Post for ShiftingGrounds--

The rise of resentment in America

Three days on from the re-election of President Obama, the hangovers that followed a night of celebration for Democrats have receded. As a nice bonus, the Republicans, by contrast seem to be facing a four-year long headache. The inquisitions and post-mortems have already began. Demographic shifts have altered the political landscape to leave them with a challenge on par in scale with that faced by the UK left in the late 70s and early 80s.

As it turns out, the GOP didn’t understand (or even want to) the nature of the country they so often profess to love. But if the emphatic defeat of Mitt Romney is provoking head-scratching from the US right about America 2012, it should also cause pause for thought among their bedfellows in Britain who – judging from coverage before and in the run up to the election – don’t seem to have updated their view of the country in twenty-odd years.

As Dan Hodges noted of his Telegraph colleague Tim Stanley back in September, these days “the problem isn’t actually with Lefty idealists transposing their dreams on to Obama. It’s Right-wing idealists who transpose their ideological romanticism on to the United States in general.”

In particular, a cornerstone of this is the notion that Americans have no patience for ‘European-style’ attacks on wealth. The story goes that broadsides on those at the top, calls for them to pay more in tax or curb profit-seeking, are resented by ordinary Joe’s who one day think they could be that millionaire chief executive or investor. Money men are always respected, success never resented, we are told. If we “don’t do God”, the Americans don’t do class politics. For years the British right – aghast at their countrymen’s growing resentment of the top 1% – have gazed longingly over the pond and repeated these mantras.

The plutocrats in the US have long spun the same yarn: bashing a billionaire isn’t only just wrong, it’s un-American. One of the stories of this election campaign, though, has been the total unravelling of this narrative.

For those of you raising a sceptical eye-brow, consider this. Romney ran for President on the basis of being a rich man – a successful businessman – and he lost on that same basis. His entire pitch was that as someone who had made it in the private sector, he knew how to create jobs and get the economy going. In times gone by this would have gone largely unquestioned and unparsed.

However, the Obama campaign (in a move straight out of the Rove playbook) turned this supposed strength into a weakness. Those in the Obama camp arguing for an attack on Romney’s record at Bain Capital won out over those preferring to hit the Governor on the safer ground of being a ‘flip flopper’. From early on the campaign sought relentlessly to define Romney in terms of what he actually did to make his money: outsourcing, asset stripping, firing at will, tax dodging. In doing so, they peeled Romney’s supposed ‘experience’ away from ideas of enterprise or wealth creation. And it worked. His reputation never fully recovered. In the home of free-market fundamentalism, Obama’s team were able to pick and win a fight about predatory verses productive capitalism.

This approach was replicated in the furthest reaches of the campaign. Again and again the Obama campaign counter-posed their candidate’s platform “For All”, as the campaign sticker blared, with that of Romney’s. Over and over, the phrase “millionaires and billionaires” tripped from the tongue of Democrats with scorn any time GOP plans were discussed (so much so it upset those poor dears on Wall Street). Tax rises on the very wealthiest also formed a key policy plank for Obama, as he separated the top 1% out from the broader ‘middle class’ in his tax plans.

All this is no small feat, and took some degree of courage when you consider Fox News has spent the past half-a-decade screaming that the President is some sort of Bolshevik. But the space for it was only made possible by a growing anger among swathes of American society at the country’s wealthiest business and financial elites. This comes not just from the financial crisis, but years of declining wages and living standards, as well as Wall Street excess and the saturation – ratcheted up since Citizens United – of US public life with money, SuperPACs and special interests. Romney’s categorical defeat at a time when all the economic indicators suggested he should have won will be remembered as the time that the groundswell of anger at the super-rich that has built up in Europe over recent years reached American shores, and swept the Republican candidate away.

