American politics
I had this on Labour Uncut during August.
At the start of May I argued that President Obama was as vulnerable to a challenger emerging as the seemingly ascendant George W H Bush was at the same time in 1991. This view was then out of kilter with the beltway view of Obama as a two term president. Subsequently the US has suffered an unprecedented credit downgrade, its economy has continued to struggle and grumbles about Obama, most recently due to his holidaying at a “millionaires’ playground”, have got louder.
Republicans are increasingly confident that Obama is Jimmy Carter. But the election will be a choice, not a referendum on Obama. They need a more convincing choice to win. As the early Republican pacesetters have not convinced, the stage remains set for a Republican Bill Clinton.
To date, tea party favourite Michelle Bachmann has probably done the best job of appealing to Republicans with misgivings, such as Romneycare and Mormonism, about the frontrunner, Mitt Romney. There may be enough such conservative voters for Romney to be defeated in January’s Iowa caucuses. The former Baptist pastor Mike Huckerbee won in this first state to vote in 2008.
God isn’t calling Huckerbee to run this time. However, God is said to have called Rick Santorum and Rick Perry, as well as Bachmann. Either they are suffering crossed wires or God’s mind is yet to be made up. God wouldn’t be the only one. The Republican race is fluid.
While Rick Perry’s backing for the three-time married Rudy Giuliani in 2008 and rumours about his own marriage are concerns for some religious voters, his leading of vast prayer meetings enables him to pitch to the religious right. That 40 percent of new US jobs since June 2009 have been created in Texas, where Perry is governor, also creates the basis – though other aspects of Texas’ economy undermine this – for appeal to those (i.e. everyone) with economic worries. A candidate able to challenge Romney for his strongest card, economic competence, and rival Bachmann for the religious right vote has a shout of being the Republican candidate.
There are various ways that this could play out.
First, Perry could crash. Karl Rove, widely seen as George W Bush’s puppet master, considers Perry beyond the pale. Perry has recently accused Ben Bernanke, chairman of the Federal Reserve, of being “almost treasonous”, damned global warming “a hoax” and belittled evolution as “a theory that’s out there”. Perry could yet follow the likes of Donald Trump in sending shockwaves through the Republican contest only to fade away.
Second, Perry could, without actually winning it, have a more sustained impact on the race. While Romney’s already backed away from many positions that he held as governor of the traditionally Democratic state of Massachusetts, he would have to tack even further to the right under this scenario and so reduce his appeal to independents.
Third, Perry could take enough of Bachmann’s support from the right and make a sufficient dent in Romney’s claim to unrivalled economic competency to be the Republican candidate. The votes of independents are likely to determine the presidential election and Perry may be even less able to secure their support than a Romney who, as per my second scenario, has been forced to run to the right. This is probably why the White House is thought to favour a contest against Perry.
If Perry’s capacity to appeal to independents really is this limited, then the Republicans are right to look elsewhere – and they continue to encourage Chris Christie, governor of New Jersey, and Paul Ryan, the Wisconsin congressmen, to enter the race. Perry may be a “good-looking rascal”, according to Clinton himself, but he might demonstrate the impossibility of being a candidate able to take Republican votes off both Bachmann and Romney and also appeal to independents. This impossibility means that the Republicans either cannot have a candidate attractive to all their diverse wings or they cannot win in 2012.
All presidential elections come down to who offers the most compelling personification of the latest stage of the American dream and, given the resilience of American cultural and political conservatism, Perry could win by embodying something quite different from Obama. Undoubtedly, an Obama-Perry head-to-head would make epic political struggle of America’s long-running culture wars. It would be spectacular and vitriolic; re-energising Obama’s supporters after the sometimes stodgy prose of his time in office.
Those of us on the left in Europe will largely hope that the man who was our dream president in 2008 retains enough support amongst independents to remain in office. But we should also reflect that the real lesson of his time in office, for our continent, is that we must do more to build the world we want. Not rely on someone who may nominally be the most powerful person in the world and who may appear to share European values, but who, in neither respect, is so without significant constraints.
I had this on Labour Uncut in August.
People make their own history, as Karl Marx knew and Angela Merkel and Barack Obama cannot deny, but under circumstances existing already, given and transmitted from the past. Over hundreds of years America has evolved to a fiercely divided, uncompromising polis wedded to a system demanding compromise. Over decades Europe has achieved monetary union. Thousands of years of history hang over its fiscal consummation, which is required to avoid collapse and further calamity. The tradition of all dead generations weighs like a nightmare on the brains of the living.
