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The New Depression

The business and political elite are flying blind. This is the mother of all economic crises. It has

We are living through a crisis which, from the collapse of Northern Rock and the first intimations of the credit crunch, nobody has been able to understand, let alone grasp its potential ramifications. Each attempt to deal with the crisis has rapidly been consumed by an irresistible and ever-worsening reality. So it was with Northern Rock. So it was with the attempt to recapitalise the banks. And so it will be with the latest gamut of measures. The British government – like every other government – is perpetually on the back foot, constantly running to catch up. There are two reasons. First, the underlying scale of the crisis is so great and so unfamiliar – and, furthermore, often concealed within the balance sheets of the banks and other financial institutions. Second, the crisis has undermined all the ideological assumptions that have underpinned government policy and political discourse over the past 30 years. As a result, the political and business elite are flying blind. This is the mother of all postwar crises, which has barely started and remains out of control. Its end – the timing and the complexion – is unknown.

Crises that change the course of history and transform political assumptions are rare events. The last came in the second half of the 1970s, triggered by the Opec oil price spike and a dramatic rise in inflation, which marked the end of the long postwar boom. Its political consequences were far-reaching: the closure of the social democratic era, the rise of neoliberalism, the discrediting of the state, the embrace of the market, the undermining of the public ethos and the espousal of rampant individualism. For the next 30 years, neoliberalism - the belief in the market rather then the state, the individual rather than the social - exercised a hegemonic influence over British politics, with the creation of New Labour signalling an abject surrender to the new orthodoxy.

The modalities of this present crisis are entirely different. Extreme as they may have appeared to be at the time, the economic travails of the 1970s were progressive rather than cataclysmic. The old system did not hit the wall, but became increasingly mired and ineffectual. What swept the social democratic era away was not the force de frappe of an irresistible crisis but that it was accompanied by the steady rise of a new ideology and political force in Thatcherism - and Reaganism in the United States - and its victory in the 1979 general election.

In contrast, the financial meltdown of 2007-2008 demolished the neoliberal era and its assumptions with a suddenness and irresistibility that was breathtaking. The political class, from New Labour to the Conservatives, is standing naked. They are still clinging to the wreckage of their old ideas while acknowledging in the next breath that these no longer work. The financial crisis is a matter of force majeure; political ideas and discourse change much more slowly, even when it is obvious that the old ways of thinking have become obsolete. Meanwhile, there is no political alternative waiting in the wings, refining its radical ideas in think tanks ready to storm the citadels of power as there was in the 1970s, notwithstanding the fact that think tanks are now far thicker on the ground. Instead, it has been the mainstream which senses that neoliberalism no longer works, fatally undermined by events and, ultimately, the author of its own downfall. This crisis will have the most profound and far-reaching political consequences and will in due course transform the political landscape, but it remains entirely unclear in what ways and when that might be.

In all these senses the financial meltdown has far more in common with the Great Depression than the Great Inflation. When the financial crisis consumed Wall Street in 1929 and proceeded to undermine the real economy, engulfing Europe in the process, it was not accompanied by a radical shift towards Keynesianism, but rather a reassertion of sound finance orthodoxy, followed in due course by the adoption of protectionism. The political mainstream as represented by Labour's Ramsay MacDonald and Philip Snowden and the Conservative Stanley Baldwin all sang from the same hymn sheet. Only Keynes and a faction of the Liberal Party enunciated a plausible alternative. Eventually a programme of fiscal deficits and public works was pursued by Franklin D Roosevelt in the United States, but in Britain Keynesianism was not properly embraced until rearmament and the approach of war. Indeed, it was not until 1945 that the combined legacy of war and the Depression belatedly resulted in a fundamental political realignment and the birth of the social democratic era.

The Grim Reaper has finally spoken:

a boom pumped up by credit steroids and a bust that takes us back to the 1930s

Since the financial meltdown dramatically intensified in September 2008, Gordon Brown has managed to ride the economic storm rather more successfully than the Conservatives, or, for that matter, than Tony Blair would have done. It is Vincent Cable, the Liberal Democrats' econo­mics spokesman, however, who has indubitably emerged as the political sage, unafraid of confronting neoliberalism's shibboleths, demonstrating a clarity of mind and the political courage to tell things as they are, in a way that has escaped all other prominent politicians. Although Brown was the economic architect of the past decade and was responsible, more than anyone else, for its excesses and was shaping up to be a rather disastrous Prime Minister, he displayed last autumn, at least initially, an agility of mind and nimbleness of foot that defied the expectations of those who believed he was capable of neither. He revelled in the sense of purpose and vision offered by the crisis, seemingly prepared to jettison the thinking that had imbued his previous decade as chancellor.

