• Another 1945?

    Steve Richards (The Guardian, 28 July) is right to say (and Ed Miliband obviously agrees with him) that next year’s election will not, and should not, be decided by personality politics. So what is it that will determine the voters’ preferences?

    It would be nice to think, as Richards argues, that the election will be about ideas. But policy ideas, until and unless they are successfully proved in practice, make little impact on voters increasingly cynical about promises.

    What might matter, however, is something even less tangible. The evidence suggests that every now and again, for no apparent reason, the zeitgeist, the spirit of the times, can change. It may be that we are at just such a juncture – and not before time.

    We have now given an extended trial to the values espoused by the proponents of the “free” market and the aggressive pursuit of individual self-interest. It is becoming increasingly clear that those values are not those of our great humane and liberal tradition; they are instead those of “dog eat dog”, “devil take the hindmost”, “look after number one”, “winner takes all” and any other of those phrases that have been traditionally used to describe with contempt and distaste the sentiments of selfishness and greed.

    It is, as Thomas Piketty demonstrates, always the case that powerful people, given the chance (and nothing is better guaranteed to offer that chance than the unrestrained market), to grab what they can, and then to entrench and protect their advantage, so that they can extend it still further.

    We may now have reached the point, however, when the question is increasingly being asked – why do the rest of us allow that to happen? Wasn’t that supposed to be the role of democracy, to ensure that the political power of elected governments would ensure that the virtues of inclusivity, social cohesion, and equal rights, would offset the otherwise overwhelming power of those who would dominate the marketplace?

    It may be that, just as in 1945 (another crucial turning-point), the forthcoming election will be about values, rather than personalities, or even policies. And the good news is that the values that we have been in danger of losing have not disappeared; they are still present in the hearts and minds of most citizens. Most people in Britain will affirm, if asked, their continued support for fairness, compassion, tolerance, concern for others. Those values have become submerged under the tidal wave of free-market propaganda, but the 2015 election may see them again rise to the surface.

    Most voters do not think about politics or economics in any systematic way. It is only a small minority, whatever their position on the spectrum of political views, that has developed a fully coherent set of beliefs and principles. The majority are perfectly capable of holding in their minds quite contradictory notions and allegiances. What matters, what determines the way they will vote, is which of those contradictory values is closest to the surface, or in other words has the greatest salience, at any particular time.

    Over more than three decades, those who have hijacked our democracy have discovered the means by which they can raise the salience in the popular mind of values that suit their interests. They have become expert at “tweaking” particular issues – outrage at social security “scroungers”, perhaps, or concern about the supposed threat to jobs or housing posed by immigrants, or fear of an allegedly threatened tax increase. They have learned to practise what the Australians have called “dog whistle” politics – the appeal to sentiments which they dare not encourage openly and which voters would be ashamed to admit to but which will nevertheless decide voting intentions.

    The control exercised by the powerful through their ownership of most media outlets gives them a great advantage in such efforts. But they are also able to exploit a natural human predilection which means that the values of self-interest and self-preservation, at least in the heat of any particular moment, will often take precedence over more socially aware and responsible attitudes. The default position for most people – especially in hard times – will quite naturally give a high priority to looking after the interests of their own nearest and dearest.

    But experience is a great teacher. When decline and social disjunction are seared over decades into the national consciousness, when hope and confidence are at a low ebb, and when the outlook is more of the same, it is not surprising that the guiding principles of the last three decades might be called into question. It is then that hearts rather than minds help to frame the compelling argument that we would all be better and stronger if we could all rely on the same degree of help and support as we are ready to offer to our own closest family and friends.

    In 1945, the British people rejected a great war hero in favour of one of the least charismatic leaders in our history. Clement Attlee won a landslide victory and went on to head the most successful and effective reforming government of modern times. Ed Miliband may know – and intuitively feel – more than we think.

    Bryan Gould

    28 July 2015


  • Yes, There Is An Alternative

    Phil Verry was a patriot, a leading businessman and head of New Zealand’s largest sawmilling firm. He was also an innovative thinker.

