Jonathan Todd

I had this on Labour Uncut a few weeks ago.

Tony Blair, according to his economics advisor as prime minister, isn’t much of an economist. In contrast – the only leader to take Labour to three general election victories – Blair is a politician par excellence. While others are better on economics, what Blair says and doesn’t say on the economy is politically insightful.

Let’s take four points made in his speech and the Q&A at a recent Progress event.

First, Labour should focus more on microeconomic debates and less on the macro-economy.

This seems an oddly technocratic point but reminds me of the view of Douglas Alexander and Jim Murphy that “Labour needs a draw on the deficit and a win on growth”. I suspect I took Alexander by surprise when I asked how we achieve this at a CLP dinner earlier this year.

I also suspect that Blair is giving his answer. We get a draw on the deficit by maintaining a strong line that closes it on the trajectory first specified by Alistair Darling. We get a win on growth not by making arguments about the economy as a whole but by crafting a series of bespoke policy offers sector by sector.

The combined impact of these offers would enable a win on growth and creates a series of talking points with business, which, as Blair stressed, matters because we won’t have this win until we have a phalanx of leading business people prepared to back us.

Second, these are distinct questions:

-          How do we make sure the crisis never happens again?

-          How do we get the economy moving again?

Separating these questions misses the golden thread of confidence. The economy won’t be moving again until we have confidence in a brighter future. We won’t have this until steps are seen to have been taken to mitigate the risk of the crisis of recent years repeating. Rock bottom public confidence attests that this isn’t coming from government.

There is opportunity in this for Labour. But we would create problems for ourselves if in reaching for this we undermine our deficit closure strategy or underplay the emphasis placed upon the tailored microeconomic offers suggested above. The priority should be these offers, rather than grasping for an elusive confidence bullet. As we roll out these offers, though, we should be thinking hard about what mix of financial, trade and fiscal policy that bullet might be composed of. We would be better placed to argue that our bullet is real on the back of some winning microeconomic arguments.

Third, the UK should join the euro when the economic conditions are right.

He’s been saying this for years. Yet the euro, at least as currently constituted, seems in contradiction with reality. As Italy looks ever more like a larger Greece, it threatens to make Lehman Brothers look like a tea party.

Blair, nonetheless, maintains that the geo-political clout of the UK would be maximised by euro membership. While this may or may not be true, euro membership now seems so far from the UK’s economic interest as to beg the question: What steps, if any, can a UK that remains outside the euro for at least the foreseeable future take to maximise our geo-political influence?

Targeting euro membership seems as 1990s as Britpop. Redolent of a time when BRICs were things you built housing bubbles with. Labour should, of course, continue to play a constructive role in the EU. However, we should also more strongly stress our support for updating the institutions of the global economy (e.g. the World Bank and IMF, including the global reserve currency advocated by Roger Bootle). Such reform would contribute towards minimising the chances of the crisis of recent years repeating. Labour advocacy would have us be the internationalist, far-sighted party that we should be.

Fourth, he rightly trumpeted his many achievements as prime minister.

While his government was characterised by much needed increases in public spending, unsustainably high tax revenues from the city afforded a large chunk of this. This un-sustainability goes a long way to explaining the deficit. These tax revenues were recycled through tax credits and similar but the distribution before this secondary redistribution was so skewed that many could only have the lives they wanted through accessing easy credit. This built up a stock of private debt that households are now struggling to pay down.

If a more equal distribution of income and wealth could be achieved without resort to secondary redistributions, these problems would be more containable. And Labour would have achieved its historic purpose. To serve this end, though, we need to return to government.

If done properly, thinking through and taking forward the ideas suggested by the economics of Blair can both make ourselves more electable and better able to realise our historic purpose in government.

I had this on Labour Uncut last week.

Tony Blair made adaptation to globalisation a Labour leitmotif. Yet the existence of the “squeezed middle” is a symptom that he did not finish the job. Today’s globalisation is more about the rise of Asia than was the case when Blair became party leader. Easing the squeezing requires better adaptation to this Asian age.

