A Jeffersonian Model for Modern Britain

The Japanese, German, French and Hong Kong economies are now coming out of recession. This leaves all eyes on the original core of the economic crisis - the Wall Street/London axis - and, of course, on the effects on the global economy of any wild card collapses like the Ukraine or perhaps Russia.

'Ave a Cup of Tea, Dearie'

The consensus amongst the British establishment is no longer grim so much as dogged. Things may be tough for some time to come, but (so it is believed) capitalism will not collapse, adjustments will be made and things will right themselves in due course.

James Buchan in Prospect Magazine asked last month whether Britain was bust. The conclusion was that we would 'muddle through'. "Ave a cup of tea, dearie". Dunkirk spirit.

There is certainly something very British about our grumpy belief that our Government is like the British weather - changeable, unpredictable, subject to some sort of 'hurricane' very very occasionally but basically dull, stable and gloomy, something to be endured.

Market Tolerance

The markets appear to have worked out that the Government has to continue to over-spend for political reasons until the election takes place, but that, once the need to be nice to the electorate is over, it will err on the side of the international investor over the demands of its people.

This helps to explain the tolerance of the market for the oodles of debt being offered to the market. Of course, the UK economy is one of the world's largest. It is also politically stable by global standards with a strong state and a stubborn and large anti-socialist middle class.

In short, the UK is a very good bet for repayment and for eventual fiscal stability. The market believes that the British state is so strong that it can enforce almost anything that is required on its people without threat to itself. It is probably correct in this assessment.

Nothing Is Certain In Politics

We have elsewhere suggested that the British political structure comprises a newly dominant Tory Party with three parties vying for the party of opposition - the troubled New Labour Party, the weak Liberal Democrats and the rising UKIP (at least in the South).

But the assumption that New Labour might not win a majority in the House of Commons may be false. The Tory Party is as tainted by scandal as its main rivals. As Cameron moves to the centre-ground, he alienates his 'tribesmen' who may be inclined to dabble in UKIP's waters.

The Tory Front Bench attack on Tory Daniel Hannan, MEP, over his Fox News remarks on the NHS may appeal to the mass of British voters but an attack on Hannan is also a coded attack on the eurosceptic right within the Party.

Libertarian Dissent

There is a complex of dissident values here - euroscepticism, a demand for tax cuts and a call for cuts in 'waste' in public services. Hannan's comments on the NHS open up the irritation amongst some of the libertarian Southern middle class at the remnants of the old social democratic consensus.

The markets will demand that the 'Keynesian' explosion of expenditures (as much political as economic) be reined back by whoever is in Government next year. Given this requirement, the parties only differ on the balance of spending cuts and tax rises.

The Conservative High Command is trying to ring-fence the health and education sectors for political reasons (though it keeps adding departments as different constituencies moan that they are being left out). Now it finds that it has its own Fifth Column.

Tweedledum and Tweedledee

But all the major parties are now just squabbling over the type of pain to be inflicted on the population and who will be most victimised.

What would a Government of 'national interest' rather than one of party advantage being doing now? Almost certainly, despite the Keynesian claims, it would be beginning to cut public expenditures that do not relate directly to current or future economic growth and innovation.

Each week that passes without some recognition of the scale of the crisis burdens future generations that are wholly innocent of the greed and stupidity of their elders.

Community and Market

Similarly, no major party (with the partial exception of the Liberal Democrats) has grasped the nettle that the crisis arose from permitting a market system to follow its instincts without any community intervention.

In the struggle between community and market, the State, as representative of the community interest, has moved in thirty years from being the sclerotic social democratic assassin of innovation to the other extreme - a mere player in a game whose rules are being set elsewhere.

Even now, there is no sign that Government of any stripe has any understanding that the State, even if it is a State that fully supports liberal economics, is not just a player but the player. In the absence of world government and a weakening US hegemon, it must set the rules so that it can always win.

A Bit of Political Philosophy

This begs the question of what the State is and what it is for. The institutionalist view is that the State is an interest separate from the community it notionally serves. History tends to confirm the truth of this proposition.

Conservative opinion is understandably nervous that any attempt by the State to set the rules for the economy is tantamount if not to socialism then to corporatism and rule by special interests. This is the libertarian driver for the Tory Right's concern to cut taxes and weaken the State.

