The Alternative is Silly

March 28, 2011

Numbers, numbers, numbers. Lots of them were banded about Saturday’s march – 250,000 being the most important one, at least if you agreed with the march’s aims. However, it’s quite clear that those who agreed were united by more than their opposition to cuts – they were united by a peculiar aversion to expressing the alternative in anything but the most vague terms, eschewing numbers – tax hikes, reallocations of funding, timescales for deficit reduction – in favour of saying why their cause was the most important, and clearly deserving of other peoples’ money.

Indeed, the other clear strand of Saturday’s march was its conservatism: a united stand for every marcher’s piece of the status quo; a fiscal NIMBYism. But perhaps I’m being unfair; the main argument of those who venture into the realm of numbers, however incidentally, is that of a form of Keynesianism. Broadly, activity to cut the deficit is counter-productive as it removes demand from the economy, thus reducing one of the factors required for growth. Instead of cutting the deficit, this additional demand should be left in the economy, allowing growth to raise tax receipts to the point where the deficit is eliminated.

Theoretically, this all sounds very good. However, I’ve yet to see anyone actually put numbers to this thesis: how much growth is required over what period of time in order to eliminate the deficit? I’m going to try to put together a very basic model of the economy to try to figure this out, in order to see if this argument works.

Warning: the following should be taken with a pinch of salt, as I am not an economist and liable to get my numbers wrong

Let’s use statistics from 2009, as they’re the most recent for which a complete set is readily available, and they stand outwith any actions taken by the Coalition Government. The UK’s GDP stood at £1,395,872m, our deficit at £86,302m and our debt at £617,100m. Tax receipts were £530,971m, and inflation (CPI) was 2.2%. Total government expenditure stood at £619,307m (including investment and depreciation), of which £31,570m went on interest payments*.

What we’re going to do is plug these top-level figures into a very simple model, to find out what level of growth we’d require to eliminate the deficit without taking any positive action, including tax rises or spending cuts. We’re going to assume that inflation remains constant (and that Government expenditure rises at the same rate), that tax receipts rise at the same rate as GDP, and that the interest payments on our debt will remain at around 5%. It’ll be a question of what level of growth is sufficient over what period of time. These are all enormous assumptions (e.g. inflation in various areas of Government expenditure, like the NHS, is higher than the CPI), as real life bears out, but they are assumptions which are highly favourable to people pushing the ‘alternative’. An assumption that may be open to challenge is my rolling of investment into general Government expenditure; investment may decrease in response to increased growth. Investment at this particular time represented about 5.9% of GDP.

Let’s start with our base case, in which Britain experiences no growth over the next ten years:

As you can see, if everything goes a bit wrong and we don’t have any growth at all, we’ll be well on our way to bankruptcy by 2020. But this is rather negative. What happens if we grow at the entirely respectable rate of 1%?

Not much. A minimal growth rate just slows down our inevitable decline. To actually eliminate the deficit with growth alone, we need to be growing at a rate of at least 4% every year:

All well and good, I hear you say: as long as we grow rapidly enough, we can ignore cutting the deficit. However, there’s a problem, and it comes in the form of this chart:

Growing at 4% for ten years would be historically unprecedented. In order to eliminate the deficit by growth alone, we’d need to enter a boom period almost unheard of in the history of the UK. This seems somewhat unlikely.

However, it’s worse than that. Assuming the worst predictions of those in fear of the bond markets came true, and the interest rates on our debate accelerated to Irish levels of 9%, we would never eliminate the deficit by 2020 even with growth rates of 4%.

Without that level of growth, the deficit would exceed our tax receipts before the end of the decade. Of course, a lot of our debt still has a good while before it needs to be refinanced, but that would merely prolong the inevitable downward spiral.

