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The art of the political wager: how to make money betting on the general election

The only certainty about this year's election is that it will break all previous betting records. So who should you be placing your money on?

Photomontage by Dan Murrell

At the end of October 2008 I found myself in Las Vegas, as one does. I was not there for any of the customary purposes, though I might have played a few mindless late-night hands of blackjack for the sake of it. I was there to follow Barack Obama, then on the verge of the presidency, and campaigning in the swing state of Nevada.

Obama spoke to a large, zealous Saturday-afternoon crowd on a high-school football field. But the sight that really struck me came early that evening, in a suburban shopping mall. Nevada was one of the states that had embraced early voting, and already – ten days before polling day – the voting machines were in full cry, and easily mistakable for the one-armed bandits that are permanent fixtures in Las Vegas malls.

But Nevada has enough gambling oppor­tunities to go round. These machines attracted a long line, not of casino-goers, but of the people who attend to their needs. They were young, mainly female and non-white. And there was no need to be intrusively journalistic and ask the bleedin’ obvious: they were not queuing to pick John McCain, who had secured his Republican base by transforming himself from a thoughtful and original politician into a fat-headed curmudgeon.

At once it was clear to me not merely that Obama would win Nevada and thus the nation, but that in effect he had won already. I shared this thought with my newspaper readers, but there was something else I would normally have done: backed my judgement with money. Three things stopped me.

First, the notion of President Obama was no longer startling – he was now heavily odds-on, which is not my kind of betting. Second, I had (forgive the little swank) started putting money on Obama in the UK more than a year earlier, when it was generally assumed Hillary Clinton would be the Democratic nominee. Third, such a bet here was out of the question. Even in the gambling capital of the world, American squeamishness is overwhelming. Though nearly every state has a lottery, bookmaking is frowned on by polite society; and betting on politics is considered sinful. A nice man from the trade magazine Gaming Today explained the background to me: in 1980, when the TV soap Dallas was the talk of the planet, one casino, in addition to its normal prices on American sports, had issued prices for Who Shot JR?. The Nevada Gaming Control Board went apeshit and banned all bets on non-sporting subjects.

And to this day the vagaries of US law make the practice difficult and hazardous anywhere from Washington to Waikiki. It has become even tougher since the demise in 2013 of Intrade, an Irish-based “online prediction trading exchange”, which for a time successfully disguised political gambling in the garb of a stock market. There are still the Iowa Electronic Markets, run by a university business school, which, “for educational and research purposes”, are allowed to accept small bets – $500 absolute max over an entire four-year election cycle – to create a simulacrum of a real market. In Britain last year a Surrey businessman placed a total of £900,000 with William Hill on a No vote in the Scottish referendum (he won £193,000).

That is a little out of my own league, but on the whole I am pleased to live in a country that makes it harder to shoot random strangers than have a bet. My name is Matthew and I adore punting on politics. And I have no plans to give up – certainly not in the next three and a half months as we approach the most fascinating, multilayered and downright bettable general election in British history. Already odds are being offered about almost every imaginable contingency for polling day and after, including prices for every constituency from Aberavon to Yorkshire East. The two biggest bookmakers, William Hill and Ladbrokes, both had a turnover of more than £3m on the Scottish referendum, suggesting an industry total of £10m-£15m. There is perhaps only one certainty about the 2015 election: it is going to break all previous betting records.

The propensity to wager is an innate part of the human condition, and perhaps the divine condition, too: the Greek gods played dice to divvy up responsibility (Zeus won the skies, Poseidon the seas and Hades the underworld). More attestably, men were betting on political outcomes when sport was not organised or regular enough to offer an alternative. Stephen Alford, in his new biography, Edward VI, says that as the boy-king lay dying in 1553, merchants in Antwerp were betting on the disputed succession. In 1743, when George II made the nostalgic and quixotic decision to lead his own troops into battle against the French at Dettingen, it was said to be 4/1 in the London coffee shops against the silly fool getting himself killed. He survived.

