Inflection Point

It's a regular feature of economic discourse in the UK for senior economists at the Bank of England to deliver lectures that are historically-informed, questioning of orthodoxy and apparently open to new ideas, from UBI to the blockchain. None of which ever seems to inform the Bank's core policies. Andy Haldane is perhaps the most high profile recent example, but you could also see the form in the recent speech of an ex-BoE economist, the Shadow Chancellor of the Exchequer. Rachel Reeve's Mais lecture was trailed negatively in the conservative press - the emphasis on the praise of 1979 as an inflection point reliably winding up lefties - which meant that its reception predictably swung too far in the opposite direction, with delirious praise in the liberal media because she'd decided that Thatcherism was a failure in its own terms and auserity self-defeating, as if these were novel ideas. But she did not reject the Thatcheritie diagnosis: "Once again, we have found ourselves in a moment of political turbulence and recurrent crises with the burden falling on the shoulders of working people – with at its root, a failure to deliver the supply side reform needed to equip Britain to compete in a fast changing world." 

Though she cites many historians and economists as authorities, Reeves isn't always accurate in her thumbnail sketches. For example: "The political economist Karl Polanyi who came to Britain from Austria as fascism rose in the 1930s wrote of the tendency of market economies that become disembedded from their societies to undermine the conditions for growth and provoke powerful political counter-movements of both left and right". In fact, Polanyi's point was that capitalism - a historically contingent form of social relations - deliberately undermines society by creating fictitious commodities in land, labour and money, which produces a counter-movement that seeks to embed the market in society by means of economic regulation and social provision. Far from originating on the left or the right of the political spectrum, this counter-movement is essentially centrist, constructing a broad consensus and operating through established political structures and norms. For example, the 19th century Factory Acts or the early 20th century moves towards a welfare state. 

In citing Polanyi and Joan Robinson, Reeves is insisting that "economics is not just about quantitative models and abstract theory – it is about values, rooted in political, philosophical and moral questions, about human nature and the good society." This all sounds fine and dandy until you soberly consider the track record of the Labour right when it comes to philosophising about the good society (Tony Crosland's The Future of Socialism was a long time ago), or wonder about the morality of people who take sinecures with water companies and employ confected outrage to expel or deselect fellow party members. Of course, what Reeves is really arguing for is not a humane and holistic approach to governance but the restoration of the pre-eminent role of the state. In 2017 William Davies described neoliberalism as the "‘disenchantment of politics by economics". Building on that, in 2021 Grace Blakeley noted that "The last fifty years of neoliberal hegemony has reshaped statecraft away from the governance of the market and towards governance by markets." What Starmer and Reeves intend is not a straightforward reversal of that, i.e. a return to the dirigisme of the 1960s, but a new compact with capital in which the state acts with more visible authority specifically in order to legitimise markets.

To that end it makes sense to claim that we are now in a new economic paradigm and that neoliberalism is history, a claim some on the left have been happy to echo, but is there any evidence for this? Reeves accepts neoliberalism's crude public image: "Governments and policymakers are recognising that it is no longer enough, if it ever was, for the state to simply get out of the way, to leave markets to their own devices and correct the occasional negative externality." But this is a myth: the market has always been a political construct. The idea of state and markets in opposition, or even persistent tension, is ahistorical. Starting with Adam Smith's "propensity to truck, barter, and exchange", capitalism has been presented as innate to human nature. But Polanyi's point is that it wasn't, and that this was what caused the trouble. Reeves's claim that the market "became disembedded" is a simple misrepresentation of his position, suggesting a failure of regulation as markets became more sophisticated rather than the interposing of a hitherto unknown form of social relation that dramatically disrupted society ("All that is solid melts into air"). 

According to Reeves, the new paradigm means "embracing the insights of an emergent economic consensus. The Harvard political economist Dani Rodrik speaks of a new ‘productivist paradigm’. The US Treasury Secretary Janet Yellen has branded the Biden administration’s agenda ‘modern supply side economics’. Across the world, related ideas appear under different banners. I use the term ‘securonomics’." The idea that these developments represent a new economic consensus is dubious. The very fact that we have many labels for the same idea should be enough of a clue. This is not simultaneous emergence but a coordinated ideological campaign. It also ignores history. Governments have always had a productivist bent, notably in strategic areas such as defence, energy and agriculture (Biden has explicitly tied his industrial strategy to national security), just as they have always concerned themselves with social reproduction. The chief policy question has typically revolved around the state's role in the discretionary economy, with a subsidiary question being where the boundary exists between that and the strategic core (i.e. mandatory) economy that the state will never cede control of. 

