Yale professor Jacob Hacker first used the term "predistribution" at a Policy Network conference in Oslo in 2011. Image: Dan Murrell.
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Jacob Hacker: Ed Miliband’s wonkish pin-up

Jacob Hacker thinks he has the answer to the public’s hardening attitude to welfare – we should “stop inequality before it starts”. But can the idea of predistribution enter the political mainstream?

It was at a think-tank conference in Oslo in 2011 that Jacob Hacker first used the word “predistribution” in public. Among those in the audience was Ed Miliband, whose intellectual curiosity was piqued. Predistribution – the idea that governments should seek to create more equal outcomes even before collecting taxes and paying out benefits – seemed to offer an answer to a question that was becoming increasingly insistent: what is the point of Labour when there’s very little money to spend? Those close to the Labour leader, such as his chief strategist, Stewart Wood, and the shadow chief secretary to the Treasury, Rachel Reeves, began using the word to link together policies such as the living wage, worker representation on remuneration committees and greater vocational training, and also to signal a commitment to fiscal responsibility.

Then, in September 2012, in an interview with the New Statesman and a speech to Policy Network (the organisation that had hosted Hacker in Oslo), Miliband himself presented predistribution as Labour’s “new agenda”. The derision followed swiftly. His use of the term, described by the then director of Policy Exchange, Neil O’Brien, as “the sort of stupid made-up word that only a policy wonk could love”, was presented as proof that the man who won the Labour leadership contest on a promise to “speak human” had given up on doing so. During a memorable session of Prime Minister’s Questions, David Cameron sarcastically declared: “I say that the Labour Party has no plans, but on this occasion I can reassure the House that it has, and the new plan is called predistribution. What I think that means is that we spend the money before we actually get it, which I think the Right Honourable Gentleman will find is why we are in the mess we are in right now.” Alluding to Yes Minister’s hapless Jim Hacker, he added: “His new guru, the man who invented predistribution, is called – and I am not making this up – he is called Mr J Hacker.”

When I meet Hacker at the Kingsley hotel in Holborn, central London, he reports that Miliband began their most recent meeting by offering an apology. “Ed was very funny yesterday,” the 42-year-old Yale professor of political science tells me. “He said: ‘I’m sorry if I screwed up the term for you.’ I said: ‘Are you kidding?’ I’m an academic; I’ve had one idea that’s broken into public consciousness in American political debate and that’s the public option [the proposal to set up a staterun health insurance agency] . . . I’m not used to having my ideas discussed by politicians. So I said, ‘You can talk about it as much as you want. I’m sorry if it made people think that you’re a policy wonk.’”

It was when a friend sent him a YouTube clip of Cameron’s PMQs riff that he realised the influence the term was having. “My first reaction was: ‘This is so cool!’ I am personally being attacked by the Prime Minister of Britain – what more could I ask for? My second reaction was: ‘Who is J Hacker?’ I had to go and look up the reference and now, knowing the reference, it was actually a very good joke and I can see why George Osborne was laughing so hard in the background. It made me think that British parliamentary discussions are a lot more interesting than American ones.”

He reflects, however, that it represented a missed business opportunity. “The punchline of [Cameron’s] joke was, ‘I have seen the latest book by Jacob Hacker. It’s entitled The Road to Nowhere and that’s where this idea will take us.’ And I was deeply offended by that. While I loved being attacked in the House of Commons, the fact that he said the book that I’d written as my undergraduate thesis at Harvard and was published in 1997, that that was my latest book, deeply offended me, because I could have used the free publicity for Winner-Take-All Politics [published in 2010] at the time.”

In person, Hacker is fluent and charming. Casually dressed in a corduroy blazer, beige jumper and black loafers, his brown-silver hair parted, he makes for an admittedly wonkish pin-up.

Born in 1971 and raised in the small college town of Eugene, Oregon, he says that politics was not a big part of his childhood but he felt “a deep unease during the 1980s about the direction of our nation [the United States], an unease that blossomed into more forthright progressivism when I went to Harvard as an undergraduate”. After graduating summa cum laude from Harvard in 1994, he studied for a PhD in political science at Yale, during which time The Road to Nowhere: the Genesis of President Clinton’s Plan for Health Security was published.