But Package Part I, widely hailed at the time and imitated elsewhere, proved woefully inadequate, and the financial system remains frozen. Meanwhile the waters are rising up the Good Ship UK, threatening to transform the banking crisis into a fiscal and currency crisis. It seems unlikely that, if that should happen, Brown will survive the next election.

Even if it does not happen, Brown faces a serious problem about his own past role, because Britain’s crisis has been greatly exacerbated by the soft-touch regulation, easy credit, runaway house inflation and overexpansion of financial services over which he presided and for which he is accountable. So far he has refused to admit or accept responsibility for his actions – he initially had the temerity (or foolhardiness) to argue that the UK was better placed than other countries to deal with the credit crunch, even though it has become abundantly clear since that the very opposite was the case. So while Brown remains in denial, the plausibility of his new turn, and his understanding of what is entailed, must be seriously doubted.

Indeed, after its initial boldness, the government now seems trapped by its past actions and its former ways of thinking. Brown's failure to accept the need to nationalise the banks suggests the limits of his new-found political courage, and his inability to embrace the logic and imperatives of the new situation. He is still a prisoner of his old timidity and his conversion to the neoliberal cause. It is his good fortune that the Cameron Conservatives have been hugely wanting in their response to the financial meltdown. Having spent his first years as leader of the opposition seeking to reassure the country of his centrist credentials, David Cameron, at the first whiff of gunfire, has turned on his heels, rejected Keynesianism and, at the very moment when events have shown Thatcherism to be deeply flawed and historically out of time, headed back to the Thatcherite womb of sound finance, arguing that a government must balance its books and that deficit financing, Keynesian-style, is reckless and irresponsible.

But all this, it must be said, is the small change of politics. The crisis threatens in time to sweep away the political world as we know it and those who fail to grasp its magnitude and meaning. Far more is at stake than the fortunes of a few leaders, be their name Brown or Cameron. Who knows where things will be this time next month, let alone next year or, indeed, in 2012? The financial meltdown now rapidly plunging the western world into what increasingly looks like a depression is the first great crisis of globalisation. There was plenty of warning. The Asian financial crisis of 1997-98 proved a salutary lesson about the dangers posed by huge capital movements that were subject to precious little regulatory control. Three economies capsized (South Korea, Thailand and Indonesia) and others stood on the brink.

There were other earlier warning signs, notably Mexico in 1995, when GDP fell by 9 per cent and industrial production by 15 per cent, following a run on the peso. These crises were blamed on the immaturity and fecklessness of national governments - in the case of east Asia on so-called crony capitalism (which, incidentally, prompts the question of how we should describe Anglo-American capitalism) - which the International Monetary Fund obliged to engage in swingeing cuts in public expenditure as a condition of their bailouts.

Yet what if such a crisis were to be no longer confined to the peripheries of global capitalism but instead struck at its heartlands? Now we know the answer. The crisis has enveloped the whole world like an uncontrollable virus, spreading from the US and within a handful of months assuming global proportions, at the same time mutating with frightening speed from a financial crisis into a fully fledged economic crisis. In so doing, it has undermined the foundations on which the present era of globalisation has been built, namely scant regulation, the free movement of capital, a bloated financial sector and immense reward for greed, thereby bringing into question the survival of globalisation as we now know it.

Enormous international flows of unregulated capital have capsized the international financial system - with disastrous consequences for the real economy - in a manner akin to the effect of a roll-on, roll-off ferry shipping too much water. We can now see the cost of free-market capitalism and light-touch regulation. Iceland may provide an extreme example of the consequences of the credit crunch but it also illustrates the dangers facing the more vulnerable economies, the UK included, in a deregulated world where the market rules: a small, open economy; a large, internationally exposed banking sector; an independent currency that is not a serious global reserve currency (of which there are only three); and limited fiscal strength. These propositions have constituted the core economic beliefs - from Thatcher and Lawson to Blair and Brown - that have informed policymaking over the past three decades and without which, it was claimed ad nauseam, an economy could not succeed. Heavy-handed regulation and an overbearing state would serve only to frighten off capital and condemn a country to slow growth, stagnation and global marginality. Now we know the fallaciousness of these claims and the consequences of "letting the market decide".