    I was privileged to become his friend and colleague, and to help him develop an ingenious refutation of the assertion constantly made by those with closed minds that “there is no alternative” to the failed orthodoxy of relying entirely on raising interest rates in order to combat inflation.

    Phil understood very well that New Zealand producers and investors, as a result of that orthodoxy, are constantly lumbered with an extra-market interest rate surcharge across the board, the cost of which is paid in the main to overseas speculators who contribute nothing to the New Zealand economy.

    Their gain at our expense in fact costs us twice over – by worsening our current account deficit (through interest payments across the exchanges) and by penalising us – through prompting an inflow of short-term lending – with an overvalued currency. The result? Our whole economy is handicapped by our difficulty in competing, both at home and overseas, with foreign producers.

    Phil devised what he called the Interest-Linked Savings Scheme – whose details are set out in my 2007 book Rescuing the New Zealand Economy – which would mimic the operation of interest rates as a counter-inflation tool without burdening the New Zealand current account with unnecessary payments to foreigners or harming our competitiveness.

    Phil would have been delighted to learn that it is that scheme, or something very much like it, that David Parker committed to this week on behalf of an incoming Labour government.

    The first element in Labour’s version of the scheme is to make the KiwiSaver scheme compulsory, thereby resolving our perennial problem of inadequate saving (and worth doing on its own account in any case); a variable savings rate would then be used as a supplement or alternative to the Official Cash Rate as a counter-inflation tool. If the rate was raised, it would, by lowering the immediate spending power of consumers, have much the same counter-inflation effect as a rise in the OCR.

    But, instead of paying an interest rate premium to foreign peddlers of “hot money”, the savings surcharge would be paid into the individual KiwiSaver accounts of New Zealanders and would in due course be paid back, with the addition – in accordance with KiwiSaver rules – of whatever return had been made on investing the money.

    The potential scope and practical operation of this scheme strongly suggest that it would be more effective and less problematic than the OCR in combating inflation. The ability to raise or lower the surcharge at short notice, and its immediate impact on pay packets, would mean that it would be much more quick-acting and better focused than interest rates.

    It would be less easily evaded than the OCR, which has seen its effectiveness substantially reduced by the preponderance of fixed interest rate mortgages. A lower evasion rate would mean that the surcharge could be lower for a given counter-inflation effect than the less reliable and more easily evaded OCR. And the fact that the surcharge would eventually be returned to those paying it would reduce any political reluctance to taking quick action to deal with inflationary risks.

    But the scheme will produce a number of further benefits as well. We would no longer be penalising ourselves and losing national wealth by making free gifts to short-term lenders from overseas.   Foreign lenders would not be paid a premium above the market rate. Unnecessarily high interest rates would no longer deter new investment. We would no longer be burdening ourselves with an over-valued currency, an inflated current account deficit and a productive sector that was less competitive than it should be.

    The wider remit to be given to the Reserve Bank would encourage a more balanced approach to macro-economic policy, which could be allowed to fulfil its proper purpose of promoting the continued development and competitiveness of new wealth-creation. Lenders and investors would be free to respond to normal market factors in agreeing on what interest rate should apply in a given transaction. Both interest rates and the exchange rate, in other words, would be freed up to perform their essential market-clearing functions in a properly functioning market economy.

    Phil argued – and Labour agrees – that those who might be nervous about departing from the current orthodoxy should be reassured, since the OCR would not be abandoned, but would be kept in reserve and turned to as and when necessary.

    The most important advantage of the scheme is the fact that we would raise the level of saving, improve the competitiveness of our industry, and encourage export success, while at the same time restraining inflation more effectively.

    Phil sadly died a few years back and therefore did not live to see the adoption of his ideas. He would have been pleased at the largely positive reception accorded to the new proposals. And he would have been delighted at the belated discovery that “there is an alternative.”

    Bryan Gould

    30 April 2014


  • Who Owns the Future?