In the UK context, this debate centres on the foundational economy, which encompasses retail (i.e. of food and the other necessities of social reproduction), care, transport and utilities (Reeves refers to it as the "everyday economy"). The topical question is which  parts should be nationalised. That Labour isn't currently demanding the renationalistion of power or water tells you that they do not intend to significantly shift the boundary between the discretionary economy of rigged markets and the mandatory economy of strategic industries. Instead, we can expect the state to take on a more robust regulatory role (Ofwat is clearly trying to work towards this new regime). We might even see investors expected to take the odd haircut. But what we won't see is any challenge to property rights. Starmer and Reeves have made it clear that social investment depends on economic growth, and that that in turn will only be delivered through private sector investment so the government must guarantee fiscal stability and protect the rights of investors.

Citing Karl Polanyi and Joan Robinson doesn't completely distract from the obvious absence in the speech, namely any reference to John Maynard Keynes, and the reason for that is that his work, despite its impeccable liberal credentials as an attempt to save capitalism from itself, obviously doesn't sit well with the fiscal straightjacket that Labour has decided to wear. Interestingly, Keynes' famous antagonist, Friedrich Hayek, doesn't get a namecheck either, but he is very much there in Reeves's comments on the ability of the state to plan the economy: "It is not the crude model of the state directing industrial development and correcting externalities as seen from the centre, but instead an approach that recognises the informational and capacity constraints of government, working in genuine partnership with business to identify the barriers and opportunities they face." This is the influence of Hayek on information theory, but it is also pretty clearly a justification for allowing the private sector greater access to the NHS.

Beyond the partnership bromide, Reeves's prescription for growth is a combination of political and economic stability, increased business investment, and a somewhat nebulous unlocking of "the untapped potential throughout our economy". This includes "Acknowledging those sectors in which we enjoy – or have the potential to enjoy – comparative advantage and can compete in a global marketplace". But where do we genuinely enjoy comparative advantage? For the first two decades of this century it was in the unique combination of being inside the EU but outside the eurozone. When Peter Mandelson says rejoining the EU is not on the agenda, it's because he knows that we could not recreate that advantage through accession negotiation. The EU would demand that we give up sterling or at least level the playing field for financial services between the City of London and Frankfurt, Paris and Amsterdam. Unless the UK discovers another comparative advantage of a similar scale ("floating offshore wind and carbon capture and storage", which Reeves references, are unlikely to fit the bill), a return to the EU isn't going to happen except under conditions of desperation.

When she gets down to specifics, Reeves can only offer tired old forumulas. Reasserting Bank of England independence is to subscribe to the mythology of money as a commodity that Polanyi criticised. Planning (i.e. building, not directing industry) is presented as something that the UK is uniquely bad at, which offers hope of a quick fix, but planning reform is offered as a panacea in most developed economies these days, with similarly negligible results, which suggests it's anything but a quick fix. The more obvious issue is the concentration of capital in property, which leads to perverse incentives, and that won't be solved by another generation of new towns. Similarly, the suggestion that we need more labour market reform, even if under the cover of enhanced workers' rights, needs to be seen in the context of decades of labour market liberalisation, punitive benefits regimes geared to maximising employment, and an emphasis on skills training. The end result is a low-wage, low-skills economy with growing levels of inactivity and under-employment. Is more tinkering going to change that?

This week James Meadway made the point that if Reeves's lecture marks a break with neoliberalism it also marks a break with social democracy in its shift away from social reproduction (health, education etc) towards industrial productivism, but that this was happening at a time of a growing crisis in social reproduction (e.g. falling birth rates because family formation is too costly). So what fills the vacuum? The answer appears to be the transfer of the authoritarian practices exhibited under New Labour in the field of biopolitics towards the domestic economy. Less an inflection point than a swivel to a new target. The problem is that the Labour right's ideological bent, combined with the structural and cultural constraints this shift will face (it's far easier to beast the poor than SME owners), will likely see it run into the sand. Indeed, before Starmer has even entered Number 10, we are seeing shadow cabinet members eagerly returning to their favourite Aunt Sally of people on benefits who should be working. The suspicion is that the display of authority intended to restore the credibility of the state after the twin insults of Brexit and Corbyn will quickly devolve into mere authoritarianism.