Quite obviously, the US has not suddenly become a socialist nirvana. American society is still beset by huge disparities in wealth and power, and little basis for its transformation exists in a politics where the most progressive US president in forty years has governed as a pretty conventional liberal by UK standards. If taxes on the wealthy do go up as planned, it will only be to where they were under Clinton – far from levels as recent as the 1970s.

But the way in which Romney was defeated is nevertheless important. Fundamentally, it chips away at a notion that has proven vital to the maintenance of the status quo: that the behaviour of the wealthiest is somehow inexorably linked to the public good, and that anyone who is good at money-making must automatically be good at governing or economics, and afforded special status.

It also means that insufferable sirens of the Thatcherite right have one fewer place to point to in the world where their brand of rapacious economic sadism enjoys broad public support. That once-vaunted bond between free-market capitalism and liberal democracy just got weaker still.

Four reasons why 'the squeezed middle' should be at the heart of Labour's thinking

This appeared on LabourList

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Four reasons why 'the squeezed middle' should be at the heart of Labour's thinking

With the budget fast approaching, the Deputy Prime Minister’s moves on the personal allowance last week make it clear that the government is making a push to be seen to stand on the side of those on low and middle incomes. This is a demographic Ed Miliband has until now been able to make his own, and must now move quickly to reclaim.

We shouldn’t be surprised that the government confident enough for a land grab. Ed’s own approach on this subject over the past year has been a bit frustrating. He introduced the squeezed middle to our political lexicon, but that is largely where it’s remained. Beyond one speech, he hasn’t built on it or fleshed out its implications, just flung it into the odd soundbite or interview. Hence it’s become a sort of ephemeral buzzword; a phrase used to describe the world, but not change it. Neither is a “blitz of interventions” on it enough, as his aides promised. He needs to put it at the heart of everything he says and does, as the problem which ‘responsible capitalism’ seeks to solve rather than just as a point of reference.

This is not because, as some have argued, it is some buzzy catch-all phrase, but because it’s a serious economic phenomenon affecting the lives of low-to-middle income earners across the country (e.g couple earning between £12,000-30,000 per year, or a family with three kids on £20,00-48,000). The average wage has been flat in real terms since 2003. The Resolution Foundation’s recent findings highlight again that these people are now badly struggling, just about keeping their head above water – most are struggling to pay bills and are having to cut back, and inevitably feel the pain of inflation, wage freezes and cuts even more acutely.

For Labour, the faltering living standards of this group are also a real political phenomenon, spanning the whole of the country, including the South and the Midlands where the party’s greatest challenges lay. The much cited Southern Discomfort series found ‘the squeezed middle’ “hold the key to Labour’s recovery” in these areas; around halve of floating voters say they do not have enough money to make ends meet. While some move up the earnings scale, many stay put – they remain the centre of gravity on the income spectrum.

But what should all this mean in practice? A hazy appeal to these people is not enough – Ed has to put them at the forefront of his strategy, especially on the economy. They need to be at the heart of every reaction to events, every press release, every PMQs, every speech. He shouldn’t be afraid to define the group if pressed, but it would also appeal to many others who feel like they work hard, pay taxes, but get little out of it. This would open up space for a distinct and coherent alternative to the Tories, in a number of ways.

1. A simple argument on the economy which resonates.

The fact is, most people are broke. Stagnating wages play a big role in explaining this, and are a significant underlying weakness in the economy (as Bill Martin and others have argued) – they have left consumer confidence perilously low, with obvious knock on effects for productivity and employment. Miliband should point out that the Tories’ economic approach is failing because the scale of their austerity measures take yet more money out of ordinary people’s pocket – the very people who drive the economy – for instance the VAT rise, cuts to child benefits and tax credits. This shifts the focus of the economic conversation away supply-side fetishism and on to what we have – a demand crisis.