Winner-Take-All Politics, his most recent book, was co-written with Professor Paul Pierson of Berkeley (who supervised Stewart Wood’s doctorate while on the staff at Harvard). It is an eloquent j’accuseagainst a Washington elite that has waged a 30-year war on behalf of the rich against the rest. “Yachts are rising, but dinghies are largely staying put,” they write, adding: “There is reason to suspect that the dinghies are staying put in part because the yachts are rising.”

Hacker explains predistribution to me as “simply the idea that government makes markets, and that rather than redistributing income through benefits and transfers the first focus should be on working to make the market more equal and fair”. If he is sanguine about the mockery the concept has attracted, it is partly because most of those who derided it simultaneously conceded that he might be on to something.

Given the financial crisis and the resultant surge in the deficit, which the Office for Budget Responsibility forecasts will stand at £108bn (5.9 per cent of GDP) in 2014-2015, Labour can no longer hope to spend its way to social democracy. At the same time, the increasing public hostility to conventional welfare policies limits the scope for a strategy centred on redistribution. “In a society that grows ever more unequal, you cannot sustain the social contract simply by taking from some of the fortunate, the affluent, and redistributing to the rest of the society. It just doesn’t work politically,” Hacker says. “It doesn’t work because it creates an environment in which the middle is more likely to be resentful towards those at the bottom, who are the largest beneficiaries of public transfers, than they are towards those at the top, despite the fact that the rich are really the ones who have rigged the game.”

He is sharply critical of New Labour and the Third Way approach of “letting the market be the market and mopping up afterwards”. By tolerating the excesses of the City in the belief that its lucre could be redistributed through the tax credit system, Tony Blair and Gordon Brown created the conditions for the crash and ultimately failed to stem the rise in inequality. As Stewart Wood, who served as an adviser to Brown between 2001 and 2010, reflected when we spoke separately: “We were doing remedial work, rather than getting to the root of the things that drive unequal outcomes. Predistribution allows you to address the forces that create less efficiency and greater inequality, which often go together.”

While redistribution will remain an important part of the left’s armoury, not least for those permanently or temporarily excluded from the labour market (the retired, the unemployed, the long-term sick, the disabled), Hacker tells me that “as a society we’re more likely to create solidarity and to get what we want as social democrats and as progressives if we make redistribution as little necessary as possible. That’s why it’s important, in the simplest terms, to stop inequality before it starts.”

The question that immediately follows is: “How?” Hacker says that when he met Miliband, the first and most important thing he emphasised was “getting the macroeconomy right”. In the short term, he says, this means “keeping the door open for stimulus”, and he quips that the International Monetary Fund has “moved to the left” of Labour on this score. He warned Miliband not to repeat the mistake of Barack Obama, whose administration derived little political benefit from the US stimulus “because they did it through a payroll tax cut that most people didn’t see”.

“Politically, the problem is if it’s invisible you get no credit for it. So do something concrete, like literally something concrete – build something, put people to work building things.” Having called consistently for a temporary, similarly “invisible” cut in VAT, Ed Balls wisely signalled in his 3 June speech on the economy that the policy would be abandoned at some point in the coming year in favour of greater capital investment. It is housing, Hacker suggests, that could be the silver bullet for Labour. “If you did a serious housing investment, you could have a pretty large effect in the short to medium term, which could help a lot in rebuilding trust in whichever party implemented it.”

Though Hacker is surely right to emphasise that growth is a prerequisite for any successful centre-left project, his presentation of predistribution is frustratingly diffuse. When I challenge him to outline five distinctive policies, he cites better financial regulation, a workers’ bill of rights, stronger corporate governance, full employment, greater investment in skills and early-years education and, as a bonus, supporting a small-enterprise economy. Here is a strategically smart agenda for a post-crisis left that recognises both its ability and its duty to shape the rules of the market.

Of a workers’ bill of rights, Hacker says: “None of this involves spending. You could have a living wage requirement linked to average wages over time, a right of request for workplace flexibility and pay transparency.” He notes: “It’s a huge issue that the workers themselves don’t understand that someone who’s working right next to them, or a manager, is earning vastly more than them. And it really depresses their ability to demand higher pay. If we’re talking about a free market for labour, you need to have information on both sides.”