One of the ironies of Marx is that communism was supposedly inevitable, but his tombstone declares that the point is to change the world, not interpret it. What’s to change if history’s terminus is already determined? What was the point of agitating publications like the Communist Manifesto if we were all, in spite of ourselves, destined for communism?
Such publications imply that Marx himself may not have seen communism as quite the iron certainty that rigid interpretations of his writing suggest. But one of the divisions between Marxism and much of the rest of the left concerns the extent to which we are prisoners of history. Parties such Labour predicate themselves on an assumption that the institutions of advanced capitalist democracies can be moulded to serve socially just ends. Ed Miliband’s father, of course, like other Marxists, thought this naive.
Recent economic events seem to vindicate Ralph Miliband. Political leadership seems oxymoronic when our nominal leaders appear only witnesses to events that they can barely fathom, let alone command. (In the non-economic sphere, our Tuscan prime minister is similarly bemused by the revenge of the lumpenproletariat). Nothing has happened to undermine James Carville’s famous wish to come back as the bond market and intimidate everybody. It’s these markets that are in the box seat and our political leaders that are cowered.
What they demand are credible plans from governments to repay their creditors. This isn’t unreasonable. I expect you’d want to see credible repayment plans before you leant non-trivial amounts of money. The governments of the third and fourth largest economies in the eurozone, Italy and Spain, seem increasingly unable to produce such plans. The downgrade of the USA, though unjustified, speaks to a similar lack of confidence in America’s ability to manage its debts.
While events seem to lead towards the largest country in the world that still professes to be communist, China, being an ever more dominant geo-political force, the Marxists should not be too triumphant. The markets are, of course, as powerful as James Carville’s wildest dream and Ralph Miliband’s bleakest nightmare. But they do not remain beyond the capacity of political leaders to have them becalmed. That is if political leaders do what it says on their tin; lead.
This doesn’t mean interpreting opinion polls as immovable. Germany, for example, could swing behind the full steps required to save the euro if Merkel articulated them well enough. It means seeing your electorate as intelligent beings capable of being won over by the force of your argument and your actions. Merkel and Obama can still do this. But only if they stop being intimidated not only by the bond markets but also by opinion polls, their political opponents and their own inevitable failure to hold in their minds every relevant fact and figure.
As the Irish leader, Enda Kenny, has said the answer from Merkel, whether the question is bailouts or debt restructuring, is always no – until it is yes. We all know the big question hanging over all of this: will the single currency underwrite the debts of all of its members? These debts would be eminently manageable under such an arrangement; so long as the political will to enact such an arrangement can be found. It is for Merkel to find this will. If she cannot, then she should say so speedily. The longer she delays the worse the fallout when she confirms her inability to rise to her historic purpose.
In spite of the tea party and the fractious nature of US politics, things are more straight-forward for Obama. He has no unprecedented, continent-wide institution building project to contemplate as a matter of existential necessity. His outlook would suddenly look much rosier if he could only say yes, we did achieve growth rates in 2011 equal to the hardly spectacular rates of 2010.
Can the US really not grow at 2.8 per cent this year? Can unemployment really not be significantly reduced from the historic high of 9.2 per cent? While markets fret over the ability of governments to manage their debts, they are also increasingly worried that the US cannot do better on growth and unemployment. Surely if the social democratic faith in the power of government is justified then Obama can prove them wrong?
Merkel and Obama can rise to their challenges or we succumb to capitalism’s latest crisis. These crises will not, however, give way to something as pleasant as Marx envisaged communism to be. It will be something with much more of a Chinese flavour.
I had this on Labour Uncut at the start of August.
“I don’t want to talk to anyone about anything right now,” she exploded. With tears in her eyes, she retreated to a back room.
This was how the Democratic congresswoman Barbara Jordan, an eloquent contributor to the committee that voted to impeach President Nixon, reacted to a request for comment immediately after the vote. This request came from Michael Sandel, later a distinguished philosopher, then a newspaper intern.
Sandel recalled this encounter when the House began impeachment proceedings against President Clinton in 1998. While Barbara Jordan’s explosion demonstrated that even Democrats opposed to Nixon recognised the magnitude of impeachment, partisan passions against Clinton overrode any such recognition on the part of many Republicans 24 years later. 13 years hence, and the trends evidenced by the contrasting attitudes of Democrats to Nixon and Republicans to Clinton have hardly dissipated.
