Thursday, 20 July 2017

From Jupiter to Mars

The resignation of the head of the French military over some relatively modest budget cuts has been greeted by Emmanuel Macron's global fan club as evidence of a firm hand: "I'm the boss". This display of imperium sits alongside the "elegance and discretion" that the French President apparently showed in his recent hosting of Donald Trump on Bastille Day, an event long on symbolism and handshakes but short on policy substance. Both of these pieces of theatre display the "Jupiterian" style that Macron had previously demanded of the presidency, a term that has been widely interpreted to mean a renewed moral seriousness as much as grandeur (le président profond). But it's a word that should also raise an eyebrow, not just for its hint of megalomania but because Jupiter is actually the codename of the bunker at the Élysée Palace from which the President would launch France's nuclear weapons (or "thunderbolts", as we should presumably now call them). In fact, this isn't a novel coinage in French political discourse but a term that was applied to previous presidents, notably Charles De Gaulle and Francois Mitterrand, both of whom are seen as epitomes by Macron, though it's worth emphasising that this earlier usage was both admiring and facetious.

The term "Jupiterian" is ambiguous because it can refer either to a president who enjoys a supportive Legislative Assembly, as Macron does, or one who is obliged to cohabit with a Prime Minister representing a different party, as Mitterrand did on two separate occasions. Jupiter may be aloof because he commands all he surveys and can let the lesser gods execute his will, or he may be aloof because he has been excluded from domestic policy (the French President retains control of foreign and military affairs in a cohabitation). One reason for the apparently friendly relations of Macron and Trump may be the shared interest in how to get your way with a notionally supportive legislature. Just as Trump has discovered that he knows no more about the Republican Party's internal dynamics than he does about the intricacies of healthcare, so Macron may well be wondering how reliable his neophyte La République En Marche deputies will be once his reform programme faces concerted opposition. Given that REM remains as much a bourgeois social movement as a disciplined party machine, and thus prey to special interests and eccentricity as much as factionalism, he has reason to be cautious.

It is easy to laugh at Macron's monarchical pretensions, but this is clearly a considered strategy rather than a personal foible. The aim is presumably to elevate neoliberal reform ("Le Projet") above the political and ideological fray and associate it with French identity ("Nos ancêtres les gaulois étaient des entrepreneurs de le soi"). He must make the project hegemonic to achieve legislative results. Though the "liberal international" are more likely to compare Macron to Barack Obama or Justin Trudeau, the more relevant comparison is with the now somewhat unfashionable Tony Blair in terms of totalising ambition and vulnerability to misplaced certainty. Where they differ is in momentum. Blair not only had 3 years to make the project normative but was building on foundations laid over the preceding decade by Neil Kinnock and John Smith as much as Margaret Thatcher. Macron achieved much the same result in under 2 years having first written off the utility of the Parti Socialiste and against the background of numerous false starts under Chirac, Sarkozy and Hollande. What this suggests is that he considers a performative urgency as fundamental to the success of his presidency. In Napoleonic terms (and he clearly does think this way), he is hoping for a rapid Italian campaign.

While some French presidents have seen international relations as a compensation for domestic weakness, Macron appears to see it as a field of exemplary action (just as Blair enthusiastically did and Obama pointedly didn't). In this context the blunt appraisals of France's role in Algeria (a "crime against humanity") and the Holocaust (specifically the state's part in the Velodrome d'Hiver roundup) are intended to echo the Gaullist ideal of the President as the teller of home truths rather than a distant monarch, even though this means challenging Gaullist orthodoxy (Algeria was a tragedy, Vichy was not France). In this he is aided by the international media's tendency to treat him as the inheritor of the Enlightenment. This is ironic not only because France put "bad faith" at the centre of twentieth century philosophy (and continues to exhibit it in politics, to judge by Mélenchon's comments on Vel d'Hiv), but because the country was central to the creation of liberal interventionism, which has been anything but enlightened in practice. Interfering in the affairs of others is assumed to have emerged during the 19th century as a characteristic of British foreign policy, with its roots in the campaign to end the slave trade, but the French Revolutionary Wars saw the beginning of both internationalism (the attempt to spread specific political practices) and intervention (the attempt to reverse specific political developments), with the First Coalition against France being the original coalition of the willing.

