial transparency in return for EU access. Ireland can offer the advantage of English-speakers, but its corporate tax advoidance offer depends on being 100% integrated into the EU and the Eurozone. Sweden is outside the Eurozone and has a fair few English-speakers, but it is never going to attract financial markets let alone tolerate systematic tax avoidance.

As regards reshoring, the trend is towards the replacement of Far Eastern labour (whose price is rising) with robots in home markets, where proximity provides comparative advantage. The UK's relatively low-level of robot use, combined with the worsening of the terms of trade with the EU post-Brexit, mean that we're unlikely to see this advantage developed.

> Hugo Evans - 30 November 2017 at 16:19

Thank you for answering. I suppose what strikes one about the the UKs advantages, such as they are, is that they are rooted in a overlapping set of regional jurisdictional arbitrages. We are an outlier and I cannot help but feel (as much as think) that the withering of the London hinterland (UK minus London) is the price we have already paid. Brexit confronts us with the fact of what we have already done to ourselves. Was it really destined to be like this by force of geo-political geography, or is there a meaningful counterfactual?

> David Timoney - 1 December 2017 at 16:31

In terms of industrial strategy, I think any meaningful counterfactual would have to pivot on the 1950s. This was the era when British industry rested on its laurels and failed to adequately invest while its competitors caught up. It was also the era of the Sterling Area, which led to a vain policy of a strong pound that left exporters vulnerable as output expanded globally.

The burdens of Sterling and the high level of defence expenditure were retrospectively fingered by many historians as the reasons why the UK wasted both its US loans and its opportunity as one of the few industrial economies left largely intact after the war, while some on the right go so far as the blame the welfare state for diverting investment away from industry.

However, this ignores that abandoning the pretensions to global influence inherent in the Sterling Area and high defence spending would have been deeply unpopular at the time (the tide of opinion only started to turn after Suez), and thus electoral suicide, while the welfare state was a conscious investment in labour to the benefit of industry. It also ignores the degree to which US policy actively undermined UK interests (the "special relationship" is the rationalisation of the abused spouse).

I'm not sure there is a credible counterfactual beyond amelioration. We could have done more to rationalise overseas commitments and defence spending in the 70s, and could certainly have handled deindustrialisation better in the 80s and financial regulation in the 90s, but we'd still have ended up in pretty much the same place.

-----------

> George Carty - 3 December 2017 at 10:28

Could the British people have been convinced to sacrifice more in defence of Empire if they had been convincingly informed that decolonization would inevitably lead to deindustrialization? (I'm thinking of Thomas Dewey's quip that the Morgenthau Plan was worth 10 fresh German divisions.)

Incidentally, would more of British industry have survived if Britain had embraced the Morgenthau Plan and thus permanently eliminated Germany as an industrial rival?

> David Timoney - 3 December 2017 at 12:07

On the contrary, I think the argument that UK industry depended on the colonies was strongly put from the 1870s onwards and convinced all too many. The problem was a surfeit of imperialism, not its lack, whose momentum led to the continuing delusions of the 1945-56 period.

Unlikely as it was to happen, Britain would have done better to have started decolonisation after 1918, not least because its large military commitment in the Middle East and Far East could have been partially diverted to home defence, which might have given WW2 a different complexion.

The rebuilding of Germany as an industrial power actually benefited British industry in the late-40s and through the 50s, essentially by creating demand for plant & machinery, though this benefit was undermined by the UK's attempt to focus its exports on the far-flung Commonwealth. The Morgenthau Plan would have been bad for all the economies of Western Europe.

-----------

> Hugo Evans - 1 December 2017 at 22:42

'The rationalisation of the abused spouse' - I may have to borrow that. 'Ending up in pretty the same place', is strong stuff. Are we just a slow motion tragedy, hung on the petard of our own amour propre. There's still a fight on about the meaning of this Brexit thing. Do you not think we need a more hopeful post WW2 alternative story to stand a chance in that fight?

> David Timoney - 1 December 2017 at 23:06

I wouldn't describe it as a tragedy - we're just adjusting to reality - but we are still in the midst of a slow motion decline. The popular view is that the 70s marked the trough and the Thatcher years a revival, but I think most people now realise that was an illusion.

The period between 2003 and 2016 can be thought of as one of disillusionment and a loss of confidence in the state. Paradoxically, Brexit may turn out to be the purgative that marks the end of this period.

I think what we need is not a postwar counterfactual, which is no more helpful than the nostalgia of empire, but an alternative vision of the UK post-Brexit (recognising that a simple cancellation of Article 50 is unlikely to happen).

