New Liberal

My new estimate for the cycle

2009-05-01T02:57:00.000-07:00

Brad DeLong some cracking recent posts

2008-05-06T13:35:00.000-07:00

This one on Jeff Sach's gloomy condemnation of US monetary policy contains a surprising statement:

I confess, I don't see why the Fed can't prevent a recession. Push the value of the dollar down far enough and export and import-competing manufacturing will grow fast enough to prevent a recession. The Fed may not like the inflation that this generates. But I don't see why monetary expansion will necessarily be ineffective in boosting output and employment.

As a naive economist I find that almost alarming; a statement that growth can be achieved whatever the circumstances if monetary growth is allowed to proceed far enough. Unsurprisingly, this occasions a host of comments below. Is this not Philips curve territory? Or is the fact that the US is not being treated like a closed economy, and the rest of the world (Asia at least) is doing well, significant in squaring the circle?

Surely, at some point, just devaluing the US currency cannot bring about endless growth for US citizens? If they have been borrowing off the rest of the world, surely they have to repay at some point, and devaluing the currency the rest of the world is owed in, again surely, has some kind of bad consequence?

This piece about the way the lower sections of US income distribution are not joining in the endless growth is also worth filing away. There is a splendidly pessimistic Malthusian analysis in one of the comments by someone calling himself Maynard, and via his blog I found THIS list of lectures about finance. Christ was a sad man I am, but they look intersting and useful

What is so surprising

2008-05-06T12:07:00.001-07:00

I've often felt like reflecting on how mystifying it is that the Tories are so popular again, before veering over to the theme of self-doubt, wondering if I have a clue about what people in Britain really think. Then I read Paul Flynn in the Express, and wonder why I was finding it so mystifying.

Here he is ranting about the EU Constitution, which has, apparently, sold us down the river. You can find 100 articles like this for every opposing one in the Guardian.

Actually, what is perhaps more surprising and encouraging is that people like this have been raving on as if Britain were a diminishing speck of land mired in poverty and beseiged on all sides by fanatical murderers, for years and years, during which time the Conservatives have averaged 33%. It must mean that the UK electorate are actually capable of reading quite phenomenal bile and hatred with perfect equanimity, without turning extreme. Cue fatuous comment about us not turning to Fascism in the 1930's. But perhaps Britain is more moderate than a depressing surf of the tabloid commentariat would suggest.

Deleted posts

2008-05-05T13:51:00.000-07:00

I tried twice to try to put on electronic paper my disquiet at recent events in politics, and ended up with nothing much worth recording. It all mashes together my own personal position, the somewhat ambiguous Lib Dem results and some quite clear difficulties with discerning a clear position in Liberalism that I can relate to. If it exists, I am fortunate enough that it can be found at CF; the stuff I read in Lib Dem news and the Liberator swerves between quite hard-headed recognition of the inevitable trade-offs necessary to policy making and a wishy-washy pressure group anti-capitalist politics that adds up to nothing much.

The great luxury of being in one of the extreme wings of political thought is the avoidance of any need to strike difficult balances. At the LSE you could find it in the dominant left-wing anti-markets rhetoric that is somehow easier to spout if you've never worked at all; and anything that seemed to oppose this could be acceptable. The right-wing side, on the other hand, can be found all over the online broadsheet commentariat (Heffer, Littlejohn, anyone from the Telegraph) and the raving commenters below. I suspect that any discomfort I currently feel is simply symptomatic of being a moderate, and is moreover common across all parties; I imagine how the left of the Tory party winces at the anti-immigration line is rather similar to how the Right of the Lib dems wince when some blowhard starts fulminating against consumerism.

This is worthless rambling; what was deleted was far more so. Ramble over.

A few random notes

2008-05-05T12:41:00.000-07:00

I earned a quick escape to the cafe this morning after heaving my toddler and Schauzer round Wandsworth Park for an hour. The FT.

Relevant to the "middle class is suffering" bit: here is something on the German middle class. It is defined objectively (rather than the opinion polling asking "who do you think you are") as 70-150% of median income, and it is projected to shrink - the so-called 'hollowing out".

Larry Summers' view on globalisation and its victims struck me as correct in the liberal line; not standing in the way of forces that ultimately benefit the world, but recognising how they produce winners and losers (I tend to distinguish Tories from Liberals in how the former are more disingenuous in seeing the rich/winners in general as having deserved it, the latter with the more nuanced views that see the injustices and path dependencies).

I liked this in particular:

There has been a race to the bottom in the taxation of corporate income as nations lower their rates to entice business to issue more debt and invest in their jurisdictions. Closely related is the problem of tax havens that seek to lure wealthy citizens with promises that they can avoid paying taxes altogether on large parts of their fortunes. It might be inevitable that globalisation leads to some increases in inequality; it is not necessary that it also compromise the possibility of progressive taxation.

Labour's very immobility in relation to capital requires differential treatment.

I also enjoyed Paul Collier's contribution to Martin Wolf's thread on food prices. Collier is very hard-headed in the Bottom Billion, and here blames an addiction to small peasant farming amongst aid-givers as part of the problem (if I remember rightly). I can recall from Global History how massive plantations were not an effective way of ensuring that prosperity reached throughout an economy and enabled the wider demand and investment that leads to sustainable development. But perhaps those writers were not analysing a period of scarcity.

