Even after Thatcher, the Conservatives never learned the benefits of redistribution

Sometimes you want to make everyone better off, not just the rich.

One of the clips of Thatcher which has been passed around in the days since her death is this one, of two exchanges from her last speech in the House of Commons on 22 November 1990. In it, she attacks the left-wing focus on equality by arguing that that focus ends up resulting in making the poor poorer – just by less than it makes the rich poorer:

I've never understood why it's an exchange held in quite such high regard – the bit at the end, where she starts making graphs with her hands, is a particularly excruciating bit of political communication – but the point does stick home. It's not that common to hear arguments for the poor to be made poorer, but it remains the case that policies which help both rich and poor are argued against on the grounds that they help the rich more.

There's good reasons for this, of course. As Richard Wilkinson and Kate Pickett's book The Spirit Level documents exhaustively, in developed nations like our own, a huge number of social, political and health outcomes are dictated by equality, not absolute wealth. So even given the fact that Thatcher's legacy was of the poor getting richer, the fact that that it included a massive increase in inequality may have meant that poor people were worse off at the end of her premiership than the beginning.

But if hurting the poor to hurt the rich more is a trap for socialists, there's a sort of parallel problem that Conservatives fall prey to: an opposition to redistribution which prevents them enacting policy combinations that help everyone.

A new paper by economists David Autor, David Dorn, and Gordon Hanson, titled "Untangling Trade and Technology: Evidence from Local Labor Markets", compares and contrasts the effects of trade and technology on employment. On the face of it, it doesn't matter to you whether you lose your job because a robot can do it cheaper, or because a Chinese labourer can do it cheaper: you still don't have your job, and your employer has more money. But in actual fact, the two have markedly different macroeconomic effects:

Trade exposure reduces overall employment and shifts the distribution of employment between sectors, [but] exposure to technological change has substantially different impacts, characterized by neutral effects on overall employment and substantial shifts in occupational composition within sectors.

Trade in particular is found to impose "particularly large" employment losses on workers without college education; but even technological change, which is neutral on "overall employment", has the effect of destroying middle income jobs while bolstering high- and low-paid labour.

Of course, all of that is background to the strong evidence that technological change and free trade make society as a whole richer. The problem isn't with the lack of gains – it's with the distribution of those gains.

How do you deal with good gains and a bad distribution? You bank the gains, and fiddle with the distribution. Cut taxes – or boost tax credits – at the bottom end of the income distribution, and pay for it with higher taxes at the top end. Or even just leave taxes at the top the same, and use the fact that the rich are getting richer – and thus paying more tax – to (more than) compensate the poor for the losses.

This is the lesson that Thatcher, and the Conservatives who have followed her, never learned. It's more than just economic good sense: it's politically useful, too, to be able to tell everyone that they will be made better off. Think how much easier the debate over immigration would be if the Tories could point to a tax cut – for the poor – which was funded through the increased gains migration brings.

In the language of economics, there are very few pareto-optimal policies left; the number of changes you can do which help everyone, as opposed to helping some and harming others, has dropped close to zero. But a good bundle of policies can still make everyone better off – and that bundle will nearly always include redistribution of wealth.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Who will win in Stoke-on-Trent?

Labour are the favourites, but they could fall victim to a shock in the Midlands constituency.  

The resignation of Tristram Hunt as MP for Stoke-on-Central has triggered a by-election in the safe Labour seat of Stoke on Trent Central. That had Westminster speculating about the possibility of a victory for Ukip, which only intensified once Paul Nuttall, the party’s leader, was installed as the candidate.

If Nuttall’s message that the Labour Party has lost touch with its small-town and post-industrial heartlands is going to pay dividends at the ballot box, there can hardly be a better set of circumstances than this: the sitting MP has quit to take up a well-paid job in London, and although  the overwhelming majority of Labour MPs voted to block Brexit, the well-advertised divisions in that party over the vote should help Ukip.

But Labour started with a solid lead – it is always more useful to talk about percentages, not raw vote totals – of 16 points in 2015, with the two parties of the right effectively tied in second and third place. Just 33 votes separated Ukip in second from the third-placed Conservatives.

There was a possible – but narrow – path to victory for Ukip that involved swallowing up the Conservative vote, while Labour shed votes in three directions: to the Liberal Democrats, to Ukip, and to abstention.

But as I wrote at the start of the contest, Ukip were, in my view, overwritten in their chances of winning the seat. We talk a lot about Labour’s problem appealing to “aspirational” voters in Westminster, but less covered, and equally important, is Ukip’s aspiration problem.

For some people, a vote for Ukip is effectively a declaration that you live in a dump. You can have an interesting debate about whether it was particularly sympathetic of Ken Clarke to brand that party’s voters as “elderly male people who have had disappointing lives”, but that view is not just confined to pro-European Conservatives. A great number of people, in Stoke and elsewhere, who are sympathetic to Ukip’s positions on immigration, international development and the European Union also think that voting Ukip is for losers.

That always made making inroads into the Conservative vote harder than it looks. At the risk of looking very, very foolish in six days time, I found it difficult to imagine why Tory voters in Hanley would take the risk of voting Ukip. As I wrote when Nuttall announced his candidacy, the Conservatives were, in my view, a bigger threat to Labour than Ukip.

Under Theresa May, almost every move the party has made has been designed around making inroads into the Ukip vote and that part of the Labour vote that is sympathetic to Ukip. If the polls are to be believed, she’s succeeding nationally, though even on current polling, the Conservatives wouldn’t have enough to take Stoke on Trent Central.

Now Theresa May has made a visit to the constituency. Well, seeing as the government has a comfortable majority in the House of Commons, it’s not as if the Prime Minister needs to find time to visit the seat, particularly when there is another, easier battle down the road in the shape of the West Midlands mayoral election.

But one thing is certain: the Conservatives wouldn’t be sending May down if they thought that they were going to do worse than they did in 2015.

Parties can be wrong of course. The Conservatives knew that they had found a vulnerable spot in the last election as far as a Labour deal with the SNP was concerned. They thought that vulnerable spot was worth 15 to 20 seats. They gained 27 from the Liberal Democrats and a further eight from Labour.  Labour knew they would underperform public expectations and thought they’d end up with around 260 to 280 seats. They ended up with 232.

Nevertheless, Theresa May wouldn’t be coming down to Stoke if CCHQ thought that four days later, her party was going to finish fourth. And if the Conservatives don’t collapse, anyone betting on Ukip is liable to lose their shirt. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.