    There is no novelty is arguing, as George Osborne does, that there is no alternative to his destructive and divisive policies of austerity – TINA was, after all, the Thatcherite catch-cry and as misleading in her day as it is today.

    But it is surely stretching credulity too far to suggest, as John Harris does in yesterday’s Guardian, that the Tories, in making that claim, have also established their ownership of the future.

    His sub-editors may have done him no favours with their headline, but let us be quite clear – George Osborne’s backward-looking reconstruction of a 1930s classical response to recession is not only discredited by history but has created a present in which living standards have fallen by a record margin, output has yet to return to pre-2008 levels, and poverty as a result is endemic and growing in many parts of our society.

    The future to which George Osborne lays claim is one which many of his intellectual fellow-travellers, including the IMF, are quietly abandoning.  It is a future of government cuts without end, of growing inequality, and of a Britain – with only 10% of our output accounted for by manufacturing – finding it increasingly difficult to pay our way in the world.

    If that is the future that George Osborne now owns, he is welcome to it.  Most people, given the chance, would choose something different.  But John Harris is on stronger ground when he argues that Labour and the left more generally have so far not offered them that option.

    Most people, probably a comfortable majority, would still sign up to many of the virtues of the kind of society that Labour propounds – one in which there is a fairer distribution of wealth and a greater concern for all our citizens.  Quite apart from the obvious benefits – that people would feel less pressured and divided, that there would be fewer social ills of the kind that always accompany poverty and alienation, that we would feel the benefits of living in an integrated society more at ease with itself – there is every reason to believe that a more equal and caring society would produce economic advantages as well.

    The statistical evidence shows, after all, that countries with lower levels of inequality – such as the Scandinavian countries and Germany – have performed better than those countries, such as the UK and the US, where high and widening levels of inequality have accompanied relatively poor economic performance over recent decades.

    This compelling evidence should come as no surprise.  A wide gap between rich and poor in an economy is inimical to economic success for reasons that apply at both ends of the scale.

    If wealth is concentrated in a few hands at the top end of the scale, the result is significant economic inefficiency.  The rich have a greater propensity to “hoard” – that is to accumulate large cash reserves which remain unspent and are therefore not available to stimulate activity so that the Keynesian multiplier effect is thereby much reduced.  And when they do spend, it is often on arbitrary and capricious purposes – little wonder that “trickle down” is not supported by any evidence.

    At the other end of the scale, why deprive the economy of the productive capacity of a large chunk of the population?  Can it possibly make economic sense to relegate them to unemployment and minimum wages when they could be both working and spending to the benefit of the economy as a whole?

    Can it make sense to consign them to a future where poor education, skills and health – all consequences of poverty – mean that they are more likely to become burdens rather than contributors?

    The task for Labour and the left more generally is, in other words, not to abandon their vision of a better and more productive and efficient society, but to demonstrate more effectively how it is to be achieved.  That will not happen on the basis of “we’ll be just as tough as the Tories, but do it with a smile.”

    The whole point of an alternative strategy is that there is nothing alternative about it.  It is a strategy that addresses our real, not imagined, problems – the need to rebuild manufacturing, the need to restore our competitiveness as a trading nation, the need to reclaim control from the banks over credit-creation and the macro-economy as a whole, the need to raise demand and get the economy moving, the need to recognise unemployment – not inflation – as the prime target of policy.

    Nor is there any shortage of good ideas as to how these should be addressed.  Look at the work of John Mills on improving competitiveness, of Michael Meacher on alternatives to austerity, of Richard Werner and George Edwards on investment credit-creation – and the growing debate among leading monetarist economists about the proper role of monetary policy.

    Labour has not yet summoned up enough courage to strike out in these positive directions.  It is not too late, but defeatism of the John Harris variety – look anywhere but where the real effort is needed, to make the economy function better than it does at present – is, sadly, not of much help.

    Bryan Gould

    7 April 2014

    This article was published in the London Progressive Journal on 8 April.