It is a point of view that bringsthe Tory Right into alignment with the US Republican Right - and with Fox News. Without a strong alternative - that state and community are fully aligned in practice - this emphasis on individual freedom becomes increasingly attractive to many angry citizens.

The Alternative Tradition

There is another radical tradition, historically of the Left, which identifies the interest of the community with the State.

Conservative opinion is rightly nervous here because, since the foundation of the Labour Party, this has meant, in practice, a strong state directed first at socialism and, latterly, at support for the special interests that sustain the clique at the top of the main Party of the Left.

However, there is no need for an identification of the State with the community to mean the domination of the community by the State - in practice, the domination of the population by whichever clique captures the party that captures the State.

A Jeffersonian Alternative

An alternative might be the radical recasting of the political system so that the State becomes the servant of the people, decentralised and much closer to the model of Thomas Jefferson. There is no voice for this model at the heart of British politics, although the Liberal Democrats come closest.

Given the lack of the political classes' support for any radical recasting of the political system (despite the growing evidence that increasing numbers in the wider population are inclined to 'revolution'), the mainstream parties are repeatedly trapped into making the existing system work.

But what would a Jeffersonian model look like? Well, we use Jefferson loosely here. The UK is an advanced service economy with exploited migrants, not an agrarian economy based on slavery. Similarly, the Enlightenment would scarcely stand up to the intellectual scrutiny that it would receive nowadays.

Spending Cuts

But we can adapt to the general principle by which the State is merely a tool of the community and has no desire to expand except that it be in the interests of the community. The community will make its own assessment of its needs through democratic means without the intrusion of special interests.

The honest position is that we have all got drunk at the party and have been presented with the bill. This bill must now be paid but those who drank the most should pay it. Revellers should not scarper and leave the bill to be paid by servants.

Public spending must be cut but the cuts must be, and be seen to be, at the expense of the State structure and of the special interests who benefited most, generationally and sectionally, from the revelry.

The Banking System

The UK has made itself highly vulnerable to the global economy by allowing mega-financial institutions to dominate its economic policy-making. There is a role in servicing such global institutions but the national banking system and the global banking system need separating out from each other.

Regional and community banks and stock markets need support and to be discouraged from becoming sucked into the global market in the way that the Landesbanken in Germany and the Icelandic banks have done. This means a far more active engagement by Government in regulating the banking sector.

The aims must be to restore the capital base of the banking sector as a prerequisite for stable lending and increased transparency in banking business. This will not nationalise banks but will demand the same sort of standards that we might require in food quality, consumer rights or travel safety.

Social Capitalism

The one concession to post-Jeffersonian socialism is that, when Government takes tax revenue, the bias in expenditure must be less towards immediate consumption (employment and general services) and increasingly towards investment in the infrastructure for innovation and growth.

New Labour's model appeared to be to pump money into people's pockets so that economic growth could be fuelled by demand for goods and services. An alternative is to create the infrastructure for economic prosperity through investment and education.

To be fair, Gordon Brown eventually changed his tune with plans for investment in energy and, latterly, transport infrastructure - and one of the few successes of this government has been investment in parts of vocational education - but all this is still relatively late in the day and still limited in scope.

The Bonus Culture

While not fully accepting the po-faced earnestness of Compass in its plans for a High Pay Commission (since innovation and success deserve high rewards), there must be a link between pay and long term success that recognises that short term bonuses are not the way to run an economy.

The short term bonus distorts the market and fails to build up long term national capital. There can be no objection to regulation of such tools so that they can become linked to real long term measures of wealth creation.

This author can certainly see no objection to progressive retrospective taxation of recent bonus income in the light of the crisis if ever we get to the point where unemployment is sustained at 3m for more than a year and there are massive cuts in public services.

A Jeffersonian Programme

So, there we have it ... a Jeffersonian programme of sorts ...

• The State given to the community and taken away from special interests.
• 'Fair' public spending cuts.
• A partial withdrawal of the national economy from the global system in order to stabilise it.
• A shift of expenditures from support for consumption to investment in economic infrastructure and innovation [the 'new deal' model].
• Government intervention to assist the bottom 15% and to restrain the top 15% without intervening in the liberties and independence of the 70% inbetween.