This might appear an odd claim given that it sought to restore Louis XVI and was mostly made up of monarchies considered even more backward than the ancien regime, but it is important to remember that liberal intervention has usually sought the restoration of a status quo ante. In other words, it is generally conservative in practice even when it adopts the rhetoric of progress. Given the dissonance this gives rise to, there is a tendency to focus the justification for intervention on the opponent's bad behaviour. This also applies in the domestic sphere. Neoliberal labour and welfare reforms are always predicated in part on the assumed failings of workers and benefit recipients, even when these are rationalised as the byproduct of a system of perverse incentives rather than moral delinquency. Macron gave an example of how these tropes can overlap in his thoughtless comments on developing nations in Africa when he talked of the need for "a fight against corruption, a fight for good governance, a successful demographic transition when countries today have seven or eight children per woman". The role of France in facilitating corruption and undermining governance in Africa was lost in the ensuing fuss over the "careless breeders" slur.

Writing a few months before the fall of the Berlin Wall, Linda Colley noted (in a June 1989 review of Simon Schama's Citizens and William Doyle's The Oxford History of the French Revolution) that "Before 1789, most Britons had regarded most Frenchmen as sad and suffering creatures oppressed by Catholic priests, exorbitant tax-collectors, and absolute and irresponsible monarchs. So initially many Britons felt only condescending sympathy when the Bastille was stormed. ... But as the Revolution grew in scale and subversion, it became more important for conservatives to undermine this easy sympathy. They did so with stunning success by shifting the public’s attention from the causes of the Revolution to its more unpleasant and violent manifestations. In particular, from Edmund Burke’s Reflections on the Revolution in France onwards, conservatives employed stories of actual or invented human suffering (Marie Antoinette’s plight, for instance) to undermine enthusiasm for any political or social virtues the Revolution might possess". Colley's point was that this approach was still common, though more as a result of the 1970s French revisionist school of history that sought to establish a genealogy between the Terror and Stalin (and even the Holocaust, which echoes in Macron's "daring" on the subject), rather than any particular British perspective.

Within France, this ideological purpose was combined with a desire to reassert the global significance of the country after the Gaullist revival ran out of steam under the twin pressures of post-1973 economic angst and post-soixante-huitard cultural scepticism. A key part of the revisionist case was the claim that ancien regime France, far from being corrupt and inefficient, was actually highly developed and a leader in state-sponsored industrialisation. There is some truth in this (e.g. textiles and armaments), though it requires ignoring the backwardness of French agriculture (food shortages were an important factor in the years leading to 1789), but it is also clear that the argument was exaggerated to suggest that a liberal state could have been achieved without violence (though it wasn't in Britain) and to undermine the Marxist reading of revolution as a superstructural crisis driven by an emergent bourgeoisie where class violence was unavoidable. One flaw in the revisionist argument is the systemic violence of the ancien regime, not just in its apparatus of social control, memorably detailed by Michel Foucault, but in its belligerence towards other countries (France was Europe's leading "rogue state" in the eighteenth century). The political order was not going to go down without a fight.

Macron's project is neoliberal, but with the strong statist bias that is a characteristic of the French political tradition. Many of his centrist supporters outside the country initially thought that he heralded a new phase of liberalism (a "restoration" after the madness of Brexit and Trump), which is why some are distressed by the early signs of authoritarianism. But this is to ignore the sense within France itself that the country has been treading water since the Mitterrand years, which in turn explains some of the attraction of Macron's sense of urgency: France must be forced rapidly through its neoliberal phase if it is to first revive its sense of national purpose and optimism (the Britpop tribute at the recent France-England friendly was revealing) and then provide the motive force for a rejuvenated European Union (in this view, Germany is insufficiently inspiring ). Though the engagement of Trump and Putin recalls the florid but insubstantial "amity" of an earlier diplomatic age, the audience for these rituals is primarily domestic, not international. The aim is to restore the presidency as the irresistible force of French politics.

