Chris Dillow's Blog

The crisis of UK democracy

Conventional UK politics is in crisis. By this I don't mean merely that things are bad. I mean that destabilizing forces have strengthened and stabilizing ones have weakened.

To see what I mean, think about financial markets. When these are stable, it's because they are dominated by negative feedback processes. If an asset price falls, "buy on dip"traders and value investors buy it, thus helping to stabilize prices. During crises, however, the opposite occurs: there's positive feedback, whereby falls in prices beget further falls. This can happen because information cascades cause people to sell because others are doing so; during the tech crash of 2000-01 Amazon's price fell by over 90%, as much as that of stocks that subsequently became worthless. Or it can happen because falling prices trigger margin calls which cause investors to avoid illiquid assets, depressing their prices even more, and to sell anything regardless of quality merely to raise money; this was part of the story of the 2008 crisis. Or it can be simply that falling prices lead people to sell to cut exposure to what they see as risky assets. This is what happened with portfolio insurance strategies (pdf) in the 1987 crash and with the liability-driven insurance strategies in the gilt market in the autumn of 2022.

Although the details of these crises differ, they share an essential feature: positive feedback mechanisms become more powerful, thus generating instability. We might define a financial crisis as one in which positive feedback mechanisms are strong, relative to stabilizing negative feedback ones.

There's an analogy here with politics. It used to be thought that the dominant character in electoral politics was the "median voter" who occupied the "centre ground". Any party that strayed too far from this median would thus lose out to the one that could capture that "centre ground". And so there was negative feedback, whereby deviations from the centre ground would eventually be corrected.

We've seen such stabilizing negative feedback only recently. Both Truss and Corbyn were victims of it.

But I suspect that such stabilizing processes have become weaker, and the destabilizing processes have become more powerful.

Take, for example, Brexit. The median voter now opposes this: a recent Yougov poll found that only 31% say UK was right to leave EU. The conventional theory says that the parties should therefore be moving towards this centre ground. But Tories and Reform are not, and Labour's movement is inadequate.

Or take economic growth. One might imagine that 20 years of near-stagnation would provoke intense debate about how to change policy to boost growth. But it hasn't. The Tories stopped thinking about economics years ago, and Labour's ideas stop at anything that might challenge the interests of rentiers or incumbent companies. Instead, what's happened is exactly what Ben Friedman described in 2006: stagnation has bred intolerance and racism. Instead of seeing negative feedback, whereby stagnation leads to policies to improve growth, we have positive feedback: stagnation leads to a retreat from serious thinking into culture war BS.

Which contributes to another area where negative feedback is weak - immigration. Net immigration almost halved last year. You might imagine, therefore, that those who were worried by it in 2022-23 would be less concerned now. They aren't. Quite the opposite. The right is merely demanding even bigger drops in migration. Cutting immigration isn't enough for them.

Which might explain why the "problem" of small boats hasn't been solved. Logically, the answers should be simple: process asylum claims efficiently and permit asylum seekers to work whilst their claims are being processed. But this hasn't happened. Instead the government prefers to make facile gestures to appease the right. Negative feedback would consist of: public concern - policy response - falling migration - public satisfaction. This mechanism is broken.

It's not just stagnation-induced intolerance that explains this breakdown. Another factor is simple ignorance. Most voters wrongly believe that net immigration rose last year. And Yougov have found that almost half of voters think there are more migrants staying in the UK illegally rather than legally - a portion that rises to almost three-quarters amongst those wanting large numbers of migrants to leave. But the truth is that less than 10% of immigrants are here illegally.

Now, in a stable political culture, we'd get negative feedback; mistaken perceptions would be corrected. But this isn't happening.

Of course, one wouldn't expect the right-wing media to inform people correctly. But the BBC doesn't do so either. Since Brexit (and possibly before) it has often preferred to report controversies as merely "he said, she said" without asking who is right. Former assistant political editor Norman Smith said in 2016:

There is an instinctive bias within the BBC towards impartiality to the exclusion sometimes of making judgment calls that we can and should make. We are very very cautious about saying something is factually wrong and I think as an organization we could be more muscular about it.

Since then, the problem has got worse. Patrick Howse says its idea of impartiality (rather than the pursuit of truth is "fundamentally dishonest and logically absurd", adding: "if you give equal weight to lies and the truth, you take the side of the lie."

One reason for this is that the corporation's commitment to public service is undermined by a commercial mentality which leads it to appeal to consumers. Adam Bienkov reports that it has "drawn up plans to win over voters of Reform UK". Hence its abject apology to Jenrick when a Thought for the Day contributor called him a xenophobe. Hence too it allowing the right to set the agenda, reporting much on migration to the detriment of issues such as inequality, economic stagnation and underfunded public services.

The problem is, though, that chasing customers isn't always consistent with telling the truth.

What it is consistent with is dumbing down and coarsening public debate. Let's take another example. Back in 2008, David Cameron claimed that the Labour government "has maxed out our nation���s credit card." This was gibberish at the time and seems even more so now that government debt has tripled since then. If negative feedback mechanisms were working, people would have driven this idiotic trope out of the discourse, pursued by derision and scorn. But they didn't. Instead, Laura Kuenssberg repeated it and Sir Keir Starmer, believing it a good attack line, turned it onto the Tory government. And so we have another positive feedback mechanism; moronic gibberish gets perpetuated and spreads. And this isn't merely a problem of rhetoric. Ignorance of concepts such as opportunity cost, comparative advantage, transactions cost economics and regulatory capture are all contributing to rank bad policy-making.

It's not just the media that has replaced stabilizing negative feedback with positive feedback, though. So too have politicians.

When Enoch Powell delivered his "rivers of blood" speech in 1968 Ted Heath sacked him days later. Compare that with Badenoch permitting Jenrick to remain in office despite associating with neo-nazis.

It's not just the Tories that aren't holding the line against the far-right. Nor is Labour. As Antonia Bance said:

Myth-busting doesn't work, so no, I am not going to waste my time correcting misconceptions and arguing with my constituents.

The government takes a similar view. One of Starmer's spokespeople has said that protestors outside asylum "hotels" are ���right to protest��� in order to express their ���legitimate concerns��� about migration - sentiments not extended to protestors against genocide.

The problem with this is not only that it is morally obnoxious. It's that it doesn't work as electoral strategy. Labour's support is falling as it leaches more voters to the LibDems or Greens than to Reform. As Anand Menon says:

You don���t fight Reform UK by making its strongest issue the national priority. Nor, as countless political-science research projects have illustrated, do you effectively combat the radical right by accommodating them.

In our FPTP electoral system, this risks letting in a Reform government. And so the negative feedback we saw under Heath - whereby politics was stabilized against the spread of racism - has been replaced by a positive feedback mechanism, whereby mainstream politicians legitimate fascism. [image error]

Of course, you'd expect Ted Heath to be to the left of today's political-media culture. But so too was Thatcher. One of her defining ideas was a reverence for the rule of law. "For justice to prevail the most basic requirement is the rule of law" she said. "The rule of law must prevail over the rule of the mob." Her epigones do not share these sentiments. Whilst Jenrick has been supporting mobs of racists, the press has been lionizing a woman guilty of inciting racial hatred. Again, Thatcher was a source of negative feedback, wanting to uphold the law against detabilizing forces, whereas today's right is a destabilizing force.

All I'm doing here is spelling out a few mechanisms in support of David Allen Green's recent attack on the complacent idea that "unpleasant situations will resolve themselves" and that balance will be restored. For this to happen, there must be negative, stabilizing, feedback mechanisms. But our political-media class has weakened these, preferring to pander to racism.

I'm not surprised that so many in this class choose barbarism over socialism. What is surprising is that they choose barbarism even over liberal democracy.

Achieving political change

Can MPs be bribed? This question is central to whether the left should change its tactics.