Roy Jenkins Biog

2008-05-04T12:07:00.000-07:00

I owe Simon Griffiths a great deal. The Senior Researcher from the Social Market Foundation was responsible for the daringly open-minded act of considering my application for the internship this last winter, an experience that ended up being almost unremittingly positive (barring the labeling of post boxes). It left me with levels of self-confidence I normally only get after an exam result or gambling win, which I will need to draw upon for a while if I am to get anywhere.

As a parting gift Simon bought me a copy of Roy Jenkins' autobiography. His PhD was in the acceptance of market forces by the Labour movement, so such crossover characters must have been right up his street. I thoroughly enjoyed the book, barring the bits where the personalities of late 70's EU commissioners are dissected in venemous detail, and it has provided useful insight into how politics works, or at least did. To do it and the subject more generally full justice I ought to cross-reference it to other key autobiographies, in particular of those whom RJ with little disguise regards as the wreckers, over-promoted or wrong-headed characters of the era (David Owen's personality was seen as political fact of dismal significance to the future of 3rd party politics; Wilson as someone with scarcely a principle or longer term idea than himself; Tony Benn and Michael Foot as almost lunatic; Dennis Healey the might-have-been. Thatcher is intruiging, but is unlikely - as someone who actually made it - to have symmetric reflections on Jenkins himself).

The lifestyle of serious politicans, with the endless invitations to speak, the midnight and beyond clause negotiations, the critical decisions (in his case, budget cuts and prisoner-treatment were the most vital), the travel, was well illustrated. I don't have the option, but even if I did I am not sure I could make that much personal sacrifice.

Otherwise, it made me very curious to read some of his actual political output, given how close he might have been to becoming a proper right-Labour prime minister. Paul Lindford has made me more curious here.

He otherwise makes a telling point about how fine speeches don't win elections. See Paul Lindford's top 10 speeches for further evidence at the top.

Thanks Simon.

Counting them

2008-05-04T11:48:00.000-07:00

Countering my dismal 6am tendency to see the worst in things, and multiply various doubts about my own direction, and that of the scarcely-understood political grouping that I find myself part of (posts perhaps to follow), I think it worth while jotting down my recollections of this lovely weekend that I am so lucky to have enjoyed just now.

Saturday was about Battersea park with Chewie gamboling away to greet dogs, the other four of us munching a picnic beneath some blossomy canopy. Battersea Park has everything: an adventure playground that suits Matilda's rather constrained risk-seeking perfectly, ice-cream vans, cherry trees and their blossoms, ambling dog-walkers, organised and improvise football. You can believe the spin of the London village when its like this, and when your miniature Schauzer forces you to exchange greetings with a dozen amiable strangers. In the afternoon, we ventured to the Roehampton to swim in the outdoor pool for the first time this year, the water warm enough but the cooling air enough to make you keep your shoulders dipped under as much as possible. Matilda has leapt on from the querelous trembling infant of a year ago, and now jumps in at the deep end and semi-flounders her way to the side, as comfortable under the water as above.

I wasted the early part of the evening trying to jot my thoughts down about the mediocre political results and their mystifying blue tide (what Tory voters have against a decade of low unemployment, massive wealth transfers to property owners, lower crime in general and cheaper Eastern European labour, I will never really get. Short memories of what 1995 was actually like, I suspect). Then later we got stressed to the last two episodes of 24.

Sunday (4th May) was what really got me in elegaic mood. The garden has been strenuously updated by several man-months of Africaner labour to suit the needs of spoilt girl toddlers, and it all seemed to pay off today. After a 6 mile jog down by the river (8:20 per mile to keep my HR down at 150; I feel like a cumbersone elk on the uphills), we camped in the garden all morning. Girls bounced on the trampoline, scootered or rode or trundled around the decking, dipped into the water-rill to fetch water for washing things, tapped tennis balls, clambered over carefully placed logs, and clamoured for a picnic. We went in at 12 to chop carrots and sweet potato for a soup, where C joined us after spending the morning marking. More of the same in the afternoon, enlivened by Chewie yelping around when trying to pass what eventually revealed itself to be half-shit, half-compacted-tinfoil. We sat down to a pot of hot chocolate, and ended the day eating roast chicken all together. (Florence: begged or threatened for each mouthful. Matilda: picking the food up like an artist scooping a blob of paint off a palette, grinning and passing extravagent praise on the gravy).

I am really very lucky. I may have a very confusing, pointless or alienating next 20 years, and end them largely insignificant in anyone's scheme of things: that seems to be the fate of most. But if I am sensible I will spend most of my years wishing I was in 2008 enjoying such a heavenly weekend with my family.

Crisis what crisis etc etc

2008-04-27T07:07:00.000-07:00

The view that is in no party's interests to propound: See it here. The FT's analysis surprised me all the same - household gearing is far better than in 1988-9, so a larger fall is needed for a big negative equity crisis. Gloomy commentators who want to believe the current world is mad and look back on a sensible period 20 years before provide more fuel to the adage that there are few historians as shoddy as the romantic conservative.

I personally think the other big story of the year so far -the breakneck inflation in essential commodities, possibly ending a trend that has been fairly solid for decades - is going to have a bigger long-term impact than the momentary disruption of financial markets. In the Economist web edition, this story is worth reading on that subject. There are few winners.

