Thursday, 28 May 2015

Executive Competence

Simon Wren-Lewis points out that one major political party in the recent general election was vocally anti-austerity, pro-immigration and pro-welfare - and they won big. The party, of course, was the SNP. While there are obviously other factors at play, this shows that a "leftish" stance in these three policy areas is no impediment to popularity. Assuming that Scottish exceptionalism is a myth, and that social attitudes are not so very different in Coatbridge and Chipping Norton, this suggests that Labour's electoral problem is less about left-versus-right than coherence and plausibility. What Blairites like Liz Kendall appear to have forgotten is that the popularity of New Labour in 1997 was not about being pro-business (which is not the same as neutralising the charge of being "anti-business"), but in offering the hope of greater competence and probity after years of ineptitude and sleaze. Lest we forget, aspiration was defined as a better education for all, not free schools for the sharp-elbowed.

Most people have no idea how the economy works, not because they're thick, but because they lack the interest, which in turn reflects the narrow focus of their own experience. Related to this, we instinctively understand microeconomics, but have to reason through the counterintuitive nature of much macroeconomics (e.g. the "paradox of thrift" is not that difficult to understand, but why would you even make the effort?). The result is that many of us rely on anecdata and media expressions of "confidence". The latter privileges not only business leaders, per Michal Kalecki, but media owners who can orchestrate the mood music. Structural factors such as investment and productivity are poorly understood and treated superficially in public debate. Instead, the media bias towards the human-scale of small businesses and commuters. In this environment, opinion on whether a party can be "trusted with the economy" is usually a proxy for wider executive competence rather than a judgement on fiscal or monetary policy, let alone industrial or commercial policy.

The classic modern example of this is the Tory victory in the April 1992 general election. This came on the back of the 1990-92 recession, which in turn had revealed the hubris of the Lawson Boom of the late 80s and undermined the claim that the UK economy had been transformed for the better under Margaret Thatcher. Despite the evidence of both long-term and short-term failure in the management of the economy, the Tories were rewarded with a majority of 21 seats. Though Labour had been ahead in the polls since 1989, its lead was slender during the period after Major succeeded Thatcher in November 1990, indicating that popular attitudes were little influenced by actual economic performance. All this changed after Black Wednesday in September 1992, when the UK was forced out of the European Exchange Rate Mechanism and the government was left looking incompetent. Not only did Labour quickly restore its lead in the polls, but the margin steadily grew, reaching double figures in 1993. It stayed that way until 1997.

Objectively, the Tory party is wholly undeserving of a reputation for economic competence. If you divide the great disasters of the last 100 years between those occasions when the government shot itself in the foot and those when it was the victim of external events, the greatest self-inflicted wounds were the result of foolhardy decisions by Tories, notably Churchill's return to the Gold Standard in 1925 and the ERM debacle. And those are just the uncontentious ones. Many would also cite Thatcher's monetarist experiment in the early 80s and the moratorium on council house-building, which, together with financial deregulation, condemned us to the structural weaknesses that are all too evident today. Similarly, Osborne and Cameron's "talking down" of the economy in 2010 ("we could end up like Greece") and advocacy of austerity ("expansionary fiscal contraction") was mendacious, negligent and wilfully stupid.

Labour has never been guilty of a policy decision in government as deluded or as damaging, which explains why many of the examples of Labour's incompetence turn out to be myths, such as Jim Callaghan's "Crisis, what crisis?" quote and Gordon Brown selling-off our gold reserves too cheaply. Labour's historic misfortune was to be in power during the two great global recessions, in 1929 and 2008. Its timid adherence to economic orthodoxy contributed to depression on the first occasion, while its flexibility and initiative were instrumental in stabilising the global situation during the second. Ironically, it was then undone again by its timidity in the aftermath, failing to adequately challenge the lurch to austerity in 2009-10. In contrast, David Cameron (Norman Lamont's bag-carrier at the time of Black Wednesday) appears to have absorbed the lesson of 1992 only too well, using the flimsiest of props (Liam Byrne's "no money" note) to bang home the message that Labour lacked executive competence. It's crass, but it works.

But perhaps a more robust defence of fiscal stimulus in 2010 by Labour would not have made any difference. The evidence suggests that the electorate punishes whoever was steering at the time, regardless of whether the crash was due to drunk-driving or another vehicle. It is the impression of not being in control that seems to matter most, hence the terminal damage of Black Wednesday. There are paradoxes aplenty. The neoliberal premise was that only by following a global orthodoxy could a government avoid accidents, but this orthodoxy demanded the ceding of much government control over the economy, which thereby increased the likelihood that an accident would be politically fatal. Gordon Brown's career in government was bookended by acts of letting go (the independence of the Bank of England in 1997) and intervention (the Keynsian resurgence of 2008-9), but it was the former that communicated the greater sense of control to the public.