In the late 19th and early 20th centuries there was a sturdy betting market on presidential elections among Wall Street traders which was well regarded for its accuracy in predicting the result. There was similar activity in the City of London and West End clubs – and with UK bookmakers, whose odds until 1961 were legally available only to the minority able to bet on credit. In the US, bookmaking got itself associated with the Mob and became ever more taboo. In Britain it was legalised and democratised.

Once the bookies came out of the shadows and into the high streets, political odds became universally available, and publicised. The first great contest after the arrival of betting shops was for the Tory leadership in 1963, with Rab Butler the odds-on favourite who got turned over, as some shrewdies must have sensed, by the 5/1 shot Lord Home. The Guardian reported a stinging attack on the practice by the Labour politician Ian Mikardo. “A sad day for Britain,” he called it. “The Tories have dragged the premiership down to the level of the Donkey Derby.” This constituted the most glorious piece of chutzpah. Mikardo is remembered these days as a) a highly effective left-wing operator and b) the semi-official Commons bookmaker, taking his colleagues’ political bets for decades.

Perhaps Mikardo resented the competition. But he was not the only one expressing doubts. Hills and Ladbrokes were already emerging as the Big Two betting firms in the new era, vying for the title World’s Biggest Bookmaker. The Ladbrokes boss Cyril Stein enthusiastically embraced politics as a business opportunity. The eponymous William Hill, still firmly in charge of his own firm, had moral qualms: “If this became a fever and millions of people went for it, I think it could affect the ballot box,” he said in a radio debate with Stein before the 1966 election. “And electing a government is a very serious business.”

Hill’s biographer Graham Sharpe admits his man lost that argument hands down, especially as he had by then already given in and started offering prices. No one else shared his view that anyone might vote primarily to support their bet. And Stein made clear in the debate there was no question of stepping across the real ethical divide:

“Would you be prepared to bet on anything?” the interviewer asked Stein.

“Anything living, yes.”

“. . . The number of people killed in the Vietnam war during a certain period, or dying during a cholera epidemic?”

“No, I said that we bet on anything living.”

The principle was thus established and has been very rarely breached since: no Battle of Dettingen-type odds. And what Stein had grasped was that taking bets on events beyond sport had a remarkable spin-off: it got the company name into parts of the media it would never otherwise reach. This was not about simple, calculable profit and loss: embracing events beyond the sports pages offered fantastic PR.

Deep down, Hill knew that, too. Two years earlier, in 1964, his firm had taken a £10 bet from a young man in Preston, David Threlfall, at 1,000/1 against a human landing on the moon by the end of the decade; the strict calculus suggests that the odds were crazed, as President John F Kennedy had set the goal before his death. In 1969 Hills had to pay Threlfall £10,000 (about £145,000 now, by the most conservative reckoning). It made the bookies cautious for a while, yet the impression was created that these are not legalised mafiosi but sometimes naive good sports, and it has paid massive dividends for them.

And so, the bookmakers still pursue this kind of business, from customised novelty (will a newborn son play cricket for England?) to reality TV (who will be next to be evicted from Big Brother?), with an eye focused far more on the headline than the bottom line. But no sane bookmaker now accepts serious money on this stuff, or indeed anything where there is a risk of insider trading (this includes betting on the next archbishop of Canterbury). On a general election, however, there is both huge interest and a level playing field: the PM hardly knows more than the rest of us. So it’s a win double for the bookies: acres of column inches and big turnover, too.

And the strange thing about political betting is that the punters can also have objectives over and above the customary chance of winning money. It is possible to identify at least four completely different types of bet never seen on a racecourse:

The insurance bet: This was particularly prevalent up to the 1970s, when a Labour government might have a serious effect on a rich man’s wallet. It existed even before betting shops: there were reports of large credit bets before the 1951 election and in the 1960s steel magnates were thought to have backed Labour heavily to get a consolation prize in case of nationalisation.

The momentum bet: When Clement Freud stood as Liberal candidate in the Isle of Ely by-election in 1973, he began as a 33/1 outsider. He then placed several £300 bets, enough to send the odds plummeting. “The clever money seems to be going on Freud,” said the Daily Telegraph. As the candidate later put it: “Actually, it was the Freud money going on Freud.” But it created the sense of impetus that has always been crucial to by-election upsets. Freud won and held the seat for 14 years. (When the Tories won it back, Freud was 5/1 on.) There were also persistent rumours, never confirmed, that Chris Huhne’s campaign team had hefty bets on their man before he lost narrowly in Lib Dem leadership campaigns to both Ming Campbell and Nick Clegg.