Though if the credit crunch continues to see massive spreads in LIBOR, this article blaming it on money-market aversion to lending to banks, and the academic papers it sources, will be worth looking back on. Philip Stephens a couple of weeks ago also asked if the excitement is getting to the financial markets commentators. Munchau today takes a different view.

I really enjoyed Bagehot this week, being reminded of the excellence of its prose which is not matched regularly elsewhere. I like the economy of the writing, its ability to put across several points in quite taut sentences. For example:

As with voters, so with Mr Brown's cooling romance with his own MPs. Part of the explanation is that parliamentary rebellion, rather like adultery, is habit-forming: at first it feels impossible, then transgressive and finally mundane. There is also, inevitably, a swelling cadre of alienated MPs—has-been ex-ministers and never-going-to-be-and-know-it backbenchers—for whom infidelity seems costless. As Mr Brown's poll ratings wane, self-interest (ie, keeping their seats) actively motivates some MPs to distance themselves from him.

I could go on, but (a) I am bored with this and knackered after a six-mile jog and another full weekend of childcare* in a three-quarters house and (b) somewhat depressed by the idea that my horizons are set by the Economist and FT Weekend edition. Oh, and Roy Jenkins' "Life at the Centre" which is hardly a laugh a minute, though interesting; the last chapter, having him describing in detail his preferences for different EU Commissioners of the 70's, could have been missed.

*following her earlier attempts at self-destruction through the ingestion of large coins and spraying bleach spray into her endlessly-experimenting gob, Florence took a more straightforward approach today by heading into the road for a laugh. Caroline almost gave birth on the spot, except the baby was quivering within her, still in shock at the mighty kick that F had dealt it in the swimming pool. F fortunately has reserves of charm to get her out of all the trouble.

Bank of England Speech - Charles Bean

2008-04-20T11:38:00.000-07:00

Morphing into Mr Bean is not so bad if it is this one, his speech is here. I found it on David Smith's blog (see blogroll). Some quotes:

At root, the problem is one of a lack of trust in a context of incomplete information about the scale and distribution of the likely losses associated with mortgages, other loans and derivative products. As the experience of Japan during its ‘lost decade’ attests, a return to normality in the banking sector requires both credible revelation of those losses, as well as injections of fresh capital.

But the MPC targets CPI inflation, not house prices. It is therefore the impact on demand – and thus on inflationary pressure – that matters to us. Some commentators look at the historically strong correlation between house price inflation and consumption growth (Chart 5) and conclude that if house prices fell significantly, then that would also generate a sharp slowing in consumer spending. But it is not clear that this need be so. Lower house prices do not make us collectively worse off. They merely redistribute wealth from home owners who expect to trade down to those not yet on the housing ladder or who are still moving up it. So any decline in the value of the housing stock should not have much net effect on spending through the so-called ‘wealth effect’.

Discussing the question of how globalisation affected the UK, he points out the well-known fact of the lower prices, increased opportunities for businessmen to choose international factors of production, in particular labour, and so forth, but then:

But this beneficial tailwind from globalisation has gradually turned into a headwind. The biggest gains from the integration of the emerging market economies into the global trading system probably came early on as the most obvious opportunities to outsource and offshore were seized. Moreover, one would expect that as these economies develop, so their real labour costs will gradually catch up with those in the advanced economies, eliminating the original gains from trade.

More with less blather

2008-04-17T01:16:00.001-07:00

This on the dollar, whether intervention works. Note to self: brush up on FX understanding, because getting a feel for it in the fixed-rate regime of Bretton woods via the Jenkins memoirs is no substitute.

This which I think was originally found on Brad deLong. A good explanation of how monetary policy is a blunt instrument:

While officials were able to inject liquidity into the
financial system, they had no way to insure that the
funds got to the institutions that needed it most.
Realizing the failings of their traditional tools, Fed officials
innovated creating a new lending procedures in the
form of the Term Auction Facility and the Primary
Dealer Credit Facility, as well as changed their securities
lending program creating the Term Securities Lending
Facility.

The article contains a literal explanation of how the Fed operates, which I find very useful. In fact, the whole article is extremely handy on central bank operations.

Bernanke's speech at Jackson Hole on housing matters is full of useful references. Summarizes it pretty well here:

As you know, the financial stress has not been confined to mortgage markets. The markets for asset-backed commercial paper and for lower-rated unsecured commercial paper market also have suffered from pronounced declines in investor demand, and the associated flight to quality has contributed to surges in the demand for short-dated Treasury bills, pushing T-bill rates down sharply on some days. Swings in stock prices have been sharp, with implied price volatilities rising to about twice the levels seen in the spring. Credit spreads for a range of financial instruments have widened, notably for lower-rated corporate credits. Diminished demand for loans and bonds to finance highly leveraged transactions has increased some banks' concerns that they may have to bring significant quantities of these instruments onto their balance sheets. These banks, as well as those that have committed to serve as back-up facilities to commercial paper programs, have become more protective of their liquidity and balance-sheet capacity.