We need a strategy to tackle the deficit. If you’re a major political party without one – not mentioning any names – you’re de facto signed up the approach above. If you’re protesting the cuts without a clear alternative yourself, you’re guilty of what my Lib Dem colleague Ian Gaskin rightly called ‘a fear of change to an unsustainable status quo’. And you’re doing it unnecessarily – consider a different pace of deficit reduction, or a different mix of tax rises and spending cuts, there’s plenty of options for a preferred strategy. The question is which allows us to repair our economy in the most effective way while minimising the impact on our standard of living. There will be pain – pain for everyone, whatever option we take – but pretending that there’s some way to avoid is tantamount to ignoring reality.

*Do let me know if I’ve made any mistakes; I find economics intriguing but statistical releases very confusing.

Advertisements

The Schismatic ‘We’

March 18, 2011

Consider the following two sentences:

“First, the tax that is avoided through loopholes in tax law, could be collected. This, quite extraordinarily, is the easiest solution to the problem we face.”

“The corporation tax burden is borne by workers and owners. We should tax those owners in a consistent way and not in an arbitrary way.”

The first is from a report called ‘The Great Tax Parachute’ by the Green New Deal Group of prominent lefties, while the second is from a report called ‘UK Uncut Unravelled’ by notorious rightey Tim Worstall. What I want to highlight in this post is the way in which both sentences apparently use ‘we’ in exactly the same way while coming to very different conclusions.

To begin the discussion, let me tell you a little story. Once upon a time I went for a job with a prominent charity, which shall remain nameless. I was asked the question – the quite notorious interview question – ‘What does teamwork mean to you?’ I responded, ‘Teamwork to me means ensuring that everyone’s role on the team is well understood, and ensuring that everyone has a part to play in achieving our shared objectives.’

I didn’t get the job. I called up for feedback, and was told, ‘We felt that you weren’t a team player. You should’ve put greater emphasis on helping out your colleagues when they needed support.’

I was somewhat flabbergasted. For me, working as a team meant working with people towards a shared goal, rather than providing mutual support. I assumed that my colleagues would be competent enough at what they did to not require any support from myself. Later, as I moved between organisations and started working in teams that did in fact consist of highly competent people, I understood that teamwork required mutual support – but not because of someone elses’ weakness, but because in practical terms some priorities will require more hands than others at different times, and everyone on a team has to be ready to pitch in.

This sort of distinction – between unconditional support and support founded upon a recognition of the competence of others – is what I’d like to highlight. In both of the sentences above, the word ‘we’ is used to refer to society, and the recommendations made are made in the understanding that they will be taken as recommendations for how we move society forward. They both implicitly assume that the reader is engaged with society; that they do not stand outside it, looking in at an internal struggle. They assume that society refers to the social and legal structures that comprise the United Kingdom. Even with this apparently identical use of ‘we’, they come to opposing conclusions.

Why should this be the case? Surely, given that both sides possess the same understanding of society, they should move towards the same conclusions? After all, UK Uncut is not claiming that the likes of Vodafone are outwith society; quite the opposite, that they are within society and are not paying their dues to it. What’s implied with this division of ‘we’ is a division in their conceptions of the individuals who comprise that society.

The following sentence:

“We’re all in this together.”

has come into common use, especially in relation to the cuts. The differing ways in which it is used are telling, because it’s impossible for the ‘we’ in that sentence to be ambivalent in the  same way as those in the sentences above. Its rejection by some points to it referring to a conception of individuals within society which is unacceptable. What is that conception?

It seems clear that, to those who reject the sentence, individuals within a society are not simply autonomous; rather they have a duty to support others within that society as a condition of membership. It is that failure to provide support that leads to the moral rejection of the actions of Vodafone; their actions have sent them on a path to their ejection from society, and it is in this sense that the UKUncut protests are understood by their activists. They are protesting a social transgression, rather than an illegality. However, social transgressions and illegality are easily conflated, which is why the protests have used language indicative of illegality when referring to Vodafone. In doing so, they have run into conflict with people who hold a quite different conception of individuals within a society.

