Mandela - The Tories still owe him an apology

Originally published August 2013.

We have lost one of the greatest men of our time. I can't match the numerous tributes in the media over the course of the last few days but can reflect that from a personal point of view that his cause clarified the difference between left and right in the politics of my generation.

When I was at university in the early 1980s the anti-apartheid movement and the ANC were our cause celebre. The governing Conservatives and their disgusting student wing, the Federation Of Conservative Students, saw fit to defend the minority regime. The Tory party at that time had absorbed large numbers of the defunct National Front, attracted to Margaret Thatcher's particular brand of nationalism and racial prejudice. A large chunk of the party was therefore made up of closet, and not-so-closet, racists. We on the left campaigned for recognition and support for the ANC, but the right continued to condemn them as terrorists.

We saw a manifest injustice that needed to be swept aside, but the right insisted it would lead to a bloodbath. We argued for one person one vote, but the right insisted that 'blacks' were incapable of self-government. To us there was no reasonable objection to international action against Pretoria, but to the right hesitation, obstruction, delay and undue consideration given to white interests was the preferred approach. While we boycotted Barclays, they refused to join international sanctions. We sang "Free Nelson Mandela", they sang "Hang Nelson Mandela".

It makes me uncomfortable and a more than a little angry now to see Conservatives joining in the tributes and quietly forgetting their party's past behaviour. To be fair to David Cameron he did apologise back in 2006 but with his 'modernisation project' now proving so unpopular with the grass roots and his party's consequent lurch to the right it no longer suffices. A large number of those former FCS members who called for Mandela's execution are knocking around in the higher echelons of government and the Tory party now. They should take this opportunity for an up-front, unambiguous, front page apology undersigned by all past offenders for their profound lack of judgement, and for delaying the process of reform. They should ask themselves how many extra people suffered needlessly or even died as a result of their continued support for the apartheid regime.

Until I see that apology I won't believe the rank and file have really changed. I am not holding my breath.

Boris And The Big Lie

Originally published November 2013.

Boris has finally come out and nailed his colours to the mast as a dyed-in-the-wool Thatcherite. In so-doing he went off-piste for a while with a foray into the realms of tax and inequality. He may come to regret this at some point - my advice to him would be to always make sure you fully understand the data before using it as a plank of your platform for a leadership bid. His central point was that since Thatcher set in-train a trend towards lower income taxes the rich have contributed a greater proportion of the overall income tax take because they have been able to create more wealth. And of course he is completely correct in his analysis ... or at least the first part of it anyway. But where he is wrong is in falling for The Big Lie about the effectiveness of trickle-down and wealth-creation.

Boris is absolutely right that the top 1% of earners now contribute 30% of the income tax take but he ignores the fact that this is because their incomes have grown disproportionately in that period also ie. they are paying more tax because they are grabbing more of the income. Boris would explain that this is a demonstration of wealth creation in action and that it is fine because it pays for all those schools and hospitals, but if we look at how the additional 'wealth' created over the last 30 years has been distributed it is clear that it has gone almost exclusively to the already-wealthy. Incomes for the majority of the population have stagnated or fallen in real terms for decades, and since 1979 there has been a steady, and cumulatively huge, transfer of wealth from the poor to the rich. The income that the majority would have earned and paid taxes on has gone to the rich instead, and naturally they have paid the tax due on it instead.

So why should we treat these large tax payers as the heroes Boris extols us to? In reality they have merely appropriated income from others (ie rent-seeking behaviour) rather than created new wealth and now are paying the tax due on it. This has nothing to do with entrepreneurship or wealth creation - our export performance has been abject; it has more to do with reduced protection for the incomes of the majority of the population, and is another point in support of the case for a mandatory living wage to spread the tax base more widely.