Some insight on the question of why the fear is so much greater than the subprime losses:

Although this episode appears to have been triggered largely by heightened concerns about subprime mortgages, global financial losses have far exceeded even the most pessimistic projections of credit losses on those loans. In part, these wider losses likely reflect concerns that weakness in U.S. housing will restrain overall economic growth. But other factors are also at work. Investor uncertainty has increased significantly, as the difficulty of evaluating the risks of structured products that can be opaque or have complex payoffs has become more evident. Also, as in many episodes of financial stress, uncertainty about possible forced sales by leveraged participants and a higher cost of risk capital seem to have made investors hesitant to take advantage of possible buying opportunities. More generally, investors may have become less willing to assume risk.

Also interesting on the subject of how Regulation Q - limits on deposit rates - causes monetary policy to have an exaggerated effect, as higher rates caused money to leave deposit-taking institutions for elsewhere, and limited their ability to lend.

This is a useful insight:

High inflation was also ultimately reflected in high nominal long-term rates on new mortgages, which had the effect of "front loading" the real payments made by holders of long-term, fixed-rate mortgages. This front-loading reduced affordability and further limited the extension of mortgage credit, thereby restraining construction activity.

This explains why money illusion can still help a housing boom along - it changes timings.

He discusses how innovations have decoupled housing and construction from the economic cycle. But other effects have come in: home equity is now much more liquid.

BDL draws attention to the positive feedback effect of marking to market.

Stuff on Financial Contagion

2008-04-16T00:46:00.000-07:00

As a financial nerd, I don't think I find anything more interesting than the way small losses (subprime) lead to larger, systemic problems (the credit crunch). It is one of the dozen or so strong arguments against pure libertarianism, the notion that things left alone settle into stable, meritocratic and just patterns*. Financial systems, left alone, produce all sorts of weird results, often when individual incentives are perfectly rational. State regulation of some kind or other is necessary. Private sector regulation leads to all sorts of problems; a great insight into this can be found reading Bagehot's Lombard Street, for example: the Bank of England, at that point a private, profit-needing entity, also had the hugely social function of holding the country's backstop of gold, and this created all sorts of dilemmas that WB discusses with great insight.

Anyway, the piece that started me off on this post was first found, I suspect, in the FT. It is this short number from a pair of economists publishing under the Banque de France, and is about the way small losses spiral into bigger systemic problems, Liquidity and financial contagion. The paper is useful in how it highlights the evolving models of banking crisis through time; from "one bank topples another and so on" to "market instruments falling in value causing capital requirement rules to cause further selling" . In other words, banking cap requirements make demand curves slope UP.

It then leads me onto an interesting speech with useful exhibits from the Fed of New York, "May you live in Interesting Times". Look in particular at the defaults on residential mortgages in the US: British figures are clearly nowhere near this.

However, worth quoting the point of this:

even if subprime delinquency rates keep climbing to unprecedented levels, it seems likely that total losses will be roughly in a range of $100-200 billion. Although this is a lot of money, it pales next to the $58 trillion of net worth of U.S. households or the $16 trillion market capitalization of the U.S. equity market. To put these losses in perspective, a 1 percent gain or loss in the U.S. stock market—which often occurs on a daily basis—is about the same order of magnitude of the likely subprime mortgage losses that will be gradually realized over the next few years.

The article/speech pulls no punches in terms of analysing the crisis in its full complexity and granularity - a useful future reference.

From there, to a Bernanke Speech in Jackson Hole last year. Bernanke's interest ought to be double, as a scholar of serious repute as well.

The US has economists in a different league from ours - recently reading Knowledge and The Wealth of Nations by David Warsh, on the essential topic of Increasing Returns in Economic Growth (another reason just letting things alone does not work), really emphasised this for me. I will try to read everything by Brad deLong, and this piece on Adverse Selection in mortgage markets is an example of the thought he can provoke. It is nice when they don't assume you can't do basic maths.

The FSF's piece on making things more robus is good (here) as another introduction to the whole affair.

Finally, for here, the 10 recommendations from arch-Bear Roubini for how to fix finance are as good a robust intro to this mess as I have found, I think**. The fact of these shadow-banks not being fully regulated (because no High Street depositors), but needing it because of the systemic risks, is an important one. Also pointing out how banks did have 'skin in the game'; after all, they are wearing some big losses. And reducing the pro-cyclicality of capital requirements, and a real criticism of mark-to-market accounting, while recognising the discipline it brings. Plus how standardization brings liquidity (look at the British Financial Revolution of the C18)

My challenge is going to be to bring this into a political context. Are there specifically right- or left-wing answers? Are some more meaningfully liberal than others?

*OK, I know this is not the definition of libertarianism. But this belief and the accompanying view that government interference necessarily makes things worse is a strong part of the political view

** Apart from this of course

On the other hand, I could get a life

2008-04-11T06:55:00.000-07:00

I mean, for **** sake I spent 10 days reading SMF's stuff in preparation for an internship. This is my last real holiday before Child No. 3 arrives and real pressured work.

Writing is thinking, so the theory goes . . .

2008-04-11T06:03:00.001-07:00

One of the more pleasurable jobs at the SMF was writing the Media Monitor, in which the 5 major broadsheets were scanned for references to significant terms like "public service reform" and "housing". Well, pleasurable up to a point: I have always experienced great disagreements with left- and right-wing extremes, but the manner of the latter is almost unbearable, and it was only through having an outlet in my sarky media monitor commentary that I could possibly stomach reading the likes of Heffer, Randall and Damian Reece.