It will take more than David Cameron hawking UK PLC from one rising Asian power to the next. The prime minister is listless in the face of power seeping from the over-indebted West to the resource-rich East, so neatly encapsulated by FIFA’s world cup decisions. His PR smoothness is no substitute for leadership in urgent debates about the architecture of globalisation. It seems that his only reason for attending the G20 was, unsuccessfully, to press the flesh for England’s world cup bid.

Perhaps Cameron confused diary entries, and we lost the world cup after he confronted FIFA president, Sepp Blatter, on macro-prudential regulation. After all, the Tory-Lib Dems’ bail-out of the Irish demonstrates that we live in an interconnected age. It exposes their myth: that our economic predicament is solely Labour’s fault.

While Cameron cannot afford himself a robust response to Asia’s rise, leading centre left thinkers are looking at the bargain Labour struck with globalisation. On the one hand, it was relaxed about the filthy rich. On the other, it recycled tax revenues into public services and redistributions, like tax credits, at unprecedented levels. But the most striking feature of this economic model is its dependence upon secondary redistribution. The middle is squeezed because we have not got to a more equitable distribution of market rewards.

John Humphrys may find it bizarrely incomprehensible, but the squeezed middle is not just a British phenomenon. In the US, the annual incomes of the bottom 90 per cent of US families have been essentially flat since 1973. It used to be middle-class aspiration that Labour needed to tap into. Now the middling sort across the whole of the West is anxious. It is even possible to understand the tea party movement when you realise that at its core is anxiety, not guns and bibles.

Tea partiers, like Essex men, are more focused on keeping what they have than wanting more. They want to take their country back, not look for answers from the great beyond. They are resentful of any perceived threat. Whether that is losing their health insurance to Obamacare or their jobs to the oilfields and factories of the East.

Politicians across Europe are increasingly willing to bemoan minorities and immigrants, other governments and Brussels. There are many corners of foreign fields that seem forever Mrs. Duffy. Tackling the squeeze is a precondition of curbing this.

Globalisation will only go into reverse if an open currency war follows banks and states defaulting. Almost any amount of squeeze for the middle and anxiety for Mrs Duffys is worth it to avoid this 1930s scenario. And the more squeezed the middle becomes, the more politicians will struggle to resist protectionism and competitive currency devaluations. These would be the seeds of a cataclysm of 1930s proportions. We cannot sustain globalisation without improving social justice both domestically and internationally.

In the UK, we must recognise that income distributions that are skewed towards the rich minority are a practical menace, as well as morally questionable. Countries with lower Gini-coefficients (a measure of the inequality of a distribution – the higher the score, the more unequal) are more likely to increase consumer demand in sustainable ways. This means that median workers will not find their wages squeezed, and their maxed-out credit cards will not create booms and busts. Labour must find ways of achieving this while scaling back government to control the deficit. Here – after the public spending largesse of the Blair/Brown years – we start with a blank piece of paper.

Even if social democracy means that the state consumes an ever-larger slice of GDP, it cannot mean it now, in such fiscally straitened times. That states, as well as markets, fail should not leave social democrats bereft of hope. It should inspire a radical pragmatism for whatever truly works. A pragmatism never abashed by cross dressing or reformers and one unafraid to deploy state or market wherever it is best suited.

Advancing social justice internationally won’t be achieved by Cameron’s glad handing. His G20 failure, which Brown would have avoided, was far more of a dereliction of duty than his failure to deliver, in contrast to Blair, a global sporting event. Not least thanks to Brown, world leaders were quick to come together effectively in the early stages of the global crisis.

The extent to which the fundamental causes of this crisis have been addressed is debatable. Global leaders must maintain their engagement in order to tackle these causes. Not just applaud what good chaps Prince William and David Beckham are. Cameron offers vapid PR stunts instead of leadership. Whereas Labour must find practical ways of advancing social justice here and internationally. Only then can the globalised middle end up slightly more eased than squeezed.

Jamie Reed, MP for Copeland, reacted to Gordon Brown’s resignation as Labour leader by writing for Progress on 11 May 2010: “The PM’s decision has set in motion a leadership contest, but it also marks the beginning of a new post-Blair/Brown era in the Labour party.”