Boris even postulated the ludicrous idea of reducing the top tax rate to 30%. In order for this to be remotely plausible and for the tax take to remain the same from this income group this would need to be predicated on even greater inequality of gross income than we see now. If we take into account indirect taxes the poorest in fact currently bear the same overall tax burden as the richest - around 35% of income, so reducing the top income tax rate to 30% would give us a tax system which is actually regressive whereby the rich pay a lower tax rate than the poor (as in the US). This is utter lunacy, but I would be happy for it to be adopted as Tory party policy. I feel that public attitudes to the wealth disparities created over the last 30 years are changing decisively and this policy would condemn the Tory party to the same fate as the Republicans in the US ie. to become a minority interest group lobbying for the super-rich.

But what I really struggle with in the perpetuation of The Big Lie is the extent to which individual Tories: 

a) don't understand the above.
b) understand and are discomfited by the above, but willfully ignore it as it flies in the face of free-market dogma.
c) fully understand the above but believe increasing inequality has desirable outcomes.

I believe that unfortunately most of the modern Tory party fall into the (c) category and go into politics to defend the interests of the wealthy. This certainly appears to be Boris's position. But what I can't come to terms with is the astounding level of bare-faced cheek he and other Tory party spokesmen display when they go onto TV and radio and continue, in the face of all the evidence, to expound the myth that trickle-down benefits everyone and that lower taxes will lead to greater wealth-creation. We, and they, know it doesn't work yet they continue to use it as cover for policies that in reality protect the interests of those they represent. When listening to them I feel as though they are all knowingly giving each other a nod and a wink as if to say "We know the truth but the public are too disinterested or ill-informed to understand it so we'll trot out the same old simplistic nonsense about tax cuts without getting round to answering any of the awkward questions". And I wonder too what they say to each other behind closed doors, away from the mic - probably along the lines of "I can't believe we're still getting away with this stuff", while pocketing another cheque from their backers in the City. They can continue to advocate tax cutting without explaining the degree to which it disproportionately benefits the rich. It takes some front on their part but you have to admire the private-education-enhanced arrogance and the disdain for the public with which they dish out their pearls of wisdom.

However, I do feel that a shift in opinion is taking place and people are waking up to the increasingly precarious nature of incomes in the bottom half of the distribution and the growing wealth disparities - I am not sure how much longer an appeal to a low-taxation, free-market, deregulated, greed-is-good approach to economic management will be an electoral asset to the Tories. With Ed Miliband starting to make some headway in challenging vested interests and coming down firmly on the side of the majority of the population, the next election is shaping up to be a more interesting contest than I expected a year or so ago.

Is Ed Miliband a Marxist?

Originally published November 2013.

The latest Tory attempts to smear Ed Miliband have centred on trying to paint him as an unreformed Marxist and a slavish follower of his father's academic teachings. Whenever Ed stands up for the man in the street it is denounced as a return to 1970s style socialism and the 'bad old days' of the state intervening in the free market. But what exactly have those free markets, unleashed by a tide of deregulation since 1979, actually done for us?

It is certainly the case that, in manufacturing industry at least, increased competition globally has resulted in higher productivity and falling real-terms prices, but at what cost? Since the 1980s, real incomes have been steadily falling for the poorer half of the UK population while the rich have been getting richer - both in terms of income and in wealth accrued  (by the way, the situation is far, far worse in the USA which has been even more aggressive in embracing globalisation). This is exactly in line with Marx's analysis - there is a continuous struggle between capital and labour with each trying to maximize the return to itself and, on recent trends, capital is clearly winning. Deregulation has enabled freer movement of capital around the world and strengthened its hand in this struggle - demands for higher pay, shorter working hours, better conditions etc are met with the threat of capital upping sticks and moving abroad where production costs (and workers' protections) are lower. At the same time legislation has reduced the power of organised labour and eliminated much of the collective bargaining which in the past may have helped to maintain wages, instead leaving every man or woman to fight for him or herself.