I say this for the simple reason that demonstrations and marches just don't work. Protestors have been on the streets for weeks campaigning against the genocide in Gaza. And they've had as much influence upon government as climate change protestors, campaigners for a second EU referendum, or protestors against the 2003 Iraq war. Just because you are right doesn't mean you're effective.

Which isn't to say such tactics are wholly useless. Protests can at least draw public attention to an issue, and more extreme protestors such as Extinction Rebellion can help legitimate more moderate ones by shifting the Overton window - the so-called radical flank effect. They also show that we are not a free country - though the benefit of this is mitigated by the fact that few people actually care about freedom.

And of course, not everything needs to done for instrumental reasons. As Robert Nozick pointed out in The Nature of Rationality, there are some things we do - even costly ones - to symbolize who we are*. This, however, runs into the objection made by Richard Sennett in The Fall of Public Man: political action does not have to consist in the revelation of individual personality, especially if this occurs to the neglect of the mobilization of power and interests.

Perhaps because of that neglect, the efficacy of protests is limited. [image error]

By contrast, many people have achieved their aims through other methods. Water companies didn't go on marches demanding the right to pollute seas and rivers; private equity companies didn't demonstrate for the right to rip off tax-payers; oil companies didn't march for the right to burn the planet; and bankers haven't been marching for deregulation. But here we are.

Hence the question: should the left adopt the tactics that do actually work, rather than believe instinctively that the response to any grievance, however legitimate, must be street protest?

By these tactics I am not of course referring to rational persuasion; no serious person believes this has much direct influence. Instead, I mean behind the scenes "lobbying"?

The thing about this is that the sums involved are small. Peter Geoghegan reports that a payment of just ��5000 to David Lammy won a donor a ��20,000 a year part-time job with him, plus the chance to catch his ear. Declassified claim that pro-Israel lobbyists have donated over ��300,000 to Labour ministers. And the Good Law Project estimates that Wes Streeting has been getting almost ��10,000 a month from private health companies.

The left should be able to easily beat this. Organizers claim that the last six anti-Gazan war demos have all had over 100,000 participants. If these had instead chipped in ��10 a time (in many cases less than they spent on the bus fare to Westminster) it would have raised over ��6m. That swamps the size of any "Israel lobby".

The same's strue of other issues. There should be more than 1000 opponents of subcontracting in the NHS able to chip in more than ��10 a month to buy Streeting's favour.

In principle, then, the left should be able to simply outbid its opponents. Which poses the question: why doesn't it?

It used to: in the 20th century trades unions funded MPs. Their decline, however, means that other actors have acquired a dominant position in the market.

The obvious reason why the left doesn't challenge this monopoly is that it they simply believe it is wrong to bribe MPs.

This, however, raises an old question in moral philosophy: how to behave when others act wrongly? In that famous thought experiment (pdf), if a murderer asks you where his potential victim is hiding, are you obliged to tell the truth? Many would say no. Similarly whilst it is usually wrong to kill, many think it permissible to do so in self-defence: pacifists don't get justice. By the same token, although MPs would not take bribes in a first-best world, in our fallen world it might be better for us to bribe them too, to level the playing field**.

Yes, strict Kantians should think it wrong to bribe MPs even when others are doing so. But I'm not sure how many people could hold this view consistently with their other principles, such as, say, support for Ukraine.

Another objection to us bribing MPs is that it's only cheap to buy MPs now because it's a buyers' market. If we were all to do so, we'd start a bidding war, an arms race.

Again, I don't think is objection is decisive. For one thing, if MPs were better remunerated their quality might - eventually - improve. And for another, to the extent that the rich are more likely to win a bidding war they are also more likely to suffer a winner's curse as they over-pay for favours. Which is a form of wealth redistribution.

A better objection might be that lobbyists aren't in fact bribing MPs so much as rewarding them for doing what they otherwise would. Granted, Humbert Wolfe's ditty about journalists applies to MPs:

You cannot hope to bribe or twist,
thank God! the British journalist.
But, seeing what the man will do
unbribed, there's no occasion to.

Why are MPs like this? Perhaps, for many of them, the money isn't the thing. Adam Smith famously wrote:

The great mob of mankind are the admirers and worshippers, and, what may seem more extraordinary, most frequently the disinterested admirers and worshippers, of wealth and greatness.

MPs, I suspect, are part of this mob. One of the things that differentiates them from us is ambition - not merely or even mainly for money, but for glamour and status. And hobnobbing with CEOs and billionaires' lackeys offers this to a much greater extent than would doing so with the representatives of people who think that, on balance, genocide might not be very nice. Money changes hands only so that the rich can show proof of funds.

If this is the case, then collective bribes to MPs would be no more effective than demonstrations and protests.
Worse still, it suggests that the obvious answer - to take money out of politics by having much tougher rules against lobbying and on whom MPs can meet - might not be terribly effective, because MPs would defer to the rich and powerful anyway, being the disinterested admirers and worshippers, of wealth and power.

Which brings me (finally!) to the point. Too many people think of politics through the question "what would I do if I were in charge?" when in fact the question should be: "how do we acquire power?" And let's face it, it's not obvious that the left has good answers to this question.

* Yes, there is a nice irony in citing Nozick to defend left-wing protestors.

** There's an analogy here with the economic theory of the second-best; price controls might be inefficient in an optimal economy, but they can actually increase efficiency when there is monopoly power. The right thing to do in an imperfect world isn't the same as the right thing in a perfect one.

The political communication problem

Sir Keir Starmer thinks the government has a communications problem. He's right, but not in the way he thinks.

James Austin summarized succinctly what many believe Starmer's problem to be:

There simply isn't a 'good' way to get a message out now; traditional platforms have diminished and have been replaced by a incredibly uncontrolled and fragmented system. That makes it very hard to get central messaging out.

The PM has made two responses to this. On the one hand, he has invited "influencers" into Downing Street in the hope of reaching voters who don't consumer legacy media. But on the other he's retreated into the 1980s by hiring a former Sun editor as communications advisor.

What this misses is that the decline of legacy media isn't a problem for Labour at all.

For one thing, not only are people not reading about Starmer in the legacy media, they're not reading about Badenoch or Farage either. Which is a blessing for Labour as it means people are less exposed to one form of right-wing propaganda. The fact that they're less inclined to read newspapers is very likely one reason why younger voters are less reactionary than older ones.

And for another, the government has a potentially much more powerful weapon than communications - reality. If it can improve living standards and public services as people experience them for themselves then it has a good chance of re-election and if it doesn't it hasn't. Think of "comms" and lived experience as being like a woman taking a dog for a walk. At any single point in time the two might diverge, but ultimately they end up in the same place: "comms" cannot gaslight that many people for a long time. Governments didn't lose power in 1979, 1997, 2010 and 2024 because they got the comms wrong, but because they got policy wrong.

You might think this claim is contradicted by a big fact - that voters are in fact horribly ignorant. Barely half, for example, have heard of Liz Kendall despite her being at the centre of one of the government's most controversial policies. Over one-fifth think MPs' expenses and spending on migrants' benefits are among the three largest items of public spending when in fact they are only a minuscule percentage. Only 15% were within an order of magnitude when asked how much is total government spending, with more over-estimating it by a factor of ten than getting the answer right. 47% believe immigration to the UK is primarily illegal rather than legal, whereas the Home Office estimate that only 4% is illegal. David Leiser and Zeev Kril have shown that people are "remarkably poor" at thinking about complex emergent systems, which is what societies are. And Ipsos and Bobby Duffy have shown for years that voters are systematically hugely wrong about many social facts; they over-estimate the number of immigrants and Muslims and crime rates and under-estimate the extent of sexual harassment for example.

There's nothing new in all this. In Austerity Britain, David Kynaston notes that most voters in 1950 paid little attention to the election campaign, and that in Greenwich (for example) barely a quarter of them could name their local MP. Political scientists have for years pointed to people's lack of knowledge of politics; the phrase "rational ignorance" was coined way back in 1957.