Unfortunately, that can't realistically happen until the current process runs aground, which means a bit more self-harm.

----------

> George Carty - 4 December 2017 at 08:44

..."an alternative vision of the UK post-Brexit"

So you're not in agreement with the remainiac viewpoint that the only possible future for a UK outside the single market is that of a third-world sweatshop-cum-tax-haven?

> David Timoney - 4 December 2017 at 09:06

No, I think there are more options than that, and the idea of the UK becoming a sweatshop on the EU's doorstep strikes me as unlikely for a host of reasons.

What an alternative vision looks like will now be heavily determined by circumstance, specifically the degree to which we maintain access to the single market and/or the customs union. That we are not in control of the outcome explains the vagueness of the vision emanating from both the Tories & Labour, and makes an ironic point about our delusion of "taking back control".

-----------------------------------------------------------

The Missing Sovereign

One of the odder developments in the world of books during the early years of this decade was the revived interest in the American author John Williams' 1965 novel, Stoner. After a politely received debut and a couple of modest reprints in the US around the millennium, the book became a bestseller after 2010 in both France and the UK, and even Waterstones' book of the year in 2012. Literary fiction is a marginal interest at the best of times, but its occasional eruption into wider consciousness (when not tied to a film or TV adaptation) is often related to its political resonance with a small number of "taste-makers" in the media. Given that Stoner was set over the course of the first half of the twentieth century and followed the third-rate life of a second-rate academic, its resonance doesn't immediately appear to have much to do with the pivotal 60s, but its concerns with truthfulness in life and academic integrity place it between the existentialism of the 50s and the postmodernism of the 70s. It has moments of self-awareness, but it's not a very good book: the characters are flat, the language carefully monotonous, the baddies wear all-too-obvious black hats. It appears to be the combination of its unadorned style and relentless self-pity that helped it find favour among the grand names of contemporary British fiction.

Much of the praise for the novel focused on its moral lessons: "We live in an era in which happiness and success are pursued ruthlessly, selfishly. We feel entitled to have them, at any cost, whether that involves divorce or questionable ethics. This is a novel that serves as an antidote to that expectation, reminding us that a life that looks like a failure from the outside, that will be quickly forgotten once it ends, can be a noble, quirky and somehow beautiful experience". That assessment should indicate the conservative virtues at the heart of the work, but it is worth being precise about who is cast as the serpent in this particular garden. The plot involves two strands: William Stoner's emotional estrangement from first his dirt-poor parents and then his wife, Edith, a frigid, unsympathetic solipsist; and his academic career, centred on the teaching of Rennaisance literature, which is blighted by the growing malevolence of his head of department and reaches a climax over the latter's protégé, a fraud and a liar. Though some sceptics have noted the class contempt and misogyny of the first strand, the reason for the book's renewed popularity is to be found in the second strand and its tale of a decent man done down by relativism and the special pleading of the aggrieved (both the department head and his protégé are disabled).

With its focus on academic bad faith and social pretension the novel is ahead of its time, occasionally reading like Malcolm Bradbury's The History Man, but without the humour and as much instrumental sex. If that mid-70s work captured the emerging reaction against post-structuralism and post-modernism, it also prefigured the way that "historical inevitability" would be recuperated from the left to advance reactionary politics. Bradbury subsequently claimed that the novel's protagonist, the self-styled radical Howard Kirk, ended up voting for Thatcher in 1979 and Blair in 1997, the two politicians who made belief in a higher truth central to their appeal. Stoner's contemporary resonance has more to do with the salience of campus free-speech and safe-spaces in media discourse than the socio-economic realities of teaching, but it also elevates a traditional ideal of male integrity and literary fidelity to the level of hagiography, which goes down well among writers prone to berate "snowflakes" and anti-canonical minorities from the security of their well-appointed studies. As one awed reviewer described Stoner's miserable span: "He has been a priest of literature, and given himself as fully as he could to the thing he loved. The book’s conclusion, such as it is—I don’t know whether to call it a consolation or a warning—is that there is nothing better in this life".

You don't have to hunt too far to find claims that post-truth and fake-news are the products of postmodernism rather than the economy of the media, and thus something rotten in the academy rather than the logic of capitalism. The response to this displacement has been a doubling-down among academics on the foundational nature of truth. This has led to what one might term "grade inflation" in respect of the political consequences of truth's abuse. For example, the American historian Timothy Snyder has claimed that "post-truth is pre-fascism". His argument is built on a chain of dependencies: "Democracy only has substance if there’s the rule of law. That is, if people believe that the votes are going to be counted and they are counted. If they believe that there’s a judiciary out there that will make sense of things if there’s some challenge. If there isn’t rule of law, people will be afraid to vote the way they want to vote. They’ll vote for their own safety as opposed to their convictions. So the thing we call democracy depends on the rule of law. And the things we call the rule of law depends upon trust. Law functions 99 percent of the time automatically. It functions because we think it’s out there. And that, in turn, depends on the sense of truth. So there’s a mechanism here. You can get right to heart of the matter if you can convince people that there is no truth. Which is why the stuff that we characterize as post-modern and might dismiss is actually really, really essential."