As discussed above, I have always conceived my colleagues as autonomous individuals responsible for their own wellbeing and for their own area of work. I recognise competence rather than fulfilment of duty. In this sense, I am a member of a society composed of individuals whose responsibility is to their work, rather than to each other. To me, ‘We’re all in this together’ means that all our work will be impacted – bankers will be fined, less efficient staff will be fired, and less important projects will be cut. In this sense, an individual transgresses against society if they fail to work while being able to do so and so require others to provide for them; this is the area in which duty is applied. Other matters are handled via the legal system; via the series of social conventions around democracy and debate that go towards determining the formal rules of society.

It is therefore clear that under the latter sense of ‘we’, tax avoidance is largely irrelevant in terms of duty; there is no shirking of work involved. However, under the former there is a question of duty – duty to contribute to society beyond productive work. This distinction in the uses of ‘we’ is why, when engaging with opponents, it is vital to ensure what they’re actually saying rather than what you think they’re saying. Much as I enjoy Tim Worstall’s blog, his report for the IEA is going to make no difference to those who don’t use ‘we’ like he does. Similarly, the man to which Tim is Nemesis, Richard Murphy, might as well not bother responding to Tim unless he’s going to shift his ‘we’ onto his turf. Until both sides are talking the same language, debate cannot take place.

I’m currently reading The Sublime Object of Ideology by left-wing darling Zizek. I’m not particularly impressed thus far – it appears to be largely the sort of intellectual dandyism beloved by the continentals; relatively simplistic concepts with minor variations hidden behind a veneer of excessive nomenclature. However, he has reminded me of an interesting philosophical trend which has bearing upon the current debate.

Let’s look at the phrase ‘ontological priority’. This is a fancy way of saying that something has to be the case for something else to be the case. Zizek uses it with reference to Marxists who think we need to overthrow the current economic order in order to sort out all of society’s ills. This ontological prioricity is also applied by other non-economic fundamentalists; people who believe that sorting out our ecological impacts will solve everything else, people who believe that sorting out the imbalance in male/female power will solve everything else, and of course people who believe that the imposition of Sharia will solve everything else.

It’s not really clear that anyone really holds such a simplistic viewpoint (although it is clear that some people genuinely believe that eco-damage is a consequence of capitalism and would never happen in a socialist utopia), but it is clear that people have a tendency to cluster around totemic explanations of the world, the answers to which will improve all aspects of society. You have the people who believe that society should aim towards incoherent concepts like ‘fairness’ or ‘progressivism’, those who believe society should aim towards some kind of classical liberalism, and those who apparently believe that if only we could improve everyone’s ‘capabilities’ society would advance.

My own totem, of course, is that society would be improved across the board if everyone focused more on cultivating their judgement, but it’s important to recognise that there are plenty of totems about. Most people have some kind of ontological priority – however weak – that informs their political judgements. Ask yourself how you would modify our contemporary society in order to begin to elucidate yours.

‘Moving society forward’ is something that is done by society; by the aggregate of all our judgements, not by the imposition of one priority or another. In order to give enough space to competing explanations of the world, we need a pluralistic system of dividing power. In this sense, the opposition of many of the Labour old guard to electoral reform is telling: they are reluctant to give this space to alternate understandings of ontological priority, as their priority is, well, their priority. However – and this is where the debate comes in – anti-essentialists would argue that there is no such thing as an ontological priority with respect to society, and all views must have the opportunity to be represented with society’s power structures.

AV, inasmuch as it provides smaller parties with a better understanding of their support, is a move towards this. It will necessarily be opposed by individuals with an investment in a particular explanation of society’s ills, which may explain why it’s being opposed by many libertarians. My advice to them would be to ditch their ontological priorities and come and join us in the glorious liberal opinion-melange.

There’s a post up on LibCon today by Rupert Read, which claims that since the Libyan rebels he’s in touch with want a no-fly zone, why not give it to them?

This seems reasonable, but I’m always slightly suspicious of anything written by Rupert Read. He’s a lecturer in philosophy, and as someone with a deep love of the subject myself, I can’t help but worry that he’s doing nothing for the image of philosophers as being completely unworldly. To demonstrate why I feel that in this particular situation, let’s look at the potential outcomes of the current Libyan situation:

1) Gadaffi wins, slaughters his opponents, and waits for the West’s horror at his actions to diminish in the face of rising oil prices. A return to status quo ante bellum. If you think we’ll never be friends with Gaddafi (or Gaddafi Junior) again after his current bout of beastliness, I have a single word for you: Lockerbie.