AI, Comparative Advantage and Natality

Beyond the banality of stochastic parrots and their "hallucinations", AI exists as a socio-political thought-exercise: a what-if. As has been the way since the emergence of sociology and its creative cousin Science Fiction, this encompasses both dystopian hell and utopian heaven. Perhaps the most obvious combination of the two is the idea that AI will take all the jobs, delivering either something akin to The Matrix, where humanity is reduced to its utility as fuel, or to a world of leisure and ease in which we can all pursue our talents and interests: "to hunt in the morning, fish in the afternoon, rear cattle in the evening, criticise after dinner, just as I have a mind, without ever becoming hunter, fisherman, herdsman or critic." We have now reached the stage where official projections for growth routinely factor in AI as a magic ingredient. But beyond the glorified press releases of business consultancies predicting that AI will "impact" half of all jobs (consider what an accurate prediction of the impact of electricity would have been), there hasn't been much discussion of the mechanisms. In other words, how in practice will AI spread though the economy and how will employment patterns respond?

This is odd insofar as we have no shortage of historical data on the way previous technologies were deployed and how they reconfigured society. We all understand how the combustion engine substituted for horses and how that resulted in grooms being replaced by mechanics, and more recently we have seen how the technology of logistics has allowed employment in developed economies to shift from the primary and secondary sectors to the tertiary. The optimistic take on AI is that we'll see something similar: old jobs being replaced by new ones and aggregate wealth increasing, which translates to higher wages and greater purchasing power. If there is a fly in this ointment, it relates to the relative narrowing of wages between different parts of the world as industry reconfigures optimally. The middle class expands in the Far East while its peers in the American Mid-West stagnate, but at a global level there is aggregate growth. AI probably won't have a differential impact around geography, as raw material extraction and manufacturing does, but it will have an impact around cognitive differentials, which is why the more pessimistic prediction is for a decline in whitecollar employment.

Noah Smith is to be found on the optimistic side of the debate (as usual), but while his just-so stories of neoliberal progress can grind your teeth, he has made a useful contribution by trying to explain how the mechanism might work during the transition. He starts by outlining the negative view: "humans will have nothing left to do, and we will become obsolete like horses. Human wages will drop below subsistence level, and the only way they’ll survive is on welfare, paid by the rich people who own all the AIs that do all the valuable work. But even long before we get to that final dystopia, this line of thinking predicts that human wages will drop quite a lot, since AI will squeeze human workers into a rapidly shrinking set of useful tasks." In answering this, Smith's core point is that AI is not limitless. It will be constrained by computing power and energy - i.e. material resources. This will raise the opportunity cost of using it for low-value tasks that could be done by humans. Relative opportunity cost means that it will still make sense for humans to do jobs and be well-paid for them while AI concentrates on the really important stuff.

One of the features of economics (which proves that it is a social science rather than a hard science) is that many of its theories cannot be proven. This is not simply about the crisis of replicability, which typically affects microeconomics, but the difficulty of conducting real-world empirical trials at the macroeconomic level (hence the delusion that micro-foundations can be used to extrapolate macro policy). However, there are a few theories that are demonstrably true because the global economy provides a reliable test environment. One obvious example is the gravity theory of trade, which posits that it is cheaper to trade with near neighbours than far-off countries due to relative transportation costs. Despite the best efforts of Brexiteers to claim that technology has abolished distance, this clearly still holds true. The relevant theory for Smith's intuition about AI is comparative advantage, which is also demonstrably true for reasons to do with differential endowments - e.g. it makes more sense to grow bananas in the Caribbean and oats in Scotland than vice versa, and likewise someone with a high IQ and someone with lots of muscle power will gravitate to different jobs best suited to their abilities. So AI can concentrate on curing cancer rather than trying to win the Nobel Prize for Literature. 

