Citizen solidarity not economic nationalism after GE2015

A realistic strategy that makes the left electable in England requires citizen solidarity rather than economic nationalism 

Tony Curzon Price
Tony Curzon Price
10 May 2015

A good part of the English Labour vote that Tony Blair captured has gone in two directions: the aspirational to the Tories and the fearful to UKIP. The central question now for Labour is whether there is a vision of the world that is honest, realistic and inspirational that might bring those voters back. If there is not, Labour in England will either be a winning party of the center right or a losing party of the left. 

Insecurity in advanced economies is about globalisation

Toby Nangle, an investment analyst, has a very persuasive article on VoxEU that tells the story of the global economy in which the rise of the emerging economies - and especially China - over the last 20 years accounts for:

  1. the decline in the power of labour in advanced economies, and therefore
  2. growing labour income inequality together with
  3. low interest rates, and therefore
  4. soaring asset values and further inequality between the asset-haves and have-nots
  5. a shrinking and threatened "citizen surplus" for the less well-off in advanced economies 

The Figure below shows the growth rates in global incomes over the period 1988-2008 by your place in the global pecking order. At the very left, if you were in the poorest 5%, you've not done well - your incomes have barely grown. But from there right through until you get to the richest 25%, incomes have grown; and, for the emerging middle classes, they've grown by a lot. Think of this as the China effect.

What happens next is what's most important for the politics of advanced economies. From the 75% to the 90% point or so, incomes have fallen or barely risen. That's where the UK's unskilled and semi-skilled workers are. The 10% richest have rising incomes over the period, the very richest doing almost as well in percentage terms as the emerging middle classes. The underlying economic story is familiar:

  1. free trade plus reform in China plus migration within the EU ... leads to
  2. decline in labour negotiating power in the advanced economies ... leads to
  3. stagnating incomes for the have-nots ... which goes with
  4. increasing incomes for those on the right side of what investors call "the convergence trade" - the emerging economy middle classes & the advanced economy middle classes ... but also
  5. soaring wealth for the global asset-rich plutocracy coming from falling global real interest rates as cheap, powerless labour substitutes for capital and leads to capital glut and globally declining rate of profit (the irony is that falling returns on capital lead to increases in the value of reall capital assets because "easy/lazy" income streams become relatively rare and therefore their price is bid up)

Now, if you're English and in the big dip at the right of the figure, hovering around the 75% mark in world income rankings, there are two pretty natural views of the world: either you look just to the left of the distribution and perceive threats from immigration and from free trade; or you look just to the right and you aspire to join those who are doing just fine out of the great global convergence. In the first case, you'd be tempted to vote UKIP and in the second you'd be tempted to vote Tory, even if you once voted Blair - especially if you think that as well as appealing to the "aspirer", the Tories might even be covering the threat from the left with anti-immigration promises. (They won't say, of course, that the threat is at least as much due to free-trade and free-flowing capital, those features of the system that have so benefited the top of the distribution, as with immigration). 


Politically, this means the "citizen's premium" for the less well-off in our societies is under threat from the forces of globalisation

One way of viewing this is in terms of the "citizen premium": how much of the distribution of income is due to global features of the economy, like class, skill & inheritance and how much is due to being the citizen of a particular country. In 1870, most inequality was due to global features like class. But by 2000, your country mattered more in the income distribution you were subject to - nation had replaced class as the critical determinant in global income distribution rankings. Just by being British, you were going to have a less unequal experience. The claret-colored bar is the size of this "citizen-premium". The story of the squeezed 75%ers is that their citizen-premium is under threat.

The third bar in the diagram below is interesting and important for one vision of the future: it shows the "citizen premium" between US States as being zero. The continental mass of the US is one model for globalisation: freedom of movement, capital flows and trade. Almost all income differences in these cases are basically accounted for by class, inheritance and luck and not by social solidarity specific to your state (though there is national solidarity in the US not captured in this graph - it is equal across all states). It is, of course, a much more unequal society than the European social democratic economies, in which locational solidarity and citizen premium continue to be important. 