For me, though, this is another reason for the government not to worry about its comms "cutting through". Asking voters to think about abstract claims about the big picture means wrestling a pig in a sty of ignorance and stupidity. Much better to get policy right and then ask them to trust their lived experience. The demise of newspaper propaganda should make this easier.

All this is, however, only half the story. Political communication is not merely a matter of the government speaking to the people. It's also about the people speaking to the government. And legacy media has hindered this communication in recent years. The biggest political events of recent years have come as a surprise to much of the political class: Brexit; the rise of Corbyn (a phenomenon more easily understood by a glance in an estate agent's window than by reading any newspaper); and the collapse of the Tories: remember when Boris Johnson squatted "like a giant toad across British politics" and was destined to be PM for a decade?

Legacy media, with its groupthink, professional deformation and ignorance of social science has done an awful job of telling politicians about reality. Organizations that employ Allison Pearson and Melanie Phillips probably aren't in the reality and rationality business at all.

Its decline could therefore better help the government see ground truth and lived experience. One problem with politics has been that the conditions have not been in place for the wisdom of crowds to hold: the mass media reduces diversity, devalues localized knowledge and increases the correlation across opinions. A more fragmented media could in theory reduce these distortions. [image error]

Social media gets a bad rap. This isn't merely because - like most things - there are a lot of idiots on it. It's also because journos rightly feel threatened by it, and because one part of politicians' professional deformation is their preference for hierarchy and aversion to complexity. The truth, of course, is that, properly used, it can greatly enrich our understanding of the world. It has introduced me to people such as Dan Davies, Giles Wilkes, Phil Burton-Cartledge and Sam Freedman among many others, any of whom teaches me more than any newspaper writer has.

"Properly used" is of course the correct phrase. Using social media as a guide to ground truth requires critical thinking, and not merely in the ability to distinguish clever people from idiots - a capacity which the Almighty has not conferred upon the producers of BBC current affairs programmes.

For one thing, it requires an ability to pick out information from noise. Edmund Burke said:

Because half a dozen grasshoppers under a fern make the field ring with their importunate chink, whilst thousands of great cattle, reposed beneath the shadow of the British oak, chew the cud and are silent, pray do not imagine that those who make the noise are the only inhabitants of the field.

Noise-makers might be fanatics and hobbyists rather than those with genuine grievances. Indeed, the latter are likely to be quiet either because they're too busy trying to keep their heads above water, because they've resigned themselves to their fate. Amartya Sen was surely right:

Deprived people tend to come to terms with their deprivation because of the sheer necessity of survival, and they may, as a result, lack the courage to demand any radical change, and may even adjust their desires and expectations to what they unambitiously see as feasible (Development as Freedom, p62-63).

An awareness of correlation neglect is important here. If a lot of people are saying the same thing, is it because they've independently seen a big truth, or is it because they are echoing each other? We know from financial markets that asset prices can become untethered from reality as traders get carried away by information cascades: why shouldn't something similar happen in politics?

Even if people are saying things that conflict with the facts, however, it doesn't follow that we should ignore them. Take Andrew Tate for example. There's nothing he can teach us about how to treat women. But we should ask: why is he so popular? What is it about the lives of young men that attract them to Tate's message? Here, we must avoid simple moralizing on both sides; condemning Tate is not enough, but nor must we assume that those young men attracted to misogyny have "legitimate concerns". Instead, we must realize that beliefs are the (often distorted) expression of socioeconomic conditions and try to discover what these conditions are.

My point here should be an obvious one - but then, political discourse is so debased that the obvious often needs saying. It's that the truth about the world is not fully captured by posh people talking to each other; just as it can be found in music, literature and anecdote so too can it be seen in social media. This evidence, though, must interpreted critically. Media studies is a useful discipline.

Stagnation - get used to it

The debate about how to raise UK economic growth begs a question: is rapid growth possible even with the best feasible policies?

My chart shows growth in real GDP per head over 30-year periods since 1750. Trend growth of much above 1% per year is unusual, seen mostly only in the post-1945 period. From a long-run perspective, therefore, the stagnation of recent years are a reversion to the norm.

Why was the post-1945 period so unusual? [image error]

On one view, it was because WWII created a large backlog of civilian investment opportunities as well as a need to repair war-damaged assets, not least of them housing. This implies that growth in that period was indeed one-off, something that cannot be repeated.

On another view, though, it was because post-war insitutions facilitated growth. The credible promise to maintain full employment gave companies the confidence to invest because they knew that demand would be strong enough to justify it. Public ownership and high income tax rates reduced incentives and opportunties for rent-seeking. And strong unions and rising wages incentivized companies to invest in labour-saving technologies and productivity improvements.

Personally, I find this debate of historical rather than practical interest. The political obstacles to recreating post-war institutions are now so huge that doing so is a mere fantasy.

It's not just social democracy that faces strong opposition, though. So too do centrist attempts to raise growth. Incumbent companies and monopolists don't want increased competition; lawyers and accountants don't want tax simplification; landlords and financiers don't want taxes to shift from incomes to capital or land; Brexiteers don't want us to rejoin the single market; and nimbys don't want laxer planning controls. For that matter, many voters and workers also don't want the disruption and uncertainty that must accompany creative destruction. A stagnant economy in which zombie firms preserve jobs and in which we face less threat from foreign competition or new technology is perfectly tolerable for many; they spent the 2010s consistently voting for it.

Not that there's anything unusual in such opposition. Joel Mokyr has written (pdf):

Technological progress in a given society is by and large a temporary and vulnerable process, with many powerful enemies whose vested interest in the status quo or aversion to change of any kind continuously threaten it. The net result is that changes in technology, the mainspring of economic progress, have been rare and that stasis or change at very slow rates has been the rule rather than the exception.

Barriers to rapid growth, however, are not only political. There are also economic ones.

Often in thinking of long-term growth it helps to distinguish between the level of potential output and the speed at which an economy approaches it. There are barriers to both.

One is simply that even big investments yield only moderate increases in output. Conventional production functions put the elasticity of output with respect to capital at around 0.3, meaning a 10% rise in the capital stock yields a 3% rise in potential output. With the ONS estimating that the UK's net capital stock excluding housing is ��3.5 trillion (yes, I know), this implies we need ��350bn of extra investment to get just a 3% rise in potential GDP. To get that in a year requires more than doubling business investment*.

Why do we get so little bang from our buck from investment? One answer is at the end of my road. The canal there has been unused since the 1840s when traffic switched to the newly opened railway. Which is how investment works: it renders earlier projects useless. When Lidl invests in a new store it reduces Tesco's sales; Amazon's expansion has cut the sales of bricks and mortar retailers; investment in wind turbines is meant to displace gas-fired power stations. And so on. Investment doesn't add much to output but rather shifts production from one capital to another.

This is not the only reason, though. The railways and internet were both huge transformative technologies. Both, however, fuelled investments in projects that simply failed. Lots of new capital; not so much extra output. And of course, it's not just shiny new technologies that have this problem. Any high street sees shops open and close within a few months.

A lot of capital spending is wasted. This is partly because investment is driven by sentiment rather than a rational view of a project's prospects. It's because the future is unknowable. The "dark forces of time and ignorance" mean that some investments will always fail.

Even potentially productive investments, however, don't yield big immediate rises in aggregate output. 19th century factories tell us one reason why. For years, electrification of these did little to raise productivity. Until someone realized that electricity meant that machines didn't have to be clustered close to a driveshaft but could instead be arranged linearly - which allowed for more efficient workflow and the development of the production line. To be really useful, technological change often requires organizational change. And that can take many years.

Simple maths tells us another reason. New dynamic industries are small. Even if they grow very quickly, therefore, they'll add little to overall GDP. If an industry accounts for 1% of GDP and trebles in size over ten years it will add only 0.2 percentage points per year to GDP growth. This is one reason why the early years of the industrial revolution did not greatly raise GDP; there just weren't that many steam engines.