One issue with Smith's model is that AI will produce greater rates of growth in those areas that it addresses. This is partly due to the compounding effect of the technology itself, but also because the movement of humanity into services that cannot be cheaply automated will necessarily intensify the unbalanced growth between the two sectors. William Baumol noted the effect by which low-productivity sector wages rose because of the competition for labour by high-productivity sectors. But if the AI sector isn't competing with the human sector for labour, there is no reason to think that wages will be bidded up. In other words, AI may not make humans redundant but it may lead to further wage stagnation because of that unbalanced growth. The best argument against this is that some of the fruits of AI must be recycled into wages simply to keep the system from collapsing (Smith envisages this in the perjorative terms of "welfare", i.e. UBI, though this is functionally no different to in-work benefits or a minimum wage), but that then emphasises the issue of distribution which comparative advantage does not circumvent. That gal with the high IQ is likely earning more than the guy with the muscles because there are more people with the latter than the former so basic supply and demand leads to different wages.

So perhaps the dystopia of AI is not that we all lose our jobs but that the economy becomes even more unequal in its outcomes. The jobs that AI won't do will include both grunt work and highly-valued work, but at the aggregate level of the economy we may end with many more of the former relative to the latter than was previously the case. Another way of thinking about this is to note that wages (returns to labour) have declined while asset wealth (returns to capital) has increased since the 1970s without the input of AI. We've had plenty of wage stagnation, particularly since 2008. If there is a more fundamental and powerful force at work (let's call it neoliberalism) the question then becomes how will that force accommodate AI? It's a reasonable assumption that it will reinforce or even exacerbate the existing trend towards wealth inequality and wage stagnation. In theory AI could disrupt this trend, but then any number of technological breakthroughs since the 70s that were characterised as disruptive turned out to actually reinforce neoliberal political economy (that is in the real world version, rather than the textbook fantasy, e.g. the growth of monopoly), so there's little reason to think this episode will be any different. 

The error is to assume that AI will carry all before it, reconfiguring society in its own image, hence the hysterical colouring of much commentary, but technologies are moulded by society as much as they do the moulding. Marx noted that "The hand-mill gives you society with the feudal lord; the steam-mill society with the industrial capitalist", but the reality, as Karl Polanyi countered, is that society also gave us the Factory Acts. If AI really were disruptive of the fundamentals of the economic system, the counter-movement would focus on the protection of the key factors of production, such as land, labour and capital, but to date the focus has been on the enforcement of propriety around generative deepfakes and the threat to the traditional media's interpretation of truth. If this carries an echo of the counter-movement of the nineteenth century, it is more of Christian revivalism than social progressivism. What this suggests is that AI won't be anywhere near as impactful as either the optimists or pessimists predict, but it also suggests that its greatest impact may be to exacerbate and accelerate existing trends.

One of those trends, which can be directly linked to the way that neoliberalism has expanded the logic of the market into the sphere of the family, is falling birth rates. As Steve Randy Waldman notes, natality is one area where comparative advantage has to cede to human emotion. Though much of child-rearing is handed over to specialists, most obviously teachers, it remains essentially a form of "cottage production" that struggles under the neoliberal logic of competition: "The relationship between wealth and natality is nuanced. When wealth is certain, its increase is likely pronatal, as people can bank on greater resources to cover the burdens of childrearing. But when wealth is uncertain, when it is delivered via tournaments that deliver outsize rewards to winners, then increases in 'expected' (meaning average) wealth likely translate to decreases in natality. The bigger the prize, the greater the cost of anything that will reduce your chance of winning." There should be no surprise that the current iteration of the Californian Ideology emphasises both the dramatic potential of AI and the necessity of pronatalism.

My guess is that AI won't become a general purpose technology (GPT) on a par with electricity or the Internet. This is because it will be too expensive, and that in turn is because there is no upper limit to its ambition, even if there are hard limits in the form of silicon and energy. You only need so much power and bandwith for most tasks, so GPTs like electricity and datacoms only need to be good enough. We already have good-enough AI, but it's fruits are underwhelming. Consequently, AI resources will increasingly be focused in specialist areas where its potential is greatest, e.g. more medical imaging rather than chasing the dream of fully autonomous vehicles. Noah Smith is right in his emphasis on comparative advantage, but as a neoliberal he assumes that the invisible hand of the market will optimally decide on how to allocate those scarce AI resources, rather than it being a political decision that will be taken to reinforce neoliberalism itself. Wealth inequality will continue to grow, even if AI companies replace oil corporations and technology manufacturers on the stock exchange, and the symptoms of that inequality, notably falling birth rates, will continue to elicit angst and ineffective amelioration.