But I did find that writing helped thinking. For the next 8 days I am trying to prepare myself for CentreForum. Just reading the FT and jotting down ways of startling the world with fresh insights is not enough. Maybe if I am forced to write a little each day I will stay in shape. I also have a cumbersome list of articles I think may be useful to me in the new post, where sophisticated understanding of the credit crunch is a sine qua non. So, I hope to keep tab of some of them here. No doubt I will forget to immediately.

But let us start with this article in the Economist's View. If you stop short of the comments you find a reasonable discussion of a really central issue: the degree to which regulation was a cause in the credit crunch. It passes through a fair amount of Galbraith to get there, which is no bad thing, and references important economists. In the FT not long ago, another writer suggested that an international perspective was needed for regulatory solutions to the credit crunch. Sounds sensible: regulatory arbitrage makes this perspective compelling. However, the very different paths being followed in Europe, Asia and America suggest it is not a straightforward case.

This could get boring.

Mega Bear Roubini is worth keeping an eye on for his painful predictions of utter doom. Here is a brief piece on the shape of the future recession. The other issue I thought worth bringing up is the replacement of the dollar as the world's reserve currency. Naturally, the Daily Star of Lebanon is the place to discuss this.

Whispered update in an empty room

2008-04-08T09:44:00.001-07:00

I have not written this thing in a few months. I'm not ashamed of that - the world of regular bloggers is either populated by solitary diarists, narcissistic wannabe media-commentators ("Today I have chosen to commentate upon . . .") and a very small number of actual academic stars (Tyler Cowen, Brad DeLong, Paul Krugman, the FT writers) whose every thought are actually worth listening to. Otherwise, blogging reveals the truth that it is much harder and more time-consuming arguing with the stupid - just establishing common ground amongst all the outrage and abuse takes a few hundred words.

Anyway. I have spent 12 weeks as the oldest intern at a centre-left think-tank, Social Market Foundation, which time has gone brilliantly for me, (even though much of it was spent sitting at slower computers than this one, on government or newspaper websites - in fact, this forces you to think a bit). It gave me a superb flavour of the world public policy, which will come in very useful in my new life in a slightly higher role at a Liberal think-tank. It also introduced me to some splendid, bright and connected people, and caused me to learn a surprising lot about road pricing, the housing supply question, carbon efficiency, the tendency of the Telegraph to employ utter morons, and other vital public issues.

The impressions would take pages, and hours which I don't have, but I can try to jot some things down before the kids come hammering on my office door:

- I am good for this life. Sorry, me me me, but that was the point of the internship. I can research, write, argue and present as well as I need to - some of the senior researchers clearly thought I could eventually do their job. I loved writing the shorter pieces to a deadline, such as on Road Pricing: a solution postponed, or even the seemingly dull AngloFlexicurity. In the end, the office often commissioned me for 700 word pieces on this or that to a deadline. I liked it. I could see it leading in 4 or 5 obvious directions.

- it is a small world. Everyone seems to know everyone else. There are a small number of intellectual MP's (David Willets the patron saint), approachable ministers (e.g. the Millibands, James Purnell), journalists and outward facing academics who make up the policy-making community, and knowing them is a big part of the game*. For example, Alison Wolf attended the OfB conference, spoke very convincingly on education: then I noticed she had been doing stuff for the SMF as well, and everyone in fact

- Advantages of incumbency part 1. Think tanks are hugely outgunned by government, and this is a serious political fact. The few hundred who labour on tiny salaries in thinktankworld are massively outnumbered by the civil servants in just one department. Both sides produce large volumes of paper, but only one of them seemed to me to be subject to real pressures, in terms of needing to make what people want. I read a few Government reports that might have taken hundreds of man-days to produce, were full of pro-Government spin, and could quite happily not have existed.

- Advantages of incumbency part 2. Connections matter, and those to the government above all - in thinktankworld, having a Minister come and speak guarantees attendance, makes sponsorship more likely, makes journalistic coverage happen, and the virtuous circle continues. Opposition can have this effect too, particularly if seen as possible Government. Being the third party again stinks - doesn't matter how bright Danny Alexander is, he won't draw the crowds.

- . . . Disadvantages of incumbency but of course Governments have to do something, and can then be blamed for it (see Northern Rock), whereas Oppositions can just do the blaming without suggesting anything useful for 6 months (see Northern Rock). So things even out - but in an odd way, with Governments encouraged to publish endlessly and behave frenetically (am thinking of how many <£30m initiatives this government has published as a research topic) and Oppositions just encouraged to be vague and negative.

There could be loads more. But I would rather save thoughts for my new role, than send them spilling into the blogosphere with all the other vitriolic, shrill chit-chat. The Internet is a wonderful thing, sure, but I like the barriers to entry that delineate areas of real quality, particularly having crossed a couple. Don't expect much here. It would be a bad sign if there was! Though I might use it to keep track of interesting articles.

*it was also obvious from the Options for Britain II conference where everyone seemed to know everyone else.

