Should we support the Liberal Democrats? How sensible are they?

I've only just alighted on an article in The Guardian earlier this week by one David Clark, formerly adviser to Robin Cook, entitled This Thatcherite lurch will take the Lib Dems nowhere. Clark complains of the 'insidious political consequences' of the Liberal Democrats, but oddly enough he's not alluding to Charles Kennedy's willingness in February last year to speak from the platform of the Stop the War Coalition, a front organisation for the totalitarian and antisemitic Socialist Workers' Party. Instead he means this:

Last autumn's frontbench reshuffle, which led to the promotion of free-marketers Vince Cable and Mark Oaten to the treasury and home affairs briefs, has been matched by a pronounced lurch to the right on a range of issues.

On Europe, where the Lib Dems had been alone in maintaining principled support for integration, Cable now opines that Brussels has got too big for its boots and that social and environmental policy should be repatriated to the member states; Europe should be little more than a bankers' playground.

The party's economic policy has a shrill, Thatcherite tone. Britain (one of the most deregulated economies in the industrialised world) is smothered in red tape, the DTI and its industrial support functions should be scrapped and above-inflation increases in the minimum wage are unaffordable.

Even the party's long-standing commitment to a 50p top rate of tax for high earners is being finessed out of existence. We are told that it will now include national insurance and a replacement for the council tax, blunting its redistributive effect and making very little difference to the status quo.

This all sounds quite promising, until you realise the intellectual idleness that underlies Clark's lament. A writer who, without a trace of irony, employs serial cliches such as 'too big for its boots', 'bankers' playground' and 'the status quo' is unlikely to have invested much thought in his analysis. All that he's really identified is that the Liberal Democrat Treasury spokesman is undeniably a capable and thoughtful economist. Unfortunately, Vincent Cable's views have nothing in common with those of the rest of his party, as I argued when he took up his present post. The overwhelming majority of Liberal Democrats, from my observation, share David Clark's prejudiced and tendentious historical misconceptions:

But they should remember that their tradition includes the New Liberalism of the early 20th century and the achievements of Beveridge and Keynes, not to mention an important strand of British social democracy. The thread linking these contributions has been an understanding that liberty and the good society cannot be secured by legal equality and free markets alone, and may sometimes be imperilled by the latter. It is a perspective that needs to be restored to the political mainstream.

I don't know of anyone in British politics who believes that liberty and the good society can be achieved by legal equality and free markets alone. I know of literally nobody outside a tiny fringe who denies the existence of public goods such as defence (i.e. things that have, in the economist's definition, the properties of non-rivalrous consumption and non-excludability). The proper dispute is between what counts as a public good and what does not; some things that have traditionally been counted a public good, such as higher education, are in fact more like hybrid goods, because they benefit principally those who consume the good rather than the public generally - their positive externalities, in other words, are fewer than has commonly been assumed.

On these questions, the modern Liberal Democrats may derive inspiration from the New Liberalism of Hobhouse and others, but they have almost nothing in common with the tradition of Keynes and Beveridge. Keynes's central insight was that market economies were cyclically unstable, and that those fluctuations needed to be countered by the operation of fiscal and monetary policy. The corollary of his premise was that governments should balance their budgets over the course of the business cycle; the modern Liberal Democrats , by contrast, condemned the current Government for alleged 'fiscal flagellation' in running budget surpluses as a result of sticking to the Tories' public expenditure targets on taking office. Beveridge proposed an insurance-based system that balanced rights with contributions, not an ever-expanding system of entitlements. Whenever the current Government, and its predecessor, have attempted to align the welfare state with this principle the Liberal Democrats have ritually opposed such measures.

In the last Parliament, I advised the Independent MP Martin Bell to vote at every opportunity in support of the Government's welfare reforms, including the cuts in benefit, and I'm pleased to say that he generally followed that course. The Liberal Democrats, by contrast, have been for years the very embodiment of reaction and unthinking conservatism. Here, to take an example almost at random, is their spokesman on Work and Pensions, 'Steve' Webb, denouncing cuts in incapacity benefit early in the current Parliament:

The Government has been talking for years about the million disabled people who want to work, but has made no progress. Now they are threatening to withhold benefit from disabled people who are unfit for work, unless they come in to talk about job prospects. Given the many barriers to work already faced by disabled people, and the discrimination that many suffer, forcing them to discuss jobs on pain of loss of benefit is cruel and unnecessary.

I can imagine that someone even with a severe disability but who has managed to build a successful career (David Blunkett, for example) would feel patronised by that sort of emotional blackmail. You can’t blame a politician for playing politics, but Professor Webb's remarks reflect an unwillingness to exercise discrimination between, say, someone with a severe wasting disease such as MS and someone with a bad back problem that makes it difficult for him to do manual labour (a genuine example of the extension of incapacity benefit, by the way). More important, they reflect an assumption that runs throughout this debate that state benefit is an entitlement rather than a contractual arrangement. And that assumption is unwarranted. It is a moral imperative that a decent society make provision for the disabled, but it does not follow from that that society has no interest in seeing that money distributed effectively. Government has no money of its own to distribute: all it does is to provide the means to transfer income from one group of citizens to another. The Liberal Democrats' attack should not be on the Government (which is neither ‘generous’ nor ‘stingy’, precisely because it has no money of its own to dispense), but on taxpayers for expecting their money to be used effectively.