Like Iceland, albeit not as extremely, Britain has been living in a fool's paradise. A failure to regulate the banks and other financial institutions in any meaningful fashion allowed bankers to behave in a grossly irresponsible and avaricious fashion; a boom that was made possible only by a government-enabled credit binge in which people borrowed recklessly; a bloated financial sector that grew to represent over 8 per cent of the total economy and which was found to have been built on foundations of sand; an overvalued currency that made manufacturing exports uncompetitive and thereby resulted in an unnecessary and counterproductive contraction in the manufacturing sector which must now be reversed; an absurd belief that boom and bust had been banished for ever, allowing the banks to turn a blind eye to the inflating of various asset bubbles and display a profound ignorance of the history of capitalism; a persistently chronic current account deficit that can no longer be compensated for by inward capital flows; monstrous salaries for those at the top of the financial and corporate tree, which were justified in terms of a trickle-down effect that remained a chimera, and as the reward for risk which was, in fact, a reward for greed and failure; growing inequality, which was justified in the name of a more competitive economy accompanied by declining social mobility in the cause of an open and flexible labour market; and, finally, the mushrooming of what can only be described as systemic corruption on a mega-scale as the state ignored the gargantuan abuses of those who ran the banks and other financial institutions, while regulatory authorities willingly colluded in their excesses.

This is the sad story of the New Labour era.

The ultimate cost of this debacle as yet remains unknown. What began as a financial crisis is threatening, as the government seeks to bail out a bankrupt financial sector, to become a currency crisis, with foreign investors concerned about the effects this might have on the value of sterling, and perhaps even worse, ultimately a sovereign debt crisis, with growing doubts about the UK’s financial viability. Until there is some end in sight to the financial crisis, and a line can be drawn under the banks’ indebtedness, we will not know the answer to these questions. One thing is clear, however: whatever the limitations of the social democratic era, it was never responsible for such an all-enveloping and cataclysmic crisis as the one that the neoliberal era – and the Thatcherites and New Labour – have managed to produce. After all the boasting about the virtues of the Anglo-American model of capitalism, the Grim Reaper has finally spoken: a boom pumped up by credit steroids and a bust that takes us back to the 1930s.

There are two key aspects to this crisis: national and global, with the latter promising to be rather solutions are concerned, we are in uncharted territory, with close to zero interest rates, a Keynesian-style fiscal boost that may prove inadequate to the task and could well fail, a hugely indebted financial sector that threatens to leave us with an enormous future tax burden and a greatly expanded national debt. All of this, furthermore, must be addressed in the context of an open-market regime which is very different from those of previous eras, and which could render Keynesian-style national solutions ineffectual. What would greatly assist any national recovery is a co-ordinated global response to the crisis; in other words, global co-operation at the highest level. This cannot be ruled out, but it would be a brave person that would bet on it. It was exactly the lack of international co-operation that bedevilled recovery in the 1930s and eventually led to the Balkanisation of the world into regional currency and trading blocs.

The most important single question in this context is the relationship between the US and China. Will the Obama administration be able to resist the slippery slope of creeping protectionism? Will arguments over the revaluation of the Chinese renminbi be resolved amicably? If the answer is in the negative, then the global outlook will be very bleak indeed and so, also, as a result, will be the prognosis for national recoveries. Indeed, the prospects would look disturbingly like those of the 1930s, with growing international antagonism and friction and a continuingly intractable crisis at a national level, with only the very slowest of recoveries.

Around the world there is growing evidence by the week of a resort to national solutions at the expense of others: measures to subsidise industries that are in severe difficulties; the Buy American clause that was inserted by the House of Representatives into Barack Obama's latest package (though since weakened); the industrial action in Britain against foreign workers; the withdrawal of banks to their national homes; the attack by Timothy Geithner, the US treasury secretary, on China as a currency manipulator. No Rubicon has been crossed but the warning signs are clear. A retreat into protectionism and beggar-thy-neighbour policies will deliver the world into a second Great Depression.

