Politics 20 September 2012 In this week’s New Statesman: The Lib Dem Conference Special Richard Reeves makes the case for a "truly liberal party". PLUS: Robert Skidelsky on the coalition's "silent U-turn" on economic policy. Print HTML Richard Reeves: The case for a truly liberal party In our magazine’s cover story this week, Nick Clegg’s former director of strategy – one of the most senior figures at the heart of government – writes exclusively for us on the future of the Liberal Democrats. In a substantial intervention ahead of the party’s annual conference, Reeves challenges the party to decide once and for all whether it is committed and has the courage to pursue the course that Clegg has charted. Read the full text online here. Robert Skidelsky: Go left, go right... go downhill After a “tepid recovery” from the 2008 collapse and a double td recession fuelled in part by Osborne’s austerity measures, Britain’s course to fiscal recovery looks conflicted. Political economist Robert Skidelsky takes a step back and asks: “What has gone wrong?” It is true that a correlation isn’t a cause, but could it be that the earlier recovery had something to do with the stimulus, and the subsequent decline with the austerity? At any rate these are striking coincidences. By contrast, the United States, which escaped Dr Osborne’s cure, has continued to grow, albeit feebly. It would be foolish to say that Osborne’s budgets have caused the slump. The charge is that his budgets, far from offsetting, have aggravated the collapse of demand that followed the banking crash of 2008. Austerity has not caused the economy to shrink, but has kept it from recovering. Skidelsky presents the theoretic argument for fiscal stimulus as a means for economic growth, especially in an era of thrift where many citizens fear “living beyond their means”. He draws a clear picture: The only thing they can do is to reduce their spending: that is, save more. But what happens if all households and firms try to increase their saving at the same time? Well, then the total spending in the economy will fall because everyone’s spending is someone else’s income. There will be less demand for goods and services and therefore for labour. Our collective attempts to get back into balance – get rid of our credit-card debt, as the Prime Minister likes to put it – will have made us all poorer, and, indeed, reduced the amount of saving as well, given that we will have smaller incomes out of which to save. So the economy will go on shrinking until the excess saving is eliminated by the growing poverty of the community. New acts of saving, though virtuous for the individual, make us all poorer when the demand for new capital has declined. That is why Keynes rejected more saving as the remedy for a slump. The correct response was more spending. And if private agents lack the resources or incentive to increase their spending then the government needs to increase its own spending. This, in a nutshell, is the theory of the stimulus. So what’s to be done? Slowly, the Conservatives have begun to acknowledge the Keynesian reality – “that to withdraw demand from an already demand-deficient economy will lead not to recovery, but to a shirking economy, a growing debt (private and public) and the need for more austerity.” He calls this acknowledgement the “silent U-turn”. He furthers: The debate is broadly between the supply-siders and the demand-siders. The supply-siders argue that there is too little money in the economy, the demand-siders that there is too little spending power. It might seem that the two come to the same thing, but as Keynes pointed out, the holder of money has a choice: whether to “hoard” it or spend it. Those who argue that any increase in the money supply is bound to be spent on buying goods and services ignore the existence of “liquidity preference” – the desire to hold on to cash because of uncertainty about the future. Aid for aristocrats In an exclusive NS report, Jason Cowley and George Eaton investigate how some of the biggest landowners in the country are receiving millions in taxpayer subsidies each year. Under the EU’s Common Agricultural Policy, to which each British household contributes £245 a year, the Queen was last year paid £730,628 for her ownership of the Royal Farms Windsor and the Duchy of Lancaster, while Prince Charles received £127,868, and Saudi Arabia’s Prince Bandar was paid £273,905 for his ownership of the 2,000-acre Glympton Estate in Oxfordshire, allegedly purchased with proceeds of the 1985 al-Yamamah arms deal between Britain and Saudi Arabia. Britain has the most unequal land distribution in Europe after Spain, with 70 per cent of acreage held by just 0.28 per cent of the population, or 158,000 families. Read an abbreviated version of the report here. Rafael Behr: Why Ed Miliband should be grateful to the Lib Dems In the Politics Column this week, Rafael Behr points out why the coalition hasn’t been entirely unbeneficial to the Labour agenda. Further isolating the Tories from the “already atrophied liberal wing” of their own party, Clegg’s destabilizing effect has perhaps done more to help than hinder. Behr writes: Labour dismisses the Lib Dems’ policy contribution to government but they cannot deny that the junior partner’s assertiveness has provoked the Tory right and undermined Cameron’s authority. It has forced the Prime Minister to neglect the already atrophied liberal wing of his own party, meaning the project to modernise and “decontaminate” the Tory brand has