I must with reluctance therefore provide answers to the two questions that head this post: they are 'no' and 'the query is undiplomatic'.

Comments

[Chris Lightfoot]

Is "bankers' playground" a well-known cliché? The only references I can find to it on the web are in the article you discuss here, and in a piece on Clerkenwell.

[Mark T]

wider recognition that the public sector has no wealth of its own and merely distributes that of the private sector would be a major step to improving popular understanding of the limits and role of government - as well as curbing the sense of entitlement to "their money". Moreover, the ever increasing agency costs levied by the public sector for performing this role need greater scrutiny.

[Tom]

David Clark opines that in post-Thatcher Britain, we have one of the most lightly regulated econonmies in the industrialised world. Utter nonsense. I very much doubt that Clark has ever had to run a small business, since if he had done so he would have realised what a nonsense that is.

Notwithstanding some of the reforms under the Tories in the 1980s and 90s, Britain remains a heavily regulated economy. The fact that it is not as heavily oppressed by red tape as say, Italy or France is not much consolation.

[John Turnbull]

"some things that have traditionally been counted a public good, such as higher education, are in fact more like hybrid goods, because they benefit principally those who consume the good rather than the public generally - their positive externalities, in other words, are fewer than has commonly been assumed."

Those damn doctors - only in it for themselves.

[Matthew]

Clearly doctors are different from the rest of us - they operate for the sake of altruism and the good of society alone.

[Andrew Ian Dodge]

I believe that the free market can both serve the economy and the public good. When has the public sector/bureaucracy ever been better at delivering a service than the private one?

[John Turnbull]

There is no such thing as a "free" market. Markets are creations of society, via governments, not the mythical, stand-alone entities that free marketeers seem to believe in. Thom Hartmann explains it well:

"Governments provide a stable currency to make markets possible. They provide a legal infrastructure and court systems to enforce the contracts that make markets possible. They provide educated workforces through public education, and those workers show up at their places of business after traveling on public roads, rails, or airways provided by government. Businesses that use the "free market" are protected by police and fire departments provided by government, and send their communications - from phone to fax to internet - over lines that follow public rights-of-way maintained and protected by government.

And, most important, the rules of the game of business are defined by government. Any sports fan can tell you that football, baseball, or hockey without rules and referees would be a mess. Similarly, business without rules won't work."

[BigMacAttack]

I really enjoy this blog. Thanks.

Tom,

The Heritage Foundation's Economic Freedom Index ranks GB 7 out 155 countries. Even if you agree with the measurement it doesn't mean more freedom isn't good. It would mean that GB is relatively unregulated.

John Turnbull,

Yes they are.

I am thinking that doctors would exist without public funds. Call me a wild eyed conservative. The government isn't creating doctors, the government is paying for their educations. Perhaps this benefits the general public, perhaps we end up with more doctors and/or better doctors, but the primary beneficiary is the doctor. They get a free education and a nice job.

If the answer no they aren't, we shouldn't fund their educations, since selfless doctor wannabes would undoubtedly still find a way to become doctors.

[Ed Snack]

With respect, the notion that governments create markets is a fiction. Markets existed long before governments were ever thought of, as neolithic peoples traded goods over significant distances. All that is required are goods that tradable and some form of communication to make the trading possible. Try reading "The Origins of Virtue" Matt Ridley, for an introduction. International trade flourished long before there were governments with any ability to enforce agreements.

[David Gillies]

Britain is, indeed, relatively lightly regulated. The problem is that 'one of the most deregulated economies in the industrialised world' is like that old joke: 'tallest building in Wichita'. The scope for deregulating even the most lightly regualted economy is vast.

I would agree that States are not necessary for enforcement of free-market rules. But they are sufficient; indeed that's one of the problems in that they usurp the regulatory structures that precede them. There's then of course a tendency to regulatory creep.

John Turnbull, BigMacAttack, you're both off beam. John, virtually all of the goods you specify could be provided by private entities - even courts (the existence of binding arbitration lends significant credence to this). There's no a priori reason that the State should provide education, hospitals or roads (if it can provide them more efficiently than the private sector then all well and good. But if Government merely arrogates to itself the right to provide these things then that is not an argument against private-sector provision of them). The set of true public goods is very small (albeit that the members of the set are very important). As for the idea that public funding of medical training make for more/better doctors - the primary function of the GMC is to keep numbers of trainee doctors down. Since when has a trade union thrown its doors open to all and sundry? There's actually a serious problem of retaining female doctors after their twenties as so many of them get married and drop out of the profession. But that's another story...

[John Turnbull]

Ed, point taken: I should have said that governments create "free" markets. Sorry to rely again on an appeal to authority, but others have already argued these points better than I could. John Gray, Professor of European Thought, LSE:

"Free markets are creatures of state power [...] Encumbered markets are the norm in every society, whereas free markets are the product of artifice, design and political coercion. Laissez-faire must be centrally planned; regulated markets just happen. The free market is not, as right thinkers have claimed, a gift of social evolution. It is an end product of social engineering and unyielding political will."

I'm not anti-enterprise or in favour of a planned economy. I'm just saying that we should recognise the so called free market for what it really is.

[Stan]

Sigh. A "front organisation" that can organise a demo two million strong? Get a grip.