David Cameron has talked about this 'global race' as though it is some previously unknown economic phenomenon which he has identified. It isn't; it is the same process Marx talked about. When it is described as a race to the bottom it is dismissed as 'pessimism' by Osborne, but nonetheless each nation continues to undercut the next to attract capital to its shores - look for example at Osborne's recent cuts to corporation tax and his plan for workers to give up workplace rights in exchange for shares estimated at a measly couple of grand in value. The argument presented in favour of this is that we have become uncompetitive so taxes and wages have to fall to boost productivity (while, strangely, board-level salaries have to rise to attract the best 'talent'!). It doesn't address the central point that even if we as a nation do succeed in winning the 'race' and staying in front it will be at the expense of ever lower wages. The Tories claim otherwise and that wages will rise as the economy recovers but this belies the lessons of the last several decades during which time in the USA for example real incomes have fallen so that the median male salary is now lower in real terms than it was in 1979, and Britain is not far behind. The pie may be getting bigger but it is not being shared fairly. And the costs of low wages paid by exploitative employers are immense - the taxpayer ends up subsidising these poverty wages through in-work benefits - tax credits, child benefit, housing benefit, etc. As these are needed due to the failure of employers to pay a living wage these benefits really represent a taxpayer subsidy directly to the bottom line of these businesses - more money being returned to capital rather than to labour.

One particularly simple and powerful point made by Joseph E Stiglitz in 'The Price Of Inequality' is this - we live in a world that has high mobility of capital and low mobility of labour. There are all sorts of barriers to the workforce moving to where the work is (ie. following the capital) - for instance, immigration controls, local support networks/ties to help families out, language barriers, cost of housing, exchange rates differences, etc ... whereas there is very little indeed to prevent capital moving to where returns are greatest. This leads to governments bending over backwards to attract capital - eg. cutting corporation taxes, deregulating the labour markets, squashing union power, removing or freezing minimum wages, etc. ie. the laws of the land are rigged to favour capital over the workforce. What would it look like if it were the other way around ie. we had a highly mobile workforce and low movement of capital? The result would be governments falling over themselves to attract labour into the country - and what kind of inducements would they be offering? Well I suspect it would be along the lines of better schools and hospitals, a decent minimum/living wage, reduced working hours, etc. It would be a very different country, and a far better one. Of course, that is not the reality, but it illustrates the extent to which we are all enslaved to capital in a globalised world.

So even though the policy prescriptions made in Marx's name may have proved disastrous that doesn't necessarily invalidate his analysis.  Ed Milband should shrug off these latest insults and continue to highlight the tensions between the returns to capital and to labour as it is obvious that a better balance needs to be found.

What next for Labour?

Originally published October 2013.

The conference season is over and it has turned out much better for Labour than I had expected - I am keenly awaiting the latest polling but expect it to show Labour back with a 5 - 10 percent lead, having had the best conference amongst the 3 main parties.

Labour succeeded in nailing down the cost of living crisis and policies to deal with it as the current differentiator between the two major parties, forcing the Tories to respond, though lamely, to Labour's agenda. The LibDems had a good conference also, though Nick Clegg's statement that he could not go into coalition with Ed Miliband could cost him his job in the long run, barring a humiliating climbdown. The Conservatives' conference was pretty lacklustre in general, though managing to avoid the temptation to indulge in triumphalism over an economy that is just managing to crawl into positive growth territory. The Daily Mail did them no favours by obscuring most of the conference with its asinine attack on Ed Miliband's father, an error which they then compounded by the crass invasion of privacy at Ed's uncle's memorial service. A new low, even for The Daily Mail. The episode only succeeded in giving Ed an opportunity to demonstrate again that he is prepared to stand up to the bullies in the media, and also humanised him in the public's eyes - ironic, as the objective was to demonise him.

The LibDems opened up some areas of common ground for a future Labour/LibDem coalition - their adoption of a policy of shifting taxation from income to assets and to green taxes is exactly in line with what I believe should be Labour's direction of travel. There has been a massive transfer of wealth from the poor to the rich since the 1980s, with 10% of the population of the UK now owning 50% of the wealth (not yet as bad as the USA though, where the richest 400 people have greater combined financial wealth than have the bottom 50% of the population combined). For too long the wealthy have been paying lower marginal rates of tax than that paid by the standard rate tax payer - a move towards higher wealth and assets taxes will redress this imbalance and make room for income tax reductions, which would have the additional advantage of reducing the in-work benefits bill. The major advantage of asset and wealth taxes is that they encourage investment in more productive assets as investors look to maintain returns to overcome the costs of taxation - so, for example, the government could combine it with tax breaks for investments in desirable industries (manufacturing, green technologies, etc) thereby focussing investment on areas where it is needed.

Further, wealth taxes encourage existing assets to be put to more productive economic use so, for example, idle development land or land which has the potential to gain planning permission would be encouraged into use by an annual cost to the owner. This was a policy actually espoused by Winston Churchill, which would present an interesting dilemma for the Tories - do they condemn it as left-wing, Stalinist lunacy or do they attempt to show it would not be economically successful - they would lose on either count. I prefer this approach to that offered at Labour's conference ('use it or lose it') as the latter can be painted as more statist, requiring the  involvement of councils and/or government, whereas achieving the same effect through taxation would encourage unilateral action by owners and hence would therefore be faster and more efficient. That said, if is Labour's intention to compulsarily-purchase land for councils to build more social housing to replace that lost since the 1980s then I am all in favour.

Finally, such a policy will also help to bring down house prices as it makes buy-to-let investment, the main driver of house price inflation since the mid-nineties, less attractive. But bringing down house prices is fraught with economic and political danger - if handled badly it will weaken the balance sheets of banks again, and it reduces the population's perceived financial wealth, therefore depressing spending. And which politician wants to be remembered for reducing the value of his or her electors' greatest financial asset? It would plainly take very careful management and a lot of political courage - I think of the three party leaders, only Ed Miliband would have the Balls to do it, but it is the right thing to do for the longer term, to eliminate speculation in the housing market and also to bring down rents, which helps to reduce the housing benefit bill.

In combination with reducing speculation in the housing market, it needs to be recognised that the major problem is on the supply side - there is no substitute for building more houses. Therefore Labour's pledge to build a million homes over 5 years is welcome and presents a clear difference with Osborne's demand-focused Help-To-Buy scheme (which should be renamed 'Lending For Landlords'). Osborne's policy will only increase house prices further and is purely designed to generate a feel-good factor before the election, hence its time-limited nature; it is the wrong thing to do for the long term health of the housing market and does nothing to help the next generation of first time buyers who will find house prices being pushed ever further out of their reach. Labour's pledge to build 1 million homes is still not enough but it is a step in the right direction.

The LibDems also pledged to increase income tax thresholds further with the aim of taking those on the minimum wage out of tax altogether. I support this but I would like it to go much further. Firstly, I would like to see the minimum wage replaced with a regional living wage - at present the UK taxpayer is subsidising unscrupulous employers who pay wages too low for anyone to live on. The market forces wages down and is able to do this due to what Marx called 'the reserve army of the unemployed'. The market is the Tories' god so they will do nothing to intervene - indeed they vehemently opposed the original introduction of the minimum wage. Wages have become so low that they have to be topped up by government through in-work benefits. This amounts to a subsidy of exploitative employers by Government - a direct transfer from the pockets of taxpayers to the pockets of these firms' owners. It needs to be stopped. By imposing a regionally set living wage, these employers would be forced to become responsible members of society again. "Oh, but they can't afford to pay wages that high - they would go out of business!" I hear you cry; well in that case they are not solvent businesses - they maintain their existence only by pocketing a taxpayer subsidy, so they should be allowed to go to the wall. This would have the beneficial effect of making it more attractive for companies to setup in areas of the country with a lower living wage - typically areas desperately in need of new investment; the result would be fewer opportunities in the South East but more in other regions. Secondly, I would like to see the tax threshold raised so that those on the living wage pay no tax - this would enable it to be set a lower level then if they were paying income tax, thereby reducing the overall impact on unemployment levels. This is in line with wanting a general shift away from work-deterring income taxes to wealth taxes.