There's another reason for that low growth, though. The UK saw financial crises in 1772, 1796, 1810, 1815, 1825, 1837, 1847, 1857, 1866 and 1890. Such panics retarded capital spending by creating uncertainty and restricting credit. It's no accident that the period of history to have seen the fastest growth - the 1940s to early 70s - was also one which did not see a crisis.

Crises, though, aren't the only reason for low investment. Another is that, except in periods of irrational exuberance, companies hold back on capital spending either in the hope of benefitting from future better, cheaper technology or from fear that if they invest today their rivals will use those technologies to undercut them. William Nordhaus famously showed that producers capture "only a minuscule fraction of the social returns from technological advances". That companies have now learned this is, I suspect, one reason for our recent low growth.

There's a further problem. At times of near-full employment, extra production of capital goods requires extra workers - workers who must move from other industries. But people are slow to move. As Abhijit Banerjee and Esther Duflo say in Good Economics for Hard Times, economies are "sticky." Most people prefer to stay in jobs they know; employers prefer relevant experience; it takes time for people to discover opportunities in different industries; to decide to make a radical career change; and to retrain. All of which delays the movement necessary for growth.

It doesn't just retard investment, however. It also slows down productivity growth.

To see the problem here, consider how much your personal productivity has risen in the last few years? I don't mean in the sense of being able to do the job more comfortably with less stress, but in the sense of doing more or the same in fewer paid hours. If you've been in your job for more than say ten years, the answer is: not much. Ater a while, the productivity gains from learning are small. We've two pieces of evidence for this. One comes from the effect of experience and tenure upon wages; this is generally small (pdf) for older people staying in the same job. The other comes from Jonathan Haskell and colleagues, who have shown that most productivity (pdf) gains don't come from companies simply upping their game.

Instead, they come from inefficient places shutting and more efficient ones opening or expanding - creative destruction. But sticky economies and low labour mobility retard this process too.

We shouldn't expect AI to change any of this. If it is anything like every other technical innovation in history it will destroy some jobs and create others (and if it doesn't, that'll be a failure of policy). But this requires labour mobility, which is slow. It might also, as with electricity in factories, require organizational changes of a sort we cannot now foresee. Companies will be slow to make these.

And there's a downside to AI: it can increase the efficiency not just of productive workers but also of the enemies of genuine productivity. It will enable nimbys and their lawyers to write more letters to planning committees; it'll allow patent trolls to become even more litigious; and in facilitating more cybercrime it'll divert even more of our brightest people away from production towards cyber security. And even if it does raise productivity in the short-term, it could cut it in the longer-term. In writing essays for students, AI is depriving people of useful future skills. And in replacing some graduate trainees AI raises productivity today, but where will the experienced accountants and lawyers come from in 20 years' time?**

As if all this were not enough, there's one other problem. Every significant classical economist - Smith, Ricardo, Mill, Marx - thought that even the meagre (capitalist) growth of their time would eventually cease as diminishing returns won the race against technical progress. They would not be surprised that we are now talking about stagnation; what would surprise them is just that it's taken so long.

The problem here is not simply that returns on capital have fallen, thereby diminishing the motive and means for investment - though this does seem to have happened. It's also that we've plucked the long-hanging fruit, the easiest ideas. As Robert Gordon pointed out, the really great, life-changing innovations are long behind us. And the efficiency of R&D spending is declining around the world.

Now, none of this is to say we shouldn't try to increase productivity. We certainly should, but it's unlikely that small efforts will triumph in the face of big obstables; a big wall needs a big sledgehammer. It'd nice to have a government that at least tried to prove me wrong. Nor, of course, is it to deny the possibility of a short-term cyclical upswing.

What it does mean is that we must think about a plan B: what if we cannot grow our way out of the fiscal corner described so well by Giles?

This is a dispiriting thought. John Stuart Mill thought that the stationary state would be "a very considerable improvement on our present condition" which would give us "as much scope as ever for all kinds of mental culture, and moral and social progress". Recent experience, however, suggests he was wrong; low growth breeds not social progress but its opposite - intolerance and racism. Which poses the question: how might we avoid stagnation having this effect?

* Perhaps a lot more. Much of this investment is replacing worn-out assets rather than pure additions to the capital stock.

** My concern here is mitigated by the fact that a lot of what these people do is not to increase aggregate output but to cream off rents.

Some leftist economic policies

The prospect of a new leftist party poses the question: what should its economic policies be?

I'll tell you what they shouldn't be: fiscal expansion. The macroeconomic policy stance must be a matter of fact, not ideology. And the fact is that we are close to the point at which increased aggregate demand would add to inflation expectations. That would mean higher interest rates, which in turn would depress much-needed housebuilding and other forms of capital spending. Rachel Reeves might be wrong to talk about fiscal rules but she is dead right to want fiscal restraint.

Here, every leftist is screaming: "we can have fiscal restraint and greater equality: tax the rich!"

As macroeconomic policy, however, this is questionable. [image error]

Remember the core truth of modern monetary theory - that the government does not need taxes to raise money; it can just print the stuff. Instead, the government needs taxes to reduce inflation. But taxing the mega-rich will only do this if it causes them to reduce their consumer spending or their contributions to Oxbridge college building. If instead they reduce their savings and their planned bequests there'll be no reduction in inflationary pressures.

To put this another way, the government needs more real resources: more care workers, nurses, solar panel installers and so on. These cannot come from the dole queues: they're not long enough for that. Instead, they must come from existing workers changing jobs. And this requires cuts in either private or public spending. Taxing the mega-rich isn't guaranteed to achieve this to a great extent - and it's surely unlikely that ��1 of extra tax revenue will mean anything near ��1 less spending.

This isn't to say we shouldn't tax the rich more. FAFO, especially as macroeconomic policy isnt everything: justice also matters.

What it does mean, though, is that leftist economic policy must be much more than taxing the rich. Here are a few possibilities.

"Don't do stupid shit." Barack Obama's motto for foreign policy should also apply to UK economic policy. It requires that we not strangle business with post-Brexit red tape and instead rejoin the single market. It means we shouldn't cripple some of our most successful export earners by limiting student visas or taxing them. It also means we shouldn't allow nimbys to stifle the night-time economy or block construction projects. And it means there's little case for higher military spending: in a resource-constrained economy, there are better uses for government money than boosting BAe Systems share price.

Economic democracy. It's no accident that our two decades of economic stagnation have coincided with high inequality, because there are many ways in which inequality - perhaps more of power than of incomes - depress productivity. As As Joe Guinan and Martin O���Neill say:

The institutional arrangements at the heart of today���s British capitalism...together form a powerful engine for the extraction of value and its distribution upwards. It is this basic institutional design that drives the outcomes we are seeing in terms of crumbling public infrastructure, social atomisation, environmental degradation, and a widespread sense of popular disempowerment.

Economic democracy is a way of fighting this. The precise form it will take will vary from organization to organization, but will probably include democratic oversight of industry regulators and more user say in public services. Also important will be worker cooperatives because as Virginie P��rotin says:

Worker cooperatives are more productive than conventional businesses, with staff working ���better and smarter��� and production organised more efficiently.

Reform outsourcing. In some cases - such as children's homes, fostering services and adult social care and probation services - this has delivered bad performance. The alternative here isn't simply to bring all services in-house. One possibility would be to ditch the ideology behind outsourcing and rely on proper transactions cost economics, which tells us that when performance is hard to measure, direct oversight beats contracting. Another possibility is to use government and local authority procurement as a means of promoting coops.

Ameliorate the misallocation of labour. Any leftist government needs to increase jobs in public services, housebuilding and in greening the economy. But where will the workers come from?

The macroeconomic answer is to raise taxes, thus destroying jobs supplying consumer goods and services, compelling workers to move elsewhere. What this fails to address, however, is that market and government failure have created lots of wasteful labour. An excessively complicated tax system has bloated the legal and accountancy industries. Inadequate financial regulation and tax breaks have inflated a sector parts of which are "socially useless", to use Adair Turner's (pdf) phrase. Agency failures have created "bullshit jobs" and guard labour. Asymmetric information gives us fund managers ���the vast majority��� of whom are ���genuinely unskilled���. And unpriced externalities support jobs which produce not just environmental pollution but also intellectual and risk pollution.