2) The rebels win, and install some form of government. It may be democratic, it may be not, but what it will be is Libyan and not founded on the personality cult of an obvious maniac. The current civil war becomes Libya’s foundation myth, and helps to bind Libya together as a country in the face of tribal adversity. The West’s overt moral support in the war wins us the new government as a strong ally.

3) The West wins the war, following an invasion on the side of the rebels. cf Iraq & Afghanistan.

It’s clear that (2) is the most desirable, the question now raised is whether a no-fly zone would help us achieve that or not. Let’s be honest about what this would involve – a no-fly zone requires air superiority to enforce, which involves taking out any air defences in operation in the area. I’m uncertain of Gaddafi’s precise armament, but you’re looking at bombing runs on radar installations and any SAM sites as a minimum. This kind of unilateral intervention on the part of NATO or other western allies only serves to demonstrate that any future Libyan Government would serve at our pleasure. Conversely, if carried out via the UN, it would be a welcome demonstration of the importance of international law. However, the Russians and the Chinese are unlikely to go for it.

I must say, a no-fly zone appeals to my inherent sense of fair play – Gaddafi’s forces have an excessive advantage over the rebels in having air support, and removing that would somewhat level the playing field. Unfortunately, there’s a presumption there which claims that we have the right to set the rules of other peoples’ conflicts outwith the framework of international law, which simply isn’t the case. This is the Libyans’ struggle, and it should continue as such. They’re fighting for the right to self-determination, and helping to determine the outcome of their struggle by acting unilaterally would run counter to that.

That’s not to say we shouldn’t intervene, but we should intervene on the presumption that the Libyan rebels are our equals. We should immediately start selling heavy weaponry to the rebels, to counter Gaddafi’s tanks. We should hire out members of our military to provide training to what is still a largely conscript force. Even if we accept only a token payment – or a promissory note – we’re still saying, “You’re our trading partners, not the subjects of our imperial will.” This then allows us – in the grand tradition of British diplomacy – to use the Royal Navy to enact a blockade of the ports controlled by Gaddafi’s forces, in order to protect the people who we want to win in order to pay us back our money.

I’d like to believe that’s what the SAS/diplomatic team really were doing in the desert with all that communications gear – setting up the conditions for arms trading. Time – and history – will tell. In the interim, it’s interesting to note that the instinct for lefties is to intervene in a conflict with moral overtones, on the conviction that they must be right. We’ve seen that before.

George Monbiot is continuing to provide a source of disappointment for me personally. Given that I’ve based significant chunks of my opinions on decarbonising the economy on his book Heat, the mistakes made in his current attempt to bring the entire economy under his analysis are somewhat dispiriting.

Another example is out today. George is – in an entirely laudable fashion – pointing out to the people marching with the TUC that they should probably be in favour of something too rather than simply against anything they don’t like. Hilariously, he’s already got some blowback from comedy leftie Cath Elliot, whose main purpose in life appears to be to fulfil every Daily Mail stereotype of a slightly ridiculous uber-feminist. She – without realising it – has demonstrated to George why his endeavour cannot possibly succeed, as the people he’s talking to want to be against specific bad things without ever having to make hard choices about how they work. This is a genuine quote from the piece:

“I’m marching because I support nurses, teachers, care assistants, Sure Start centres and libraries. For the voluntary and community sector, for hospitals, midwives and schools. I’m marching because I believe that the state has a responsibility to take care of all of its citizens – not just those who can afford to pay but everyone, no matter who they are or what they’ve done. I’m marching because I’m for universal benefits from the cradle to the grave, and because I believe that disabled people, the young and the elderly have just as much right as everyone else to live lives free from poverty and stigma.”

I’m sure Cath believed this sounded ever-so-inspiring when she wrote it. However – and quite typically – it glosses over any possible distinction between types of provisions of services. There’s actually nothing in there that Cameron or Clegg would disagree with, it’s that vague.