Stalemate in Russia

The death of Alexei Navalny has been interpreted as evidence that Russia has once more entered a stalemate. This doesn't refer to the minimal movement of the frontline in Ukraine but to the belief that Russian society is once more stuck, much as it was in the Brezhnev years, and that all anyone, inside or outside the country, can hope for is Putin's inevitable demise by natural or unnatural causes. The current gloomy predictions, centred on this weekend's presidential election, are that he isn't going anywhere soon. He has stablised the economy on a war-footing, international sanctions have proved ineffective in bringing social pressure to bear on the military campaign, and weariness in the West means that Ukraine will face a frozen conflict for years to come if not pressure to negotiate the partial surrender of invaded territory. I have no particular insight into the military situation, though I would note that my simplistic assessment that Russia hasn't got the materiel to take Kiev and Ukraine hasn't got the mapower to liberate the Donbass and Crimea remains sound, if hardly original. What I'm more interested in is the changing perception in the West of Russia, that "riddle wrapped in a mystery inside an enigma", as Winston Churchill patronisingly put it. 

The trigger for this line of thought was an article in Eurozine by Kirill Rogov - Russia's Future and the War - published in the immediate aftermath of Navalny's death. The heart of Rogov's argument is the oscillation between pro-European and anti-European sentiment, with Navalny presented as an ikon of the former: "This regular pendulum movement can be seen throughout Russian history – periods of pro-European modernization, followed by periods when the anti-European agenda is prevalent. The rapid adaptation of European models and practices is then replaced by hostility to the European ideal and efforts to replace it with Russia’s ‘national’ or even ‘civilizational’ identity." There are two problems here. One is the claim that "As the face of European idea in Russia, Navalny incorporated everything that the forces of revanchism in the country oppose." Even the most superficial review of Navalny's history reveals a man who was happy to play the Russian chauvinist when it suited him. Like many Eastern European politicians (and many Western European ones), he moved seamelessly between liberalism, nationalism and Islamophobia. As Jeremy Morris noted, "the anti-Putin contains many ingredients of Putin himself".

The second, and bigger, problem is the idea that Russia is bipolar. Some of this is simply recycling of old tropes about Russia's propensity for suffering and its tendency towards manic depression, which owed as much to the long shadow of serfdom and the knout as to the tortured speculations of Tolstoy and Dostoevsky. The modern equivalents are the trope of alcoholism as an expression of social ennui and, topically, the accusation of fatalism in the face of political corruption. But there is an obvious inconsistency in the idea that Russia is governed both by a persistent structure of feeling (the "Russian soul") and by a tendency towards a periodic volte-face centred on its attitude towards Europe and its associated "modernisation". Rogov's attempt to prove the reality of the latter leads to some questionable history: "The Bolshevik project in the twentieth century was probably the longest period of Russian anti-Europeanism. It was certainly the most extensive and bloody attempt to establish in Russia a system of institutions and values completely opposed to European ones. However, after the Soviet regime entered the phase of its demobilization in 1960s, it was only a matter of decades before a pro-European elite had formed in the Soviet Union, leading to an anti-communist and pro-western revolution."

As any fule kno', the Boshevik project was consciously pro-European and modernising, hence the belief that revolution in Russia might trigger a general proletarian uprising throughout the continent. The Comintern was focused on generalising a Marxist analysis of history, not on emphasising Russian exceptionalism. Marx and Engels themselves contributed to the debate in the late-nineteenth century on whether Russia could proceed directly from the "primitive communism" of its agrarian base to socialism. They said no (the proletarian phase was necessary), but the key points to draw out here are that the Russian left was looking to European models and Marx and Engels were insisting that revolution in Russia would require first revolution in the West. This was finessed by Lenin as an alliance of workers and peasants, and would eventually give way, after the failure of revolutions in Germany and Hungary, to Stalin's "socialism in one country", but at no point did this entail a rejection of Europe. Even at its most extreme interpretation in the 1930s, Soviet Communism remain infatuated with European ideas of industrial modernity, scientific rationality and the appreciation of high culture (if not its contemporary expressions).