So what will be the political effects of the financial meltdown? Some are already evident. Just as the Great Inflation of the 1970s played to the tunes and concerns of the right, with its invocation of the market, the New Depression suggests the opposite, the inherent limitations of the market and the indispensability of the state. Indeed, the speed with which the neoliberal refrains and invocations have unravelled has been breathtaking. The single most discredited aspect of the social democratic legacy was nationalisation, and yet the government, with the most extreme reluctance, has been obliged to nationalise Northern Rock and partially nationalise the Royal Bank of Scotland and the merged Lloyds TSB and HBOS. Who would have ever imagined, at any point during the past 30 years, that no less than the financial commanding heights of neoliberalism would have ended up in the hands of the state, with precious little opposition from anyone except a few disgruntled shareholders? Even now, however, the Labour government, still trapped in the ideological straitjacket of New Labour and displaying extreme timidity in the face of powerful vested interests, which has always been a New Labour characteristic, is running scared of the inevitable logic of the situation, namely that all the high-street banks should be taken into public hands until the mess is sorted out. Anything else leaves the public responsible for all the debts and risks, while the banks continue to be answerable to the very different interests of their shareholders. But such is the fury and depth of the crisis that this scenario is highly likely.

The state is experiencing an extraordinary revival. The credit crunch is the most catastrophic example of market failure since 1945. It became almost immediately obvious to wide sections of society that there was only one institution that could potentially sort out the mess: the state. Far from being a rational distributor of resources, the market had proved the opposite. Far from bankers and financial traders embodying the public interest, they have been exposed as irresponsible and dangerous risk-takers whose primary motivation was voracious greed. If trade unionists and the nationalised industries were the demons of the 1970s, bankers and the financial sector have assumed the mantle of public enemy number one in the late Noughties. In fact, the irresponsibility of bankers, and the damage they have inflicted on the economy, hugely exceeds anything that the unions could possibly be held responsible for in an earlier era. Meanwhile, the fallen heroes of the pre-Thatcher era, most notably Keynes, are duly being exhumed, restored to their rightful position, and pored over for their ability to throw light on the present impasse and what might be done; if the recession turns into a depression, Marx will once again become required reading.

This political shift is not just a British phenomenon, but a more general western one. The most striking feature of President Obama's inaugural speech was the way in which it embraced and legitimised African Americans for the first time in American history. But it also had another powerful theme, namely its invocation of the public interest and public service. After decades during which American political discourse has been dominated by the language of individualism and the market, it came as a shock to hear a US president articulate a very different kind of philosophy, renouncing private greed in favour of the public good. Obama's election can in part be seen as a response to the failure of the neoliberal era, as well as of Bush's neoconservative agenda; certainly his election represents a remarkable shift to the left in US politics, in contrast not just to Bush, but every recent US president, including Reagan, Bush Sr and Clinton. That Obama is the first African-American president also represents a remarkable redrawing of the political landscape. There is no more powerful - nor difficult - way of redefining society or to embrace a new form of representivity than to include a racial minority that has been excluded.

This brings us finally to what might be the longer-term global consequences of the crisis. Again, we are inevitably stumbling around in the dark because so much depends on whether the recession metamorphoses into a fully fledged depression and in what way and shape the world eventually emerges from the debacle. That said, two key points can be made. First, the credit crunch signals the demise of the Anglo-American, neoliberal model of capitalism, which has exercised a hegemonic influence over western capitalism and been the blueprint for globalisation since 1980. Because of its catastrophic failure there seems very little chance of its resurrection. The process of recovery - whenever that might be - will be accompanied by an overriding concern to ensure that the events of 2007-2009 are not repeated in the future, just as happened in the US in the 1930s with the strict regulatory framework that was introduced for the banks after their comprehensive failure in 1929. This will include the search for a new global regulatory framework that controls and constrains international movements of capital, as well as strict controls over the financial sector at a national level. A new set of political priorities - and with it a new political language - will be born.

Meanwhile, the influence and prestige that the US, and to a far lesser extent Britain, have enjoyed will vaporise in the same manner as their neoliberal model. Their 30-year project has failed and they will be obliged to pay the price in their reputation and the esteem in which they are held. The countries of the former Soviet Union and the casualties of the Asian financial crisis that were forced to swallow the neoliberal medicine will have good reason to feel aggrieved and resentful. The west has been forthright in accusing the non-western world of corruption. The financial meltdown suggests that the west has been guilty of huge hypocrisy. Systemic corruption has lain at the heart of the western financial system. An entirely disproportionate and extortionate level of bonuses has ensured the enormous enrichment of top executives in the financial sector, all in the name of reward for success, when in fact it was the reward for failure. In addition, we have had the collusion of the credit-ratings agencies; a regulatory system characterised by its failure to act as any kind of constraint; and governments that ensured the continuation of this web of relationships and applauded its achievements. The corruption was on a breathtaking scale as evidenced by the size of the bailouts required to rescue the banks. It will be difficult for western governments to make these kinds of accusations of others in the future. That Obama represents such a voice of hope will help to mitigate the inevitable ill-will towards the US, but this should not be exaggerated amid the euphoria surrounding developments in Washington.