What Macron is promising is a state-led revolution whose template is the implied counterfactual of that 70s-era revisionist history: an enlightened technocracy delivers a programme of economic and social liberalism, avoiding violence through high seriousness and civic patriotism, while acting as a moral exemplar for all the nations of the earth. The problem is that economic liberalism promotes violence: the "social murder" that John McDonnell was criticised for explicitly naming recently. Macron may acknowledge the mistakes of the state - which is to say, the errors of less capable men - but he will not accept that the violence of the state arises inescapably from the needs of capitalism. That said, he may prove lucky in his timing. Not only has the eclipse of the UK and the incoherence of the US boosted France's international standing, but the prospect of decent Eurozone growth and the attraction of Paris relative to a post-Brexit London means that "reform" might proceed against a healthier economic backdrop. The danger is that slow progress on the domestic front, particularly if its is associated with street protests and strikes, might encourage Macron to attempt decisive action abroad, if only to deflect the violence of the state. He might be cutting military expenditure today, but that could quickly change.

Wednesday, 12 July 2017

Cancelling the Gig

One thing we're unlikely to ever know is whether Theresa May intended the Taylor Review to provide "cross-party" support for a series of technocratic changes to employment practice or whether it was always going to be merely a propaganda stunt intended to help recast the Conservatives as the "workers' party". The unforeseen general election result has put the kibosh on both possibilities. She won't risk her parliamentary majority over legislation - however modest in its impacts and Blairite in its inspiration - that might prompt a backbench rebellion by the free-market right of her own party, while the claim that the Tories are best placed to advance the interests of the economically insecure looks ridiculous in the face of a resurgent Labour Party committed to abolishing zero-hour contracts. May's vacuous appearance at the launch of the final report, Good Work: The Taylor Review of Modern Working Practices, looked like nothing more than a weary obligation and perhaps compensation for Matthew Taylor having wasted a year of his life (I wonder if the title was a wistful recognition of this).

One of the more bizarre claims in the report, which may well have been inserted specifically to garner a gold star from the Prime Minister, was the existence of a uniquely British way of working: "We advocate change but in doing so we seek to build on the distinctive strengths of our existing labour market and framework of regulation; the British way ... The UK is good at encouraging economic activity and creating jobs. ‘The British way’ works and we don’t need to overhaul the system. But persistent issues with wage growth and productivity provide sufficient rationale for us to look at how the labour market framework could be improved". The implication is that what we might term "a red, white and blue way of working" is a relatively recent development, stemming from the deregulation of the Thatcher years and the "flexibility" celebrated under Blair, but these developments were not confined to the UK: consider the union-busting of Reagan's America and the Hartz programme of Schröder's Germany. If there is anything particularly British it is the increased visibility in recent decades of the grey economy, where people survive on a combination of episodic work and benefits. In the past, that work would have been largely hidden and cash in hand. The aggressive pushing down of unemployment and disability claimant numbers, along with the growth of in-work benefits, has brought it into view.

The report is superficial but can't help hinting at deeper issues. For example, "The same basic principles should apply to all forms of employment in the British economy ... we need to make the taxation of labour more consistent across employment forms while at the same time improving the rights and entitlements of self-employed people". In other words, employment is currently disfigured for many by a de facto class system that leads not only to unequal rights but to inconsistent tax revenues. Though the public focus is on the most vulnerable workers, it is clear that the government is also concerned with well-paid contractors, hence the aborted attempt to increase National Insurance contributions (NICs) for the self-employed earlier this year. Many independent contractors (particularly those operating through personal service companies) have superior benefits to employees in the practical sense that foregone rights, such as employer pension contributions, are more than made up for via higher incomes. Those higher incomes are the result of tax avoidance (that is, avoiding income tax and NICs by paying lower-rate dividend and corporation tax), which means the cash-equivalent of those supposedly foregone rights is indirectly subsidised by employees. It's also worth noting that employers can also avoid tax, over and above employer NICs, through the capitalisation of contractor costs.

Taylor adopts a deterministic (and neoliberal) stance in seeing technology as both the powerful enabler of the gig economy and an area of risk that requires government regulation. This qualifies the claim of companies like Uber that the "platform" is a purely neutral space between employer and contractor, but it does so by implying that government is outside and must intervene for the public good, judiciously balancing the interests of providers and consumers as well as workers. This ignores the extent to which such platforms arise within the spaces created by existing regulation. The result is that Taylor casts government as another potential beneficiary of the technology rather than one of its architects: "technology can also offer new opportunities for smarter regulation, more flexible entitlements and new ways for people to organise". The problems of the gig economy are not the result of technology, any more than the problems of dock workers a hundred year ago were the result of hiring booths. The technology responds to the legal environment. For example, consider this statement: "Platform based working offers welcome opportunities for genuine two way flexibility and can provide opportunities for those who may not be able to work in more conventional ways". Now replace the first three words with "Prostitution".