How to shrink these industries is a question almost entirely ignored by mainstream politics. It shouldn't be.

Tax reform and simplification. A radical option here is to increase taxes on land (pdf), perhaps by replacing council tax and business rates with a land value tax; billionaires might be able to leave the country, but they can't take Essex with them. Other possibilities would be to equalize income and capital gains tax rates; unify income tax and national insurance contributions; or remove the interest deduction for corporation tax. And this is not to mention countless lower-revenue options that would cut red tape. The Mirrlees Review would be a good basis for starting to think about tax reform.

Stronger competition policy. Competition drives productivity; most efficiency gains come not from incumbent companies upping their game but from inefficient firms leaving (pdf) industries and newer ones entering. Government must facilitate this process by suppressing monopolies and encouraging new entrants. This requires more than aggressive competition policy. It might need a state investment bank to help finance start-ups. And it might also require a relaxation of intellectual property protections. Tech companies have already unilaterally abolished such protections, so they can hardly complain if a government were to give them their own medicine.

A maximum wage. This is often advocated on the principle of reducing inequality. But it might also create better incentives. If it is set as a multiple of an organization's lowest or median wage, it would incentivize bosses to increase these, thus sharpening incentives to raise productivity rather than merely increase exploitation. It might also, at the margin, disincentivize bonus culture (pdf) or office politics and so facilitate motivation crowding-in, whereby professional pride displaces chasing every pound. And if it applies to only some organizations, such as those in receipt of government money or companies in which bosses have only small ownership stakes, it would encourage business start-ups. It would tell bosses: "if you want big money, you've got to be an entrepreneur not a bureaucrat."

Reform utilities. An obvious possibility here is simply nationalization. Another would be to follow Dieter Helm's suggestion and replace them with a franchise model. A third would be to stop utilities buying regulators by placing them under more democratic control.

A sovereign wealth fund. In their excellent Angrynomics, Mark Blyth and Eric Lonergan advocate this as, in effect, a trust fund for the worst-off from which young people in the future can draw to buy housing or education. Another case for one lies in macroeconomic stabilization; to the extent that sterling tends to fall in recessions, the value of the wealth fund's overseas assets would tend to rise, which could be used to support economic activity in a downturn. Yet another purpose was suggested by Aneurin Bevan: public ownership of corporate assets gives a flow of dividends which could be used to fund public services.

Benefit reform. Yes, we should consider a universal basic income. Even if we don't go that far, however, we could move in the direction by making benefits simpler and less difficult to get (try applying for PIP!) or by letting people keep their benefits for a while when they find work, thus sharpening incentives to do so.

Universal basic services. This idea has been proposed by Jonathan Portes, Howard Reed and Andrew Percy and was discussed (pdf) at the time by the Labour party. It consists in expanding the welfare state to include free busses, council housing, phone, broadband, TV licences and some food. This would raise living standards for the worst-off without, they say, much reducing work incentives to the extent that the services are not withdrawn as people move into jobs.

All of this is of course only the merest outline, and isn't meant to be exhaustive. I've tried to keep it brief not merely because I don't want to test the reader's patience too much (this isn't Substack or a podcast) but because, to paraphrase Marx, there's little point writing recipes when you don't have a kitchen. A big priority for the left isn't so much to come up with ideas but to create a space where good ideas can be discussed intelligently. This requires the repairing of the public realm and the removal of the influence of liars, billionaires, racists, the lobby correspondent mindset, and culture war charlatans.

You will all have doubts about these proposals. But there's one issue that needs more attention than it gets.

The fate of many Sure Start centres shows the problem. Tories closed many of these even though IFS evidence shows that the fiscal benefits of them exceeded the costs. Which tells us that good evidence-based policies cannot survive a philistine government. This is an especial problem for nationalization; nationalized utilities merely give a future right-wing government stuff to sell off cheaply to their cronies.

The question, then, is how to future-proof policies. This is one case for universal benefits. It's also a case for greater devolution, so that national government can't wreck everything. And it's also a case for highly localized action - be it energy coops, credit unions, repair cafes, communal gardens and so on. But all this is another story.

Not debating immigration

How should we debate immigration? Here's my advice: don't.

Debates don't work, at least not as they should. They don't favour the truth, but plausible liars and for those who can best appeal to prejudice and cognitive bias. Jonathan Portes, who is doing great work in trying to bring facts and rationality to the issue, describes his opponents' strategy: "Flood the zone with a mixture of lies, half-truths, misleading claims and statistics taken out of context." Against this, rational discussion is bringing a knife to a gunfight.

We needn't look far for a parallel here. It's now obvious that Brexit was a bad idea: only 31% of voters say it was the right decision. But have Brexiteers retired in shame? No. Dan Hannan - who gave us the most absurdly cretinous fantasies - still has a seat in the House Of Lords and a newspaper column. The marketplace in ideas is broken; peddlars of crap do not exit as they would in a well-functioning market. Even if immigration scaremongerers could be proven wrong, they'd not shut up. And why would they when they have much of the media on their side? As the old(ish) saying goes, "never argue with a man who buys ink by the barrel."

Put it this way. Imagine that net immigration were to fall to (say) under 200,000 by the next election, a drop of three-quarters from its 2023 peak. Would Reform 2025 Ltd then say "Labour's making great progress; we'll therefore give up"? Of course they wouldn't. [image error]

Or to put it another way, the UK has been receiving immigrants for decades - be it Jews in the late 1800s, Pakistanis and the Windrush generation in the 40s and 50s, Ugandan Asians in the 70s and so on: as one who remembers the latter, talk about immigration seems as relevant as Slade or power cuts. If the "debate" about immigration hasn't been resolved by now it's not going to be, because the evidence isn't decisive.

A second reason not to debate immigration (or at least to be very careful about doing so) lies in a distinction between two types of politics - that based on lived experience versus that based on abstractions often gleaned from the media. Some us us think of immigrants as our friends, uncles or the local shopkeeper. The right by contrast invites us to see them as an abstract threat. Hence the fact excellently described by Ben Ansell; people who live in areas with more non-UK born residents tend to be more likely to think immigration is a good thing. One reason, I suspect, why support for Trump's immigration policies has declined is that "immigrants" are changing from the demons mythologized by Fox News into actual real people.

Unless we're careful, debating immigration risks us being like a therapist who indulges his patient's fantasy thus threatening to make the psychosis worse. If we must do so, we must speak in concrete terms, about real people not abstractions.

So, what should we do instead?

Matt Goodwin inadvertently gave us the answer recently on Twitter. "London is over ���it���s so over" he said, pointing to unreliable and overpriced trains, homelessness, crime, and struggling restaurants.

Which blurts out the truth. Immigration is not merely about immigration. "Concerns" about immigration are linked to a wider sense of national decline, of economic stagnation and government failure.

Sure, Goodwin might be seeing what he wants. But we now have abundant evidence that economic stagnation fuels the far right. Back in 2006, Ben Friedman showed that, historically, slower economic growth led to increased racism and intolerance. Markus Brueckner and Hans Peter Gruener have found that, across Europe "lower growth rates are associated with a significant increase in right-wing extremism." Thiemo Fetzer showed how areas hardest hit by austerity were more likely to vote for Brexit. He and his colleagues have shown that shop closures are correlated with support for rightist parties. And Diane Bolet has found that areas seeing more pub closures are more likely to support Ukip (as was).

A place in decline invites the post hoc ergo propter hoc fallacy: "since the immigrants arrived, this place has gone to the dogs". We could reverse this: if the cost of living were declining and places thriving, it would be harder for people to see immigrants as a problem - unless of course they were mere racists.