  • Aiming at the Wrong Target

    Labour will be “tougher than the Tories” when it comes to forcing long-term beneficiaries back into the labour market; so Labour’s new shadow Work and Pensions Secretary, Rachel Reeves, was reported as saying last week. The comment, which was presumably made deliberately to secure the headline, seems to be a mistake on a number of levels.

    The report suggested that the comment was a response to polling that showed that voters were twice as confident of the Tories’ effectiveness in dealing with the issue as they were of Labour, and was presumably an attempt to nullify the supposed advantage that the Tories enjoyed.

    But my own political experience, and particularly experience of campaigning, suggests that the initiative was based on a false premise. Most voters, unlike those who are politically active and committed, do not have coherent political positions that are consistent across all issues. They are perfectly capable of adopting attitudes that contradict each other from one issue to the next.

    What determines the way they vote is not necessarily what they think on a given issue but which issues are uppermost in their minds on polling day. History shows that, with their allies in the right-wing media, the Tories are expert at tweaking the issues that give them an advantage at the crucial time.

    So, immigration, supposed benefit “scroungers”, trade unions bent on strike action, all attract headlines as part of a deliberate attempt to raise the salience of issues that suggest that our deep-seated problems are caused by failing to rein in the nefarious activities of ordinary people and are in no way the responsibility of the powerful people who run our economy and take most of its benefits.

    It is an important part of this well-proven strategy that Labour should be lured into contesting such issues so that public attention is focused on them. I recall that, in the run-up to the 1992 general election, the Tory press provided the “oxygen of publicity” to fears that a new Labour government would raise income taxes.

    The Labour response was to launch, at the beginning of the election campaign, a plan to raise National Insurance contributions. The idea was to use John Smith’s Scottish prudence to show that this was a sensible initiative that should not be regarded as an increase in taxes.

    Not surprisingly, this proved difficult to sell to the electorate. Labour’s tax plans became the dominant and continuing theme of the election campaign, with the result that John Major’s government was re-elected.

    The lesson to be drawn is that election campaigning is largely about controlling the agenda. A successful opposition campaign should be about exposing the government’s failures and focusing on those elements in its own policy that are likely to strike a chord with most voters.

    Time spent on trying to negate vulnerability on issues peddled by the Tories, in other words, is likely to be wasted at best and counter-productive at worst. And that is never more true than on the issue on which Rachel Reeves thought it wise to make her own demarche.

    Her comment spells bad news for Labour. It focuses attention on an issue which can only benefit the Tories. No one will believe that on this issue the Labour opposition will be as ruthless as the Tories (and heaven help us if they did!) The most the voters should hear from Labour on the issue of benefit fraud is that, as in every part of public spending, dishonesty will be punished and value for money will be insisted upon.

    But what it does do is to validate the Tory insistence that benefit fraud and supposed “scrounging” is an issue that deserves to be at the top of the government agenda. The more Labour proclaims its “toughness’, the more voters will believe that this is an issue that deservedly requires priority government attention – and the more likely they are to think that Labour is simply posturing and that only the Tories are to be trusted to take real action.

    Worse, it diverts attention from what Labour should really be saying about the fact that so many people are victims of unemployment and are therefore forced to depend on a generally miserable level of benefits in order to keep house and home together.

    The most effective means of reducing the number of beneficiaries would be, in other words, not punishing the unemployed further, but restoring something approaching full employment; and the most important obstacle to that is a damagingly under-performing economy, the direct consequence of failed government economic policies and of their insistence on austerity as a response to recession (now disowned by the IMF, no less) in particular.

    Nor is it the case that this is an accidental by-product of Tory policy. It is an essential part of the Tory strategy that the burden of getting our economy moving again is to be borne by working people. According to this doctrine, it is their responsibility to price themselves back into work by accepting lower wages, and accepting fewer rights and protections at work – “zero hours” contracts are a good example.

    The pressure on beneficiaries is all of a piece with this approach to our economic problems. In the absence of new jobs, forcing the unemployed back into the labour market can only mean that those with jobs will be compelled to withstand that competition by accepting lower wages if they wish to stay in work. The result? Downward pressure on wages as a whole.