In essence, the report is a pious call for a better behaved capitalism: "The best way to achieve better work is not national regulation but responsible corporate governance, good management and strong employment relations within the organisation, which is why it is important that companies are seen to take good work seriously and are open about their practices and that all workers are able to be engaged and heard". The all-too-evident failure of this approach since the 90s does not appear to have given Taylor pause for thought. If anything, he remains wedded to the New Labour idea that government's role is to even-handedly support both employers and employees as if the challenge were one of different endowments and needs rather than a power imbalance between the two: "The law and the way it is promulgated and enforced should help firms make the right choices and individuals to know and exercise their rights". Employers have clear choices while employees have theoretical rights. There is little recognition in any of this that employee rights were largely secured through independent labour organisation leading to workplace and parliamentary pressure (i.e. forcing choices on others), not through the "wokeness" of benign employers.

The pro-employer bias of the report is most obvious when it comes to the issue of overhead costs, though Taylor at least shows delicacy in avoiding the traditional term - "employee burden" - in favour of a more neutral alternative: "the ‘employment wedge’ (the additional, largely nonwage, costs associated with taking someone on as an employee) is already high and we should avoid increasing it further". The report explicitly refers to the current apprenticeship levy as an element of this wedge, and you can infer that it also includes employer NICs, maternity leave and holiday pay. No evidence is provided to show that this is "high", either in absolute or relative terms, or that it is problematic beyond reducing corporate profit. It is simply taken as read that business overheads should be reduced. The Taylor Review might appear to be more employee-friendly than the bonkers Employment Law Review produced by Adrian Beecroft in 2012, which in attempting to make a bonfire of red tape managed to self-immolate, but it springs from a similar worldview: entrepreneurs, not workers, are the true wealth-creators.

Despite his comments about consistency, Taylor mostly proposes little more than cosmetic change: "Worker (or ‘Dependent Contractor’ as we suggest renaming it) status should be maintained but we should be clearer about how to distinguish workers from those who are legitimately self-employed". What he doesn't do is question the basis for the difference in employment status. The traditional argument is that the self-employed are exceptional, reflecting episodic work demands or variable terms, but it is the corporate employee, with fixed terms and PAYE, that is actually the exception historically. Recognising this, some libertarians call for all workers to be self-employed and for wages and terms to be set individually. The capitalist argument against this is essentially Ronald Coase's The Nature of the Firm, namely that the boundary of employment is determined by transactions costs (i.e. overheads), so it is optimal for some labour to be held permanently inhouse and some to be bought in contingently. In other words, the categorical difference in status is for the convenience of the firm not the employee.

This truth is obscured by a tendency to appropriate incidental aspects of an employee's circumstances as a trade-off for reduced employment benefits, as if the firm were doing the worker a favour. For example, you might put up with a poorly-paid job because it is 10 minutes walk from your home, as you thereby save on time and travel costs, but that convenience is a feature of your circumstances, it isn't intrinsic to the job. Similarly, a zero-hours contract may well suit some workers who have other demands on their time (e.g. care obligations), but that shouldn't be taken as a quid pro quo that justifies lower wages. Such "flexibility" is usually a unilateral imposition by the employer, not a negotiated compromise. This tendency to confuse the interest of employer and employee is evident in the report's approach to piece-rates, where it proposes a margin of error to ensure average hourly rates don't drop below the national minimum wage (NMW). This misses the point that the issue with piece-rates is their inappropriate application to jobs over which the worker has limited control. For example, piece-rates for Uber trips are problematic because they leave drivers vulnerable to external factors such as traffic or time-wasting riders (traditional taxi fares, which combine time and mileage, mitigate this). Where workers have control they are able to calculate and thereby guarantee their hourly rate of pay. If you fall below the NMW, that's evidence the job shouldn't be paid on a piece-rate.