Which points to the way to fight the immigration battle: stop places going to the dogs. We should be saying to voters: "we get that many areas seem in decline, but this isn't because of immigration: here's what we should be doing instead." The better Labour MPs see this. Jeevun Sandher recently wrote:

If we want to win the next election, we need to make life affordable for our voters. Investing to get energy and housing costs down while creating good non-graduate jobs for Reform-curious voters will put more money in these voters��� pockets. If we get cash in peoples��� pockets, we win the next election. If we don���t, we lose.

This is easier said than done. One problem is that these aims are undermined by the government's plan to raise military spending; doing so requires lower spending than would otherwise be the case elsewhere - on either public services or private consumption. And cuts in the latter would exacerbate the pub and shop closures which fuel the far right.

A second obstacle is the large number of vested interests blocking growth. I'm thinking not just of nimbys opposed to infrastructure spending and housebuilding but: incumbent companies opposing tougher competition policy; lawyers, accountants and financiers opposed to simpler taxes; landlords opposing a shift from taxing incomes to taxing land; utility companies opposed to fairer prices; Brexiteers opposed to rejoining the single market; and a financial system generally that likes the low real interest rates that accompany stagnation.

A further problem is the quality of British management. It has become so accustomed to rent-seeking and bullying that it has largely lost the ability to raise productivity.

And all this is before we mention the possibility that capitalism itself might be a barrier to growth. The problem isn't just that low profitability deters investment-enhancing growth: why do so many industries from steel to nuclear require government subsidies? It's also that some investments don't happen because capitalists fear that they will get only a "minuscule fraction" (William Nordhaus's words) of the payoffs from them, whilst others are undertaken out of misplaced optimism rather than a rational assessment of their returns.

Perhaps my pessimism is misplaced. But that's the debate we should be having. And the right don't want it because they don't want to discuss the failure of British capitalism. If they do, they only show the vacuity of their own thinking, be it about Brexit or "Britannia cards". They'd prefer that we demonized migrants than looked at the root causes of stagnation - and certainly prefer that we divide people along ethnic rather than class lines.

We should ask Reform: "why should we talk about your hobby horse when we know that your last pet obsession (Brexit) was a failure, and when we have more important things to think about?"

You might object that we should stand up for the rights of migrants and indeed - given that immigration controls also reduce their liberty - the rights of citizens too. Morally yes, but we have to choose our battles. When we discuss immigration, we are fighting the battle the right wants to have. That ignores Sun Tzu's advice: "he will win who knows when to fight and when not to fight." Setting the agenda matters, and we should not concede this to the right but rather set our own.

Discussing immigration steals cognitive bandwidth. The opportunity cost of doing so is that we don't discuss more important matters - matters that, if we could at least partly resolve them, would boost economic growth and so defeat the far right.

What do politicians do?

Politicians make mistakes. This is inevitable because society is complex and knowledge is limited. But there are different types of error. Being bad at your job is one type, but another is simply not understanding what your job actually is. By some definitions of political activity, leading politicians have for some time been guilty of the latter.

Consider two of these definitions. Here's Michael Oakeshott (pdf):

Governing is a specific and limited activity, namely the provision and custody of general rules of conduct, which are understood not as plans for imposing substantive activities but as instruments enabling people to pursue the activities of their own choice with the minimum frustration.

And here's Bernard Crick:

Politics are the public actions of free men...Politics, then, can be simply defined as the activity by which differing interests within a given unit of rule are conciliated...A political system is that type of government where politics proves successful in ensuring reasonable stability and order.

By these definitions, some of MPs' recent activities are not politics. Sir Keir Starmer's call for Kneecap not to perform at Glastonbury is not politics by Oakeshott's definition, because it is not the provision of a general rule. Yes, there is (and should be) a general rule against incitement to violence, but whether Kneecap have broken this is a matter for the courts, not for MPs. When asked the question, Starmer should have replied: "it's none of my business; I'm not the taste police."

Nor is it proper politics for MPs to say who should use which toilets at work. Having a piss is not a "public action". In a free society it is not for MPs to decide on who uses toilets but for the managers of those sites (assuming they have nothing better to do). And if staff or customers don't like their decisions they should negotiate with those bosses or go elsewhere. MPs should butt out.

I'd say the same about their calls to ban mobile phones in schools. Classrooms are not truly public spaces - try going into one without proper authority. Decisions on what should happen in them should be left to teachers. In thinking otherwise, MPs go beyond the boundaries of politics - and, I'd add, their own competence.

Stepping beyond their remit, however, is only part of MPs not understanding their job. There's a worse part - that they are not doing some things that, by many conventional definitions, should be political activity.

In domestic policy I'd put these loosely into three categories.

One is the solution (well, more like amelioration) of collective action problems - the problem of what happens when an individual's pursuit of their self-interest conflicts with others' interests. Addressing these problems allows individuals "to pursue the activities of their own choice with the minimum frustration."

The Tory/LibDem government of 2010-15 was egregiously bad at doing this. For example, Cameron's encouraging people to buy petrol before a tanker drivers' strike failed to see that if everyone did this then there would indeed be fuel shortages. And "encouraging" the unemployed and disabled into work failed to see that if everyone tried to do so at a time of a slack labour market the result would merely be falling wages and frustration. Worst of all, in pursuing austerity they failed to see the paradox of thrift - that if enough people try to increase their savings, the upshot is merely lower aggregate incomes and hence less ability to save.

And this is not to mention the abject failure of the provision of some collective services, such as dentistry or insurance for social care. 

In this context, there's one area where the current government is also at fault. The public sphere is blighted by a tragedy of the commons: the domination of money and the decline in norms against lying mean that the marketplace of ideas is broken - the fact that Dan Hannan is a legislator for life despite issuing perhaps the most moronic prediction in political history is just one datapoint of evidence for this - and rational debate and policy-making thus much harder than it should be.

Good politicians should be asking how they could repair this by limiting the power of the wealthy to buy politicians, by democratizing the media, or by promoting deliberative democracy (pdf). Which they are clearly failing to do.

A second category of where politicians aren't doing their job lies in the recognition and management of tradeoffs. MPs are not telling voters that tougher controls on immigration would mean worse public services or higher taxes. Nor are they saying that increased military spending means less spending elsewhere, on either private consumption or public services. Nor that faster economic growth comes at a price: it requires both attacks on vested interests (nimbys, financiers, incumbent companies, Brexiteers and so on) and the insecurity associated with creative destruction.

And thirdly, the role of politicians should be to mobilize some interests and demands whilst demobilizing others. Brexiteers were great at this, moving a fringe issue to the centre of politics: before 2015 less than 10% of voters thought relations with the EU were one of the most important issues. So successful were they that they even created new identities: few of us thought of ourselves as Leavers or Remainers before 2016. Most politicians however - and especially this government - don't even try to repeat this. Instead, they take public opinion as a given, oblivious to questions of how it is formed or changed, and don't even try to change the agenda.

Politicians, then, are not doing what seems to be their proper job in two senses; they're doing things that aren't politics in expressing opinions that are irrelevant; and they are neglecting the proper political tasks of ameliorating collective action problems, managing trade-offs and shaping public opinion.

Why is this? [image error]

One possibility lies in the fact that societies often have exemplars, ideals of what a person should be: the heroic warrior, the devout Christian, the romantic, or the detached rationalist, and so on. One of today's exemplars is the newspaper columnist, Loose Women presenter or the terminally online, who inflict upon us their ill-informed opinions about everything, and MPs feel the need to conform to this exemplar. What this fails to see is that the right response to very many questions is either "none of my business" or "I don't know". There should be a distinction between an MP and a general-purpose rentagob.

There is, however, another possible reason why MPs neglect the proper job of politicians. It's quite simply that such neglect works well for those in power. Ignoring how the public realm has been debased by the tragedy of the commons enables a few billionaires to dominate the discourse, especially given most politicians' lack of interest in changing public opinion or in setting the agenda. Similarly, ignoring tradeoffs avoids an awkward possibility - that some of the costs of improving economic growth or public services might have to fall upon capitalists. POSIWID.