It's perfectly reasonable to characterise Russian history as one of warmer and cooler relations with the West - nobody would claim that today's froideur over Ukraine is the same as the sympathy shown towards Putin during the Second Chechen War. But the stronger claim being made is that these changes in temperature can be sourced to a reaction by Russia - the West being blameless (the idea that Putin was incited to invade Ukraine by the expansion of NATO is a version of this, albeit one that points the finger at Western carelessness as much as Russian pique). As Rogov puts it, "Periods of pro-European orientation in Russia often coincide with – and are stimulated by – signs of the success of Europe and the European project. ... when Europe reached a trajectory of sustainable growth at the end of the twentieth century, democratizing citizens’ access to the benefits of this growth by creating a mass consumer society, while at the same time making a breakthrough in European integration, it provoked the crisis and collapse of the totalitarian anti-European empire in the East." 

If this dynamic were really at work, you'd have to ask why the USSR didn't collapse in the 1960s when the signs of the success of the European project were visible to everyone (consider the UK's repeated requests for accession to the EEC) and at a time that Rogov claims the Soviet regime was "demobilizing". He explains the delay as the gradual formation of a pro-European elite, as if Khrushchev inherited a backwater that had to be slowly opened to the West in the manner of Peter the Great, rather than a major power with broad international influence and two decades of close political, economic and cultural involvement with half the European continent. And can we really say that the 1980s and 90s in Western Europe was a period that "democratized citizens' access to the benefits of growth"? That phrase echoes the rhetoric of Thatcherism, but it doesn't chime with popular experience during an era of privatisation and rising inequality. The benefits of growth since 1979 have not been equally shared and the neoliberal political economy that has dominated Western Europe these last 40 years cannot be plausibly described in terms of greater democratisation.

The simple truth is that the bipolar nature of Russia reflects a lasting ambivalence in the West about how the country should be treated, rather than something innate to Russian society. Insofar as Russians do resent the West, it relates to that ambivalence: the unwillingness to accord the country equal respect and the sense that it can never quite qualify for membership of the club. That ambivalence ultimately reflects Russia's Eurasian position, hence the disproportionate focus in the West on its relations with China: the worry that they might ally and so present a threat to the US hegemony in which Western Europe has invested so much. Such an alliance would probably have little impact on geopolitics, contrary to the "heartland" theory of Halford Mackinder that Rogov alludes to with talk of Russia as part of the "Greater European Periphery". That 77% of Russia's population is west of the Urals, and that much of the other 23% were moved east by diktat, doesn't lessen the suspicion in the West that the country is essentially an Asiatic horde waiting to descend on European civilisation, hence the quagmire in Ukraine is easily translated into a clear and present danger for the Baltics and even Poland.

Rogov's analysis is hopeful in the sense that he thinks the pendulum will inevitably swing back: "Breaking off economic ties with Europe so abruptly and maintaining hostility towards Europe at such a high degree would produce strains on society and very strict forms of authoritarian control. After some time, when this control proves too expensive, or for other economic or political factors, prevailing opinion will turn back in favour of Europe." This strikes me as naive on two counts. First, it imagines that Russian politics is always and only ever about Europe and attitudes towards it, which is obviously ridiculous. And second, it implicitly identifies public opinion with a narrow band of the middle-class: the liberal intelligentsia that admires an idealised Europe as a way of avoiding having to think about Russia in domestic terms - a stratum that Rogov himself represents. As Tony Wood pointed out in Russia Without Putin, what ultimately matters is the post-Soviet system of capitalism, of which Putin is as much a prisoner as anyone in a Siberian labour camp. 