Viewed in Coasian terms, the attractiveness of self-employment to contemporary businesses is due to reduced transaction costs, so we should expect the level of self-employment to grow as those costs are reduced by technology or deregulation (i.e. removing statutory overheads). The popular view is that technology is a major factor in driving this precise change, but this fails to explain why over the last twenty years self-employment as a percentage of the workforce has trended down in the US while trending up in the UK, despite the former being the originator of much of the technology and no more regulated than the latter. One obvious explanation for the difference is healthcare: US workers are incentivised to find permanent jobs with coverage while UK workers aren't. Deregulation also appears to play a smaller role than anti-red-tape champions claim, with variations across European countries clearly owing more to longstanding structural features of the economy (e.g. self-employment has been consistently high in Greece and Italy) or compositional changes over time (e.g. it has trended down in Poland since EU accession, probably because international firms moved in and domestic firms expanded).

The one proposal in the report that has the potential for a significant impact is for non-guaranteed hours to be paid at a higher minimum rate. As Torsten Bell notes, this is better thought of as a minimum overtime multiplier. While most statutory overtime rights internationally (e.g. in the US and France) focus on a minimum multiplier for hours over a standard working week, there is no reason why the higher rate can't be applied to every unguaranteed hour. This would mean that all hours for a zero-hours contract would have to be paid at the higher rate, which would discourage the use of such contracts for low-paid jobs. That this proposal has only a slim chance of being enacted is indicative of the degree to which the UK labour market is already highly deregulated, not to mention vulnerable to employment regulation abuse (for example, the infamous "Swedish derogation" has been twisted in the UK to legitimise paying agency workers lower wages than permanent employees doing the same job).

Despite claims that we'll all be working in the gig economy of the future, it is clear that the new flexibility applies predominantly in specific sectors that have long been based on more arms-length or casual working arrangements, such as delivery driving or bar work at the lower end of the pay scale and professional and corporate services at the top end. These jobs are often centuries-old, as is the agitation for better worker rights and regulation of the trade. Much of the new economy is simply the old reconfigured. For example, the workers in Amazon's distribution centres are the descendants of casualised dock workers. Cranes, larger cargo ships and containerisation have simply moved the labour demand downstream, taking the precarious employment conditions along with it. While part of the UK growth in self-employment is due to the surfacing of the grey economy, and some may also be attributed to outsourcing and "Coasian optimisation", there remains the possibility that growth over the last decade reflects an ongoing sub-division of these traditional sectors - i.e. more labour is competing for the same hours of work (think of Uber drivers competing with licensed taxi drivers) - rather than either a growth in those industries as a percentage of the economy or the extension of self-employment to other sectors. In other words, the hidden story behind the "British way" may be the old tale of under-investment, poor productivity and short-termism.

Monday, 10 July 2017

Lilliputin and the Yahoo

The significance of Donald Trump's relationship with Russia has little to do with any covert deals or financial assistance, let alone connivance in the hacking of the Democrat National Convention. What matters is his public willingness to treat Vladimir Putin as an equal, whether from an egotistical belief in his own prowess as a "deal-maker" or simple naivety. The news that the pair discussed "forming an impenetrable Cyber Security unit so that election hacking, & many other negative things, will be guarded and safe" could be taken as evidence of either. US liberals have promptly interpreted this as the Yahoo Trump being "played" by the more cunning and inscrutable Putin, while the Russian President has predictably gone all statesman-like and hailed a new era of cooperation. Much of the antipathy of the US national security apparatus towards Trump arises from a belief that he has made a strategic error in failing to publicly categorise Russia as a second-rank regional power with structural weaknesses that should limit its foreign policy ambition. The withdrawal from the Paris climate change accord might be foolish, but it speaks of a US that is still the global hegemon and prepared to defy international opinion. The indulgence of Russia's claim to a place at the top table undermines that.

Putin's signal achievement has been to re-establish a parity of esteem between Russia and the USA. This might be purely symbolic - Russia remains economically and (outside its nuclear arsenal) militarily weak - but it serves to legitimise the regime at home and compensate for a weak economy and social stagnation. It also enables a foreign policy that combines calculated snubs of the powerful with intimidation of the weak. There have been two key factors in this achievement. First, the US hesitancy over direct involvement in the Middle East under Obama created a small vacuum that Russia was only too happy to fill. Though Hillary Clinton was expected to take a more robust (i.e. aggressive) stance in Syria, the geopolitical imperative of the US pivot towards the Pacific was always going to allow Russia greater room for manoeuvre in its "near abroad", regardless of the occupant of the White House. The shady rise of Trump has provided the second factor, not so much in the possible collusion between his campaign and Russian state actors, which is likely to be trivial and squalid if it amounts to anything, but in the hyperventilation that the suspicion of influence has prompted among liberals and neoconservatives. In terms of perception, this has given the impression of Russia as a worthy adversary.