Many Republicans today would throw a tea party on the White House lawn, rather than discretely sob, if president Obama were impeached. This is in spite of the fact that impeachment should only properly occur when the constitutional system is seriously threatened. No matter that such a threat is inherently a matter of national tribulation; glee could be expected from those who seem consumed only by tribalism. The “Nazi Socialist Communist Muslim” would have got his comeuppance.
Watergate wrenched the scales from America’s eyes. But not so long prior to this, president Kennedy had private morals loose enough to make a French politician blush. These foibles weren’t widely known and he was revered, if for nothing else, simply for being the holder of the office that he held. Now these indiscretions are dramatised like an episode of keeping up with the Kardashians. The age of deference is gone and politicians are swept along on a tell-all celebrity tide.
While Obama retains a scholarly air, there is something rather tell-all about arriving in office with two autobiographies behind you. More significant than Obama’s willingness to tell-all, is the number of Americans for whom no matter how much he tells, his truths will never be accepted. And no matter how much he compromises, these compromises will never be reciprocated. He is someone they refuse to try to understand and who they are incapable of dealing with in good faith.
Lots of Tories felt the same way about Tony Blair and Gordon Brown. The difference is that these prime ministers never had to win a proportion of their opponents over to get their way. They had a majority in the Commons, and the Lords only ever resisted for so long. In contrast, Obama’s party has no majority in the House or filibuster majority in the Senate.
The political pendulum swings more violently in majoritarian systems such as ours. The checks and balances restrain it in the US. Part of the reason that I support a second chamber elected by PR in the UK is because a somewhat more democratic restraint on the executive would be to the benefit of our system. The US now appears, however, a case study in what can go wrong when this restraint is too sharp. With Republicans so trenchantly refusing to play ball with Obama, the pendulum rests not on a radical centre, a cross-dressed mix of the best of Democrat and Republican ideas, but upon dysfunction.
The checks and balances hardwire the necessity of reaching across the aisle into the American system. Yet Washington DC has become increasingly dominated by politicians as dogmatic as the hardest edged British whips. It’s not just a matter of not compromising with the enemy for many, but not compromising with reality either.
In reality managing US debt requires tax rises. In reality immigration reform must include pathways to citizenship for the 11m illegal immigrants slogging away in the US economy. In reality Obama’s health care reform looks remarkably like the proposals with which Republicans countered Hilary Clinton’s plans in the 1990s, not the road to serfdom. In reality prices have risen at the pumps but remain a fraction of European levels, environmentally unsustainable and only likely to continue to rise given finite supply. In reality Obama is a prisoner of the Republican refusal to accept reality. The debt ceiling fiasco isn’t an exception, but indicative of a deeper malaise.
The genius of the founding fathers was that in less partisan times radical centres could be found and that checks and balances restrained government before it did too much damage to the extraordinary entrepreneurial, industrious and proud American people. Powerful though these qualities remain on the part of the people, America faces new challenges that it won’t meet without improved public policy. Its checks and balances will prevent this so long as the civic decency and ability to see the national interest of Barbara Jordan is in so short a supply.
This is a conundrum that only those confident of the capacity of Europe and China to extend freedom globally can be sanguine about. In other words, it would be foolhardy not to be concerned.
This is my contribution to the new Pragmatic Radicalism publication.
Politicians of all parties claim to favour rebalancing the economy; whether this is rebalancing from the public sector towards the private sector; from domestic consumption to exports; from finance towards manufacturing; or from London and the South towards the North and Midlands. These various kinds of rebalancing all enjoy broad political support but these consensuses risk being as glib as saying that all mainstream British politicians believe in, say, liberty. They mask deeper complexities and challenges, which must be overcome to achieve meaningful economic rebalancing. Labour should seek policies which will enable this, as well as language and demeanour that will allow us to reap the political benefit of tapping into the popular desire for a less financial-centric society and economy. We should, however, focus on the substantive issues and avoid puerile bashing of bankers. Let’s consider in turn each kind of rebalancing.