That Tony Blair’s autobiography has been published on the same day as ballot papers have been sent to party members in this contest is an unwelcome echo of this era. While his actions as PM, particularly on economic policy, have had a distinctly Thatcherite flavour, David Cameron was the first Tory leader to fully emerge from Margaret Thatcher’s shadow. He was also the first of these leaders, since John Major in 1992, to win a General Election. There is a lesson in this for Labour. And Blair’s seeming desire to play back-seat driver isn’t helpful in assisting Labour avoid the electoral fate of the Tories post-Thatcher.  

While Labour needs to move on from the Blair/Brown era, this shouldn’t mean a lurch to the left. Blair is, actually, sensible in imploring from the back-seat that any such lurches be avoided. The trouble is that it is the driver who the electorate needs to hear and their voice is drowned out by any noise coming from the back-seat. The driver also needs to hear himself think and to think afresh. Such thinking is unlikely to be assisted by the noise coming from the back-seat. The back-seat driver is right to avoid lurches to the left but the very meaning of left and right are much in flux and it is far from clear that the back-seat is truly able to think whatever unthinkables need to be thought in this context. 1994, after all, is not 2010.

James Crabtree has written a fascinating and much commented upon Prospect piece on the role that an apology might play in a quick return to Labour government should the Conservatives win the General Election later this year. This has set me thinking about the role of contrition in politics in general and two sorry Tory stories in particular. These sorry stories are: First, seeing (tacit and non-formal) apologies for being slow to make peace with the 1960s and for the excesses of the 1980s as being integral to the rebranding of the Conservatives sought by David Cameron (a project that is now threatened by a sense that the credit crunch and the scale of public debt have caused the Conservatives to renew their marriage vows to Margaret Thatcher and the 1980s); and, second, conceptualising the Republicans as being split between those who see a need for some kind of apology for the years of George W Bush as necessary to their political renewal and those who do not.

Some recent events – the reaction to the attempted Christmas day terrorist bombing in the US; the election to fill Ted Kennedy’s Senate seat in Massachusetts; the tea party protests; the spike in retirements from Democratic Congressmen; and President Obama’s approval rating - would seem to strengthen the position of those who are unapologetic for the Dubya years. But my default sense – which I am increasingly having cause to question - is that in the long-term more contrition than that which the likes of Karl Rove are presently prepared to offer will be required for the Republicans to fully recover. That said; there are signs, which are worrying to a European and (in the American sense of the word) liberal, that an unreconstructed Republican party might return to the White House in 2012. An example of such a sign is that when I departed Dulles airport, just outside DC, 48 hours ago I noted lots of t-shirts on sale like the one below.

Dulles may be in Virginia, but it is hardly in the heart of red state territory; Massachusetts is even less so. I can only fear what they are now thinking in such territory. But let’s return to American politics via a review of the role of an apology (of sorts) in the fortunes of the Conservative Party in recent years.

“There is no such thing as society.” This was one of the most outrageous and defining claims of the Thatcher years. So, for Cameron to repudiate this by saying that ”there is such a thing as society” was for him to grasp towards an apology for the excesses of Thatcherism in the form of a Clause 4-esque moment. In actuality, he failed to fully seize this moment by following this line up with words (“it’s just not the same thing as the state”) that amounted to a Burkian little platoons view of society that is little removed from Thatcher’s notion that “there are individual men and women, and there are families. And no government can do anything except through people, and people must look to themselves first.”

Notwithstanding this I am with James Crabtree – pace Luke Akehurst – in conceding that lines such as these from Cameron, as well as a focus upon such non-traditional Tory themes as poverty and the environment, amount in tone, at least, to a sustained Tory apology and repositioning.

But that is soo 2005/7. You know, PCC (pre-credit crunch). We are now in a very different era. Philip Stephens has captured well what this meant for the Cameron project:

“The cuddly, environmentally friendly prospectus he offered during his early years as leader has collided with grim economic reality. The Tory leader used to promise to share the proceeds of economic growth between public services and lower taxes. There is nothing left to share. The choice is between what services to cut and what taxes to raise.”