The USA and Russia have long been held up as each other's mirror image, and not just in the banal sense of being vast continental states with huge resources. Ideologically, there is a shared belief in exceptionalism springing from a messianic purpose - the shining city on the hill and the third Rome - which fuelled comparable notions of manifest destiny. The image of Russia as a suffering Christ was particularly potent, first as a bulwark of Orthodoxy against Islam and then as the victim of godless Bolshevism. Even those sympathetic to the idea that 1917 represented a leap forward have interpreted the historical role of Russia in similar language, echoing the sacrificial imagery in the rhetoric of the Great Patriotic War and the moral symbiosis implied by the Cold War. For example, Perry Anderson paraphrasing Eric Hobsbawm notes that "In the world at large, the October Revolution had twice saved capitalism from itself: by defeating Nazism on the battlefield, and by obliging Western societies to prophylactic reforms after the war. That check on its feral instincts is now, to everyone’s detriment, gone."

Territorial expansion in the 18th and 19th centuries, the abolition of serfdom and slavery, and even the nation-building role of transcontinental railways have all been held up as parallels, despite some very real differences (for example, slavery was a product of cash crops not subsistence, while Russia's expansion was a far longer and bloodier exercise than the conquest of the American West). In the 20th century, the head-to-head competition of capitalism and communism for global affection accentuated the comparison, but the impression of similarity was misleading. The USSR came close to defeat by Nazi Germany, a state whose dominance in Europe up to 1941 owed more to the weakness and neutrality of other powers than its own strength, while the USA barely stretched itself in defeating Japan, dismantling the British Empire and providing most of the muscle to beat Germany in Western Europe. At the point when the cost of the war in men and materiel looked like it might become problematic in domestic politics, with the invasion of the Japanese home islands, the USA promptly dropped the first atomic bomb. Game over.

Though there was much talk of an "overtaking" by the USSR in the 1960s, triggering the space race and a more aggressive stance in proxy conflicts, the reality was that the US economy was vastly more powerful and its military far better equipped and capable, despite screwups such as Vietnam. This became all too obvious once the Soviet Union was drawn into its own misjudged entanglement in Afghanistan. The dissolution of the USSR and the implosion of the Russian economy in the 1990s revealed the extent to which the contest had only ever been even in the symbolic but practically useless area of nuclear missiles (hence "Upper Volta with rockets"). Since then, Russia's objective has been to encourage a more diverse international order in which its own weaknesses would be less relevant, which rubs with the grain for many other powers too. The consensus view is that Russia and China want "a more pluralist international order, rather than a single dominant power system. They wish to see the institutions of international society, notably the UN, the WTO and international financial institutions, work autonomously and impartially. Russian politicians repeatedly talk of the need to establish a more multipolar system."

The Hamburg G20 meeting was a success for Russia as much because of America's isolation over the climate accord as for the "constructive" discussions between Putin and Trump. Encouraging the Chinese to pursue their own self-interest, rather than seeking to corral them, is part of Russia's strategy, hence the mutual caution over North Korea which, given the lack of any substantive US initiative, meant the G20 meeting produced nothing in the way of a response to Kim Jong-un's Independence Day gift. The Russian objective with regard to Europe is to semi-detach it from the US, hence the focus on undermining NATO rather than the EU. The aim is to convert 3 power blocs (NATO, Russia and China) into 4. While this will not achieve anywhere near parity - Russia will remain the weakest power by a Lilliputian order of magnitude in terms of GDP - it will narrow the gap. Russia's motivation is, as ever with the short guy in stack-heels, a demand for respect (it is worth noting that "respect" is also a guiding principle for Trump, albeit filtered through the sentimentality of a wannabe wiseguy, which perhaps explains his personal sympathy for Putin as much as any possible kompromat).