    Is this the strategy that Rachel Reeves intends to endorse? Wouldn’t she do better to focus on unemployment and its causes, and persuading her colleagues to develop a strategy for dealing with it?

    Bryan Gould

    14 October 2013

  • The Labour Leadership

    It may truly be said of David Shearer that nothing so much became him as the manner of his going. He is living proof that, in today’s politics, being a decent and thoughtful person is not enough.

    Parliamentary politics and modern communications both place a huge premium on fluency and articulacy. Quite why those qualities should be equated in the public mind with the ability to run the country is not quite clear. Glibness is not always a sign of special ability.

    Many commentators, including of course government politicians, will profess to see David Shearer’s departure as evidence of the hopelessness of Labour’s cause. The reality is, I believe, quite different; David Shearer’s decision shows clearly how tantalisingly close is the breakthrough that will push Labour through the winning tape – and here is why.

    What will be painfully clear to National party strategists is that, even as things stand today, their chances of winning the next election rest on a knife edge. With poll ratings now under 50% and trending downwards, it is hard to see how they are going to find the votes to form a government in an MMP parliament.

    Both Act and United Future seem destined for the knacker’s yard. The Maori party’s chances seem almost as slim. The Conservative party is virtually an unknown quantity, as its ability to win any seats. Where is John Key to find the parliamentary votes to give him a working majority?

    New Zealand First, if they cleared the 5% threshold, might or might not be prepared to do a deal but Winston Peters might be equally tempted by the prospect of joining a new government and making a fresh start as Foreign Minister. His decision in that regard would of course be made much easier if a Labour-led coalition could show that, even without New Zealand First’s support, it commanded a greater share of the popular vote than the National grouping.

    All of this takes place against a background where the government’s greatest advantage – the Prime Minister’s personal popularity – is a wasting asset. There are only so many times that one can go to that particular well before it runs dry. “Trust me” works well until the day that trust is exhausted – as Tony Blair discovered when the truth was finally known about the Iraq war.

    The point to grasp is that all of these considerations and uncertainties present themselves for National without any further deterioration in the polls and at a time when the only alternative as Prime Minister was unable, by his own admission, to show that he was a credible option. Imagine how a new contender, able to demonstrate the necessary credibility, could transform what is already a difficult situation for National into one that is very favourable to Labour. Another few percentage points are all that is needed.

    It is a measure of David Shearer as a man that he will have done precisely this calculation. He will have concluded that a new leader – and a leader recognised as a potential Prime Minister – would provide all that is now needed for a Labour election victory, and he has accordingly acted in the interests of the party and, as he sees it, of the country as well.

    His personal sacrifice places a special responsibility on those who will now play a part in the Labour leadership election to make that sacrifice worthwhile. The party will congratulate itself on having changed the election process so as to give itself into the best chance of electing a leader who can take them to victory.

    The great advantage of widening the franchise, so as to give party members and affiliates as well as MPs a vote, is that it creates an electorate that is able to stand back from narrow personal and partisan concerns and to put the interests of the party first.

    I have participated (in the British Labour party) in a number of leadership election elections – usually as a voter and on one occasion as a contender. I have had experience of elections conducted both with the franchise restricted to MPs and also when the franchise has been widened.

    The benefit of the wider franchise is that personalities matter less and (hopefully) ability matters more. Within the hothouse atmosphere of the caucus, every vote matters greatly and the temptation is to allow all sorts of personal considerations – ancient grudges, favours to be repaid, long-standing friendships – to sway voting intentions.

    With a wider electorate, especially one that includes thousands of party members, individual votes matter less and a broad consensus about what is important to the party matters more. That is now the opportunity that presents itself.

    The good news for Labour is that the likely contenders all seem to have what it takes. The forthcoming leadership contest is not only a welcome exercise in democratic participation; it is an essential step in offering New Zealand voters a real choice as to who should form the next government.

    Bryan Gould

    23 August 2013

    This article was published in the NZ Herald on 26 August.