Liberalism and politics – short-term thinking or the fight for ideals?

In the UK, the Liberal Democrats are holding their Spring conference this week. I declare an interest. That party represents the closest thing to the ideals that I hold – the belief that monopolies of any type are bad in principle and that the state (and other potentially totalitarian groupings) should be limited in scope and the individual in society provided with the best chances to succeed.

This overly-simplified outline of Liberalism (probably not social democracy) – at least to a British formula – where society is seen as individuals and groups that must be enhanced and where over-bearing accumulation of power is to be resisted – is nevertheless a strong reason why I pay my annual subs to the party.

Against the centralist doctrines of the Labour party (where state is still seen to be the best judge of everything) and Conservatism (difficult to assess but primarily a “market is best” doctrine allied to a notion that old institutions must be conserved no matter what), Liberalism should be the politics of the 21st Century. It shouts for the spirit of individuals and civil society making changes for the better against the rigid institutions set up in the 19th and early 20th Centuries. It should be capturing the spirit of the internet age – where freedoms to communicate should be elevating transparency and openness to a new generation (and convincing the old as well). It should be screaming about how the UK fits into the future of a world that continues to change (and not always for the better), where the rise and development of China threatens the drive to democracy and transparency that has been in place since the defeat of Nazism and totalitarianism after World War II and since.

Today’s Politics

Tragically, politics in the UK is all about shopping baskets. All our attention is drawn to GDP and austerity. These issues are important – especially to those living (or just about surviving) on low incomes. The drive to change taxation at the margin (and we always talk about changes at the margin – not true in the US where a real debate on dramatic changes in taxation are taking place – see John Mauldin’s latest on this) is a proper argument but the focus on taxation and its short-term impact blots out everything else.

Liberal Democrats believe in a wide range of issues. Moving in with the Conservatives as part of the Coalition Government has been a brave move that is hitting the party hard – based on recent polls. Shifting the tax burden to free those earning low salaries to a wealth tax (although the shift is tiny) is seen by senior Liberal Democrats as working to define the party.

Ask a voter what the Liberal Democrats stand for and they will probably answer with comments about university tuition fees or other short-term decisions made during this parliament.

Today’s politics, the politics of short-term economics and counter-terrorism (or long-standing views on how to counter the perceived threats that international terrorism poses) is our staple. Politicians (and we are not blessed with the cream of intelligence in that area – they usually became bankers in the 1980’s) are hooked on short-term ideas and the next election. It was ever thus.

GDP slaves, taxation dummies, election addiction, five year parliamentarians that act like five-year olds.  In the UK we may have been better off than our EU colleagues in Greece (we do have a society that respects to a greater extent tax collection as a cornerstone) but minor modifications to our lives emphasize the conservatism of the nation –  conservatism that is likely to propel the UK backwards and means that our influence is greatly lessened as the 21st Century progresses.

Tomorrow’s politics

Political parties are under threat. Their short attention span means they are missing the evidence that is before them. People and groups in society are pursuing single initiatives to great effect. Whether these groups are organized as NGO’s or small societies or other types of organization, civil society (propelled by new technologies) are able to have a greater influence on politics than ever before. Politicians and government has to be aware of that change and make efforts to respond to it

That response has to mean that decisions must be allowed to take place at the lowest level possible not at the highest.

It must mean that politics has to “open up”and be more inclusive – that means helping those in society to understand what parties stand for – really stand for – and the world that they see ahead.

It must mean that the political parties must continuously work to make themselves relevant.

For Liberal Democrats fighting to show themselves as sufficiently different so that voters provide them with a future beyond this parliament, it seems pretty important to use the remaining three years to do two, crucial things.

First, sure – secure the short-term changes that (even if at the margin) show benefits to that area of society that is bleeding because of the poor economic conditions.