Perhaps, therefore, those high-minded definitions of politics are wrong. Bourgeois politics is not about high-falutin ideals but simply about preserving capitalist power. On this definition, MPs are doing their jobs well.

Politics vs Econ101

Once upon a time, the phrase "classical liberal" meant something other than "racist crank". In that idyllic era, those liberals loved to point out how their opponents were failing to understand Econ101. I yearn for those happy days, because our government is actually committing just this failure.

Giles Wilkes points to one way it is doing so. In her Spending Review, he says, Reeves did not tell us what programmes were being cut to finance her pet projects such as Sizewell C or Transport for City Regions. This, says Giles, means it's impossible to say how much (if at all) the Review will boost economic growth, because we don't know (and I suspect not does Reeves) how much the green-lighted projects will boost growth relative to the projects not undertaken. She is ignoring opportunity cost.

A more egregious example of this lies in the government's promise to raise military spending to 3% of GDP. This, of course, means that almost a percentage of GDP less will be spent elsewhere - on either private sector capital spending, other public services, or private consumption. All these cuts (relative to what would otherwise be the case) carry costs - one being that they risk continuing the visible symptoms of economic decline such as pub and shop closures that have fostered support for the far right.

Maybe these costs are worth it, maybe not. My beef is that Labour isn't trying to show that they are costs. That's a failure of basic economics.

And it's not the only one. Another is an apparent reluctance to recognize the concept of comparative advantage, the notion that countries (and indeed regions or people) should specialize in what they are least bad at.

Like it or not, much of the UK's comparative advantage lies in higher education and the creative arts. But Labour is restricting these by imposing a levy on income from foreign students; making it hard for musicians to earn a living by red tape on EU tours or by allowing nimbys to restrict music venues; or by allowing the theft of writers' work. By contrast, the government is supporting less competitive industries such as steel, even though it makes little sense for this to be produced in a country with some of the highest energy costs in Europe. [image error]

There's another way in which this government, like its predecessors, are ignoring Econ101: transactions cost economics. Why do companies exist? Why not instead just pick up workers to do specific tasks (as with TaskRabbit) or buy all inputs on spot markets from suppliers? The answer, wrote (pdf) Ronald Coase in 1937, is that it is sometimes expensive and difficult to use the price mechanism as the buyer often cannot specify in advance (or even verify after the fact) precisely what he's getting:

Owing to the difficulty of forecasting, the longer the period of the contract is for the supply of the commodity or service, the less possible, and indeed, the less desirable it is for the person purchasing to specify what the other contracting party is expected to do. It may well be a matter of indifference to the person supplying the service or commodity which of several courses of action is taken, but not to the purchaser of that service or commodity.

Coase's work inspired a massive field devoted to the question of when things should be allocated by the price mechanism and when by companies. And it's a field successive governments have ignored in contracting out services that are subsequently badly or expensively done. It might be easy to tell if your office is cleaned well, but can you really tell whether a child is well brought-up or an old person well cared-for? And if you can't, then you can't enforce the contract. (I strongly recommend Sam Freedman's Failed State on this.)

If you're beginning to see a pattern here of ignorance of basic economics, you'd be right. Here are five other examples:

 - Competition. Strongly competitive markets don't just help customers get a better deal. They also improve productivity by forcing bad companies out of the market and enabling good ones to expand. Rachel Reeves, however, seems to be weakening the Competition and Markets Authority in an attempt to "attract investment" by permitting more takeovers.

 - Free trade. Econ101 advocates this for the same reason it likes competitive domestic markets. Of course, global free trade is impossible whilst the orange abomination is in the White House, but the government's remaining outside the Single Market - whatever other case there might be for it - is unjustifiable by conventional economics.

 -  Balance sheets have two sides. Rachel Reeves has said that nationalizing utilities "just doesn���t stack up against our fiscal rules���. But in acquiring a company the government would get an asset that pays a higher return than debt. That would actually strengthen the government's balance sheet. Reeves ignores this obvious fact because the fiscal rules look only at debt but not at assets, as if a home-owner focused only on his mortgage and ignored the value of her house. Which of course makes no sense. 

 - Regulatory capture. "Regulation is acquired by the industry and is designed and operated primarily for its benefit" wrote (pdf) George Stigler in 1971. And this is true of Ofwat and Ofgem, who offer regulators the prospect of well-paid jobs, thereby acquiring the freedom to pollute and overcharge. To its credit, the government is aware of the "failure of regulation and governance" in the water industry. But it has been slow to change this, and seems unaware that this is a systemic problem with regulation.

 - The tragedy of the commons. Back in 1968, Garrett Hardin pointed out that commonly-owned assets were in danger of becoming worthless as people over-exploited (pdf) them - for example as herdsmen overgrazed common land, or fishermen depleted fish stocks or (we might add) as polluters put too much carbon into the atmosphere. In many ways, Hardin overstated his case because as Elinor Ostrom showed (pdf), people devise ways of conserving the commons. But there's one way in which he was right. The public sphere is a common asset that is being degraded. The media pushes an agenda which squeezes out many issues; dishonesty often prevails over honesty; and politicians are selected sometimes for incompetence and often for a distorted view of the world. And yet the government shows no sign of wanting to do anything about this.

In all these respects, what we have is a government largely detached from economics. Not that this is true only of the Labour party: almost all I've said applies equally or more so to the Tories and Reform 2025 Ltd.

You might reply that this is a good thing, because Econ101 is wrong. True, it sometimes/often is. But this doesn't explain or justify Labour's ignorance of it, any more than can Trump's tariffs be justified by the errors of basic trade theory. In fact, the opposite. The government is most deferential to Econ101 in just those areas where it is wrong - for example in not recognizing the many imperfections in labour markets, or in equating a high wage with high social utility.

The question of whether one subscribes or not to heterodox or orthodox economics is logically if not sociologically largely independent of one's politics.

In terms of policy recommendations, I'm not making an especially leftist point here. Yes, Econ101 might oppose privatization in its current forms and urge restictions upon those media which produce intellectual pollution, which is as much a negative externality as environmental pollution. But wanting competition and free trade were once conservative principles.

In another sense, though, I am posing a radical question. Why is it that our politics has become so degraded that it has abandoned basic economic reasoning? Might it have something to do with the nature of UK capitalism?

The political engagement dilemma

"The only thing necessary for the triumph of evil is for good men to do nothing." "If a battle cannot be won, do not fight it." These two great truths (wrongly attributed respectively to Edmund Burke and Sun Tzu) encapsulate the dilemma of whether we should engage with bourgeois politics.

Better men than me have thought we shouldn't. "When offered a choice between two politically intolerable alternatives, it is important to choose neither" wrote Alasdair MacIntyre of the 2004 US presidential election. This, he continued, is because the competing candidates narrowed down debate to exclude important, attractive, alternative viewpoints. [image error]

Which is exactly what we have in UK politics now. Many important questions are off the agenda such as: can we use tools beyond macroeconomic policy to reallocate resources towards housebuilding, decarbonization, social care and so on? How can we economize on the scarcity of management ability? Does inequality impede productivity growth? Might the UK's poor economic performance be due to fundamental forces within capitalism? How can we improve the public sphere to facilitate better policy-making? Is there a case for greater economic democracy? Etc, etc.

It's not just specific policy agendas that are excluded from mainstream politics. So too are entire viewpoints, and not just Marxian ones. Where would a cool-headed Oakeshottian sceptic find a political home? Where would a Hayekian wary of top-down management do so? Or someone wanting to combine competitive markets with equality? And how can someone who values freedom support parties that concern themselves with which toilets people use or what women wear?

Instead, three of our main parties seem to be pandering only to a small subset of voters: older social conservatives who still support Brexit, are obsessed with immigration and want a return to the 1950s with national service, metal-bashing and coal-mining. (Though, strangely, they don't want the income tax rates of that period.)