The lesson for Labour is that a reputation for economic competence does not depend on cosying-up to business leaders or developing detailed plans for long term productivity improvements, even though both of these may have tactical value in occupying media bandwidth as well as strategic significance. The crucial factor is to avoid being on duty when the ship hits an iceberg. If you're off-duty, your priority is to point the finger and shout loudly about the incompetence of the other guy, with minimal regard to the facts. If Cameron and Osborne knew this, then I suspect that messrs Brown, Balls and Miliband did too. Was the intellectual lassitude of Labour after 2010 the result of this learned helplessness? Was the focus on the "double-dip" recession in 2012 evidence that Labour was waiting for the Tories to screw up, and was the "35% strategy" (assuming there actually was one) an acceptance from 2013 that a game-changing cock-up wasn't likely before the end of the parliament?

What this reading suggests is that Labour's fortunes may well revive simply because the Tories are likely to screw up, and because there isn't a credible alternative government beyond Labour. History tells us that the Conservative Party is prone to cavalier misjudgements, while Labour (absent external events) is cautious and risk-averse. George Osborne will not be able to blame future economic performance on the last Labour government (though I'm sure he'll try), while even the EU is no longer a credible excuse. The danger for Labour is that we've been here before, but the period in question was not the early 90s but the early 80s, when the Tories were able to exploit a war in the South Atlantic to build an unassailable poll lead despite a record of economic mismanagement that stood comparison with the early 1930s. Following Marx's maxim, "the first time as tragedy, the second time as farce", my money's on a border dispute over Berwick-upon-Tweed.


  1. I think an awful lot of voting stems from people positioning themselves against others, rather than people choosing parties according to concepts like 'competence'. I think events were made easier for Blair not just because Tory 'competence' (on wider matters than just the economy) was shattered, but because after Black Wednesday the economy was recovering by conventional measures, and because immigration was not an issue. Thus Blair could sell himself without having to threaten the privileges of anyone apart from the utility companies, and could even display a pro-EU attitude as something of an advantage.
    The era since the 'crash', on the other hand, has seen a constant attack from the right (including the Lib Dems since 2010) on the worst-off , with the intention of dividing working people as much as possible and keeping people in an attitude of every man for himself. Given that the 'structural trends' and contradictions of the economy only seem to be worsening, the Tories have already decided to show their glee in continuing their policies, with the sell-off of housing association property showing the way. Unfortunately, this style of governing has proved to be successful for them, and I can't see Labour clawing their way back much unless they create some kind of attitude of collective endeavour. I can only see them spending five years trying to do the opposite.

    1. Some voting is driven by an active dislike, but I don't think most people actually feel that strongly. Many people vote out of a sense of civic duty, which means they are often expressing lukewarm support at best, or even trying to second guess the popular mood (not everyone votes rationally in their own interests, and some just want to be on the winning side). For them, nebulous ideas like competence do matter.

    2. I actually think that the Tory reputation for competence, whether it affects voting or not, is driven by old-fashioned conservatism, or deference to the elite. This seems to have become more important again as the Tories have become posher since the Thatcher/Major era, and crucial in the ridiculous advantage in popularity that Cameron had over Ed Miliband. As you said, many people vote because it is expected of them and, in the absence of any other positive motivation, have often sided with their 'natural betters'. Working-class Toryism still has plenty of legs in it yet.

      In that lies the essential failure of 'New Labour'. I think Blair was trying to create an alternative elite based on technocratic managerialism, with the idea of 'what works' being paramount. Given that 'what works' is as nebulous an idea as 'competence', this was always going to be treading on thin ice. When the illusion of control is stripped away (the financial crisis) and issues that are judged more on vague perception and panic than evidence achieve prominence (immigration), then there is no other sense of loyalty or commitment that will hold on to voters other than tradition and fear of the enemy. The ironic thing has been that the people who have stayed loyal to Labour from 1992 to 2015 have been the kind of core voters that the Blairites have held in contempt.

    3. I think you're right about Blair's aspiration towards a technocratic elite, but the illusion of control was being stripped away well ahead of 2008: arguably as early as 2001 (the public dissastisfaction with NHS funding), and certainly by the Iraq debacle of 2003. The problem with neoliberal managerialism is that it must pretend that all problems are tractable, because problem-solving is its USP. This bumps up against reality.