Bodging It

Does any current political party come close to this sort of moderate national programme? The current political class is, as Buchan has suggested, muddling through.

All parties are still committed to an economic model that dominated the period from the 1980s to the credit crunch. None have a sense of a nation that is greater than the sum of its individuals.

It is a recipe for long term decline as a succession of political oligopolists bodge their way through social order problems, spending cuts and economic distress.

For all the communitarian talk of Brown and Cameron, neither has presented a workable model for the command of the State by the people nor for the just sharing of the pain in the coming years of austerity.

Either we give up on the interventionist State altogether and take the libertarian route of the Tory Right and of UKIP or we develop some sort of communitarian democratic model, tantamount to a revolution from below.

This author suspects that we will be muddling through for decades to come.

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Economic Underpinnings Of Political Crisis

The Financial Times on Tuesday [23 June] had an extensive analysis of British public spending. This will soon account for almost half of the UK economy, matching war time levels and that period when ‘socialism’ controlled the ‘commanding heights’ of the economy.

It notes that the general trend in politics is to seek ways to shrink the state but that there is much room for conflict on what should be cut and what protected. 20% of the population now works for the Government directly or indirectly, 6m directly.

Public spending and the consequent role of the State is the central ideological battleground emerging out of the recent crisis. There are too many variations on this theme to cover fully in this posting.

But the dawning realisation is that New Labour’s version of the market economy has, by stealth, constructed a national economy that relies on high levels of economic growth to transfer resources disproportionately to the public sector, often with minimal economic and skewed social justification.

Fault Lines

The sudden ending of the motor behind public sector purchasing power with the credit crunch and a somewhat passive redistribution model, skewed by its nature towards the retention of power by a surprisingly small element in society, has exposed some worrying fault-lines in the wider system.

• The last decade has seen a dependency culture in which a less-than-efficient state structure sustains a significant proportion of the middle classes as well as active service workers.
• A commitment to high growth strategies has skewed policy heavily towards encouraging low cost labour inputs (in essence, migration) that needs to be serviced.
• The increasingly authoritarian tendencies of New Labour (necessary, it would seem, to maintain a simulacrum of control over an unstable system) comes up hard against the libertarian instincts of the Southern English.

The bloc vote created by high public spending (not only direct employees but consultants and providers of services to the public sector) in itself creates an electoral drag on any attempts to reform the inefficiencies in the publicly-funded parts of the economy.

Similarly, the high growth commitment to encouraging migration makes demands on the use of the public sector that diminishes the number and quality of services to those indigenous Britons who are not safely ensconced within it: hence the move to the right in the recent elections.

The New Labour model is, as we have often pointed out, held together by an alliance of special interests.

The political faction at its head, the trades unions and the non-Southern English regions were combined by Blair with middle class voters who appreciated the market economy orientation during the boom times.

This might have expected to solidify its hold by winning over migrants (with full voting rights) and anyone indirectly dependent on public spending, a good proportion of the middle classes, notably in London and the South-East, but also central to its hold on the regions.

The Threat To Assumptions

The fiscal crisis now threatens this whole system. If economic growth is not fuelling taxation revenue and if authoritarian measures cannot squeeze more taxation out of the upper middle classes to feed the maw, then the strains begin to show.

If the market-based middle classes are drifting away from New Labour, who is to replace them? Are there sufficient migrants and voters dependent on the public purse, a sort of mega-payroll vote, to do this? If not, where will the strains begin to show first? ....

• Choices over spending cuts means choices over who in the political alliance will gain or lose.
• The unemployable unskilled indigenous working class who voted BNP are not the only ones competing with incoming labour.
• Those in the southern middle classes (the goose that lays the golden egg) who are not safely set up within the public sector are seeing job insecurity, loss of final pension schemes, negative equity and the prospect of increased taxation.
• Investments in the next stage of economic development (mostly related to transport and energy distribution) are triggering troublesome alliances between locally affected middle classes and increasingly active eco-anarchists.
• Within a weakened New Labour, ‘progressives’ are demanding (against all economic sense) more public spending.

It looks like some of the older elements in the coalition (especially those in some regions and those in the industrial trades unions who depend on manufacturing capacity in defence and automotive) are going to suffer most. It is vital for New Labour that this pain is felt after they have voted and not before.