That system has functioned well enough in the interests of the elite, and even the liberal intelligentsia. It has been coming under pressure in recent years, and the Ukraine misadventure can certainly be tied back to that fact and the regime's need for positive achievements, but it has yet to produce a coherent domestic opposition to that system, let alone a credible challenger to Putin. Alexei Navalny's narrow focus on elite corruption meant that the wider economic system never really came into view politically, while his personalised approach to campaigning presented too many in Russian society with the excuse of preferring the devil (and relative stability) they knew. As Wood put it in 2020: "Russia's imitation democracy is capable of reproducing itself whether Putin is in charge or not. It if is to be replaced by something substantively different, an alternative to the system as a whole will have to coalesce - not just an anti-Putin who can take the current president's place." Insofar as Russia is once more in a stalemate, it is because of the failure to develop an anti-capitalist opposition.

The Coming Tide

Barring the unforseen, Wednesday's budget is probably the last major political initiative we'll see prior to the calling of the general election (an Autumn statement, if it happens first, is likely to be more of the same). As such, it told us little we didn't already know about the leading parties: that the Tories will emphasise their commitment to lower taxes, and that Labour will offer little in the way of differentiation. Further austerity is therefore baked-in. The decision to abolish (i.e. rebadge) non-dom tax status was as heavily trailed as the reduction in NICs. Yet Labour appear to have been wrong-footed, having no alternative up their collective sleeve for the former and quick to support the latter as part of their own commitment to lower taxes on "hardworking families". The increase in child benefit was the one (mild) surprise, but even that made perfect sense as a gesture towards a pivotal demographic inclined to turn out at the polls. Most of the benefit will accrue to higher income households and will do little to offset the cost inflation suffered by those on lower incomes.

The predictability of the budget announcement makes Rishi Sunak's hyperbolic Downing Street statement on the Friday after the Rochdale by-election seem even more of an oddity in retrospect than it appeared at the time. He clearly wasn't teeing-up some major economic or foreign policy initiative, but equally the claim of democracy in existential peril hasn't heralded any major new policies in respect of policing, just a demand that the Met in particular gets tougher. In reality, the erosion of the rights of protest has been an incremental process since the early-80s, something done as a matter of bureaucratic routine rather than a novel initiative that needs to be announced from a lectern outside Number 10. The revelation that the Prevent scheme now considers socialism and anti-fascism to be warning signs of potential terrorism is the latest fruit of that process, and also a clear sign that the Home Office is confident that an incoming government under Keir Starmer isn't going to raise an eyebrow at a definition that automatically places the left of the Labour Party under suspicion. 

Sunak's speech has been interpreted as a diversion from the Conservative Party's Islamophobia, but that strikes me as an overly negative motivation. The Prime Minister has never given the impression of being a man of strong beliefs, or of being particularly concerned about the party's public image, so it may make more sense to view this simply as an attempt to shore up support by appealing to social reactionaries and the Jewish community. But there are two problems with that. First, those are demographics that the Tories already enjoy dominance among, so appealing to them in this way seems unnecessary, unless the party's internal polls are predicting something truly dire. The second problem is that Keir Starmer's alacrity in supporting the Prime Minister's authoritarian impulse means this isn't a dividing line between the parties. Some Labour supporters will see this as evidence of Starmer's astuteness in avoiding a trap, though I think he was merely being himself. But again, the idea that outbidding Labour on the restraint of protest will be the key issue at the polls seems unlikely.

Perhaps the simplest explanation is that Sunak wants to remind us he is still Prime Minister, there being few other issues on which he is able to command supportive media attention. In other words, this is another symptom of a government that has run out of ideas and has yet to convince itself that it knows how to avoid the coming electoral tide. Attention switched this week to Jeremy Hunt, and we shouldn't under-estimate the possibility that Sunak's statement was simply intended to pre-emptively distract from the inevitable media attention given to the Chancellor. If there is one thing we have learnt over the last decade it is just how self-regarding and bitchy Tory politicians are. Hunt's budget sought to cement the idea that the Tories are the only party who can be relied on to deliver tax cuts, even though the popular mood is very much in favour of increasing public spending after almost a decade and a half of austerity. You could see this as a last desperate attempt to make the political weather, but I think it's more a case of the Tories going down swinging, an approach apparently alien to Labour politicians (if only Gordon Brown had had the balls to abolish the House of Lords in 2009).

