Sunday, 5 March 2017

Hey, Maybe Neoliberalism Wasn't So Bad After All

Yes really. But don't worry, this blog has not renounced its political values. Let me explain...

It's only been a few months since the EU referendum, but already it's clear that it has catalysed a fundamental realignment of English politics (just as Scotland was realigned by the independence referendum). First consider how voters of different parties divided on referendum day:


One thing that leaps out immediately from this breakdown is that the major reason for Leave's victory was David Cameron's failure to bring his own voters with him. Labour voters on the other hand broke for Remain in much the same proportion as the resolutely pro-EU SNP, belying the idea that Corbyn's half-hearted campaigning was to blame for the result. The figures for the smaller parties were no surprise, although with the notable exception of UKIP there were substantial minorities opposed to the party line in each case.

Now compare with a YouGov poll from last month asking whether the result was the right one:


While Remain and Leave are still almost evenly matched overall, the differences when split by party are remarkable. Support for staying in the EU among Conservative voters has collapsed, while for both Labour and the Lib Dems pro-Remain sentiment has hardened significantly. The Lib Dems in particular are now approaching UKIP levels of unity on the topic. To what extent this is a hardening of views among existing voters vs. movement of voters between parties cannot be judged from this, but either way something important has happened.

How have these changes manifested at the ballot box? A number of surveys showed that Remain voters had become far more motivated after the referendum than they ever had been during the campaign, and this started to show almost straight away in a steady drip of council by-election wins by the Liberal Democrats, often on astonishing swings:


Their performance has been all the more impressive for them still languishing at around 10% in national polls. Clearly Remain voters are looking for a way to give Brexit a kicking where they get a chance, and the Lib Dems are more often than not in the right place to deliver it. This showed most obviously when the parliamentary by-elections came round, first with their remarkable vote share increase in true blue Witney and then triumphing over pseudo-independent Zac Goldsmith in Richmond Park. But other parties have had unexpected results too: notably the Conservatives incredible win in Copeland and the complete flop of UKIP's leader in Stoke Central. Meanwhile, Labour hang on as best they can.

So what factors underlie these shocks? It's obvious first of all that this is not a systematic shift along the traditional left/right spectrum. But there is a shift of some kind. Hints of what this might be can be seen as far back as 2005 in this fascinating analysis of "axes of belief" (no doubt the beliefs themselves go back further in time). This study found that there were two statistically significant political axes: one an economic one, broadly speaking left vs right in the free market sense, and then a much more significant cultural one, dubbed "the axis of UKIP". At one end of this axis lies isolationism and authoritarianism, while the other end is internationalist and pro-immigration, with a liberal view of criminal justice. You could label this axis internationalist/isolationist, liberal/authoritarian, inclusive/exclusive, Guardian/Daily Mail or any number of other names, but I will defer to Nick Clegg and use his terminology of open vs. closed, as here:


Of course the idea that there is more than one "axis of belief" in politics is an established and fairly well-known one. The point is that the cultural axis was very much of secondary importance as far as election results were concerned until the referendum, but now it is dominant. (Note that the Leave campaign's arguments aligned with the cultural axis, while Remain's arguments were economic. It remains to be seen whether public opinion will change when the economic reality of Brexit hits home, but we can certainly predict how Brexiters will react when it does: they'll blame foreigners.)

Now consider where each party stood on this chart at the time of the referendum. On the economic left/right axis there has been a shift since the 2005 analysis, when Charles Kennedy had adroitly placed the Lib Dems to the left of New Labour. While Tim Farron, unlike Nick Clegg, is very much on the Kennedy wing of the party, Corbyn's Labour is undoubtedly considerably further left than that. So the parties can now be safely ordered in the traditional way from left to right: Labour, Lib Dem, Conservative, UKIP. For the open/closed axis on the other hand we can confidently order them Lib Dem, Labour, Conservative, UKIP, which fits with the distribution for Remain and Leave. This give us the following plot:

(You can argue about the exact positions of the parties and the "political centre", but you get the idea)

Note that I have put the Conservatives on the Open, aka Remain, side of the fence, in line with Cameron's position in the referendum, though at odds with their own voters. Which brings us neatly to the topic of this post.

A lot of nonsense is spouted about the concept of neoliberalism, not least the pretence from some of its own supporters that it doesn't even exist. In fact it is one of the more sharply defined political concepts (certainly far more sharply defined than liberalism itself). We can even define a Neoliberal Era lasting from the 1980's to the financial crisis of 2007/8. There is no mystery about what it involved: shrinking of the state wherever possible, tax cuts, privatisation, deregulation, and constraints on organised labour. In some ways it is a return to a 19th century classical liberal view of the world, hence the name, which is particularly apt in the light of the era ending in true 19th century fashion with financial panic and severe recession.

