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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Hopes of an anti-Brexit party are illusory, but Remainers have a new plan to stay in the EU

Stopping Brexit may prove an impossible task. Remainers are looking to the "Article 49 strategy": reapplying for EU membership. 

The Remain campaign lost in the country, but it won by a landslide in parliament. On 23 June 2016, more than two-thirds of MPs voted for EU membership. Ever since the referendum, the possibility that parliament could thwart withdrawal, or at least soften it, has loomed.

Theresa May called an early general election in the hope of securing a majority large enough to neutralise revanchist Remainers. When she was denied a mandate, many proclaimed that “hard Brexit” had been defeated. Yet two months after the Conservatives’ electoral humbling, it appears, as May once remarked, that “nothing has changed”. The government remains committed not merely to leaving the EU but to leaving the single market and the customs union. Even a promise to mimic the arrangements of the customs union during a transition period is consistent with May’s pre-election Lancaster House speech.

EU supporters once drew consolation from the disunity of their opponents. While Leavers have united around several defining aims, however, the Remainers are split. Those who campaigned reluctantly for EU membership, such as May and Jeremy Corbyn, have become de facto Brexiteers. Others are demanding a “soft Brexit” – defined as continued single market membership – or at least a soft transition.

Still more propose a second referendum, perhaps championed by a new centrist party (“the Democrats” is the name suggested by James Chapman, an energetic former aide to George Osborne and the Brexit Secretary, David Davis). Others predict that an economic cataclysm will force the government to rethink.

Faced with this increasingly bewildering menu of options, the average voter still chooses Brexit as their main course. Though Leave’s referendum victory was narrow (52-48), its support base has since widened. Polling has consistently shown that around two-thirds of voters believe that the UK has a duty to leave the EU, regardless of their original preference.

A majority of Remain supporters, as a recent London School of Economics study confirmed, favour greater controls over EU immigration. The opposition of a significant number of Labour and Tory MPs to “soft Brexit” largely rests on this.

Remainers usually retort – as the Chancellor, Philip Hammond, put it – “No one voted to become poorer.” Polls show that, as well as immigration control, voters want to retain the economic benefits of EU membership. The problem is not merely that some politicians wish to have their cake and eat it, but that most of the public does, too.

For Remainers, the imperative now is to avoid an economic catastrophe. This begins by preventing a “cliff-edge” Brexit, under which the UK crashes out on 29 March 2019 without a deal. Though the Leave vote did not trigger a swift recession, a reversion to World Trade Organisation trading terms almost certainly would. Although David Davis publicly maintains that a new EU trade deal could swiftly be agreed, he is said to have privately forecast a time span of five years (the 2016 EU-Canada agreement took seven). A transition period of three years – concluded in time for the 2022 general election – would leave the UK with two further years in the wilderness without a deal.

A coalition of Labour MPs who dislike free movement and those who dislike free markets has prevented the party endorsing “soft Brexit”. Yet the Remainers in the party, backed by 80 per cent of grass-roots members, are encouraged by a recent shift in the leadership’s position. Although Corbyn, a Bennite Eurosceptic, vowed that the UK would leave the single market, the shadow Brexit secretary, Keir Starmer, and the shadow chancellor, John McDonnell, have refused to rule out continued membership.

A group of Remainers from all parties met in the Labour MP Chuka Umunna’s office before recess, and they are hopeful that parliament will force the government to commit to a meaningful transition period, including single market membership. But they have no intention of dissolving tribal loyalties and uniting under one banner. A year after George Osborne first pitched the idea of a new party to Labour MPs, it has gained little traction. “All it would do is weaken Labour,” the former cabinet minister Andrew Adonis, a past Social Democratic Party member, told me. “The only way we can defeat hard Brexit is to have a strong Labour Party.”

In this febrile era, few Remainers dismiss the possibility of a second referendum. Yet most are wary of running ahead of public opinion. “It would simply be too risky,” a senior Labour MP told me, citing one definition of insanity: doing the same thing and expecting a different result.

Thoughtful Remainers, however, are discussing an alternative strategy. Rather than staging a premature referendum in 2018-19, they advocate waiting until the UK has concluded a trade deal with the EU. At this point, voters would be offered a choice between the new agreement and re-entry under Article 49 of the Lisbon Treaty. By the mid-2020s, Remainers calculate, the risks of Brexit will be clearer and the original referendum will be history. The proviso is that the EU would have to allow the UK re-entry on its existing membership terms, rather than the standard ones (ending its opt-outs from the euro and the border-free Schengen Area). Some MPs suggest agreeing a ten-year “grace period” in which Britain can achieve this deal – a formidable challenge, but not an impossible one.

First, though, the Remainers must secure a soft transition. If the UK rips itself from the EU’s institutions in 2019, there will be no life raft back to safe territory. The initial aim is one of damage limitation. But like the Leavers before them, the wise Remainers are playing a long game.

George Eaton is political editor of the New Statesman.

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear