A Political Parable

In politics, there are lighthouses, and there are sailing ships. There are far, far more of the latter. The lighthouse will stand where it stands, regardless of tempests, but when the weather gets rough, the sailing ships will run before the wind, irrespective of which way the wind is blowing. When the wind veers, the sailing ships can be blown right back where they started or even beyond. The lighthouse will still be where they last saw it.

Much more important than following the behaviour of the sailing ships therefore, is understanding what meteorological factors are causing the wind.

The most successful politicians will probably be ships. The most respected will usually be lighthouses.

Sadly, of course, whilst a ship may occasionally be blown on the rocks, a lot of lighthouses are on the rocks to start with!

Has Representative Democracy Failed In The UK?

I was recently asked this interesting question of Quora. Here's my answer:

Logically, in order to establish the success or failure of any system, we must first discover its intended objective and then the time frame over which we shall measure.

For representative democracy, there may not even be a universally accepted objective. Different people or different cultures, at different times, in different circumstances may seek different outcomes.

Abraham Lincoln famously defined democracy as government of the people, by the people, for the people.

A century and a half later, there are still many who believe his middle phrase to be a step too far. Some issues, they will tell you, are just too complex for the people to grasp; such decisions should be left in the hands of those who know what’s good for the people, by which term they mean, of course, people like themselves.

On the other side of the argument are ranged democrats who believe that everyone is the world’s leading expert in how things affect themselves. One does not need to be able to explain why rain falls in order to know that when rain falls one’s roof leaks. However, if the government is made up entirely of well-off people who don’t have leaky roofs then this problem is unlikely to be considered, let alone solved.

So now let’s extend the problem to cover not just leaky roofs but homelessness, substandard housing, overcrowding and so on. Do the people who suffer from these, and other social evils, have a right to be heard and to participate in the examination and solution of their problems, or should a paternalistic ruling class decide and administer what they consider to be in the poor’s best interests? Seems easy enough?

But before we run away with the idea that democracy solves everything, let’s consider the problem of hard choices. In the NHS, for example, everyone considers that their own needs should be attended to, but when we add up the implied expenditure from attending to everyone’s needs, we find we have a sum much larger than we are collectively willing to pay for the NHS.

The concept of representative democracy is supposed to provide a forum within which competing needs and wants of individuals in society can be prioritised in a rational way. In principle, we enjoy competition for power between different philosophies with different priorities, of which two important ones are wealth creation and wealth distribution. Usually, in order to win and hold power, some sort of centrist compromise has had to emerge.

The problem we face today is that, over time, the political parties embodying these philosophies have become transformed from organic plants, growing in the soil of local communities and nourished by local culture and information, into hothouse blooms that can only exist under London glass. Our nominal representatives have less and less genuine interaction with us, the people they supposedly represent. Not many of them are genuinely local people; they are career politicians who have climbed the greasy pole until they have been allocated a winnable seat. They are supposed to be the honourable member for Suchandsuchtown, but they possibly never heard of the place until they attended their selection meeting.

It seems to me that many of today’s MPs represent primarily themselves and their own ideas and careers, then the party to which they owe their elevation, and only as an afterthought the people who elected them. This does not necessarily make them bad people; many, I am sure, are honest, decent folk, doing what they believe to be best. But were their priorities not as I suggest above, you could not possibly have well over 400 Remainer MPs in a country where over 400 of 650 constituencies voted to leave the EU.

There. I arrived in the end at the issue which probably gave rise to your question. I tend to agree that hard cases make bad law, but the complete disconnect that has now arisen between representatives and represented is not, in my view, a sustainable situation.

I don’t think this is the same as saying that representative democracy has failed. In its relatively short history, it has done much to advance society. However, when citizens of the information age are still quoting an eighteenth-century, pre-democratic age political philosopher (Edmund Burke) in order to explain why parliament is not delivering what the electorate voted for, I suspect we have arrived at an era in which substantial reform is required for our system to continue (or perhaps recommence) effective functioning.

What worries me about UK politics.

To begin with, let me declare an interest. In 1979 I stood for election to parliament as a Liberal, back in the days when there was a Liberal Party. I was one of the 100 prominent Liberals (‘prominent’ being a relative term in this context) whose names were listed in the press as opponents of the Lib-Lab Pact.

There is no longer any British political party representing my broadly centrist position. I have to say with regret that since the merger with the Social Democrats my former party has turned into something neither liberal (in the classic sense) nor democratic (as demonstrated by its attitude to the EU Referendum result). For me, this explains its failure to fill the vacuum in moderate politics created by the polarisation of the two main UK parties and the rise of fissiparous nationalism in Scotland.

I am troubled by the seemingly inexorable rise of identity politics. In politics, I do not care about a person’s identity, I care about the quality and rationality of his or her ideas. To value ideas only insofar as they are uttered by an approved sort of person and to dismiss ideas uttered by any disapproved sort is a classic ad hominem fallacy, offering no hope of reaching the truth. Identity politics emphasizes irrelevant divisions and breaks down social cohesion to our collective diminution as citizens.

Another major concern is the diminishing respect for free speech. Extreme political correctness is the new fascism. No-platforming, shouting down, political violence and other forms of mob censorship are rapidly destroying our free society. I find it so tragic that things for which my father’s generation fought and died are so little valued and so lightly cast away by people who have the nerve to call themselves liberals. I’m sorry, but such people do not know the meaning of liberalism; they should read JS Mill’s On Liberty and learn what it is.

I value social media. Living as I do in rural isolation, forums such as this allow me to feel close to people all over the world. At the same time, I worry about the apparently deliberate policy of some media to create what has been called ‘echo chambers’; self-reinforcing factions rarely exposed to alternative views. When the certainty of one’s own righteousness becomes intense, there is an unfortunate tendency to respond to contrary views with hostility and belligerence rather than reasoned argument.

(In passing, may I mention that as a former philosophy teacher I know a thing or two about rational discussion. It was frequently necessary for me to play devil’s advocate, putting forward arguments for a view I didn’t actually support because it was necessary that someone should. You cannot convincingly claim to be correct if you are not familiar with the main objections to your view and able to offer reasoned refutations thereof. Without this there is only emotion and prejudice.)

I am disturbed by an increasing willingness to define ourselves by what we are against, rather than what we are for. Admittedly, this is often instinctive and reactionary. During the Scottish Independence referendum the unionist campaign understandably resorted to playing down the prospects of an independent Scotland but I would have preferred to see far more emphasis on what the UK had achieved and could in future achieve through integration. Likewise, the Remain campaign’s scaremongering about the dangers of leaving the EU was far more prominent than any enumeration of the benefits of membership.

I know politics has always been a bear pit. Confrontation is the nature of the beast. Yet it is vital to keep in sight the underlying truth that the UK collectively is far more than the sum of its parts. Split its countries or its society apart and we all suffer.

I wish I could have said the same for the EU. Sadly I can’t. The direction it has chosen is one which benefits just some citizens at the almost unbearable expense of others.

Sum You Lose

The recent electoral success of the SNP throws the spotlight back on the question of Scottish independence. It seems few people remember that the economic forecasts of the nationalists were discredited within months of last year's referendum. Perhaps therefore a summary of the crucial points might be appropriate.

In December 2013 The SNP published Scotland's Future, a document long on words and short on numbers. Yet amongst the numbers it did contain, one received surprisingly little attention. It was projected that in the first year of independence the Scottish fiscal deficit would be £4.4 billion, or approximately £1,000 for every adult member of the population.

Remember that figure, it is important. At a time when people were blithely talking about being one of the richest countries in the world, creating a more caring society and setting up an oil fund for the benefit of future generations, the numbers actually showed that Scotland was already living beyond its means and proposed to go even further into debt.

In order to arrive at this deficit figure, they made assumptions about likely sources of government revenue. Large receipts were expected from taxes on Scotland's oil and finance industries, which together form a disproportionately large component of our national income. Assumptions were also made that Scotland would continue to use the pound sterling as its currency and that Scotland would run a Balance of Payments surplus. All four of these assumptions were flawed.

Official statistics were pessimistic about future oil prices, given the threatened slowdown of the Chinese economy and the rapidly expanding supply of cheap shale gas from the USA. Alleging deliberate manipulation of the figures to disparage the potential riches of an independent Scotland, the nationalists substituted their own oil price estimate (of over $110 per barrel). In fact the official statistics turned out to have been over-optimistic. In 2015 oil prices are in the range $50 to $60, around half the nationalist projection. So far from supporting an independent Scotland, the oil industry was soon in need of UK government help.

The UK Chancellor of the Exchequer challenged the assumption that Scotland would continue to use the pound sterling. He expressed himself poorly. What he meant to rule out was a currency union by which the rest of the UK would continue to underwrite Scottish finances. Fresh from the 2008 banking crisis in which UK taxpayers had been required to find £46 billion to bail out Royal Bank of Scotland, that was hardly surprising.

His lack of clarity was misrepresented as a threat. "No-one can stop us using the pound," Alex Salmond declared. This was of course true. Surprisingly he did not go on to explain that no-one could stop us using the dollar or the yen or the Zambian Kwacha either.

An independent country may use any foreign currency it likes, provided it can get hold of enough by means of a trade surplus. Panama, for example, uses the US dollar. All that you have to do is give up any desire to control your own monetary policy. If Scotland were to use the pound without a currency union it would have no choice but to accept UK monetary policy as its own.

It also means the Scottish government could only run a fiscal deficit to the extent that it could cover the revenue shortfall with reserves of sterling.

An odd sort of independence, you might think, that resulted in less economic powers than Scotland already has?

When the currency problem became clear, the large Scottish financial institutions announced plans to move their services to UK customers south of the border. This was not simply a brass plate technicality to comply with EU regulations as nationalists claimed.

Banking profits derive from the difference between the interest rates at which banks can borrow and those at which they can lend. Essentially a bank's lending operations create new money and most of the money supply in a modern economy consists of bank deposits, not cash. In order to perform these money-creating operations, banks must be within the jurisdiction of, and accept regulation by, the central bank responsible for that currency. A bank attempting to create new foreign currency would be acting illegally; it can only operate in a foreign currency to the extent that it possesses reserves of that currency.

The net result of this alleged technicality would therefore be twofold.

      1. Scotland's financial institutions would be responsible to the Bank of England and pay their taxes to the UK Treasury.

      2. Without financial exports it is unlikely that Scotland could run a Balance of Payments surplus. This would eliminate the Scottish government's ability to acquire reserves of sterling and thereby to run a fiscal deficit.

Now please remember the important figure that I quoted at the beginning of this article. By the SNP's own projections, the fiscal deficit in the first year of independence was to be £4.4 billion.

This was before accounting for the fall in the oil price and the loss of the financial services industry. It was before losing control of monetary and overall fiscal powers as a result of sterling becoming a foreign currency. This £4.4 billion deficit was actually a serious underestimate, perhaps not within several orders of magnitude of the reality.

Not only would a future Scottish government be unable to afford the promised fairer society, it would have to borrow improbable sums just to keep public spending at present levels.

Why improbable? Because in order to borrow you must first establish that you are creditworthy. Why might the international financial community suspect that Scotland was not creditworthy? Because the SNP threatened that if they did not get their own way on the currency they would walk away from responsibility for Scotland's share of the UK National Debt.

Let us leave aside whether one could throw over this debt without sacrificing Scotland's claim to a share of the national assets and infrastructure which that debt has financed, much of which is not located in Scotland and nearly all of which would need to be replaced by an independent country starting from scratch.

Let us also leave aside the fact that a country involved in a major financial dispute with an existing EU member would struggle to find an easy path to re-joining the EU.

Just consider this single point. What international lenders would offer reasonably priced funds to a new government whose first independent monetary act had been to deny any responsibility for debts accumulated jointly under the previous political union?

I am an economist. But of course I am also human. I might be wrong. To persuade me that I am, would enthusiasts for independence please not shout at me. Just show me your numbers.

And before you do, please check that they add up.

Political Parties Do Not Deserve Public Funding

The latest scandal to afflict the finances of political parties has revived the old demand for public funding. Strangely enough, this demand always seems to proceed from the presumption that parties must be funded somehow, rather than justifying such a premise.

Public funding derives from either taxes or borrowing. We have an unsustainable fiscal deficit, so perhaps now is not the best time to suggest yet another call upon the public purse.

The calls upon tax revenue already have to be rationed; there are far more causes worthy of state support than there is state support available. Who will explain to the patients queuing in ambulances outside A&E that in our wisdom we decided funding political parties was more important than their medical needs? Who will explain to our troops in the field that they are short of equipment because we allocated higher priority to political funding?

The party system in this country may have evolved as a method for the legislature to seize power from the executive but it has been sustained to a point where legislative tyranny has supplanted executive tyranny. Politics as a civic duty has given way to politics as a career to be pursued by an entire class of professionals who are without knowledge or understanding of real life as lived by taxpayers and who do not appear to understand that before money can be spent it must first be earned.

These professionals believe that they should be allowed to spend our money on the communication to us of party-biased misinformation. The more of it they are allowed to spend, the more distortions their advertising campaigns put out and the more special advisers they are able to appoint in order that ministers may be surrounded by yes-men rather than impartial civil servants.

The party system in the UK is moribund; parties used to be mass movements, now they are largely hollow shells inhabited by few but careerists. Nevertheless they maintain a stranglehold on government. In the 1950's over 90% of voters supported one of two parties and election turnout exceeded 80%; now over a third of us don't vote at all and the two big parties only poll two thirds of the votes that are actually cast.

When our great metal bashing industries lost market share at such a rate we reluctantly closed them down and learned as a nation to make our living in other ways. Likewise we need to reinvent our democracy not just subsidise dying political dinosaurs.

There are public services for which British taxpayers have shown themselves more than happy to pay. Funding political parties is not amongst them.