The heart-not-head bet: Though the big money in the Scottish referendum was for No, nearly all the small bets were for Yes, apparently coming from shiny-faced pro-independence voters anxious to back their hopes, not their fears.

The grandstanding bet: At the Rochester by-election last November Michael Gove publicly placed a £50 bet on the doomed Tory candidate. This had no purpose except to draw attention to Gove’s continued existence and ambition.

The original purpose of both sides – trying to make a profit on the transaction – is certainly not absent. Indeed, in recent years it has become more central. At the heart of this phenomenon is a new class somewhat different from the blokes who hang round the betting shops. Their bible is a somewhat clunky blog-cum-website, PoliticalBetting.com, founded ten years ago by an ex-journalist, university fundraiser and Liberal Democrat candidate called Mike Smithson, who lost his political betting virginity as a teenager in the 1963 Tory leadership shemozzle.

Smithson uses the slogan: “The view from OUTSIDE the Westminster bubble” (Bedford, actually), which for political betting purposes is definitely the place to be. No one can make money from the bookmakers by following conventional wisdom. And Smithson and his small team of contributors are particularly good at getting beyond that.

But of the two words in the site’s title, the first is more significant. This is a wonkish site first and foremost. I am not sure whether knowing that the Conservatives retained a seat on Rother District Council by winning the Darwell by-election adds to the sophistication of my political analysis, especially when I am not sure where either Rother or Darwell might be. But it certainly makes me feel clued up. As does the rigour Smithson brings to the study of polling data.

The site’s small profit, however, comes from the betting firms paying commission on click-throughs that generate custom, although the companies are just a bit wary of this new business. “I know who some of these people are,” says Matthew Shaddick, head of political betting at Ladbrokes. “A lot of them are political obsessives: activists, poll-watchers, or they work in political HQs. Real anoraky stats people, or political scientists with their own models.” In other words, not necessarily the mug punters the bookies traditionally love.

Shaddick is the embodiment of the industry’s response. He is 45, and took a degree in politics and modern history at Manchester before becoming a Ladbrokes lifer. A few years back, the firm was looking for someone in the office to look after the politics bets. “I put my hand up on the basis that it would take a couple of hours a week,” said Shaddick. Now it’s his full-time job.

Over at William Hill, political betting is largely overseen by the founder’s biographer, Graham Sharpe, who has been at the firm since 1972 and is now its media relations director. Sharpe is a long-standing master of the showbiz aspects of the operation. In particular, he arranged sponsorship to keep Screaming Lord Sutch in business as a national treasure through the 1980s and 1990s. Sutch was the indifferent pop singer and magnificent self-publicist who stood in 41 elections, passing 1,000 votes just once. (He added greatly to the national merriment, if not to his own, and committed suicide in 1999, aged 58.)

Sharpe took what is thought to be the longest-odds bet in history: £10 from Sutch that he would become prime minister at 15 million/1. It was understood that Sharpe would have been compensated for the inevitable loss of his job at Hills with a place in His Lordship’s cabinet.

Though their background and perspectives are very different, both Sharpe and Shaddick see politics as a major growth area. Excluding the skill-free but profitable internet casinos and one-armed bandits in the shops, the bookmakers’ core betting business is now split evenly three ways: one-third football, which is rising; one-third racing, which is falling; one-third everything else including politics – which Shaddick reckons is the fastest-growing area of all.

They also agree it is very different from other betting, and that there is little overlap between political punters and other clients until the final days of the campaign. Suspected political know-alls are treated with the same respect as a big-time racing insider. It is both a nuisance and a badge of honour to try to place a carefully worked-out wager and be told by a huge and allegedly fearless multinational that it will only accept a sum that would not even shake the toytown Iowa Electronic Markets, because the computer knows who you are.