Economic nationalism or citizen solidarity?

The US archetype for a future global society is one with which most of the right is intensely comfortable, partly, of course, because it has found a way to make it work electorally (especially with the sop of immigration control mopping up the fears of "aspiring, hard working English" families who nevertheless quite rightly feel a twinge of fear in the air).

Those on the right who care about equality and fairness - and they are there, the "good right" - believe that the 75%ers need tough love to get out of the income growth trough they're in, while the global economy's success in creating an emerging middle class should be celebrated. And there's a point in the indefinite future in this story of development that the left ought to be intensely comfortable with: once the global pool of weakly organised, cheap labour is fully employed, labour will be able to once again be strong and negotiate an egalitarian deal. We will be back in a world in which capital holders invest to substitute away from organised labour; labour productivity increases; and organised labour negotiates for itself a share of its increased productivity. But that, of course, is way off. The real question we face is what world we create in the meantime and how to go about it.

There is a temptation to improve conditions in one country and to recreate the environment for favourabla labour negotiations with various forms of economic protectionism. This would involve policies like an EU exit, immigration controls and capital controls. A large devaluation could do some of this on its own, although it would also need capital controls to maintain itself. Under the most optimistic vision of this course, semi-skilled manufacturing would be attractive once more in the UK; investment in plant would boom; those caught in the 75% trough would instead face a future of rising (sterling) incomes and good jobs - the sort of future those just to the left of them in the world income distribution are currently enjoying, with continued prospects for aspirational moves to the right. 

There is a lot that is attractive in some versions of this strategy - particularly that it takes seriously the plight of those people who have put UKIP second in so many constituencies - and I certainly wouldn't rule out every aspect of it. But in some versions its anti-internationalism is hugely unattractive. What I'd like to understand is whether the only alternative to the globalists that has an electoral future is this sort of go-it-alone economic plan.

My starting point is to ask what's actually wrong with the message of the "good right". The real problem is not really their values per se, but their credibility. Specifically, they would be more credible:

  1. If they were less comfortable with the wealth accumulation at the top entailed by the current global model of development and were prepared to tax progressively at home and cooperate internationally to stop tax evasion; feeling less comfortable about the ability of the financial sector to escape the strictures of normal competitive markets in whittling away profits and senior pay would also help;
  2. If their "tough love" policies appeared to be aimed at actually helping those in the 75%-trough. In the phase of global development we're in, the 75%-ers need more of what goes to determine good outcomes in the free-for-all: skills, inheritance and luck.  In other words, they need capital (social, infrastructure, human and financial, for the skills and inheritance), and, if unlucky, they need income (that is, welfare). The 75%-ers need exactly what those doing better out of globalisation have in abundance; if the nice right were enthusiastically corrective in this way, we might believe them more;
  3. if they acknowledged the importance of a state in delivering what the 75%-ers need, and therefore the importance of sustaining a sense of solidarity with fellow citizens of that state (or, in our complex world of subsidiary sovereignties and responsibilities, stateS plural). Instead, the right seems intensely comfortable with encouraging and sustaining the values of foot-loose individualism that fit so comfortably with the interests of foot-loose financial capitalism and that undermine the sustainability of states to deliver redistribution;
  4. if they were serious about depolarising the international arena; making peace not war; making our armed forces agents of human security.

If the good right actually became more credible in these ways, I think that they would have come all the way to becoming a realistic left. And in that observation, there might be an electoral strategy. This set of policies would be different from the go-it-alone devaluation, although not necessarily inconsistent with it. It would require taxes at the top, tough financial regulation and international cooperation to tackle point "1"; investment in skills, education, infrastructure as well as welfare spending for point "2"; it would require devolution, localism and flexibility to reconnect those doing well out of globalisation with the visceral reality of a shared and common civic and political existence - this would create a civic space outside of the market in which our solidarity could flourish; it would require a transformation of foreign and defence policy. 

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