2. Bold, short-term policies which also address the party’s economic credibility.

Shockingly, most polling shows the views of ordinary voters are not the same as Westminster insiders. Most are not besotted with deficit reduction time-tables (hence ‘too far, too fast’ polls well in abstract) they just don’t trust the Labour party with their money, unfair as it may be. It’s this which the Tories have exploited to push their message as the only credible approach. But there are more progressive ways of neutralising this issue. Labour should advocate a cut to the bottom rate of income tax as a means to stimulate the economy. This must be costed; so Ed should suggest partially doing so through increasing the top rate of tax by the same basic amount (e.g 2p on the top for 2p off the bottom) – then challenge the Tories to oppose it. A more vocal campaign for a living wage should be his next step, as a means of making work pay. This, on top of Labour’s other work challenging train and energy companies, would hammer home the message that the party’s economic priority is the back-pockets of ordinary people, not the wealthy elite. This is the surest route back to economic trust, not trying to out-posture the Tories on cuts.

3. Some coherence on cuts

If Ed wants to stick to his underlying position on cuts, there needs to be more logic to those he supports and those he doesn’t. Putting those on low-to-middle incomes at the heart of Labour’s thinking would mean opposing those cuts which most directly add to the squeeze on these families (for instance child benefits, housing benefits and tax credits) while supporting them in areas where they have the least impact on this group and thus on demand (for example, International Development or Defence). This doesn’t obviate the need for touch choices, but protecting living standards should replace the more scatter gun approach adopted thus far.

4. Long term vision (which goes beyond just spending)

The squeezed middle also lends itself to a long-term argument for the run up to the next election. At the heart of the this pithy phrase lies the failure of an entire economic model. Even when the economy was booming in 2003-2004, growth had stopped translating into wage gains for many ordinary people. They were working harder, but gaining less. The benefits were increasingly skewed towards the top: while the share of GDP going to low-to-middle income earners steadily declined over the last 30 years, it soared among the top 10 and 1%. For all the growth in the last eight years and in the next eight (if any), average real disposable household income will likely stay around the same. Neither is growth in new industries or technologies per se bound to aid employment – well paid working class and lower middle class jobs have steadily been sucked out of Anglo-Saxon economies (as the story of the iPhone in the US illustrates), replaced by more insecure, lower paid work. It is to this backdrop, to fill the gaps and make ends meet, that many have borrowed up to their eye-balls.

This is the most significant long-term trend occurring in theUKtoday. Finance-led growth, the decline of trade unions, and a hands-off, self-regulatory approach to the market and globalisation have all played a major part in getting us here. For a generation, all of this – the dominance of big money, inequality and excess at the top – has been sold with the promise that the benefits will ‘trickle down’. Now, for the heart of our working population, that trickle has dried up. Livelihoods and the economy at large are being now undermined. New Labour’s more redistributive measures mitigated the effect of this, but never re-shaped it. A return to the old growth, in the long-term, won’t be enough. The system is broken, and there’s an obvious need to re-think the entire way we do capitalism in this country.

Unlike other party leaders, Ed at least gets this, and has a critique of modern capitalism which accounts for it. His ‘responsible capitalism’ agenda is a good start, but he needs to state the problem more clearly: it is not an abstract issue of morality, or heart over head, but efficiency, real jobs and building an economy which serves everybody. Neither does this have to all be about spending – to the vogue question, ‘What is Labour about when there’s no money?’, pre-distribution should be the answer – getting up stream to better shape economic outcomes. Greater economic organisation in the workplace, a more active state ‘picking winners’, the separation of casino and high-street finance, national and regional investment banks, the protection of industry from predatory takeovers, new procurement rules, measures to deter outsourcing, and much more all have a role play a role.

But no space for any of this can really exist unless the broader trend it seeks to address is more widely known and prioritised. Inconsistency, not ideology, has long been Labour leader’s biggest problem – picking themes up, making a speech, then not building on it. He has done well to redress that over ‘responsible capitalism’ and bankers bonuses, but he now urgently needs to build that within a bigger argument about living standards, and hammer away at it day after day. For Labour, the way to the British people’s hearts is through their wallets.