David Goodhart touches upon another aspect of the Cameron project, “after Labour embraced the 1980s (the turn to the free market) the Tories have recently made their peace with the 1960s (race and gender equality, environmentalism and so on).” Part of the ”friendly prospectus” involves an apology for not previously being at ease with the 1960s. While Labour had to adapt to the 1980s to reinvent itself under Tony Blair, the 1997 election constituted, in part, a rejection of the dogmatic firmness of the Tory faith in the free market. Consequently, as well as finally reconciling themselves to the 1960s, Cameron has sought to apologise for the 1980s Thatcherite dogma that lead to 1997. He’s the “heir to Blair”, remember.

This strand of Cameron’s apology – the 1980s strand, if you will – has gone flaky since the need to control public debt (and the implied requirement for restraint in public spending) has become more apparent. This is because the Conservatives have seemed more keen than Labour to address this need. Peter Mandelson tried to increase this flakiness by speaking of the “barely disguised glee” of the Tories at the prospect of spending cuts.

The 1960s strand is also undermined by a Conservative Home survey that reports that reducing Britain’s carbon footprint is the lowest priority of Tory PPCs. Their second highest priority is “cutting red tape”. How 1980s and John Redwood-like is that?!? It’s like the regulatory failures of the credit crunch never happened. Perhaps, only Boy George and “reducing the public deficit” (aka cutting public spending), which was their top priority, could be more 1980s.

All of which supports Mandelson’s argument and gives the suggestion that Cameron may be a somewhat reformed character who wants to rebrand the Conservatives, but the Conservatives themselves do not wish to be so changed and the public are unconvinced that such a change has been completed. Jack Scott, a Labour PPC, has picked up strong evidence on the doorstep for this view being held amongst the public.

Cameron’s attempt to change the Conservatives has certainly been buffeted, most spectacularly by the credit crunch. However, he remains keen that the perception of change, at least, holds; whether he can make this perception stick in the hearts of his party and the minds of voters are different questions, however.

Returning to America, we note one of the most basic and fundamental distinctions between British and American politics. The Republicans have no politician in an office akin to Cameron’s. Whether the Republican leadership wants to apologise for George W Bush, as Cameron has sought to apologise for Thatcher et al, is immaterial, because no office exists from which a leader might thrust such an action upon their (welcoming or otherwise) party. Cameron may have fluffed his Clause 4 moment but this structural distinction between the US and the UK means that there is much less chance of a Republican Clause 4.

The nearest the Republicans have got to such a moment came in the form of a recently published book by Michael Steele, Republican Party Chairman, in which he discusses why the GOP has often lost touch with typical Americans since the Ronald Reagan era and concedes: “We screwed up.” (Notice another difference between the UK and the US: The 1980s are something for which the party of the right is to apologise in the UK and are something for the party of the right to seek to recover in the US).

However, as E. J. Dionne Jr notes, some Republicans remain on the offensive about the period for which Steele is apologetic. These are the kind of Republicans who are doubtful about Michael Steele.

“Much of the contention surrounding Barack Obama’s presidency is simply a continuation of our argument over the effects of George W. Bush’s time in office. That is why Obama, despite his fervent wishes, has been unable to usher in a new period of consensus. Bush’s defenders know that Obama’s election represented a popular reaction against the consequences of the Bush presidency. Because Obama is both the anti-Bush and the leader of the post-Bush cleanup squad, his success would complete the rebuke. So the Bush camp — Karl Rove’s regular contributions to the Wall Street Journal’s opinion pages are emblematic — must stay on the attack.”

The strand of the Cameronista project that is so determined to underline a sense of change within their party, it seems to me, is motivated by a desire to act upon an insight provided by Danny Finkelstein, one of their most sympathetic commentators: the British electorate is never wrong. Change is required, it is thought, to show that the party has moved on from the past mistakes that kept it out of office. However, the Rove strategy seems based on precisely the opposite view: the Dubya years weren’t missteps at all, but coloured by the right actions, and, in time, the American public will come to realise that they made a mistake in evicting the Republicans from the White House. It’s not so much “don’t blame me, I voted McCain” as “sorry, I’ve seen the error of my ways and wish I’d voted McCain.”