Historically, Russia has had little to fear from either the USA or China. American involvement in the allied intervention of 1918-19 and the Sino-Russian border spat of 1969 are trivial compared to the major invasions by European forces from Napoleon through the Crimean conflict to the two world wars. France stopped being a credible threat after 1815 and Britain after 1919, despite their development of nuclear arsenals following World War Two, while the division of Germany and the NATO/Warsaw Pact standoff guaranteed stability. The reunification of Germany was obviously a cause for concern, but there are few Russian strategists who fear a revival of German chauvinism because they correctly recognise the restraint that the EU represents. That said, they also recognise the value of weakening the EU, short of its dissolution, which explains why Putin's minions supported Marine Le Pen as well as Eastern European authoritarians but are more circumspect about supporting the AfD in Germany. In an ironic echo of traditional British diplomacy, Russia seeks a balance of power in Europe. Whether that will produce a reconciliation with France remains to be seen, though the egos of Macron and Putin suggest a stage-managed clinch in the manner of Napoleon and Alexander I at the Treaty of Tilsit shouldn't be ruled out.

Though Hamburg will be widely interpreted as further evidence of US decline, this is just the overwrought solipsism of a US media and foreign policy community that sees Donald Trump's ignorance as a global embarrassment, forgetting that America's track record has long been marked by stupidity and arrogance. Nixon may have gone to China, but he also illegally bombed Cambodia. Reagan may have met Gorbachev, but he also invaded Grenada. Though it has garnered less coverage, what stood out was the total marginalisation of the UK at the G20 meeting, and that surely wasn't just down to Theresa May's awkward personal style. This not only points to the relative diplomatic isolation that Britain will face post-Brexit but it also suggests that in a more multipolar international order a middle-ranking nation like the UK (number 5 by GDP) may find itself lower down the place settings than a nation like Russia (number 11 by GDP) that has better managed to "punch above its weight", a description that the British Foreign Office thought it had trademarked years ago.

Monday, 3 July 2017

Payback Time

Less than a fortnight before she called the general election, Theresa May claimed that Labour's proposed policy to fund free primary school meals through VAT on private school fees was evidence that a government led by Jeremy Corbyn "would bankrupt Britain". Not much thought seems to have gone into that response, considering that Labour's proposal was cost-neutral and the amount in play was tiny, which perhaps reflected that the Prime Minister's mind was already elsewhere. Since the election, the debate on education policy has jumped from the wisdom of scrapping free school lunches and reintroducing grammars to scrapping tuition fees and reintroducing the education maintenance allowance. Support among Tory MPs for taking food out of the mouths of babes appears to have waned while some, such as Damian Green, are admitting that tuition fees are an "issue". That said, veterans of the coalition government that raised fees from £3,000 to £9,000 in 2012 are firmly resisting any backsliding, largely on the grounds that free tuition represents an unfair subsidy. As Michael Gove put it: "If you don’t benefit from a university education, you shouldn’t have to pay additionally to support those who do".

The premise behind this is that non-graduates do not benefit from the education of graduates. This is obviously wrong in particular - a non-graduate may directly benefit from the ability of a graduate doctor or nurse to save their life - but it is also wrong in general. There is a strong correlation between average educational attainment and national GDP, and strong evidence that graduates are not just more productive themselves but that they help raise productivity among non-graduate co-workers as well, thereby producing higher incomes all round. While the state obviously pursues an ideological agenda through education, and religious indoctrination is still a factor in school and curriculum management, the primary objective of modern government is to ensure that students have the skills demanded by industry. That increasingly means analytical and data manipulation skills, hence the expansion in further education since the 1990s. A secondary objective is to cajole university research, through systems like the Research Excellence Framework, towards areas that may ultimately be of benefit to the national economy. The UK's investment in R&D remains low, relative to other developed nations, which means that the higher education sector (which accounts for about a quarter of the total) is critical to any future above-trend growth in investment. A coherent and comprehensive industrial strategy would seek to expand this.

While Secretary of State for Education during the coalition years, Gove emphasised economic value as much as the development of moral fibre, even going so far as to insist that all schoolkids should learn to code while wearing ties. That might sound like a joke, but it is representative of Gove's ambition to reconcile the old instrumentality of "traditional intellectual disciplines" (learning Latin will get you a job on a broadsheet) with the new instrumentality of "modern technological innovation" (learning computer science will get you a job building apps). In reality, further education largely inculcates general skills (chief of which is how to pass as middle-class) and thereby provides a series of signals to employers in respect of socialisation and pliability. The instrumentality can be over-done. Just as it is foolish to praise the often anti-intellectual culture of the traditional British university, so it is idiotic to pretend that we're now teaching every child to code (if they're interested, they'll teach themselves). Of course Gove is a journalist, not an educationalist, as is Jo Johnson, the current Minister of State for Universities, Science, Research and Innovation. Johnson minor echoes Gove: "Abolishing tuition fees & funding unis out of general taxation would be regressive, benefiting [the] richest graduates".