The second point is more far-reaching. It is doubtful whether we can still describe ourselves as living in the American era or, indeed, the Age of the West. If not yet quite over, both are certainly drawing to a close, and it seems likely that the effect of the financial meltdown will be to accelerate the rise of China as a global power. The contrast between the situation in China and that in the US could hardly be greater, even though it has been partially obscured by the depressive effect of the western recession on Chinese exports and on China’s growth rate. While the US economy is contracting, China’s grew at roughly 9 per cent in 2008 and is projected to grow at about 6 per cent in 2009. Its banks, far from bankrupt like their US counterparts, are cash-rich. China enjoys a large current account surplus, the government’s finances are in good order and the national debt is small. This is a crisis that emanates from the US and whose impact on China has been essentially indirect, through the contraction of western markets. It is the American model that has failed, not the Chinese.

One of the factors that intensified the Great Depression, and indeed was part cause of it, was Britain's growing inability to continue in its role as the world's leading financial power, which culminated in the collapse of the gold standard in 1931. It was not until after the war, however, that the US became sufficiently dominant to replace Britain and act as the mainstay of a new financial system at the heart of which was the dollar. The same kind of problem is evident now: the US is no longer strong enough to act as the world's financial centre, but its obvious successor, namely China, is not yet ready to assume that mantle. This will undoubtedly make the search for a global solution to the present crisis more difficult and more protracted.

Martin Jacques's new column will be published fortnightly in the New Statesman. His book "When China Rules the World: the Rise of the Middle Kingdom and the End of the Western World" will be published in June (Allen Lane, £25)

the global downturn in numbers

    0.5%

    IMF prediction for global growth in 2009 - worst since WWII

    Up to 40 million

    Number of people who will lose their jobs this year, according to the International Labour Organisation

    $9.7trn

    Total pledged by the US alone towards solving the crisis

    3.6%

    Proportion of GDP pledged by the G7 and BRICs countries towards fixing the crisis (1.5% this year)

    2.3m

    Number of US properties that received a default notice or were repossessed in 2008. In the UK, 45,000 homes were repossessed - another 75,000 are expected to be taken in 2009

    14

    Number of major global banks which collapsed, were sold or were nationalised during 2008

    200,000

    Number of European companies expected to fail this year; an additional 62,000 are expected to fail in the United States. These figures represent record levels of insolvency

    52%

    Increase in UK company failures between late 2007 and late 2008

    14%

    Drop in level of Chinese exports during January

    1%

    Current UK interest rates (down from 5% in October 2008). In the US, rates have fallen to between 0 and 0.25%

How the crisis unfolded

13 September 2007 Run on Northern Rock begins when it is revealed that the bank has requested emergency support from the Bank of England

21 January 2008 FTSE suffers worst falls since 11 September 2001

February 2008 Northern Rock nationalised

17 March 2008 JP Morgan Chase takes over the US investment bank Bear Stearns

12 July Mortgage lender IndyMac collapses - second biggest US bank in history to fail

9 August 2007 European Central Bank pumps ?95bn into banking market

7 September Financial authorities step in to rescue Fannie Mae and Freddie Mac

9 September Bradford & Bingley becomes second British bank to be nationalised

15 September Lehman Brothers files for bankruptcy

16 September AIG, biggest insurance firm in the US, receives $85bn rescue package

3 October 2008 US government announces $700bn Troubled Assets Relief Programme

8 October UK launches its first bank bailout plan, making £50bn available

October 2008 Iceland's banks collapse. IMF extends £1.4bn ($2.1bn) loan a month later

24 November Alistair Darling announces a temporary cut in VAT from 17.5 to 15 per cent

23 January 2009 UK enters recession

28 January US Congress passes Barack Obama's $819bn stimulus package

5 February UK Monetary Policy Committee votes to cut interest rates to 1 per cent - the lowest in over three centuries

Michael Harvey

Martin Jacques is a journalist and academic. He is currently a visiting fellow at the London School of Economics Asia Research Centre and at the National University of Singapore. Jacques previously edited Marxism Today and co-founded the think-tank Demos in 1993. He writes the World Citizen column for the New Statesman. His new book on the rise of China, When China Rules the World, will be published in June.