As well as on terrorism and foreign policy, the Republicans are unrepentant on their role in the economic situation. This is also noted by E. J. Dionne Jr:

“It’s striking that most conservatives, through a method that might be called the audacity of audacity, have acted as if absolutely nothing went wrong with their economic theories. They speak and act as if they had nothing to do with the large deficits they now bemoan and say we will all be saved if only we return to the very policies that should already be discredited. The few exceptions to this rule — Bruce Bartlett and Richard Posner, the authors of two bravely dissident books, come to mind — find themselves excommunicated from the conservative movement.”

Until very recently – the Massachusetts vote, etc – I’d have dismissed this lack of contrition, this pig-headedness, this wilful “we were right and we’re not sorry”, as the surest way for the Republicans to keep themselves out of high office for a long time. As Finkelstein argues, all of this is about the Republicans choosing to listen to themselves, not the electorate, who they are convinced can be very wrong. But if the Democrats can lose in Massachusetts, may be, an unrepentant Republican Party can return to the White House.

As Mandelson and Cameron both understand, the perception that the Conservatives have not changed is a real threat to their return to government. The credit crunch has complicated this rebranding exercise, though this exercise is still of great political significance. I’ve always tended to assume that the same rules apply to the Republicans: They won’t win without independents and they won’t gain the support of such voters without demonstrating that they have listened to them by showing contrition for the things that are perceived to have gone wrong under Dubya.

Yet now I am starting to wonder and worry whether the same rules do actually apply to the Republicans. America is, famously, different. It is the right nation - there are deep reasons why, for example, as touched upon above, Reagan is revered in the US as Thatcher is reviled in the UK – and, perhaps, its slight turn to the left under Obama (always more a rejection of Dubya than a convinced liberalisation) may prove temporary. It gets frighteningly easier and easier to imagine Gideon Rachman’s dystopian dream of a President Palin – the unapologetic pitbull - becoming real 2012.

Where would the world be then? Wishing that it and President Obama had acted differently? If not now, when?

It is difficult to overstate the strategic importance to the EU of Turkey. So, a sense of regret and concern should be felt across the union when Recep Tayyip Erdogan, Turkey’s Prime Minister, says of Mahmoud Ahmadinejad, Iran’s Holocaust denying President, that “there is no doubt he is our friend.” But Europe has not been awash with such sentiment in recent days because, as Philip Stephens argues, Europe has clung to the past as Turkey has turned east.

Must Europe wither? It surely shall if we do not wake up and smell the coffee and move on from the navel gazing and introversion that have marked recent years. Tony Blair suggested three years ago that the big distinction in politics was between open societies and those which were closed. “If you take any of the big motivating debates in politics today”, argued Blair, “each essentially has, at its core, this question: ‘Do we open up? Albeit with rules and controls, or do we hunker down, do we close ourselves off and wait till the danger has passed? Is globalisation a threat or an opportunity?’” The EU has chosen to hunker down, to close itself off, not just to Turkey but to a world that is hurtling towards a G2 in which there is no place at the top table for Europeans.

British pro-Europeans, like Nick Clegg, must have watched these developments with horror and wished that the EU could turn itself around and open itself up. The conclusion of the Lisbon process offers a great opportunity for this and Blair’s candidacy for the EU presidency offers the leadership and gravitas necessary to achieve this. Even his advocates, such as Charles Grant and Will Hutton, do not fail to find fault with Blair. Yet “the message” Grant hears “in places such as Beijing, Delhi and Washington is that if the EU wants to be taken seriously, it should choose a big name as president”. Is there another big name candidate? No. Thus, the choice is to be closed (and deride Blair as a ‘superstar’ unworthy of support as Clegg did today) or open (and go for Blair precisely because he is a superstar in the capitals that now matter most).

It is not just a betrayal of Clegg’s pro-European credentials for him to fail to back Blair, it is an abdication of his profession. Politics exists, after all, as J. K. Galbraith knew, “in choosing between the disastrous and the unpalatable”. Clegg may find Blair unpalatable; so do Grant and Hutton, to some extent. But Turkey getting into bed with Iran is the first of many disasters that shall befall the EU if it continues on its current trajectory. It is because Grant and Hutton have retained the ability, unlike Clegg, to distinguish between the unpalatable and the disastrous that they are able to bring themselves to support Blair.