As for migrant effects, the single market is permitting import of European skilled labour as much as unskilled labour so that the BNP and the wildcat strikes are two sides of the same coin.

The wildcat strikes at power stations and other sites are still spreading while talks continue to try and resolve the central dispute at the Lindsey oil refinery. Even if this particular crisis is resolved, they are only the tip of an iceberg of ‘ressentiment’.

As for the private sector middle classes, they see public service workers better protected than they are and by their taxes. They increasingly distrust the Conservatives as any better and are moving not to the libertarian centre-left (Liberal Democrats) but to the libertarian right (UKIP).

And as for dissent against economic growth, initially small-scale, these revolts now have considerable potential for expensive civil order problems if conditions worsen.

Meanwhile, within the ruling party, restoring the universal social provision dimensions of the Labour Movement could remove the ‘baksheesh’ from the middle classes element in the alliance and redirect it back to the working class. Middle England is in no mood for this …

The Authoritarian Impulse

New Labour was always riddled with ‘internal contradictions’. Unless it develops a new strategy for power (extremely unlikely under the current leadership), it has only two options in the run-up to the next election:

• a return to at least the simulacrum of rapid economic growth (so that it can make the hard choices from 2010 rather than the Conservatives);
• an assertion of authoritarianism – or both.

This latter is already under way, directed at the BNP and the eco-anarchists. The war on the BNP continues with an attempt to apply the Race Relations Act to its ‘whites only’ membership policy and with hints of a preparedness to suppress it forcibly under certain circumstances.

The holding for four days without charge of four activists at the Kingsnorth site, simply for attempting to identify a police officer, indicates the lengths to which the Government is prepared to go in collusion with industrial interests.

In short, the Government appears to be panicking quite early in the game about two still-marginal threats. But the instinct of New Labour is often authoritarian. We only have to think of the reactions of Reid, Straw, Blunkett and Harman when faced by new threats or by behaviours that they do not like.

Will we see a dangerous combination of an aggressive Government with low legitimacy using Parliament and the security apparatus (including police) to maintain order in a way that might split the country with serious civil order consequences as conditions in the street worsen?

The Bank Stands Up To Be Counted

This brings us to the most important recent development – one at the very centre of economic policy. This is the reported breakdown of trust between the Governor of the Bank of England and the Treasury.

Mervyn King complained openly to Parliament that he had not been adequately consulted on regulatory reform. The lack of consultation on regulatory reform must be seen in a wider context.

The situation is serious because of the Governor’s underlying concern: that the Government was borrowing ‘extraordinary’ and ‘enormous’ amounts that must be reduced faster than the Government is planning.

The Government is trying to hold its coalition together for less than a year in order to get four or five more years of power. It is doing this by borrowing in the market to maintain the illusion, to more intellectually challenged or lazy voters  dependent on the goose, that the day of reckoning will not come.

The Bank of England (assuming the need to keep to certain basic rules in a liberal capitalist economy that is embedded in the international system) is only doing its job. It is Becket to Henry, a turbulent priest speaking truth unto kings.

The point is that politicians like to gamble. Central bankers do not. The New Labour government is betting the house, perhaps our houses, that, Micawberish, something will turn up, perhaps a US recovery or some other ‘deus ex machina’.

New Labour is becoming a threat not only to itself (as a viable expression of the centre-left) but possibly to the nation as its essential obsession with the holding of power is placed ahead of the needs of the country.

A short term drive for office could work but it might only be returned on a minority of the total vote to face the need to cut public spending and raise taxes in ways that will create serious discontent within its own base and a detachment from Parliamentary politics of its more extreme opponents.

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Change in British Political Culture

The Prime Minister survived a somewhat lame attack from Blairite and backbench rebels on Monday night. This should be no surprise to seasoned watchers of the Labour Party whose high level power struggles can easily descend into civil war.

MPs are currently in a lose/lose situation – but a civil war is still worse than a duff Prime Minister for their electoral prospects. Brown is now claiming that he will be decisive (aka stop dithering) and that he will rebuild the economy.

Brown has also made a lot of promises about inclusion, transparency and consultation but this was a meeting of the PLP not of the membership. A natural expectation must be that the political class will retreat into its laager and that it will continue to fail to connect with discontent out there.