This article first appeared in the 16 February 2009 issue of the New Statesman, The New Depression

RICHARD SAKER/REX
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Electric dreams

How the “hippie tycoon” Dale Vince – a pioneer of renewable energy – plans to turn football and our motorways green.

In the hills above the tiny Cotswolds town of Nailsworth, on a road named Another Way, is an unusual football stadium. As you enter the New Lawn ground, the first thing you see is a pair of Nissan Leaf electric cars plugged into charging stations; on the reception counter are flyers for the Vegan Society. This is the world’s only meat-and-dairy-free football club, where players and fans enjoy Quorn fajitas, veggie burgers, cheeseless pizza and tea with soya milk.

Look out from the main terrace at the Forest Green Rovers club and you’ll see more curious sights. An array of 170 solar panels is positioned atop the south stand. Behind a corner flag is a large tank for storing water that has been recycled from beneath the organic pitch, which is fertilised with seaweed. Even the advertising banners stand out: the most prominent bears the white skull-and-crossbones logo of Sea Shepherd, the marine conservation charity.

It might all seem quaint and worthy, the vanity project of a hippie tycoon. But Forest Green Rovers are a serious club. The team of full-time professionals sits in the playoff places near the top of the National League, the fifth tier of English football. If they keep that up, they stand a good chance of winning promotion to League Two, for the first time in the club’s 127-year history. But the longer-term goal is to make it all the way to the Championship, just a step from the
Premier League.

That is why Forest Green Rovers are moving ahead with plans for an extraordinary new stadium near Stroud, in Gloucestershire. Designed by Zaha Hadid Architects, the firm that built the London Aquatics Centre for the 2012 Olympics, it will seat 5,000 people, with a capacity to expand to twice that. And it will be constructed almost entirely of wood. “That’s never been done before, anywhere,” said Dale Vince, who rescued the club from near bankruptcy in 2010 and is now its chairman. “It will be the greenest stadium in the world.”

We met in early November at the Stroud headquarters of Ecotricity, the renewable energy firm he founded in 1995, which runs 19 windfarms and two solar parks. Vince, who is 55, is not your typical corporate boss. He was wearing brown boots, ripped jeans and a black T-shirt. His hair is shaved on the sides, with a small ponytail on top, and his sideburns are long. A silver ring hangs from the tragus of his left ear.

Vince’s office is scantily furnished with two beanbags, a standing desk, a small, round table in the middle and a large, green Union Jack on the wall. If you didn’t read the newspapers, which drew attention to his wealth last summer while covering a legal battle with his ex-wife, you would have no idea he was worth more than £100m.

It is a fortune that has allowed him to spread his green dreams into areas beyond football. Before the 2015 general election, Vince gave £250,000 to Labour, £50,000 to the Liberal Democrats and £20,000 to the campaign of the Green MP, Caroline Lucas. But he may yet make the biggest difference with transport. Ecotricity has built what it calls the Electric Highway, a network of 296 charging points at motorway service stations which has made it possible to drive from Land’s End to John o’Groats in an electric car. Vince says he is trying to accelerate the demise of the internal combustion engine. “Our government is not the most ambitious on green issues but by 2030 it wants all new cars to be electric or hybrids. We think it could happen sooner.”

 

 

***

 

Vince grew up in Great Yarmouth, Norfolk, in a two-bedroomed ­bungalow. His father was a self-employed lorry driver who worked hard yet worried about being able to pay the bills. “That’s why I decided to drop out and live like a hippie,” Vince wrote in the Daily Telegraph in 2009. “I didn’t want a career or a mortgage.”

He left his local grammar school at 15 and four years later became a New Age traveller: his first home was an old ambulance. He toured Britain and Europe, and along the way he got married, painted, learned to bake bread – and had run-ins with the police. He was part of the Peace Convoy, a confederation of anti-authoritarian travellers, and in summer 1985 he took part in the “Battle of the Beanfield”, when police trying to prevent a free festival at Stonehenge clashed with protesters. Some travellers were beaten and vehicles were smashed.