Liberalism as Optimism

2008-01-02T13:11:00.000-08:00

Another reflection that continually re-occurs to me as I read is how the general liberal view, in particular through history, has been the more optimistic one. On big questions like universal suffrage, Catholic emancipation, Home rule for the Irish, opening borders, liberalising trade, being more humane in the justice system, there seems to be a tug between fear and hope. Perhaps when people were making the case against hanging burglars or forgers, or for giving votes to women, there were dissenting voices arguing how this 'progress' was all well and good, but collapse of the social fabric/revolution/takeover by Foreigners would inevitably follow. Brave politicians may have lost their careers or damaged their parties taking the other view.

This is not a straight anti-Tory point; Margaret Thatcher is perhaps the clearest example of similar bravery but against traditional Leftish institutions. Neither can one conclude that change has always been right and stasis wrong. It is easy in hindsight to applaud the correct steps towards modernity, jeer at the traditionalists, and forget entirely the context and the lives crushed or disordered in the transition. I suppose the most I can say is that the status quo has an inbuilt advantage - people hurt by change form special interests, like the angry Tory farmers of the 1840's, and their political power is more concentrated than the beneficiaries, like the millions enjoying cheaper bread. Hence political courage is needed more on the side of progress and reform.

Reflections on Peel

2008-01-02T12:12:00.001-08:00

I greatly enjoyed Robert Peel by Douglas Hurd, and in fact found it extremely instructive, not least the Acknowledgments, which provide a solid example of what one has to do in order to write such a book. It also made it clear how important Peel was to the development of British politics in general, and the British state itself, through his key reforms. The economic historian in me latches onto the repeal of the Corn Laws and the powerful thrust he gave to Free Trade itself, in the teeth of opposition from his traditional Protectionist Tory supporters, who had often campaigned on precisely the opposite platform. But other major contrasts with the present era are more interesting.

The first that comes to mind is the typical attitude shown by British statesmen towards being in power. In brief, one finds more reluctance than naked ambition at this time - examples of politicians energetically shrugging off the opportunity to form a Ministry in the face of overwhelming organisational difficulties, and the general impossibility of forming permanent coalitions. Through the whole of the 1830's Peel worked on a long-term strategy, refusing the idea of holding the Premiership if it did not come with a genuine working majority in Parliament, and a cohesive team in the Cabinet. During his time, and epitomized by his publication of the Tamworth Manifesto, one sees the embryonic formation of the modern British Party Political system - although, with crushing irony, his own attempt at making a cohesive Conservative Party immediately floundered on his stance on Free Trade, where he effectively chose what was right for the Country over what was right for the Party, and split it in passing the repeal of the Corn Laws. But for him it would have seemed deeply dishonourable to hold onto power when both the Country and the Party were against him. Hence, upon reading the final chapters, one cannot help reflecting how Hurd's last boss, John Major, was utterly different -spinning out a deeply unpopular ministry to its very bitter end in 1997, in a manner that probably suited neither the country nor the conservatives. Very different times.

The other reflection that springs to mind is the basic integrity that imbues a man who nevertheless changes his mind on enormous matters - the non-Ultra conservative, who realises that change is inevitable, manages it, rather than screeching hysterically about the End of the World that change represents. On Catholic Emancipation, Reform and Free Trade he recognised ultimately that his earlier view were wrong, and that his instincts to conserve what is best in Britain would nevertheless be best served by a managed programme of change. At some point in the next century, Sterling will be abandoned. I wonder if it will be a similarly bloodied, stubborn and strong Conservative that manages it?

Interesting Hurd quote in Peel biography

2007-12-27T11:50:00.000-08:00

I am reading Douglas Hurd's biography of Peel for light amusement (as a sometime-wannabe historian, reading more scholarly stuff like Ferguson's The Rothschilds depresses me more - you can imagine writing DH's book quite easily in comparison). It obviously contains many of his reflections, implicit and explicit, on politics in general. Page 99 has an interesting quote about Tory 'Ultra's':

"The Conservative Party will always include Ultras within its ranks. These are men and women who instinctively resist change and pine for a golden age that never was. Every Conservative Association has always contained such individuals, sometimes as its most energetic supporters . . . [of the 'charming' Ultras] There is nothing ungenerous in their affection for the past; their backward look is warm-hearted, even delightful. They pick out selectively what was good during the lifetime of their grandparents and great-grandparents and lament its passing. Yet most of them live pretty comfortable lives. . . . Ultras can be roused temporarily to great passion, as they were against Catholic Emancipation, for the Corn Laws, later against Home Rule for Ireland, later still in favour of Rhodesia, against European Integration. But there are limits to their passion because in the end most of them are pessimistic about politics and in particular their own chance of success".

This is an interesting and honest observation about grassroots politics as well as its Tory incarnation, not least for the clearly wrong views that this 'charming' side of the Ultra tendency tends to follow. Wistful Toryism, observing and ranking the past through spectacles dimmed by their own bias and a natural tendency to forget the grim and backward, is just one manifestation of charming grassroots conservatism; no doubt those idiots campaigning hard for the right to a dusty cramped career in an uneconomic coalmine are the same, on the other wing.

The 'sour' Ultras, are described thus: "There is nothing warm or nostalgic about their politics. many of them are intelligent and sincere; but their appeal is to the prejudices and cruelty which are part of human nature. The foreigner, the immigrant, the down-and-out, the Roman Catholic, the Jew, the Muslim - all of these have at different times been the focus of their sourness". Melanie Phillips sometimes seems to be here.