Rebalancing from the public to the private sector
The Office of Budget Responsibility (OBR) predicts that by the end of this parliament there will be 1.5 million more people working in the private sector and 400,000 fewer in the public sector. The political and economic strategy of the Government largely depends upon something of this order coming about. While their cuts are faster and deeper than is prudent, it is not inconceivable that extremely lax monetary conditions – rock bottom interest rates and quantitative easing – and a low pound allow something approximating to the OBR prediction to become real. Equally, there are many reasons why it may not; not least on-going instability in the eurozone.
It would be as unwise for Labour to be wholly pessimistic about the prospects for private sector recovery as it would be for the UK to gloat about troubles in the eurozone. Labour has to be the party of optimism, which should include being optimistic about the ingenuity of business, particularly if the Bank of England contains its fear of inflation and doesn’t raise interest rates too rapidly. Labour must avoid the perception that we see fiscal stimuli as the only motor of growth and monetary and exchange rate conditions as irrelevant. We should also acknowledge, through a credible deficit reduction programme, that a key reason for deficit reduction being important is that it reduces upward pressure on interest rates.
Part of this programme should involve a shift in the tax base to sharpen incentives towards hard work. This means less tax on income and more on wealth. A land tax could form part of this transition. It would do something to dampen the British tendencies towards property speculation and bubbles. It might also form part of a Labour drive towards tax simplification. Because taxation of land is simple it would be difficult to avoid. Labour could win friends from UK Uncut to the CBI with a considered drive towards tax simplification. UK Uncut should appreciate simplifications that make tax harder to avoid and the CBI should value simplifications that support economic growth. A land tax offset by reductions in taxation on employment would reduce the capacity of the rich to avoid taxation and increase the extent to which everyone keeps the fruits of their hard work. Tax simplification should not be owned by the right. It should be part of Labour’s arguments for rebalancing from the public and private sectors.
Rebalancing from domestic consumption to exports
The global recession has demonstrated the utility of exchange rate and monetary flexibility and vindicated the decision to keep the UK out of the Euro. It is far from certain, however, that policy thus far has successfully contained the banking and fiscal crisis in the eurozone. Given the importance of eurozone growth to UK growth, the UK should play a constructive role in arriving at such policy, while not confusing our responsibilities with those which properly belong with eurozone members. As debates about the future of the Euro and the EU are disentangled – or, as has been more the case to date, conflated – British interests are ill-served by the chair left vacant at the negotiating table by David Cameron.
The prime minister has been eager to champion trade with the BRICs (Brazil, Russia, India and China) and bored by Europe. Not realising the connection between the BRICs and the EU. In 2009 Ireland’s 4.5 million people accounted for more UK exports than the BRIC countries combined. It should be an economic priority for the UK to deepen our comparative advantages with the expanding middles classes of the BRICs. The development of these countries does much to explain the expectation of Gerard Lyons, chief economist at Standard Chartered, that the global economy will at least double in size between now and 2030.[1] However, the extent to which the UK benefits from this development depends on how quickly we advance trade with the BRICs. We need an EU that is recalibrated towards adaptation to a global economy that is increasingly driven by Asia. Cameron is too scared of Bill Cash to properly work towards such an EU. His carpet bagging of UK PLC to the BRICs counts for little next to this.
Rebalancing from finance to manufacturing
We need to be realistic about employment prospects in manufacturing. The UK’s manufacturing sector remains the sixth largest in the world by output but no manufacturing sector in the developed world, even in Germany, a country with a stronger modern manufacturing reputation than us, has been able to avoid a considerable long-term decline in manufacturing employment.
We should not give in to the presumption that finance and manufacturing cannot be complements. We should be asking: what kind of financial sector would be most complementary to manufacturing in particular and the wider economy in general? And how can public policy best encourage such a financial sector?
The objectives set for the Independent Commission on Banking – minimise systematic risk and moral hazard; promote competition in both retail and investment banking – are vital. George Osborne won’t hold the Commission to these objectives. But Labour should. We should also be advocating a financial sector that is as complementary as possible to the wider economy. This argument probably goes beyond the remit of the Commission but the work of the Commission gives Labour a chance to firmly place it within the national debate.
Alongside rock-solid retail banks we need a flourishing of nimble financial services firms that are prepared to provide capital to enterprising SMEs. Such firms must be developed in green manufacturing but they will be more likely to do so if a credible price for carbon can be established. At the moment the carbon price comes from the ineffective EU-ETS. This carbon trading scheme either needs meaningful reform or replacement by a carbon tax. Either approach should be taken forward at the EU level, rather than in the form of the cack-handed move towards a carbon price contained in Budget 2011. Again Cash haunts Cameron.