The coup is over but public and party discontent simmers. It is unlikely that speculation about challengers will end. The next flashpoint is the Party Conference in September. After that, the Queen’s speech in October will be the last before a General Election.

Changes in British Political Culture

It is worth repeating just how bad it was for Labour:

• it lost its popular hold over Wales, Labour’s since 1918
• there is no Labour Euro-representation in the South West
• its share of the vote collapsed to 8% in the ‘prosperous’ South East
• it is now the third party after the Liberal Democrats in English local government
• it secured the lowest vote ever recorded by a serving Labour Government
• the vote fell under 10% for the first time since 1910
• it controls not a single County Council.

What is not often commented on is the degree to which a nation that was once dominated by two tribal mass membership oligopolistic parties with a small liberal Democrat rival and with virtually no nationalist presence (outside the peculiarity of Northern Ireland) has been transformed in the space of thirty years.

The UK is now a country of multiple parties and shifting allegiances. If the Conservatives appear to be the largest party, they are not so dominant as to become complacent.

At the next level down from the Tories’ uneasy dominance, we appear to have three competing parties jostling for second place, possibly as the permanent rival to Conservatism in a revived two party system.

Labour has fallen and UKIP has risen to give the Liberal Democrats an opportunity in theory but one which they show no sign of taking.

The LibDems should be the premier centre-left pro-European party, whittling away votes from progressive New Labour and the liberal wing of the Tories. History shows that they are rarely up to the task.

In reality, the question is whether Labour will recover (which may look less likely in view of the decision of the PLP to back the Prime Minister but is still the best medium term bet) or whether UKIP will create what is, in effect, a broader neo-nationalist challenge to the Conservatives.

If UKIP wins the race, would it drive the Tories to the centre (and to coalition) or force the Conservatives to concede the policy that holds UKIP together? The Tories could crush UKIP with just one policy commitment – withdrawal – but this would cost it business and liberal votes.

This is a bit of a mess. Apart from bread and butter issues, all four parties are dancing around Europe. Two hold the line for hard-line positions (the LibDems and UKIP) that then act as a check on the manouevrability of the two historic mainstream parties.

Meanwhile, the Tories and New Labour try to have their cake and eat it in keeping together their uneasy coalitions of pro- and anti-Europeans. A referendum could lance the boil but it would also expose the contradictions within the ‘moderate’ mainstream parties.

Rising Dissent From Below

Much of the debate centres on the four leading parties because the First Past The Post electoral system means that a leading party might command a majority in the House (and so control of the State) with a minority of the actual vote, let alone a minority of those able to vote.

This raises disturbing questions of legitimacy and even of right of popular resistance in due course, as well as the level of bitterness amongst the losers. FPTP is going to be under great strain if a political culture with multiple parties, each with real backing in the country, is really emerging.

This becomes more critical as a third level of party claims serious support for certain types of community yet cannot get full representation because it is too thinly spread.

This was the historic problem with the Liberal Democrats who were constrained in any radical resistance to the system by their absolute commitment to Parliamentarianism.

The two main contenders for this status now, the Greens and BNP, have a different view of the primacy of Parliament and they have ‘fundi’ wings quite prepared for direct action.

We have not mentioned the nationalists only because they are localized - but they are important. They offer a challenge that is centrifugal, constantly threatening to break up the Union.

Yet the new parties (there is a category of ‘others’ which is a breeding ground for yet further challenges) could undermine the historic liberal democratic consensus in Parliament through action outside it if they become more and more frustrated at lack of progress in their areas of policy concern.

This challenge is also highly regionalised. If the petty nationalist parties have their base in localities so do the mainstream challengers, but the most interesting assessment is where the second level parties are dominant and where the BNP, Greens and ‘Others’ have a voice.

The Tories now lead in every part of the country except the North East (where Labour still leads and the Tories follow), Scotland and Northern Ireland (which is sui generis). The SNP’s leading role in Scotland bodes ill for the Union.

But at the second level, Labour still leads the second place position in London, the East Midlands (only just), the North West, Yorkshire and Humber, Wales and Scotland. UKIP leads in the South East, the South West, the East of England and the West Midlands.

In other words, excepting the country’s global city, Southern Britain has moved sharply towards neo-nationalism while Northern Britain and the Celtic fringe remain Labour’s to win back. The Liberal Democrats seem not to be relevant to the struggle for second place in this analysis.