Vince, a tinkerer, built a small windmill on top of his van to power the lights. In the early 1990s, while living on a hill in Gloucestershire in a former army truck, he had an epiphany: what if he could harness the wind on a much bigger scale and change the energy industry? He decided to “drop back in” to society to set up Ecotricity, which claims to be the world’s first green energy firm. The model was simple: the company would produce as much renewable electricity as it could, buy in any extra fossil-fuelled power it needed, and use customer revenues to construct more windfarms until the operation was fully green.

“I built my first windmill in ’96, after a five-year battle with all-comers – Nimbys, bigots, planners, big power companies, you name it – and went to Kyoto in ’97,” Vince wrote on his blog, Zero Carbonista. “The rest is just more history.”

That windmill is still turning: its blades can be seen from the top of a stand at the New Lawn. And like the football club, which has doubled its home attendance in six years, Ecotricity is thriving. It has nearly 200,000 customers. Accounts filed at Companies House show turnover for the year ending April 2016 of £126m, up from £109m; pre-tax profit was £6.7m. Vince is the sole shareholder but the company does not pay dividends and he draws a salary of less than £150,000. The converted 18th-century fort where he lives with his second wife and their son is worth more than £2m, but he says he is not motivated by money.

Despite Ecotricity’s success, the firm faces several challenges, including the implications of Brexit, which Vince opposed. “We have not left [the EU] yet, but the pound has slumped and banks are thinking of leaving,” he said. “The process of leaving will be tortuous, and the idea that we can trade better outside the EU – that’s nonsense.”

A more immediate problem for Ecotricity is regulatory. The last Labour government introduced attractive incentives for companies and homeowners to produce renewable energy, especially wind and solar power. These subsidies amounted to billions of pounds – since 2002 Ecotricity has received £36m towards building windmills costing over £100m – and have helped make Britain a world leader in green power. In 2011, 9 per cent of Britain’s electricity came from wind, sun and other renewable sources; in 2015 the figure was 25 per cent.

But since the Conservatives won a majority under David Cameron in 2015, breaking free from the restraints of their coalition partners, the eco-friendly Lib Dems, the government has made it harder for green projects to secure planning permission. It has also reduced financial support for the industry. In December 2015, days after helping seal the Paris climate-change accord, which called on all countries to reduce their dependence on fossil fuels, the government announced a series of cuts to subsidies for renewables, which are paid for through business and household energy bills.

“They [the Tories] have smashed renewable energy with a sledgehammer,” Vince said. “And they’ve done it in a deceitful way, saying it was for the good of the industry. They’ve practically shut down solar and onshore wind in the UK. Bringing forward new stuff now – I don’t see it happening.”

At the same time, the government is promoting fracking, a controversial process that involves blasting water and chemicals into rocks to release trapped gas. Fracking has been suspended or banned in France, Germany, the Netherlands, Scotland and Wales because of environmental concerns. Official surveys show that fewer than one in five Britons supports fracking, yet in October the government overruled councillors in Lancashire and approved plans to explore for shale gas there. “[Fracking] is a big risk to take for a gas that we cannot afford to burn if Britain is to hit its carbon-reduction targets,” Vince said.

His proposed alternative is to produce “green” gas from grass grown on marginal farmland. Ecotricity will build its first grass-to-gas mill in Hampshire next year, and Vince says that in theory the green fuel could be used to heat almost all homes in Britain within two decades. His vision is unlikely to get much support from Theresa May, who, after taking office in July, abolished the Department of Energy and Climate Change and transferred its functions to an enlarged department responsible for business. “It’s ideological when it comes to green stuff,” Vince said. “The left embraces it and the right does not.”

That is why, in February 2015, he donated funds to Labour, the first time he had done so. What does he think now, with Labour trailing so far behind the Tories in the polls? “Jeremy [Corbyn] is a lovely man. He believes that he can lead the party to a general election victory. But if I were him I might be inclined to stand aside. The party seems so riven, and that is a real problem. The Tories are having a free-for-all.”

He believes that Tony Blair has a role to play in restoring the fortunes of the left. “I am against Trident and nuclear energy, and for social justice. But I’m also a practical person. What Tony Blair did with Iraq was disgraceful. But there was more that was right. I think Blair did a fantastic job, and rumours of his return excite me.”