This unthinking emotive response to policy is what George is up against in trying to persuade the ‘radical left’ in having some concrete policies they could fight for. Tim Worstall has already done an evisceration from the classical liberal perspective, but there’s one thing I’d like to pick up on. It’s this bit:

“…with a commensurate reduction in the income tax and national insurance paid by people with low earnings.”

Tim notes with glee that George is endorsing a policy of the Adam Smith Institute and UKIP, all haters of the notion that the State should compel you to take out insurance. NI, as originally conceived, is the contribution you make towards any benefits you might require from the state – Jobseekers’ Allowance, the state pension, Bereavement Allowance and so on. It also partly funds the NHS. Although it’s drifted away from its original intention, it still represents an important – and liberal – principle – that everyone should pay to look after themselves.

It’s a fund to which everyone contributes and to which everyone is entitled as a consequence. The private alternative – unemployment insurance – would be unaffordable to the least well off, as their premiums would constitute a significant fraction of their income. However, an insurance model based on universal contributions ensures that an affordable safety net exists for everyone, regardless of income.

George wants to turn this into a de facto redistributive tax, which will only serve to decrease support for the principle of universal contribution to a hedge against universal risk. It’ll send a message to those who aren’t the worst off, but are getting there, of ‘Don’t worry about looking after yourself – there are people better placed than you to decide how you should be looked after’. I’d argue, by contrast, that National Insurance should be extended to a greater fraction of PAYE contributions and be used as a true universal form of health insurance. Labelling it ‘regressive’ is to miss the point – insurance is something you do because you need to guard against risk, and if working with other people can reduce your costs in this regard, then it’s a great thing for everyone. The only thing I’d add in this regard is the provision of different packages of benefits – the ones listed above may not be appropriate for you, as you may get more value out of a system of vouchers. You should have the option to hedge against differing types of circumstance, rather than having those circumstances mandated from on high. This may involve some kind of private provision, but as long as the risk remains distributed across the population, shielding high-risk groups from excessive premiums, that’s no bad thing.

Buff Liberalism

March 4, 2011

Nick Clegg’s speech on ‘muscular liberalism‘ has been described as foreshadowing an argument within the Coalition on anti-terrorism policy. Foreshadowed by Cameron’s speech earlier in February, it calls for liberals to argue, challenge, and ultimately defeat the specious arguments espoused by violent extremists – a stark contrast to Cameron’s determination to ‘No Platform’ extremist groups.

It is interesting inasmuch as it reveals a fault line within the coalition that’s largely been overshadowed by saturation coverage of the cuts. The Conservatives, like their counterparts in the US, do believe in utilising the power of the state to promote a particular moral line – in this case, Cameron seeks to exploit that State’s role as the begetter of much debate by removing certain positions from the contest. It is a subtler, and shallower, version of mad Tea Partiers demanding that the State ban gay marriage, but it follows the same principle – that there is a specified moral code that it is the duty of the State to promote. Clegg’s speech, by contrast, focuses on the duty of the individual to argue for the sort of morality that he or she desires – a debate only possible within a liberal and tolerant framework.

This fault-line, I presume, is an instance of Clegg’s new-found determination to say when he disagrees with the Prime Minister. As someone who loves philosophy, it’s fantastic to see the PM and the DPM discussing the deep philosophical issues that divide them in public. However, I can’t help feeling that something has been lost along the way, which is that you’re not in fucking ancient Athens now, Clegg.

You can’t just give long meandering philosophical speeches about buffing up your liberalism. You’ve got to translate those into messages that will resonate with the electorate. Where is this happening? Where’s the killer line from that speech? Even the quoted expression comes from Cameron, not Clegg.

I’ve said this a lot in private conversations, but I think it’s time to start saying it in public. Can the party start firing people now, please?*

*Also, see Barnsley. Nice that the Campaigns Department decided to not waste money not fighting an unwinnable seat, but I’d have hoped they’d at least tried to prevent us from being humiliated.