Where Third Level Dissent Lives

Clearly, there is some tension between the Tories' desire to be a national party and its need to manage Southern English euroscepticism while Labour re-builds its still strong Northern and Celtic base to return in force later. The trouble for Labour is that most of the people live south of the River Trent.

A decisive resolution of the West Lothian Question under a Tory Government could see English domestic legislation fall entirely into the hands of the centre-right for a generation, forcing Labour into moderate euroscepticism to survive South of the border.

This leaves the third level dissidents. The Greens are dominant at this level in London, the South East, South West, the East of England, Wales (but only just) and Scotland. The BNP is dominant in the East & West Midlands, North West, Yorkshire & Humber, North East.

In other words, we see here exactly the same basic divide between the political culture that was once fully dominated by the Labour Party and the one that was once fully dominated by the Tory Party.

In the traditional Labour world of England and Wales, the Conservatives are now back in force (at least outside the North East) but only (in part) because the BNP and others have undermined New Labour.

On the other hand, in the traditionally conservative South, the Tories are increasingly challenged not by Labour but by UKIP. Successful organised dissent to the rise of the Right is coming mostly from the environmentalist Left as a Green challenge that is chipping away at the mainstream centre-left.

This suggests that New Labour is losing in multiple directions, against centrifugal tendencies in Scotland, against a resurgence of one nation Toryism, because of anger about the condition of the white working class and because of anger over foreign policy and the increasing integration of the country into the EU.

But, as we shall see, the obsession with economic growth at all costs in the past has also created more focused popular anxieties over migration and the degradation of the environment.

This is a perfect storm for New Labour because we have not mentioned the low turnout. The vast mass of the population were not engaged to vote at all. They were indifferent or apathetic and even declined not to protest at what they appear to have seen as an unresponsive political system out for itself.

Economic anxiety does not appear to have triggered a positive vote but rather a negative attitude to a political class that is increasingly seen as not competent to deal with crisis conditions, indeed almost as an irrelevance.

Policy Implications

The fundamentals of popular disenchantment run deep. They extend far beyond single issue concerns.

We can boil down the apathy and the dissident votes, the failure to endorse Conservatism in a ringing fashion and the confusion over whether current government, liberal or neo-nationalist solutions are best for the country into two broad themes:

• the unresponsiveness of the current political system to the people
• anxiety and anger over the felt effects of neo-liberal economics.

New Labour is unlikely to be able to recover ground until it deals decisively with these two issues. It only has a year of power to do so.

Its current approach to the reform of the political system appears to be little more than tinkering with Parliament and an espousal of the sort of liberal constitutionalism much loved by armchair intellectuals who read the Guardian. This misses the real point of public anger.

Apart from the West Lothian Question which is an irritant, the public generally do not want a European super-state and they want to be involved in local decisions. They do not want a transmission belt State telling them how to live their lives. A written constitution is utterly irrelevant to this.

New Labour has still not understood the point. It is probable that Gordon Brown is psychologically incapable of doing so. The Tories have picked up on these messages and are likely to respond positively in the coming year, severely weakened though they are by their own image of financial rapaciousness.

It is the second issue, the effects of neo-liberalism, that is more problematic. The dissent against the system is still relatively small but it is clearly growing. Behind the BNP and Greens is a political free market under the rubric of ‘Others’.

‘Others’ received more votes in London, East of England, North West and South West than either the Greens or the BNP and they were competitive as a group virtually everywhere else. A combined dissent vote would have made a fifth party at second rank in its own right.

This dissent comes down to anxiety at two primary results of radical New Labour approaches to economic growth that have shunted aside ‘sustainability’ – migration and environmental degradation.

This is not the time to go into these two issues in detail but suffice it to say that many people who are concerned about migration and environmental degradation did not make the leap to vote for the BNP or the Greens but they are still engaged in these issues and they want action.

Sweep away the personality politics that obsesses the Westminster Village and you have a very serious policy crisis for the Government.

The voters are saying that top-down rule by ‘experts’ without an observable connection with locality and a failure to manage the costs of growth are just not acceptable.

They are saying that this Government must be replaced by one that can deal with these issues if it cannot prove its ability to handle the consequences of its own policies. Now that’s a tough call for New Labour.

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