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.

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 [2002], 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?

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.

Alison McGovern
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Forget universal basic income - this is how we can include voters in economic growth

The links between economic growth of the country and that of the people, families and towns have broken. The state can fix them again. 

Economic policy is always boring, until it’s too late.

Pensions. How they are funded, who they cover, what happens if they fail. Boring. Until it was too late.

Mortgages. Who has them, who needs one, who should have one. Boring. Until it was too late.

Finance. Capital markets, their products, their structure, their risk profile. Boring. Until it was too late.

You see the point I’m making. It’s easy to look away from numbers. The data doesn’t necessarily tell us an obvious story. And then one day, a catalyst sparks an unforeseen, if, with hindsight, predictable event, and we all wonder why we didn’t see it coming.

Something similar happened with the Brexit vote. Of course, it was a perfect political storm: an overconfident Prime Minister calls a referendum that he only needs to have to pay off his right flank, safe in the knowledge that the mainstream voters and the leadership of the Labour party will carry him through. Except he forgets that there is someone more despised than even his right flank - him. 

But beneath all of that, the Brexit vote revealed a divided country. Between those who felt that Britain as it was before the referendum offered them a decent enough – if imperfect - future, and those who felt it offered them nothing of the sort. 

Could we have seen it coming? Perhaps we could. Take two graphs.

Real wages are still, today, on average below what they were in 2008, nearly a decade ago. At the point of the referendum, average wages were yet to return to the level they hit eight years earlier. The difference between real and nominal wages is inflation. People have watched prices steadily drift up while their wages have remained stubbornly flat. Not an overnight shock, but a long drawn out crisis all the same.

Vast numbers of pensioners (over 60 per cent of them) voted to leave the European Union, and pensioners incomes have not seen the same fall as incomes for the working age population (in fact they rose by 19 per cent in real terms in the last 10 years). But it is important not to overinterpret the data with hindsight. After all, there are nearly 32m British people of working age. That surely should have been enough to carry the vote, had far too many people had so little reason to back the status quo.

In the years running up to the crucial Brexit vote, the economy was, by and large, moving ahead. But in the case of the most crucial, most noticeable, economic transfer - a person’s wages - the economy was not moving ahead at all. In fact between the crash and the 2015 general election, wages largely only fell, and since then, pay has struggled to make up ground, against a picture of an otherwise ‘growing’ economy.

Worst of all - nearly 4m households in measurable (and therefore known) poverty include someone at work. Of the 17m Brexit voters, some were wealthy retired voters who always hated Brussels. But how many more simply had too little to lose, and couldn’t stand David Cameron?

The problem with all this though, and the reason we didn’t see it coming, is that no one’s life is a graph. I mean, we are all data points. But no one feels like a data point. And people are notoriously bad at providing logical, graph-like, mathematical reasons for their political judgements. "My individual wages have failed to keep pace with growth in the economy at large," said no person on no doorstep, ever. Unhappiness with what is on offer manifests itself in lots of different ways but it isn’t likely to be an analysis of the macro-economy.

We all know of course that people are much more likely to connect with politics (and politicians) emotionally. That is how we make our choices. But our emotions are informed by the facts of our life and are responses to the facts we see. So, whilst the graphs above cannot tell us all we need to know about why Remain lost, they do tell us about some facts likely to impact on the choices we make.

The challenge is to work out how we can change the trends shown on the graph, and how this in turn will affect those who lost out over the past decade. What can be done to repair the link between economic growth and economic growth for all?

This challenge is to create "inclusive growth". Or as I think of it, making sure there is a hard chain which links growth in the economy overall to the growth of wages and incomes of the many. When the country rises, so must all within it.

The hard links in the chain are what should have kept our country together. They are the rules that should have meant that the British economy doing better meant individuals, families, towns, cities all doing better too. You can see from the graphs above that the rules worked between 1997 and about 2005. Our country grew, and we all grew in capacity with it. But then the model stopped working. And 11 years later people were asked to vote for the status quo, even though the status quo was clearly failing the many.