Rebalancing from London and the South towards the North and Midlands
As well as having sharp economic disparities between our regions the UK has one of the most centralised political systems in the democratic world. Labour should take ownership of the localism debate with the intention of creating forms of localism that reduce these disparities. This means holding localism proposals to the real localism standards proposed by IPPR – localism be effective and efficient; properly funded; at the heart of a drive for social justice; accompanied by a step-change in the transparency and accountability of local decision-making; and framed within a constitutional settlement between central and local government.[2]
Local government should be where the next generation of Labour leaders and ideas emerge. When we were last in opposition Lambeth was ill governed by Red Ted Knight. Now it pioneers the ground-breaking co-operative model. Liverpool was once troubled by Militant. It should soon have a resonant voice in national policy debates in the form of a Labour mayor. That Andrew Adonis, as Transport Secretary, reports battling to identify the views of great regional cities like Liverpool, while Transport for London made constant demands of him, is indicative of how skewed our national conversation has been.[3]
Regional cities haven’t only lacked voice in national debates. They have also lacked private sector employment. While Brighton and Milton Keynes both grew their private sector jobs bases by 25 per cent between 1998 and 2008, some cities slipped backwards: Stoke (-16 per cent), Blackburn (-12 per cent), Blackpool (-6 per cent).[4] The Government’s response – Enterprise Zones, Local Enterprise Partnerships (LEPs) and the Regional Growth Fund – is inadequate. The Regional Growth Fund is one quarter the size of the budget for the (now abolished) Regional Development Agencies (RDAs) in 2009/10.
The future of funds previously allocated by RDAs has been keenly debated. But these funds account for less than one per cent of total government spending in the regions.[5] Mainstream budgets, such as transport, skills and housing, are much larger. The principles of real localism should be applied to these budgets. The interface between LEPs and mayors remains to be worked out but the real localism case for devolving mainstream budgets to mayors, given their transparency and accountability, seems stronger than to LEPs.
Irrespective of whether it is to mayors or LEPs that mainstream budgets are devolved it is imperative that these resources are allocated to maximum incremental impact. This means working with the grain of markets, ironing out market failures and only intervening where there is a clear rationale for doing so. That many of these markets are global, both underlines the interconnectedness between the domestic and global economies and the scale of the challenge facing policy makers who are seeking to achieve on much reduced resources objectives that often proved sadly illusive during the New Labour boom. Yes, the resources available in the boom years were not always as well targeted as they could have been. Yes, real localism hasn’t been applied before and should enable better targeting. Nonetheless, it remains the case that politicians eulogise economic rebalancing, due to its popularity with voters, without acknowledging that it often runs contrary to the underlying drivers of our economy or facing up to the tough policy choices that will be required to make it more of a reality.
Conclusion
Voters are strikingly confused as to what Labour stands for.[6] Economic rebalancing, in every sense, given the ineffectual policy, lip service and lack of resources provided by the Government, can be a policy area commanded by Labour, in which we find new expression of our values of equality and fairness. But it raises many challenges, which the party’s policy review should seek to navigate. Only by rising to these challenges will Labour be able to move beyond the dismal record of politicians over-promising and under-delivering on economic rebalancing.
While the country almost aches for politicians capable of doing better than this, Labour will need to be bold reformers of both state and market to be these politicians. Applying real localism principles to mainstream budgets and fully realising the promise of mayors would, for example, be profound reforms of the state. Reforming the financial sector to make it as complementary as possible to the wider economy is as far reaching a reform of the market. Nothing less than such thoroughgoing state and market transformations will be needed for the UK to prosper in an increasingly Asian age.
Margaret Thatcher and Ronald Reagan were right-wing, obviously. But they were coherent, courageous and possessed of certain irreducible beliefs. And not wrong about everything. Sarah Palin is, in contrast, clearly incoherent and vapid. Andrew Sullivan once described her as the “reductio ad absurdum” of Reagan’s conservatism. Palin, basically, manifestly is nuts. The reluctance of the American right to acknowledge the self-evident contrast between Thatcher and Palin is indicative of their estrangement from reality. If the Republicans select her as their presidential candidate, reality will surely, finally, file for divorce.