stalled. Then, as coalition relations soured and the intimacy of the early months threatened to dissolve Lib Dem identity, the party embarked on a strategy of “differentiation” that abetted Labour’s attacks on Cameron. Clegg’s implicit message has been that Conservative instincts are as sour as they were when the “nasty party” label hung around their necks. Coalition is meant to sweeten the mix. Were another hung parliament to be in the draw, Miliband might have the Deputy PM to thank… If Ed Miliband is in a position to form a government, it will be in no small measure because Clegg has hemmed the Tories into an ideological corner from where, history suggests, they struggle to reach a majority. That isn’t the reason most Conservative MPs, obsessed with the contamination of their purest policy ambitions, are angry with the Lib Dems. It is a reason why they should be. Daniel Trilling: How New Labour opened the door to the far right In an exclusive extract from his new book, Bloody Nasty People, Daniel Trilling reports on how the BNP gained a foothold in British politics: With first-hand reportage from England's north-west, including interviews with key figures from within the far right, he examines how Nick Griffin exploited ethnic tensions in the aftermath of the 2001 riots - and how the Labour leadership responded: If voters in Burnley wanted the government’s attention, now they had it. Over the weekend of 15 and 16 June , write Nigel Copsey and David Renton in British Fascism, the Labour Movement and the State (Palgrave Macmillan), Tony Blair met with senior strategists, chief among them his pollster Philip Gould, who warned that thousands of "angry young working-class men" were poised to desert Labour for the BNP. […] But New Labour was in thrall to triangulation, the strategy which had helped the party defeat the Conservatives by occupying the political space normally held by the right, pushing them further away from the centre. What would it mean to "occupy" the space held by fascists? Trilling challenges the former Home Secretary, David Blunkett, over his comments in 2002 that asylum seekers were "swamping" British schools - an echo of remarks made by Margaret Thatcher: I visited Blunkett at his House of Commons office in the autumn of 2011. He denied pandering to racism. "My use of the word ‘swamped’ was specific. It means ‘overwhelmed’ and if you look at the dictionary definition they’re interchangeable," he told me, still testy about the incident. Yet even though he now regretted his incautious use of wording, he defended the strategy: "My concern from 2001 onwards was to ensure that we didn’t allow that considerable progress that [far-right parties] were making in other parts of Europe to be reflected in Britain. Plus: Katherine Angel writes a candid piece of memoir about female sexuality and how for too long the subject has been limited by male definitions: “Female sexuality – it’s everywhere, right? Our media are saturated with it; women pout out at us from every screen, unveil their desires in every story. Female sexuality: yawn. But it’s not female sexuality that is everywhere. It’s not even, as many might argue, a fictive female sexuality, defined by the projections and fantasies of others. What is everywhere is anxiety about female sexuality, discomfort with female desire.” Elsewhere in the New Statesman: Our Critic At Large this week is John Gray writing on Thomas Hobbes, “an intrepid rationalist with an unwavering confidence in the power of reason – especially his own – to resolve immemorial human dilemmas”. Gray in particular reviews a new edition of Leviathan and argues: that Hobbes “had no interest in liberty or democracy as ends in themselves” and so “can be seen as the greatest exponent of enlightened despotism”. In Books, Colin MacCabe reviews of Salman Rushdie’s memoir, Joseph Anton for our lead essay. MacCabe recalls the era of the fatwa, in which “ours was one of many houses in which Salman Rushdie was always welcome as a guest after he had been condemned to death by the mullocracy in Tehran”. MacCabe writes that “the story Rushdie tells is never less than gripping. And there are moments, particularly in his description of his now regretted reconversion to Islam, when he writes as well as he has ever done”. Read the full review here. Elsewhere in Books: Gary Imlach reviews Tyler Hamilton’s book about Lance Armstrong and doping on the Tour de France; Isabel Hilton reviews two books on China, The End of the Chinese Dream: Why Chinese People Fear the Future by Gerard Lemos and Scattered Sand: the Story of China’s Rural Migrants by Hsang-Hung Pai; and Jonathan Derbyshire interviews Paul Auster about his memoir, Winter Journal. Auster says: The funny thing about writing about oneself is that I’m not very interested in myself. I use my own life as an example of what it means to be human. I just think of myself as anyone or everyone. I’m trying to share my experience with others as a way of establishing some kind of common humanity. What does it feel like to be alive? Isn’t that what all writers are trying to do? › Why the Lib Dems need a centre-left election strategy Charlotte Simmonds is a writer and blogger living in London. She was formerly an editorial assistant at the New Statesman. You can follow her on Twitter @thesmallgalleon. Subscribe More Related articles Metro mayors can help Labour return to government How the Brexit referendum has infantilised British politics Vote Leave have won two referendums. Can they win a third?