Fundamentally, neoliberalism is a concept of the economic axis. In the UK neoliberal government began under Thatcher, was effectively accepted by Blair and more recently pushed further by Cameron. These governments could be placed at various points on the cultural axis, but all operated in the context of a neoliberal consensus that pushed all parties rightwards economically.

If neoliberalism has a bias on the cultural axis, it is towards the open or liberal end, as the name suggests. In fact the neoliberal era has seen a rapid increase of globalisation, free trade and immigration, all indicators of open-ness. Neoliberalism is certainly not a closed philosophy. The coalition government for example was a particularly open one, characterised by the "global race" the Tories were so fond of to justify cuts in workers' rights and welfare, but also relatively culturally open as symbolised by Cameron's sincere support for gay marriage. No wonder that many closed-minded Tories left to join the comforting bigotry of UKIP.

Post-referendum this has all changed. Through pursuing a "hard Brexit" with no prospect of staying in the European single market, Theresa May has taken the Conservatives in a substantially more closed direction. Meanwhile Labour too have adopted a more closed position through the panicked desire of seemingly all factions of the party to give up on the principle of freedom of movement within Europe. So the chart has changed:


We now have three parties chasing after Leave voters, while only one is unquestionably looking after the interests of Remain voters. It's not rocket science why the Lib Dems are pulling huge victories out of nowhere. Perhaps the real surprise is that they continue to languish in national polls, though maybe a change here requires a national election campaign, as has often been the case for them in the past. Adapting to the new politics is straightforward for the Lib Dems, as the quintessentially Open party. While they may have a ceiling of perhaps 20-25%, representing the hardcore Remain-or-die vote, that would still be a huge improvement on their position as of the 2015 election.

For the Conservatives, the task is trickier, as they are a party that is only firmly defined on the economic axis while fuzzy on the cultural one. But this does give them a certain ideological flexibility, as their hard Brexit policy demonstrates. As a result they have encroached firmly on UKIP territory, netting them their victory in Copeland by squeezing the UKIP vote, but at the cost of losing many other by-elections to targeted Lib Dem assaults, culminating in Richmond Park.

And here is where the title can be justified: yes, neoliberalism is terribly right-wing. Yes, the rightward economic shift that took place between 1980 to the present day is regressive for society and should be reversed. But it truly wasn't as bad as the new dominant ideology, which is both right-wing and closed. This is far more obvious on the other side of the Atlantic, but here too, in a considerably less terrifying, thankfully conventional, yet still tangible way, we are losing the good aspects of the neoliberal era while doubling down on the bad.

Labour may be the only party which can chart a course out of this unsettling period. For the Lib Dems, the new politics is essentially defensive. It's about defending the open, liberal parts of the neoliberal settlement against those who are trying to take us in a closed direction. Farron, as a "social liberal", will also pursue a social justice agenda somewhat to the left of Clegg's Lib Dems, but this is secondary to the defence of open-ness.

Defending what we've got is an important task, but not one that will reverse the tide when the true driver towards closed-ness is the huge rise in inequality during the neoliberal era and the redirection of the resentment that generates towards outgroups. As a party of the economic axis, the mirror image of the Conservatives, it is Labour that is best placed to take us in the direction necessary to undo the damage done by neoliberalism. Easier said than done, of course. Labour's task is the trickiest of all, as it involves changing the terms of debate 90 degress from the now dominant cultural axis back to the now secondary economic one.

Last and least, UKIP. Perhaps the only silver lining of the referendum result is they are a significantly diminished force, albeit largely because the Conservatives have stolen their clothes. They will also lose their only electoral powerbase, in the European parliament, when we leave, and their only MP, Douglas Carswell, is under threat of being kicked out. The underlying reason for this is instructive: Carswell is a so-called "liberal Leaver". This is one of two tribes we haven't yet considered, the other being "Lexit" campaigners:


On this plot the official Vote Leave campaign and the UKIP-aligned Leave.eu represent the bulk of Leave voters. Both were closed campaigns (think of the ugly rhetoric against Turkey joining the EU and Syrian refugees respectively), while Vote Leave was cannily fuzzy on the economic axis, even featuring arguably leftish arguments such as the notorious NHS funding promise.

The "Liberal Leave" argument, however, is quite different. Liberal Leavers such as Carswell do not really care about immigration, in fact are quite open about the need for it to remain high. Their argument is economic: what they really object to is the EU as a closed shop that prevents Britain becoming the buccaneering right-wing tax haven of Thatcherite dreams. Watch the truly astonishing Brexit: The Movie if you want to understand this mindset. In fact a lot of senior Vote Leave figures feel this way (e.g. Boris Johnson and Michael Gove) and it has even made it into Theresa May's speeches in the form of "Global Britain". The fact that all of these arguments lie at 90 degrees to Vote Leave's actual xenophobic campaign may yet be swept under the carpet at the cost of an obvious betrayal of their own voters. It is clear at least that a Global Britain is completely incompatible with reducing immigration - imagine trying to sign a trade deal with, say, India, which doesn't include relaxation of visa rules for example. It is telling that it takes Tories from a previous generation such as Ken Clarke and John Major to point out the disaster that lies ahead.