The standard objection to all this is that we should hold our noses and support the lesser of two (or three or four) evils. That's just what many of us did last year. But there are problems with this.

One is that those demanding that we do so don't return the favour: those centrists who urged leftists to suppress their doubts and vote Labour last year weren't so enthusiastic about supporting the party in 2019*, preferring to whine about being politically homeless.

Another is that our vote was (deliberately) misinterpreted. It was taken not as a mandate to reject the Tory party and all that it stood for, but rather as a reason to kow-tow to Reform 2025 Ltd.

And thirdly, voting legitimates an illegitimate system - one that not only gravely restricts cognitive diversity but which gives weight to nasty or ill-informed preferences; which insults our intelligence with drivel about "maxing out the credit card" and there being "not a huge amount of money"; and which, in giving undue weight to the power of the rich, is a debased form of pseudo-democracy.

On top of all this, politicians - merely by being politicians - have a distorted worldview. Even the best of them tend to be overconfident about the potential for top-down policies to change a complex society; to under-rate the value of emergence (via either markets or economic democracy); and to overvalue hard work.

Of course, voting is not the only form of political expression. There's also protest.

But there's a simple problem here: protests don't work - not only by failing to influence governments but also by often reducing public support for their cause. Anti-war protestors might be just as correct today as they were in 2003 - and they are just as impotent**. Protesting is more a form of self-expression than a means of forcing change, a futile gesture. And there are many other forms of self-expression - music, needlework, writing and so on - that are better for one's mental health.

Yes, mental health. Engagement with politics makes us miserable, frustrated and angry that politicians are so stupid, nasty and limited in their worldview. We've academic research to support this. Whilst most forms of volunteering make people happier - because they have a purpose in life and get to meet others - Stephan Humpert has shown that political activity actually worsens life satisfaction. One of the many good things I did on retiring was to switch from Radio 4 to Radio 3 which is gloriously unpolluted by news between 8.30am and 1pm. Let us cultivate our garden.

But, but, but. There are arguments to the contrary.

One is that, as Terence said, "I am man, and nothing that is human is indifferent to me." Some of us take an interest in politics because it is a branch of interesting subjects - social science, psychology and, increasingly, psychiatry - in a similar way to how zoologists might study baboons.

Many of you might add that we have a public duty to engage in politics. Such claims are often bad faith. I've not been deafened by centrists urging we Marxists to be more politically active. Quite the opposite: the goal of the McSweeneyite tendency in the Labour party seems to be to silence the left.

And herein is a reason for us to be active. Our silence means that politics will remain dominated by know-nothings and cranks hostile to fundamental questions of how to build a more prosperous and freer country. Good collective decision-making requires there to be cognitive diversity. And in exiting the public sphere we further diminish the albeit slight hope of ever attaining such diversity.

Nor will our inactivity be interpreted properly. The political class (of which the legacy media is part) will see it as apathy and not what it really is - which is contempt.

And engagement can bring with it power. Why has pensioner poverty fallen so much this century whilst housing has become unaffordable for younger people? Is it really nothing to do with the fact that pensioners are more likely to vote than younger folk?

But there's something stronger. Whilst disengagement is an easy option for affluent older people like me (and Farage) it is not so for others. Post-2010 austerity policies killed tens of thousands of people. That's many more than could be saved by charity and voluntary work. Even if political action can't build a much better society, it could save us from a much worse one.

Perhaps very much worse. In the US there is a very real threat of the country descending into fascism. That's something to be resisted by any means necessary, the only issue being how most effectively to do so.

And there's the rub. Even if MacIntyre was wrong to advocate withdrawal from bourgeois politics, he was correct - and wrongly ignored - on another point. At the end of After Virtue, he urged the construction of new forms of community "within which civility and the intellectual and moral life can be sustained through the new dark ages." To put it into more economic and political language, we need vehicles for collective action - be they environmental groups, stronger unions or consumer advocacy organizations to be a counterweight to captured regulators. This side of electoral reform, these probably shouldn't consist of a new party. But they should include groups capable of putting not just intellectual but also political and financial influence upon the political class.

* Perhaps because they didn't regard a corrupt clueless buffoon who wanted to cut us off from Europe as the lesser evil compared to mild social democracy.

** Not all protests fail, though. The poll tax protests of 1990 did force a change of policy. Whether this was because they were correct and powerful, or because financial markets took fright at the sight of riots in Trafalgar Square, is however unclear to me.

Systems, not individuals

Here are three recent items that are connected:

 - Morgan McSweeney thinks that abolishing the two child limit on universal credit wouldn't give Labour "enough political capital with voters."

 - Nick Clegg is criticised for saying that requiring tech companies to observe copyright laws would ���basically kill��� the AI industry. If burglars had to ask homeowners permission, his critics say, this would kill the housebreaking industry.

 - People are mocking Jordan Peterson for his incoherence in front of a bunch of (albeit smart) young people.

The connection here is that all three are examples of systemic problems and yet people focus instead on criticising specific individuals.

For example, there have always been idiots and charlatans, so there's nothing notable about Peterson. But why is he more famous than, say, Alasdair MacIntyre or (to cite just a few younger people) Brian Klaas, Cory Doctorow, Daniel Chandler or Matt McManus? The answer lies in selection effects. Many of those claiming to be public intellectuals are selected not for merit but for something else. [image error]

It's hard to say what this something else is. I don't think it is mere ideology; many intelligent conservatives aren't famous*. What is the case, though, is that there has been a decline in the standard of public intellectuals: on the iPlayer you can see Kenneth Clark, Jacob Bronowski and AJP Taylor; compare them to many of their modern equivalents. Or compare Laura Kuenssberg to Brian Walden. Peterson's status as a prominent "intellectual" is a symptom of a systemic problem.

So too are Clegg's remarks. The fact that capitalism is founded upon theft is of course no surprise. Capital, wrote Marx, comes into the world "dripping from head to foot, from every pore, with blood and dirt." And profits are, from a Marxian point of view, a form of theft - the extraction of surplus labour. Clegg is thus merely blurting out a truth.

Two truths, in fact, because he's channelling another of Marx's insights:

At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production or ��� this merely expresses the same thing in legal terms ��� with the property relations within the framework of which they have operated hitherto.

The question is: how is this conflict to be resolved? Do we do so by restricting creators' property rights? Or could we do so by restricting those of tech oligarchs through some form of socialized AI development? Obviously, I don't know. What I do know is that we have here a systemic problem, requiring systemic analysis: is it possible to reconcile a common sense conception of justice with technical progress?

McSweeney also raises a systemic question. The point here is that cutting child (and adult!) poverty is not just morally right but also very possibly economically correct too because fewer poor children today mean fewer low-earners or criminals in the future. If McSweeney is right** that there are few votes in this, it tells us something important about our political system and culture - that it mitigates against sensible policy. Sam Freedman is bang right:

It's a pretty dismal reflection on our politics that a policy as bad as the two child limit was introduced in the first place and has survived for a decade.

But what exactly is it reflecting? It might be the power of our reactionary oligarchic media. Or it might be that the "Treasury brain" disease has spread beyond Whitehall. Or maybe endogenous ideological formation has caused people to resign themselves to poverty and injustice. Or maybe politicians wrongly take public opinion as a datum rather than as something that can be changed by campaigning or by economic change. Or maybe something else.

Whatever the answer, we need to think about politics and economics as systems, and very often systems which select for some things and not others: why do they select for charlatans and against good policies? Is technical progress compatible with justice or not? And so on.

Instead, too many people - even good clever ones - don't do this. In confining themselves to criticising McSweeney, Clegg or Peterson as individuals they are engaging in what I've called schoolteacher politics, focusing upon individual error rather than systemic processes. But as schoolteachers used to tell me, "must do better."

* Jesse Norman for one; his novel, The Winding Stair, is very good indeed.

** Of course, McSweeney might be wrong. But that merely raises another systemic problem: how can it be that a man who is wrong about his whole job - how to get Labour re-elected - can become so powerful?