One of the main causes of the stagnation of British wages, which began in 2003, is the steep decline in trade union membership (from over 13 million in 1979 to 6.5 million) and collective bargaining agreements, and Hacker suggests we will require new institutions in order to protect workers’ rights. He offers the example of US open-source unions, which “use social media and new organising tactics to run campaigns to change the terms of employment”, and Germanstyle works councils, which “adjust national labour agreements to local circumstances”, as models for the UK.

But can predistribution succeed in a global economy in which companies relentlessly seek out low-wage, low-tax locations? Hacker concedes that “some form of global regulation or government would help a lot with predistributive strategies” – which suggests we could be waiting some time – but adds more encouragingly, “We should recognise that companies do not just go to low-wage, low-tax locations; they go to high productivity relative to wage locations. And with regard to taxation, it’s pretty clear that stability is more important than the level. The key is to figure out how to raise productivity and skills investment would help greatly with that.”

The UK productivity gap – the difference between our productivity and that of other countries – is at its highest level since 1993, at 21 percentage points below the G7 average. Yet while the British government has pledged to reduce corporation tax to 20 per cent in 2015 (the joint lowest in the G20), more productive economies such as the US and Japan retain corporation-tax rates of 39 per cent and 38 per cent, respectively.

In any case, as Hacker argues, “You’ve got to focus on the primarily non-traded sectors: education, health care, social care, face-toface services. There’s no global competitive reason why you can’t do that.”

Five years after the start of the greatest crisis in capitalism since the 1930s, and after the comprehensive failure of austerity, the centre left remains becalmed. In Britain and elsewhere, it is the populist right that is gaining ground as voters shun mainstream social democracy. Even so, Hacker says he is “cautiously optimistic”.

“I do think there’s this hunger for direct and simple policies to help the squeezed middle. And one thing you can say for predistribution ideas, like ‘Hey, let’s have a living wage’, is that they’re pretty straightforward to explain.” He also remarks: “The cost of organising has come down with the information revolution. You can marry simple policies with new organising strategies. That’s a pretty powerful force multiplier.”

While Miliband and his allies often speak of the potential for a Thatcheresque transformation of the economy and society, Hacker suggests greater modesty is in order. “You’re not going to get a big bang of policy change. Instead, what progressives need to do is gain office, do some important things that improve the overall situation of the squeezed middle, and then get re-elected and repeat.” If Labour is to win in 2015, Miliband will need to pull off a daunting balancing act, persuading the voters that he offers a bold alternative to the coalition and at the same time reassuring them that Labour won’t run out of other people’s money again. Though the word may rarely pass his lips now, predistribution remains his best hope of doing so.

George Eaton is political editor of the New Statesman.

This article first appeared in the 08 July 2013 issue of the New Statesman, The world takes sides

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The Brexit Beartraps, #2: Could dropping out of the open skies agreement cancel your holiday?

Flying to Europe is about to get a lot more difficult.

So what is it this time, eh? Brexit is going to wipe out every banana planet on the entire planet? Brexit will get the Last Night of the Proms cancelled? Brexit will bring about World War Three?

To be honest, I think we’re pretty well covered already on that last score, but no, this week it’s nothing so terrifying. It’s just that Brexit might get your holiday cancelled.

What are you blithering about now?

Well, only if you want to holiday in Europe, I suppose. If you’re going to Blackpool you’ll be fine. Or Pakistan, according to some people...

You’re making this up.

I’m honestly not, though we can’t entirely rule out the possibility somebody is. Last month Michael O’Leary, the Ryanair boss who attracts headlines the way certain other things attract flies, warned that, “There is a real prospect... that there are going to be no flights between the UK and Europe for a period of weeks, months beyond March 2019... We will be cancelling people’s holidays for summer of 2019.”

He’s just trying to block Brexit, the bloody saboteur.

Well, yes, he’s been quite explicit about that, and says we should just ignore the referendum result. Honestly, he’s so Remainiac he makes me look like Dan Hannan.

But he’s not wrong that there are issues: please fasten your seatbelt, and brace yourself for some turbulence.

Not so long ago, aviation was a very national sort of a business: many of the big airports were owned by nation states, and the airline industry was dominated by the state-backed national flag carriers (British Airways, Air France and so on). Since governments set airline regulations too, that meant those airlines were given all sorts of competitive advantages in their own country, and pretty much everyone faced barriers to entry in others. 