The mirror image of the Liberal Leavers is the "Lexit" position (= left-wing Brexit), once a mainstream school of thought in the Labour party at the time of the 1975 European referendum, but now relegated to a fringe on the left of Labour, 50% of the Green party in parliament, and some of the minor parties further left (notably TUSC, the third of the three organisations which applied to become the official Leave campaign). Lexit, like Liberal Leave, is not a closed position: in general it is pro-immigration for example. The Lexiteers' objection is on the economic axis: that the EU, far from a brake on neoliberal aspirations, is in reality a capitalist plot to prevent the UK from enacting socialist policies. Once we divorce, we'll be heading for socialism faster than you can say "Up yours Delors". The fact that Britain is one of the most free-market oriented of all the EU nations might seem to militate against the Lexiteers' strategy, but we will find out whether they were right soon enough.

While both Liberal Leave and Lexit might charitably be called niche positions in the public at large, combining as they do the doubly unpopular proposition of retaining high immigration while losing membership of the single market, politically speaking they are both very important, and not just because in a tight vote they may have swung the result to Leave. Liberal Leave is important for their advocacy of a Global Britain described above, while Lexit is important because it informs the thinking of Labour's current leader, who comes from the left-wing anti-European tradition of Tony Benn and his followers.

Now while Jeremy Corbyn does have a long track record of voting against European integration consistent with this background, he did apparently sincerely convert to the Remain cause on becoming leader. And if we are to attach any blame for the result to Labour, as much if not more should go to Alan Johnson's all but invisible Labour In campaign as to Corbyn. Regardless, this is an academic debate given that it was Tory voters who delivered Brexit.

The reason Corbyn's Lexit roots are important is not because his pre-referendum campaigning was half-hearted, but because of the way he and John McDonnell have positioned Labour after the referendum. Both a large majority of Labour voters and especially Labour members were pro-Remain, and yet Labour have fallen into line with the Tories' principle that "access" to the single market is all that is required, not membership of it. This is a strategically nonsensical position.

The reason that Corbyn doesn't want a soft Brexit is not to restrict freedom of movement (although he has starting making noises in that direction), but because single market rules prevent, for example, any industrial strategy which counts as state aid. Unfortunately the supposedly "moderate" wing of Labour have reached the same position as Corbyn, in their case in order to chase Leave voters who want immigration reduced at all cost. In fact, in an irony of gargantuan proportions, virtually the only prominent Labour figure to argue for the pro-European strategy that the membership overwhelmingly wants is Tony Blair.

This is tragic. Labour should not go all out for Europe like the Lib Dems but they do need to be at least the soft Brexit party. The only time the Tories ever lose elections in government is when they lose economic credibility, and leaving the single market is an economic open goal for Labour so large it can be seen from outer space. For their part Labour need to regain economic credibility (leaving aside that they didn't deserve to lose it in the first place), and defending single market membership at every possible opportunity is the perfect way to do this. But the sad fact is no credible leadership candidate apparently wants to take this position.

One final thought: let's look forward to 2020, assuming there is no early election. While May is currently in the middle of a political honeymoon, it will not last as the economic realities of Brexit become clear. Assume too that Labour depose Corbyn and begin to recover up to the giddy vote share heights achieved by Brown and Miliband. Meanwhile the Lib Dems continue their resurgence and SNP hegemony in Scotland is unchallenged. This is a recipe for another hung parliament, and possibly a new Conservative/Lib Dem coalition. But there will be a big difference between 2020 and 2010, as shown here:


While a Cameron/Clegg coalition was a natural fit, a May/Farron coalition would be a considerably more distant relationship, both on the economic and especially the cultural axis. It's far more likely that coalition talks will fail on the pretext of, say, a Lib Dem demand for proportional representation, and May will end up leading a minority government reliant not only on the goodwill of other parties but also Cameron's old allies on the Tory backbenches...

I'm not saying this scenario is inevitable or even likely, but it is one plausible future. One thing is for sure, the interesting times will continue until our future relationship with Europe is fully settled, and there is zero chance of that happening before 2020.

PS: In case you doubt there's been a fundamental realignment in British politics, perhaps you didn't notice there are more favourable references to Nick Clegg, Tony Blair and John Major in this post than in the rest of this blog put together.