No doubt some are charming, some vicious, and many Tories are not ultras at all, but like Peel and Hurd pragmatic improvers and conservers. But the DNA of the party borrows too much from such energies for me.

Working out how to vote

2007-12-18T13:50:00.000-08:00

Has anyone ever done this starting from a totally open mind? I doubt it - such superhuman detachment is, well, not really human at all. I claimed to, but was pretty much certain that if I reached the conclusion that I was a Tory, it would represent some sort of defeat. "Retiring overpaid City derivatives expert concludes 'It's the Tories for Me'". Hmmm.

But where do you go if you want to find out how to vote? None of the blogosphere, and very little of the newspaper commentariat, cater for the sceptical politically motivated objective outsider. Blogs compete with one another in shrill attention-seeking - with millions of them out there, all of them commenting on the same stories, this is hardly surprising. There are no marks awarded for reasoned consideration of opposing views, not if you are trying to gain points with your target audience (i.e. your own tribe). Policies are only criticized insofar as they undermine the great objective of the tribe's political aggrandaisment. Allegiance means unswerving allegiance, and Service to the Cause. This, at least, is how the Left-Right 'debate' appeared to me.

Unswerving loyalty, in crude Darwinist terms, is probably a superior strategy for organisational success. That is why armies are not designed to function like university common rooms - no debates in the ranks. However, it is a lousy way of sharpening ideas. Popper and the defeasibility of the proposition strongly guide my approach to difficult questions. So those answers that seem true-by-definition - i.e. The view of the Party - have little conent for me.

This is why I thought 'swing voter' would be a longer-running affair. I thought I floated amidst the fluidity of ideas, whereas political parties are solid bodies - particularly as consistency over time is seen as such a great virtue. However, I swiftly realised that this conclusion stemmed from a mis-characterization of how people actually decide to vote or follow a party allegiance. This mis-characterization might be crudely described in this way (I call it the Policy Market Stall):

First you work out what policies you like. So you make a scale of 1-10 for issues like Immigration, income tax, state control of education, importance of inequality, the risk of environmental meltdown/Islamic terrorism and so forth. Self-interest is normally assumed to operate; so if you live under a flight path, you oppose more runways - if you are a high-earner, you hate high taxes. Then you mesh this with each political party's avowed views and manifesto. The degree of 'fit' is what makes you vote a certain way. As you age or change, and the parties change, you might change vote. But you may well be rigidly stuck with one party your whole life, owing to an overwhelming set of preferences (i.e. the very rich never shifting from property-defending Toryism).

Maybe this approach is a fair description sometimes. Perhaps it worked when parties fell much more squarely around class lines, and the two class-parties took 95% of the votes. When it was a straight matter of the rights of Labour over the rights of Capital, you could perhaps show politics moving in great tidal sweeps, according to some kind of Marxist juggernaut. But for me, and for now, I think it fails terribly for several reasons:

- Most of what a Government will do cannot be anticipated - it will constitute a reaction to unforeseen events - like 9/11, Foot and Mouth, Financial crises. Here you need to know the character of the Party - it's DNA - the basic personalities of its leaders, the pressure that really tell upon it. This cannot be divined from a policy shopping-list

- Most policies are still in gestation. What the Civil Service works out are not mere details but often the real substance of the policy. Just spouting "Regionalisation" or "Localisation" will mean nothing without the details, which can render the policy meaningless and weak (Prescott's Regions) or not. The huge process of turning kitchen-cabinet thoughts into laws and actions will turn out all sorts of trade-offs, where the DNA of the party will again be paramount.

- Even supposedly similar policies mean different things in the mouths of different political actors. Reforming Incapacity Benefit means different things to Tories and Liberals - the former are more likely to come from the angle that the benefits system is a scam, and the latter that its systematic weaknesses are benefiting nobody. Similar recipes from the Lib Dems and the Tories to the IPPR/Labour Party's recent work on it, but meaning different things and, under political stress, likely to fly off in different directions.

- the actual personalities of political parties matter when you might end up working with them in a career move. The self-righteous whinging and vocal anti-capitalism of Left-leaning students really put me off Labour grassroots at the LSE. From the half-dozen recent meetings of thinktanks etc, I did not like the company of nostalgic socialists like Mark Garnett, and even less the paranoid Islamophobes that turned up to the Civitas lunch on "Why I am not a Muslim" (The Spectator, not Civitas, made the running here; I still respect Civitas' work with supplementary schools). I find Tories declaiming on Tradition, Nation, Queen and Our Culture under Threat about as annoying as anything I can remember since The Word was on Channel 4.

Hence, the way I reached my political decision cannot (thankfully) be put down to a long list of worthy policies. There are great Lib Dem policies, but ultimately it came down to the character and values that could be discerned from the party, in its representatives I met, reading the debates online, the articles (Orange Books, policy briefings), the conduct of their MP's in debates, and so forth. Liberalism means something. Nick Clegg, obviously, explains this better than me. It is the Liberal character of Britain's past that makes me proud. And my reading of political history has the Liberal side consistently being on the right side of the important questions - on Reform, Irish home rule, the introduction of a welfare state, on voting reform, on Internationalism and progressive taxation. It is a generous doctrine, not a self-serving, drawbridge state or nanny state doctrine. Unlike Labourism, it does not favour a particular class, or have illusions about its superior ability to tell people what is good for them. Unlike Toryism, it does not make a fetish of property, nor have that gloomy rose-tinted view of the past that denies the possibility of progress, and fears every new or foreign thing. This is all woolly. It is meant to be. But every time a specific policy comes out - Tory tax giveaways to the ultra-rich, Labour micromanaging toddlers - I know that these principles make a difference.