The "mechanism" can be summarised as follows: democracy depends on law, which depends on trust, which depends on truth. This is questionable. The idea that democracy depends on the rule of law is no more meaningful than the idea that autocracy does - all forms of government depend on laws. The idea that law depends on trust is here reduced from the expectation of justice to mere administrative efficiency: the automatic functioning of the law. Up to this point, both Nazi Germany and the Soviet Union have ticked all the boxes. The idea that trust depends on truth ignores the collective insistence of philosophers, sociologists and economists that it depends on self-interest (or enlightened altruism, if you prefer). We might still take oaths on holy books, and the shame that arises from the breach of social rules about lying is a deterrent, but what ultimately keeps us honest is consequentiality: the fear of worldly punishment or of lost opportunities arising from reputational damage. In Snyder's argument, trust is a rickety bridge intended to span the gap between law and truth. A straight link between the two is difficult to make when laws in a democracy aren't intrinsically "true" but simply norms that we have agreed to through political debate. What distinguishes democracy from autocracy is who decides, not the quality of the decision.

Snyder's equation of good governance with laws and laws with truth is actually a conservative argument that harks back to the pre-democratic era when laws were deemed to have divine sanction through monarchy. What democracy depends on is not a law against vote-rigging, but a social convention that you don't cheat. Challenging claims to absolute truth does not undermine democracy. In fact, just as contesting miscarriages of justice occurs more in democracies than autocracies, it should be seen as a sign of a healthy society. Likewise a press that is routinely sceptical rather than partisan. Looking back at Germany in the 1930s, Snyder notes the power of the media: "The second thing that German Jews were not aware of, or Germans were not aware of, was how new media can quickly change conversations. In that way, it’s not exactly the same, but radio at that time often ended up being a channel for propaganda. There are parallels with the internet now, where there were hopes that it would be enlightening. But in fact, it turns out that with presidential tweets, or with bots, or isolated habits of viewing, it isn’t necessarily enlightening. It’s the opposite. A lot of us were blindsided by the internet in much the same way that people could be blindsided by radio in the 1930s."

The jump from prewar radio to the Internet is telling, skipping both television and modern newspapers, not to mention their current symbiotic relationship with social media. This historical elision also ignores the deregulation of radio and TV that started in the 1980s, which created a market for news and opinion in which fairness and objectivity withered under commercial pressure. Given that the Internet cannot be held responsible for the growth of a right-wing media ecology in the 80s and 90s founded on myths, bullying and paranoid conspiracy, the idea that postmodernism was to blame for the erosion of truth serves the dual purpose of diverting attention while affording media practitioners, many of whom were at college in those decades, a degree of revenge for past slights and embarrassments (notably their own temporary commitment to intolerant strands of activism). More fundamentally, this characterisation of the Internet as a propaganda machine without precedent beyond the archetypal medium of mid-century totalitarianism serves to cast the present situation as exceptional: "we are facing a real crisis and a real moment of choice", as Snyder puts it.

This sense of impending crisis encompasses both the belief that the forces of an emergent Fascism might engineer a state of emergency - for example, Snyder suggests that Trump might leverage a terrorist attack in the manner of the Reichstag fire - and the idea that the erosion of truth by self-interested Internet companies and Russians waging nonlinear warfare has gone so far as to require state intervention to revoke the errors of a misled democracy, such as in the case of Brexit. Apart from the cognitive dissonance required to hold both of these views, the obvious flaw here is the casting of two dim kids on seaside donkeys as horsemen of the apocalypse. While acknowledging the dangers of complacency and the all-too real erosion of rights since 2001, I can't help but suspect that Trump is too lazy to mount a putsch while the outcome of the EU referendum has been a series of botched coups (usually involving Michael Gove) that never managed to get beyond the beer hall. To borrow the terminology of Carl Schmitt, the Nazi jurist and originator of the concept of the state of exception, what has been striking is the inability or unwillingness of anyone to take on the role of the sovereign. In that sense, William Stoner's failure to command his own life, and his escape from the world into the imaginative consolations of the past, makes him all-too representative of our time.