This is especially likely if you are betting not on the next prime minister, or most seats, but on something obscure: perhaps supporting an outsider in a constituency the bookmakers had not even thought in play. It is possible to finesse that by tramping round the shops and forking out a large number of small sums, but even that way head office gets wind eventually. This is a complicated battle of wits.

There will be NS readers who no doubt regard this entire article with horror, who share not just the original William Hill’s disdain for gambling on politics but a detestation for betting of all kinds. Some of them will be members of parliament. However, they are the real gamblers. Most of us would be terrified by the notion of subjecting our career and livelihood to continual monstering by the press and Twittersphere, interspersed with periodic revalidation by public whim.

Of course gambling can ruin the lives of those without the capacity for moderation, just as drinking can. But it is different for genuine punters. By that I don’t mean Lottery players, but people who aspire to make rational predictions about future outcomes, be it a horse race or a three-way marginal, and who back their judgement with affordable sums of money – and understand that betting is about honourable defeats as well as victories because it is a search for value, not certainties. For them it is a constant source of intellectual challenge and occasional delight. A hobby to help ward off boredom and dementia: more lasting than Candy Crush and FreeCell; more piquant than a crossword; and cheaper than golf.

The idea that the bookmakers must inevitably win has in fact never been less true. The days of the 10 per cent tax on every bet have gone; the internet provides instant price comparison sites; and hot competition from new entrants, especially the betting exchanges, has forced the companies to slim their once-obese profit margins.

And political betting has a particular appeal because the relevant data is so transparent. True, I would have saved myself some money if I had got inside Alan Johnson’s head and realised he appeared to be serious about not wanting to become leader of the Labour Party. But most of the time the information is out there and just needs to be collected, processed and understood. In racing, no student of form knows what a trainer might be up to; and no trainer knows for sure how his horse really feels. No football expert can accurately predict the day when Manchester City might just screw up against Burnley.

We aficionados all have our failures, heaven knows. But we can smile about our past triumphs, as over some long-ago night of passion. I was a fairly early Obama backer but Mike Smithson spotted him long before I did and backed him to be president at 50/1. My own moment of glory came in 1990, when I divined that Michael Heseltine would indeed topple Margaret Thatcher but then get punished by being deprived of the prize himself; therefore I knew – just knew – that the answer to the question simply had to be John Major, at 10/1. And I kept betting until Hills told me to get knotted.

I am relishing the 2015 election first and foremost because I care about my country and want it to be run by politicians who share my vision of its future; second because, for a journalist, it will be fascinating to write about; and third, because I hope that I might just have another moment of blinding insight to match the one I had 25 years ago. Which may be lucrative in a medium-sized way – and gloriously satisfying.

Matthew Engel is a columnist for the Financial Times and the occasional political betting columnist for the Racing Post. His latest book is “Engel’s England” (Profile)

This article first appeared in the 23 January 2015 issue of the New Statesman, Christianity in the Middle East

Jeremy Corbyn. Photo: Getty
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Lexit: the EU is a neoliberal project, so let's do something different when we leave it

Brexit affords the British left a historic opportunity for a decisive break with EU market liberalism.

The Brexit vote to leave the European Union has many parents, but "Lexit" – the argument for exiting the EU from the left – remains an orphan. A third of Labour voters backed Leave, but they did so without any significant leadership from the Labour Party. Left-of-centre votes proved decisive in determining the outcome of a referendum that was otherwise framed, shaped, and presented almost exclusively by the right. A proper left discussion of the issues has been, if not entirely absent, then decidedly marginal – part of a more general malaise when it comes to developing left alternatives that has begun to be corrected only recently, under Jeremy Corbyn and John McDonnell.

Ceding Brexit to the right was very nearly the most serious strategic mistake by the British left since the ‘70s. Under successive leaders Labour became so incorporated into the ideology of Europeanism as to preclude any clear-eyed critical analysis of the actually existing EU as a regulatory and trade regime pursuing deep economic integration. The same political journey that carried Labour into its technocratic embrace of the EU also resulted in the abandonment of any form of distinctive economics separate from the orthodoxies of market liberalism.