As a supporter of universal benefits, for the common bonds they highlight between people from all walks of life, I welcome Nick Clegg's plan to introduce free school meals for the first 3 years of primary school, though I can't see any reason for not extending it all the way up to year 6 pupils other than cost. Money should be found to commit to this in Labour's manifesto for the next election. On a similar theme, child benefit should be reinstated as a universal benefit to demonstrate the importance we as a society place on raising the next generation. This can be looked on as a way for the baby-boomer generation to hand back to the next generation some of the financial wealth they have accumulated in the last 3 or 4 decades; it will help the next generation to bring up the children on whom we will all ultimately depend in our old age (read 'The Pinch' by David Willets for some terrific insights in this area).

On the EU referendum issue, Labour should not make the mistake of matching Cameron's pledge of an in/out referendum. Labour is a pro-European party and should not put itself in the situation of being the party that may end up taking Britain out of Europe. Vote Labour and you know what you get - a party that is committed to the European project; vote Tory and you have no idea what you might get - we may remain in Europe or we may pull out. We don't even know which way the Prime Minister will swing on this issue - a ridiculous situation which will cause uncertainty up to the next election and then beyond if the Tories win. I hope Ed has the courage to make the pro-European case and fight for it in the General Election.

And finally there is one policy I would like to see Labour steal from UKIP, it is relatively trivial but it is one of those bug-bears that just annoys people - I would like to see National Insurance abolished and have it combined with income tax. It is a tax already in all but name, so let's just get on with it - abolish NI and re-introduce a top rate of tax of 50%, to bring some clarity to the taxes we are asked to pay.

Cameron's place in history

Cameron is in a hole, and it's one entirely of his own making.  Such is the (misplaced) inner confidence and self belief deriving from his privileged upbringing and educational background that he fails to recognise the limits of his own abilities and of what is achievable.  He managed to convince himself that he really could single-handedly renegotiate Britain's relationship with the EU.  He really believed he could then go on to persuade the people of Britain to back him.  This was his historic mission after all - a political gamble to resolve a weeping sore on the backside of the Conservative Party and to guarantee his re-appointment as Prime Minister, after which he would hold the referendum and safely keep Britain in the EU where even he knows our best interests lie.  A triumph!  After all, isn't this what he was born to do?  Isn't this what his life has been building to; isn't it his birthright?  What he failed to recognise is that in the main, encouraged by his own lunatic friends in the media, the British people now want to leave the EU.  By promising to give them the opportunity to do just that he has opened Pandora's box and it will not be closed again.  He failed to recognise that he really does not carry the influence required to persuade them otherwise, that people no longer doff their caps and defer to his better judgement.  He has given the people the choice without giving them the means to choose, and the result will be an exit from Europe.  It will be a disaster.

So why did he offer the referendum at all?  Well it was interesting to see Tim Montgomerie on the BBC News today describe how Cameron realised he could never resolve the split in the Tory party over Europe except by delegating the decision to the British people to settle, thereby shutting-up his warring factions up for good.  This is a tacit admission that the referendum's only purpose is party political, and not in the national interest.  Well, I guess we knew that all along but it's nice to have it confirmed.  Unfortunately it means Cameron will be remembered as the Prime Minister who was too weak to articulate and stand by an opinion of his own and instead allowed Britain to be shoved towards the EU exit door.  He may even get to be the PM who takes us through it, because however he manages to present his renegotiations and whichever side of the in/out debate he eventually comes down in favour of (presumably whichever side is playing best with the public at the time ....) the referendum will result in an 'out' verdict.  And Britain's position in the world will be gone for good, our influence diminished and our relevance to the emerging economic world powers will be zero.

Still, the fruitcakes, clowns, closet racists and swivel-eyed loons will be happy - they will have got what they wanted, even if they don't really know what that is or understand it's implications.