Second, and far more important in the long term, ensure that Liberal Democrats shout about the society that the party wants to have in place and the UK’s place in the world. This is not about minor taxation shifts. This has to be a society where individuals and groups have a bigger say but also where the opportunities to develop (in terms not just of how many makes of designer trainers one can buy but in terms of real education opportunities, real quality of life from birth to death, a society where large, monopolistic groups which threaten that society from inside or outside are not tolerated) are maximized.

Liberal Democracy (or at least the Liberal part of it) has a strong tradition in all these areas. The message has been obscured in its pro-Europe and pro-euro fervour and over-reliance on short-term tax issues and the obscuring of its longer-term reason for existence and how it should want to change the world.

Nick Clegg’s speech back in December at the Open Society Institute made an attempt to voice some of these issues (see https://jeffkaye.wordpress.com/2012/01/01/liberalism-and…e-21st-century/).

Politics needs to motivate and excite in the 21st Century as large movements (such as the labour movement in the late 19th Century and early 20th) are not so obvious – that does not mean it is not happening.

The movement is now about individuals and groups within civil society using whatever tools are available (and which technology is supplying) to make their case. For Liberal Democrats, the aim should be to show how it supports that key change in society and can help and nurture it and maybe lead it and make it work.

Putting the toothpaste back in the tube……….

Growth fuelled by borrowing is at an end. Massive debt-financed binges that held sway in the USA and Europe led to the banks offering new and evermore high risk loans to those who knew no better – those who were caught up in the binge culture. The banks were not allowed to fail (except for Lehmans) and now nations that bailed them out are paying the price – not Governments, but taxpayers and workers throughout Greece, Spain, Italy, Portugal, USA, UK, Ireland where Government spending is heading down, taxes are headed up and growth (as measured by GDP) is slowing and may well reverse.

The Euro crisis is a manifestation of the disease – a genetic disorder that was bound to show itself once the patient came back to earth. It is now showing all the symptoms of a patient that has been in denial and is only gradually coming out of therapy.

Not many saw this coming but some extraordinary thinkers on finance and the economy did. I do not refer just to Roubini or  Taleb who have garnered so much publicity. I rely greatly on the writing of two Americans – A. Gary Shilling and John Mauldin – whose books appeared after the banking crisis but who were both forecasting the problem well before.
Gary Shilling’s “The Age of Deleveraging” (http://www.amazon.co.uk/Age-Deleveraging-Investment-Strategies-Deflation/dp/111815018X/ref=sr_1_1?s=books&ie=UTF8&qid=1325520758&sr=1-1) and

John Mauldin’s “Endgame” (http://www.amazon.co.uk/End-Game-SuperCycle-Changes-Everything/dp/1118004574/ref=sr_1_1?s=books&ie=UTF8&qid=1325520845&sr=1-1)

should be required reading by anyone that wants to understand how the toothpaste got out of the tube and why it won’t go back in. Deleveraging (really the theme of both books) is about reducing our dependence on loans – from individuals to intermediaries like banks and then to governments. This triad of over-extended lending (which is actually worsening) is not allowing itself to be cured.

Most economists did not correctly judge the problems or see ahead the solutions that were needed. Equilibrium based economics working within the norms of “binomial distribution” (normal ranges of events) never see the dramatic risks that can build up in economies while politicians never see beyond the next election. We are all geared to a simulation of the real world in a quasi-science that is not working. As one of Michelle Houellebecq’s characters said in his recently written “The Map and the Territory”: “the economy was linked to almost nothing, except to what was most machine-like, predictable and mechanical in the human being. Not only was it not a science but it wasn’t an art. It was…almost nothing at all.”

Economics and its story of the real world needs to re-invent itself. Politics need to drive this need – not the 1p in the £ tax break or short-termism that covers all thinking today. Democracy is in danger itself (who is running Italy but unelected administrators) unless we are able to urgently re-establish a link between the way we are governed, what we believe to be important in our lives and what we use to help us make decisions.

Please read Shilling and Mauldin – not everyone will agree with everything they say but the thoughtful analysis and insight they provide in a world of people who really do not understand anything they are talking about (which includes many so-called financial experts) is crucial.