This determination to unashamedly do what Tories do should be borne in mind when we consider the growing body of commentary on the future of the Conservative Party. This can be broadly divided between the psephological focus of the moment and the longer-term analysis of the Tories as a historical and sociological force. For the first, there has been much heated talk of "meltdown" and "wipeout". In a first-past-the-post system this is conceivable: there is an inflexion point at which falling levels of support lead to an exponential increase in seats lost (i.e. getting into what might be called Lib Dem territory in terms of national levels of votes-per-seat). However, opinion polls and by-elections are rarely wholly reliable guides to general elections, and we must never under-estimate the fact that conservative voters are by temperament conservative and so stick with the devil they know. The second approach has tended to focus on the long-term demographic and material challenges for the party: in short, that they've lost the young (actually all cohorts up to about 60) and that their dominance among the old means their base will gradually shrink. The traditional transmission of youthful liberals into middle-aged conservatives appears to have broken down under the weight of unaffordable housing and rising income inequality. 

In this context, the "culture wars" and the associated authoritarian turn against youthful protest are seen as an attempt to motivate that elderly base and retain the social reactionary vote detached from Labour in the so-called "Red Wall" seats of the 2019 general election. There are a number of problems with this theory, not least whether the Red Wall even exists independent of Brexit and why the only people in small Midlands and Northern towns who vote are apparently either OAPs or crypto-Fascists. But if there is one thing we know about the political commentariat it is that it remains endlessly fascinated by the far-right, hence the outsize attention given in recent weeks to Liz Truss's attempt to carve out a speaking career in America, the anti-Enlightenment New Conservatives, and the ever-present Nigel Farage. While the media's intermittent focus on the left is always about preserving the Parliamentary Labour Party's ideological conservatism, its focus on the far-right is about normalising the idea that the Tories are a genuinely broad church and that radical shifts are natural and welcome (consider Chamberlain to Churchill, or Heath to Thatcher).

One product of this broad church assessment is the idea that the Conservative Party is an unstable alliance between conservatism and liberalism, hence it is apparently at risk of being "torn apart" by someone as intellectually shallow as Suella Braverman. But the party's actual raison d'etre is simply a defence of hierarchy, which makes it inherently stable. The default governing mode, which we are experiencing at the moment, is do-nothing because doing nothing preserves existing hierarchies. When the party has shifted to an activist mode, as in its adoption of neoliberalism in the 1970s, that has invariably been an attempt to restore hierarchy and its associated privileges. Thatcher's "Let managers manage" sought to restore capitalist power in the workplace while policies such as privatisation and right-to-buy sought to restore the privileges of property ownership (that ex-council houses ended up in the hands of petty landlords was a feature, not a bug).

Likewise, the idea that Labour is united by a common cause but divided by strategy misunderstands that socialism seeks to supersede liberalism, which is why the latter seeks to restrain and impede the former. This idea also ignores the structural imperatives to preserve hierarchies (consider the motivations and behaviours of the PLP). The motor of UK politics since 1832 has always been liberal "reformism", and the practical application of that has always been the creation of novel forms of governance and representation that preserve existing hierarchies while accommodating limited "progress". For example, nationalisation took industries into public ownership but largely retained and reinforced the existing management, which meant moves towards workers' control were stymied and the prospect of future privatisation preserved. Likewise, the return of those nationalised industries to private ownership has seen not only non-exec sinecures for helpful ex-politicians but the growth of a parallel bureaucracy of market regulation that shows a marked continuity with the QUANGOs of old.

The Conservative Party does not face an existential crisis, any more than democracy itself does, however both the party and our political system are subject to secular trends and material factors that will inevitably alter them. The Tories are facing a period out of office because the model of transferring economic control of public services to privileged private interests has finally hit the buffers. The crass profiteering around Covid contracts was like stripping an already emptied shop of its shelving. To paraphrase the lady, "The problem with Thatcherism is that you eventually run out of state resources to loot". The state has not shrunk, because it can't, and the rents extracted from it are now too high to bear, a point the public have got if the Westminster parties haven't. The challenge to democracy is that both the Conservatives and Labour remain in denial about the death of Thatcherism, despite standing amidst the mounting wreckage of the financial crash, auserity, Brexit and the pandemic. The palpable lack of enthusiasm for Labour, and the likelihood that enough of us will wearily troop to the polls to consign the Tories to temporary electoral oblivion, is a reflection of that sea-change.