He won!

2007-12-18T07:25:00.000-08:00

(phew). Nick Clegg is a prime reason I joined the Liberal Democrats - he kindly gave an hour of his time to me purely to provide career's advice (friend of a friend, another local Putney parent, etc). But the conversation fell into politics, it went on for ages, and it persuaded me to apply for Lib Dem policy adviser positions, and vastly accelerated my understanding of the party. In person he is both impressive and refreshingly normal - on TV, this may come across as a lack of polish compared to his opponent, but I think it stems from a deep determination to not b***shit anyone.

The next few months will be extremely interesting for the Party- at the time, I think he may have regretted the lower level of visibility his recently announced stance on immigration was allowed. This will change - at last, an honest debate on this topic (not 'we're thinking what you're thinking' snide and allusive threats), one that exposes the deception at the heart of the other parties' policies, which pretend to be able to expel, police-state style, hundreds of thousands of hard-working law-abiding immigrants as if they were a bacterial disease.

What this is about

2007-12-17T14:02:00.000-08:00

I used to have a blog called 'Swing Voter'. It was set up to be a way of collecting my thoughts as they - hopefully - coalesced around a political affiliation. I have long been the sort of political nerd who stayed up through all of election night, gambled on it intensively, read Bagehot and Lexington and the more thoughtful commentators whenever I could, as well as a smattering of the giants from the political canon: Smith, Burke, Paine, Mill, Keynes, Hayek, Popper, some Locke, some disciples of Marx, hosts of small libertarian articles, modern writers like Martin Wolf, Samuel Brittan, Anthony Giddens, John Kay, and so forth. Light reading means the diaries and biographies, from the lightest (Lance Price) to the magisterial (everyone should read Lord Blake's biography of Disraeli - and find out where Roy Jenkins got most of his material). I should have done most of this on my PPE course, but preferred philosophy, foolishly.

Apart from colossal self-importance (my vote really matters), the blog was intended to help me work out my next career direction, as the City life had provided a rather extreme example of extent of inequality and enabled me to give it up young. I wanted to do something that involved thought as well as decision, and the general area of policy making/government/perhaps journalism/political helping struck me as having this combination. People were surprised, however, to find that I was embarking on this without a firm political affiliation. Most of the people trying to work as an MP's researcher, say, have spent long periods at university lecturing their fellow self-0bsessed student layabouts about how the world should be run, and assembling a CV filled with those pointless posts ("third year graduate soup administrator, defeating the Fascist candidate narrowly"). In other words, the main qualification for being in politics was no longer questioning how you voted.

I thought this daft, and reckoned my value higher for actually having considered the options rather than tribally painted my face red/blue/green/orange and stuck by whatever the Party had said ever more. But I recognised at the time that I would surely prefer one party to another, enough to want to help it or work for it, and use my recent ambivalence as an asset ("when I was thinking of voting Tory this is what I thought of Gypsies, you see").

I was surprised to find the period of swinging ended quite quickly, and my partiality would render the very title of the blog mendacious. It is very difficult to remain impartial in this game. Clear, defining difficulties with either 'main' party became quickly obvious - in fact, I sometimes suspected a conspiracy by their so-called Stars to find and trumpet objectionable policies and attitudes to make my decision easier (only today, on immigration, the Labour party showing how scared they are of the Tory immigration dog-whistle). I read exhaustively the policy documents, think-tank reports (Civitas, Adam Smith, IPPR, SMF, even some nonsense from Demos) to try to get under the skin of the parties.

I thought blogs would help too, and in a sense they did. I knew from past experience that the standard style of the Vanity Publishing Web was infantile, breast-beating, foul-mouthed, favouring extremist poses ("If I say so and so is an utter c*** and the worst thing to ever happen to Britain, they will surely understand that I am right") - in fact, all the things you'd expect it to be.

(Editors Do a Job. That is why the novel your best friend has mysteriously failed to get published for 10 years is such rubbish, and why the Blog that Attempts to be a Wise confection of Richard Littlejohn and Friedrich Hayek reads like a zitty Etonian schoolboy's soapbox election rant. Insert links to any number of Furious Tory Doughty Street stars' blogs here)

So all I learnt from most of the blogs I read was what the slightly dimmer but resoundingly self-confident and under-researched tribalists were like. This is useful, and the different styles they coalesce around told me something about what it would be like working with them. The only blogs where there is reasoned debate are those hosted by Liberals, like QuaeQuam, LibDem Voice, and the Conservative Home Tory Diary, although you get your fair share of foaming loons there too.

The swinging ended, which will be covered in more depth later. I have joined the Lib Dems, helped Nick's campaign (at time of writing, no idea if my 35 phone calls made a difference), even helped stuff post and canvas. This has not brought my political speculation to a total end; the vast difference between the realm of Noble Liberal Ideas and the dirty laborious local political stuff inspires all sorts of posts. But I am absolutely certain of the rightness of my choice.