The EU changed all that. Since 1994, the European Single Aviation Market (ESAM) has allowed free movement of people and cargo; established common rules over safety, security, the environment and so on; and ensured fair competition between European airlines. It also means that an AOC – an Air Operator Certificate, the bit of paper an airline needs to fly – from any European country would be enough to operate in all of them. 

Do we really need all these acronyms?

No, alas, we need more of them. There’s also ECAA, the European Common Aviation Area – that’s the area ESAM covers; basically, ESAM is the aviation bit of the single market, and ECAA the aviation bit of the European Economic Area, or EEA. Then there’s ESAA, the European Aviation Safety Agency, which regulates, well, you can probably guess what it regulates to be honest.

All this may sound a bit dry-

It is.

-it is a bit dry, yes. But it’s also the thing that made it much easier to travel around Europe. It made the European aviation industry much more competitive, which is where the whole cheap flights thing came from.

In a speech last December, Andrew Haines, the boss of Britain’s Civil Aviation Authority said that, since 2000, the number of destinations served from UK airports has doubled; since 1993, fares have dropped by a third. Which is brilliant.

Brexit, though, means we’re probably going to have to pull out of these arrangements.

Stop talking Britain down.

Don’t tell me, tell Brexit secretary David Davis. To monitor and enforce all these international agreements, you need an international court system. That’s the European Court of Justice, which ministers have repeatedly made clear that we’re leaving.

So: last March, when Davis was asked by a select committee whether the open skies system would persist, he replied: “One would presume that would not apply to us” – although he promised he’d fight for a successor, which is very reassuring. 

We can always holiday elsewhere. 

Perhaps you can – O’Leary also claimed (I’m still not making this up) that a senior Brexit minister had told him that lost European airline traffic could be made up for through a bilateral agreement with Pakistan. Which seems a bit optimistic to me, but what do I know.

Intercontinental flights are still likely to be more difficult, though. Since 2007, flights between Europe and the US have operated under a separate open skies agreement, and leaving the EU means we’re we’re about to fall out of that, too.  

Surely we’ll just revert to whatever rules there were before.

Apparently not. Airlines for America – a trade body for... well, you can probably guess that, too – has pointed out that, if we do, there are no historic rules to fall back on: there’s no aviation equivalent of the WTO.

The claim that flights are going to just stop is definitely a worst case scenario: in practice, we can probably negotiate a bunch of new agreements. But we’re already negotiating a lot of other things, and we’re on a deadline, so we’re tight for time.

In fact, we’re really tight for time. Airlines for America has also argued that – because so many tickets are sold a year or more in advance – airlines really need a new deal in place by March 2018, if they’re to have faith they can keep flying. So it’s asking for aviation to be prioritised in negotiations.

The only problem is, we can’t negotiate anything else until the EU decides we’ve made enough progress on the divorce bill and the rights of EU nationals. And the clock’s ticking.

This is just remoaning. Brexit will set us free.

A little bit, maybe. CAA’s Haines has also said he believes “talk of significant retrenchment is very much over-stated, and Brexit offers potential opportunities in other areas”. Falling out of Europe means falling out of European ownership rules, so itcould bring foreign capital into the UK aviation industry (assuming anyone still wants to invest, of course). It would also mean more flexibility on “slot rules”, by which airports have to hand out landing times, and which are I gather a source of some contention at the moment.

But Haines also pointed out that the UK has been one of the most influential contributors to European aviation regulations: leaving the European system will mean we lose that influence. And let’s not forget that it was European law that gave passengers the right to redress when things go wrong: if you’ve ever had a refund after long delays, you’ve got the EU to thank.

So: the planes may not stop flying. But the UK will have less influence over the future of aviation; passengers might have fewer consumer rights; and while it’s not clear that Brexit will mean vastly fewer flights, it’s hard to see how it will mean more, so between that and the slide in sterling, prices are likely to rise, too.

It’s not that Brexit is inevitably going to mean disaster. It’s just that it’ll take a lot of effort for very little obvious reward. Which is becoming something of a theme.

Still, we’ll be free of those bureaucrats at the ECJ, won’t be?

This’ll be a great comfort when we’re all holidaying in Grimsby.

Jonn Elledge edits the New Statesman's sister site CityMetric, and writes for the NS about subjects including politics, history and Brexit. You can find him on Twitter or Facebook.