Ask Vince what he would do if he were Energy Secretary and he reels off a list: ban fracking; rip up the Hinkley Point C nuclear power contract; spend “a billion dollars” on promoting energy efficiency; tax polluting power companies; perhaps renationalise the energy industry, from producers to suppliers. He would also give green vehicles a big stimulus, as has happened in Norway with marked results. Thanks to tax breaks and incentives – exemption from VAT and public parking fees, freedom to use bus lanes – plug-in cars now account for over a quarter of new car sales in Norway. “It’s economic signals that change behaviour,” Vince says.

 

***

 

As a boy, Vince was astonished at how many cars there were on the road. Surely the fuel they were burning couldn’t last for ever, he remembers thinking. But the oil companies kept discovering reserves, so there was no incentive for manufacturers to develop green cars. In 2008, when there were fewer than 2,000 electric vehicles on the road across 40 of the world’s most developed countries – and barely any at all in the UK – Vince and his engineers decided to take the initiative.

“I’m a bit of a petrolhead and also a tree-hugger, which is a dilemma. I could not get an electric car at that time, so we bought the shell of a Lotus Exige on eBay and turned it into a supercar,” he told me.

The Nemesis, as it was called, broke the British land speed record for an electric car in 2012, clocking 151.6 miles per hour. By then, however, Vince had realised that building cars was a different proposition from generating energy. Instead, he had started rolling out the infrastructure that he hoped would hasten the take-up of electric vehicles.

“We wanted to break the chicken-and-egg scenario,” he said. Few people owned electric cars, so there were barely any motorway charging points in Britain, which in turn discouraged people from buying the vehicles. Ecotricity started with a three-pin-plug point at a service station in 2011. It took eight hours to charge a Nissan Leaf, a small, five-door family hatchback that at the time had a 73-mile range. “We knew it was not good enough, but that a massive increase in technological capacity was coming.”

Today, a Nissan Leaf, the world’s bestselling electric vehicle, can drive for 80 miles on a half-hour power-up at a service station, which isn’t a full charge. Most new electric cars can run for between 100 and 150 miles before they need to be plugged in. “Range anxiety”, which has been a deterrent for many potential buyers, is fading away. “In a few years’ time you’ll be able to drive 400 miles on a 15-minute charge,” Vince said.

The Electric Highway has encountered some bumps along the way. Early on, Ecotricity entered into an agreement with Tesla, the Californian electric car company run by the technology billionaire Elon Musk (who also plans to colonise Mars). But in 2014 Ecotricity claimed that Tesla had gone behind its back, negotiating with service stations with a view to installing its own chargers. Ecotricity sued Tesla, which then countersued; the companies reached an out-of-court settlement in June 2015. (Vince was involved in another settlement a few months later. His former wife, whom he divorced in 1992 when they had no assets, had claimed nearly £2m of his fortune, and was awarded £300,000.)

As with his early embrace of wind power, Vince’s bet on the Electric Highway looks a smart one. According to the International Energy Agency, there were 1.26 million either fully electric or plug-in hybrid vehicles on the road at the end of 2015, more than three times as many as in 2013. The IEA forecasts that by 2040 there will be 150 million plug-in cars in service. With petrol consumption accounting for nearly 20 per cent of all oil consumed, that has huge implications for the petroleum industry – and the planet’s climate. In November, Shell announced that overall demand for oil could hit its peak in as little as five years.

Ecotricity had allowed drivers free use of its motorway plug-in stations since 2011, but in July it introduced tariffs for the first time. A half-hour charge now costs £6. The move angered some motorists; but Vince, who says the Electric Highway should cover its costs this year, is unapologetic. “We don’t have to make money in everything we do,” he said, referring to the football club and the car-charging network – but however altruistic his motives might be, he is also a businessman.

Green cars remain relatively expensive in the UK – the cheapest model in the Nissan Leaf range costs more than £20,000. But prices are falling and choice is growing, with more than 40 electric or hybrid models on sale in the country.

“The stumbling block was the range of the cars and the cost. What’s happening is one is going up and the other is going down,” Vince said. “The technology is on the cusp of mass appeal. You will see the government jump in before long and claim credit for that.”

As for Vince, he doesn’t even own a car. On a beanbag at the office in Stroud are the helmet and jacket he uses when riding in to work on his KTM motorcycle. And yes, it’s electric.

Xan Rice is the features editor of the New Statesman

Xan Rice is Features Editor at the New Statesman.

This article first appeared in the 05 January 2016 issue of the New Statesman, Divided Britain