It’s been astounding to witness so many left-wingers, in meltdown over Brexit, resort to parroting liberal economics. Thus we hear that factor mobility isn’t about labour arbitrage, that public services aren’t under pressure, that we must prioritise foreign direct investment and trade. It’s little wonder Labour became so detached from its base. Such claims do not match the lived experience of ordinary people in regions of the country devastated by deindustrialisation and disinvestment.

Nor should concerns about wage stagnation and bargaining power be met with finger-wagging accusations of racism, as if the manner in which capitalism pits workers against each other hasn’t long been understood. Instead, we should be offering real solutions – including a willingness to rethink capital mobility and trade. This places us in direct conflict with the constitutionalised neoliberalism of the EU.

Only the political savvy of the leadership has enabled Labour to recover from its disastrous positioning post-referendum. Incredibly, what seemed an unbeatable electoral bloc around Theresa May has been deftly prized apart in the course of an extraordinary General Election campaign. To consolidate the political project they have initiated, Corbyn and McDonnell must now follow through with a truly radical economic programme. The place to look for inspiration is precisely the range of instruments and policy options discouraged or outright forbidden by the EU.

A neoliberal project

The fact that right-wing arguments for Leave predominated during the referendum says far more about today’s left than it does about the European Union. There has been a great deal of myth-making concerning the latter –much of it funded, directly or indirectly, by the EU itself.

From its inception, the EU has been a top-down project driven by political and administrative elites, "a protected sphere", in the judgment of the late Peter Mair, "in which policy-making can evade the constraints imposed by representative democracy". To complain about the EU’s "democratic deficit" is to have misunderstood its purpose. The main thrust of European economic policy has been to extend and deepen the market through liberalisation, privatisation, and flexiblisation, subordinating employment and social protection to goals of low inflation, debt reduction, and increased competitiveness.

Prospects for Keynesian reflationary policies, or even for pan-European economic planning – never great – soon gave way to more Hayekian conceptions. Hayek’s original insight, in The Economic Conditions of Interstate Federalism, was that free movement of capital, goods, and labour – a "single market" – among a federation of nations would severely and necessarily restrict the economic policy space available to individual members. Pro-European socialists, whose aim had been to acquire new supranational options for the regulation of capital, found themselves surrendering the tools they already possessed at home. The national road to socialism, or even to social democracy, was closed.

The direction of travel has been singular and unrelenting. To take one example, workers’ rights – a supposed EU strength – are steadily being eroded, as can be seen in landmark judgments by the European Court of Justice (ECJ) in the Viking and Laval cases, among others. In both instances, workers attempting to strike in protest at plans to replace workers from one EU country with lower-wage workers from another, were told their right to strike could not infringe upon the "four freedoms" – free movement of capital, labour, goods, and services – established by the treaties.

More broadly, on trade, financial regulation, state aid, government purchasing, public service delivery, and more, any attempt to create a different kind of economy from inside the EU has largely been forestalled by competition policy or single market regulation.

A new political economy

Given that the UK will soon be escaping the EU, what opportunities might this afford? Three policy directions immediately stand out: public ownership, industrial strategy, and procurement. In each case, EU regulation previously stood in the way of promising left strategies. In each case, the political and economic returns from bold departures from neoliberal orthodoxy after Brexit could be substantial.

While not banned outright by EU law, public ownership is severely discouraged and disadvantaged by it. ECJ interpretation of Article 106 of the Treaty on the Functioning of the European Union (TFEU) has steadily eroded public ownership options. "The ECJ", argues law professor Danny Nicol, "appears to have constructed a one-way street in favour of private-sector provision: nationalised services are prima facie suspect and must be analysed for their necessity". Sure enough, the EU has been a significant driver of privatisation, functioning like a ratchet. It’s much easier for a member state to pursue the liberalisation of sectors than to secure their (re)nationalisation. Article 59 (TFEU) specifically allows the European Council and Parliament to liberalise services. Since the ‘80s, there have been single market programmes in energy, transport, postal services, telecommunications, education, and health.