We will never be able to see the trends until it is too late. We need rules that shape our markets, including the labour market, to achieve an outcome that people can see and feel in their pockets. Analysis of the past is only any good if it can help shape the future. 

It’s not enough to say that somehow our economy is rigged against people, as if this was one great fiddle. Rather, we should remember that policy choices have consequences. 

Now some people suggest that the correct response to falling wages, and precarious work, is some sort of universal benefit, or citizens’ income. But recent Fabian Society research demonstrated that the vast majority of people – about 80 per cent - feel positive about their work even despite the story told here about wages. So even if it were practical for government to raise taxes in order to transfer something in the region of the state pension to every person in our country, it hardly seems like it would be popular. 

If people, in general terms, actually like their work, the problem is then making sure they get paid enough and get promotions. It means recognising what the past decade has taught us: that the growth of the economy must mean economic growth for all within the economy, or else there will be consequences.

So, the question remains: what are the hard links in the chain between the economic growth of the country as a whole, and economic growth of the people, families and towns within it?

Unfortunately, this is where the boring stuff still matters. You can get paid more if you have better prospects. That means a buoyant labour market, and the skills to participate in it.

Now the government say that they are addressing the challenges in our economy by investing in infrastructure, through an industrial strategy. And along with buzzy new ideas like universal basic income (where citizens are guaranteed a certain income), everyone in politics loves announcing campaigns for new railway lines (me included). Trains are big, fast, expensive and showy. But travelling to work by train tends to be the preserve of those who already have a high-skilled job and are commuting some distance. We should worry a little more about those who get the bus to work.

Then take those who work in low-pay sectors like care, retail, hospitality, or construction. Each sector has its own challenges, but one thing that unites of all these sectors is the likelihood of people working in them to be working below their potential skill level. Hopefully our new metro mayors will be able to provide better education opportunities for those at or near the minimum wage. But what about in those areas without mayors? Do they fall even further behind? Skills transfers matter much more for future growth than a massive financial transfer like universal basic income.

And in case anyone should think that I have forgotten, with less than 15 per cent of people in the private sector represented by a trade union, it is little wonder that workers have insufficient power to command better wages. Our labour market leaves too many people on their own, without the strength of collective bargaining to get them a good deal.

Universal basic income fails for another crucial reason. It would fail for the same reason that tax credits were economically effective but open to political challenge. For most people, the part of government, of the state, that they wish to defend are the things they can see, they can touch, emotionally engage with. The hospital their child was born in, that cared for a sick parent, the school they went to, the park they played in with their grandchild. They prefer to earn their wages, and do a job they enjoy. Transfer payments from the state are always harder to defend, as the history books attest. 

So for me, truly inclusive growth means making the most of the institutions we already have – colleges of further education for example – and building new ones like universal quality childcare. Many members of our workforce are prevented from returning to work after the birth of a child, simply because of the cost of childcare. Universal free childcare would allow many more women to go back to work or have the time to gain more skills, should they want to. Moreover, good quality childcare would benefit all of our children by narrowing the attainment gap. These hard links in the chain - the links that ensure that growth in Britain involves economic growth of all of those people and places within it - are, in fact, the institutions of the state. 

These are the platforms Labour governments have built for ordinary people to stand on. But these are the very institutions under attack from current government policy. If we’re going to rebuild the chain, then the government must change tack. We need to develop new ideas and solutions and the all-party parliamentary group on inclusive growth can be a place to bring people together across the party divide. Theresa May has spoken about an economy that works for all. Now’s the time to protect the institutions that can deliver that economy and inclusive growth, before it is too late.

The APPG on Inclusive Growth's 'State of the Debate' event with the OECD, World Economic Forum, RSA and IPPR is on Tuesday 21st February at 6.30pm at Parliament. See www.inclusivegrowth.co.uk for full details.

Alison McGovern is Labour MP for Wirral South.