      As you say, traditional conservatism can claim authority on the basis of "leave well alone" - i.e. the pessimistic acceptance that much is intractable ("the poor are always with us" etc) and the best we can do is not make it any worse - however it is notable how much the current Tory party have been seduced by the same neoliberal delusion: witness the "Maosim" of Gove and IDS in the last government, and the aggressive reforms outlined in the Queen's Speech this week.

    4. Oh, I'm not suggesting that the current Tories represent traditional conservatism, just that some of electorate still perceive them that way, an image that has been enhanced by the presence of so many Old Etonians at the top level of the party. The strong showing of the Tories among the elderly is undoubtedly due to the persistence of deferential thinking and the fear of change.

  2. You haven't mentioned in your analysis the chance that the Tory Party may split over Europe during 2017 or after. It's possibly wishful thinking but I have high hopes for this scenario. Cameron gets a fig leaf from Europe, they win the EU referendum (stay in), the Tory right cry traitor and march off to join UKip or even another right or centre right party. Labour governs till 2050.

    Another issue. I'm thinking of registering as supporter of Labour to get a vote in the leadership race. Whats holding me back is I'm not a joiner and the £3 fee is a pint in a pub where I live (not in London). Can you recommend a candidate? There are all kinds of fractions and groups in the Labour party that I know nothing of. The press don't go into details just concentrate on personalities.

    I thought if in doubt go for Yvette Cooper, probably the sharpest knife in the draw. My doubts there was the Ed Balls factor. If Ed Balls turns up on Strictly Come Dancing he may yet make the transition to national treasure and even be a plus factor for Yvette. Stranger things have happened.

    Thanks in advance for any advice.

    1. I doubt the Tory party will split over the EU, or at least not in a way that damages its electoral prospects. Splits tend to occur over binary issues - home rule for Ireland, tariff reform etc - not ones where there is a range of possible outcomes.
      There is a small core of nutters for whom it is a point of principle, but for most on the Tory right it is simply a matter of maximising advantage: the spirit of this revanche derives from Thatcher's "rebate", not the 1975 decision. The pivotal issue will be preserving the City's privileges. If this is achieved, everything else (sovereignty, red tape, benefits) can be finessed.

      I can't really recommend any of the Labour leadership candidates: they're all much of a muchness. Burnham needs to grow a backbone (see his stint as Health Secretary), Cooper is a bigger thug than hubby, Kendall is a parody Blairite, and Creagh is a careerist blank (I've met her). If I had a vote, I'd probably plump for Burnham, just because he gave a shit about Hillsborough.

      That's why I think they should leave Harman as interim and defer a decision till after the EU referendum dust settles in 2017. Labour needs to focus now on rebuilding a popular party from the ground up, both to evolve a credible narrative and establish the resources needed to get the vote out in future, and to provide organisational resilience. The Tory plan to "reform" the union levy is a clear and present danger.

    2. I suspect the EU referendum will benefit the Tories by drawing a line under the issue, and I think they will be able to adapt to the result either way. Given that the question is effectively going to be whether to approve the erosion of rights and benefits that Cameron negotiates away or to leave the EU altogether, the issue is basically one of Tories versus UKIP and merely demonstrates how powerless the rest of us are.

  3. Does the timing of the EU referendum matter? Assume Gideon goes again for a fiscal repression expansion strategy timed around the electoral cycle. Should the Tories go for May 16 or May 17 for the vote?

    1. The Tories are keen to accelerate the vote because they realise that any delay will be damaging to inward investment. UK growth looks like it's heading down again, while the EU looks like it is starting to motor (the resolution of the Greece crisis might turbo-boost this trend). I don't think that domestic fiscal policy has much bearing on the timing.

  4. Herbie Kills Children31 May 2015 at 12:34

    I think you are fetishising elections and not focusing enough on peoples everyday mentality.

    Let us be sober for a moment.

    There are many intersections that decide an individuals vote, it is a product of background, history, culture, personal circumstances etc etc. But if we were to put a weighting on the various factors then the influence of the media would figure very highly for certain sections of the population.

    Therefore many people are simply products of the tabloid press and when all said and done are pretty much brainwashed.

    When we say we are free thinking individuals we are indulging in a form of self delusion. I think to break from self delusion is a difficult thing to achieve but you can only start by admitting your self delusion.

    I will start the session, my name is Herbie and I am brainwashed.