What this populist spin highlights is a confusion among Conservatives as to the dynamic behind the growing unpopularity of tuition fees and student debt. Gove believes that the ressentiment of the non-graduate can be deployed in defence of the status quo, forgetting that many non-graduates have children who already have (or are resigned to acquiring) hefty student debts. Similarly, the Tory media struggle to see past free tuition as anything other than a bribe to secure the youth vote. The issue for new graduates is not simply the quantum of debt but the sense of being trapped: either stuck in a low-wage job and so unable to pay down the debt at all or seeing a portion of a modest pay packet disappear every month to service a capital amount that barely seems to shrink. And that feeling of intimidation spreads from children to parents, particularly those used to fretting about money. This is not something that upper middle-class parents like Gove (despite his more humble origins) are likely to properly appreciate. They either have the spare cash to pay up-front and so avoid the need for a loan, or they can be confident that their child, who graduated from Oxbridge rather than an ex-poly, will soon be earning enough to pay off the loan within a couple of years. For some, funding an unpaid internship is more of an issue. Telling poorer students that they may never have to pay the debt back if they don't earn enough over the next 30 years is not much of a consolation.

Given the likelihood that tuition fees will continue to rise ahead of wages, and that interest rates on the debt will probably remain in advance of inflation and may even rise further (the government is now busy selling-off the loan-book in tranches), the looming spectre of future student debt is beginning to worry parents with much younger children. In part this is because of those parents own experience, having either "got in under the wire" and enjoyed the last of free tuition and 100% maintenance grants in the 80s or been among the first to incur a (then modest) debt in the 90s. If we date the cultural impact of student loans from 1998, when tuition fees were first introduced and most maintenance grants were converted to loans, then we are about to see the first generation of kids applying to university whose parents will include some (if very few) that still have outstanding loans from their own college years. The post-2012 point is that the number of still-indebted parents will grow as fees increase over time and full repayment becomes more difficult. The occurrence of inter-generational student debt could turn out to be significantly bigger than that of inter-generational, long-term joblessness (that famous chimera).

This goes back to a point I made in an earlier post: the "Thatcherite denial of society places increased stress on that traditional redoubt of conservatism, the family. The fairness of distribution between the generations becomes a point of potential conflict within the home (all too often a literal struggle over property ownership), rather than a social conflict negotiated through politics in which the family's interests are largely common. A likely reaction to this is for more of the older generation to become politicised, in the sense of deliberately pushing the issue of distribution back into the social sphere, as the best means of advancing their offspring's interests without familial grief". While housing as a point of friction has the potential to be ameliorated through inheritance, the only solution to the psychological burden of student debt in families of modest means is for parents to help pay off their childrens' loans early. Telling them that they're wasting their money and should be comfortable with long-term debt falls on deaf ears in an environment where paying down the national debt is considered a moral necessity. I'm guessing, but I suspect parents who do this are disproportionately non-graduate Daily Mail readers, not graduates who read The Financial Times

In other words, the Tories "divisive" stance on this issue is probably alienating many of their natural supporters. The claim that non-graduates gain no benefit from the education of graduates jars with common sense and sympathy when that graduate is your own child. Just as the "intergenerational conflict" around housing obscures class - it is the children of social housing tenants who face the greatest barriers to getting a foot on the property ladder today - so the graduate/non-graduate dichotomy obscures age and the generational watershed that occurred with the expansion of higher education in the 90s. The Tories recast tuition fees in 2012 as an aspirational mortgage secured against talent, but austerity has made many parents a lot less confident about their children's future income prospects, and that's on top of the continuing class and gender inequalities of employment opportunity and pay. If the dementia tax was popularly interpreted as a demand for the payback of house price windfalls, student loans are now being interpreted as debt bondage but without the upside of a lottery. The Tories' problem is not just that they cannot easily articulate a "socialised" tuition funding system but that their policies are hurting families, and they seem largely oblivious to this.