Britain has long been an extreme outlier on privatisation, responsible for 40 per cent of the total assets privatised across the OECD between 1980 and 1996. Today, however, increasing inequality, poverty, environmental degradation and the general sense of an impoverished public sphere are leading to growing calls for renewed public ownership (albeit in new, more democratic forms). Soon to be free of EU constraints, it’s time to explore an expanded and fundamentally reimagined UK public sector.

Next, Britain’s industrial production has been virtually flat since the late 1990s, with a yawning trade deficit in industrial goods. Any serious industrial strategy to address the structural weaknesses of UK manufacturing will rely on "state aid" – the nurturing of a next generation of companies through grants, interest and tax relief, guarantees, government holdings, and the provision of goods and services on a preferential basis.

Article 107 TFEU allows for state aid only if it is compatible with the internal market and does not distort competition, laying out the specific circumstances in which it could be lawful. Whether or not state aid meets these criteria is at the sole discretion of the Commission – and courts in member states are obligated to enforce the commission’s decisions. The Commission has adopted an approach that considers, among other things, the existence of market failure, the effectiveness of other options, and the impact on the market and competition, thereby allowing state aid only in exceptional circumstances.

For many parts of the UK, the challenges of industrial decline remain starkly present – entire communities are thrown on the scrap heap, with all the associated capital and carbon costs and wasted lives. It’s high time the left returned to the possibilities inherent in a proactive industrial strategy. A true community-sustaining industrial strategy would consist of the deliberate direction of capital to sectors, localities, and regions, so as to balance out market trends and prevent communities from falling into decay, while also ensuring the investment in research and development necessary to maintain a highly productive economy. Policy, in this vision, would function to re-deploy infrastructure, production facilities, and workers left unemployed because of a shutdown or increased automation.

In some cases, this might mean assistance to workers or localities to buy up facilities and keep them running under worker or community ownership. In other cases it might involve re-training workers for new skills and re-fitting facilities. A regional approach might help launch new enterprises that would eventually be spun off as worker or local community-owned firms, supporting the development of strong and vibrant network economies, perhaps on the basis of a Green New Deal. All of this will be possible post-Brexit, under a Corbyn government.

Lastly, there is procurement. Under EU law, explicitly linking public procurement to local entities or social needs is difficult. The ECJ has ruled that, even if there is no specific legislation, procurement activity must "comply with the fundamental rules of the Treaty, in particular the principle of non-discrimination on grounds of nationality". This means that all procurement contracts must be open to all bidders across the EU, and public authorities must advertise contracts widely in other EU countries. In 2004, the European Parliament and Council issued two directives establishing the criteria governing such contracts: "lowest price only" and "most economically advantageous tender".

Unleashed from EU constraints, there are major opportunities for targeting large-scale public procurement to rebuild and transform communities, cities, and regions. The vision behind the celebrated Preston Model of community wealth building – inspired by the work of our own organisation, The Democracy Collaborative, in Cleveland, Ohio – leverages public procurement and the stabilising power of place-based anchor institutions (governments, hospitals, universities) to support rooted, participatory, democratic local economies built around multipliers. In this way, public funds can be made to do "double duty"; anchoring jobs and building community wealth, reversing long-term economic decline. This suggests the viability of a very different economic approach and potential for a winning political coalition, building support for a new socialist economics from the ground up.

With the prospect of a Corbyn government now tantalisingly close, it’s imperative that Labour reconciles its policy objectives in the Brexit negotiations with its plans for a radical economic transformation and redistribution of power and wealth. Only by pursuing strategies capable of re-establishing broad control over the national economy can Labour hope to manage the coming period of pain and dislocation following Brexit. Based on new institutions and approaches and the centrality of ownership and control, democracy, and participation, we should be busy assembling the tools and strategies that will allow departure from the EU to open up new political-economic horizons in Britain and bring about the profound transformation the country so desperately wants and needs.

Joe Guinan is executive director of the Next System Project at The Democracy Collaborative. Thomas M. Hanna is research director at The Democracy Collaborative.

This is an extract from a longer essay which appears in the inaugural edition of the IPPR Progressive Review.

 

 

This article first appeared in the 23 January 2015 issue of the New Statesman, Christianity in the Middle East