Though 63% of the electorate did vote for other parties, David Cameron looks politically unassailable, and cannot be held to ransom either by backbench Conservatives or by the SNP.
The big question now is whether Britain strikes out in a new direction, or continues along a corporatist route which has created a low-productivity, debt-dependent economy.
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Hindsight is wonderful thing, and in this instance tells us that we should not have been all that surprised by the outcome of the general election. There was a huge (14.4%) swing against the coalition, but David Cameron’s genius lay in ensuring that the entirety of this pain was inflicted on the hapless Liberal Democrats. His party’s own vote, meanwhile, increased fractionally in a climate of fear that Labour’s economic wrecking-ball might swing into action with the help of the invading Scots.
Of the 14.4% of the voters who deserted the coalition, very few (a net 1.5%) switched to Labour, the rest going to the SNP, the Greens and, above all, UKIP. Britain’s quirky electoral system took care of the rest, ensuring that the Conservatives secured a Parliamentary majority with less than 37% of the vote, whilst UKIP’s 12.6% – 3.88 million votes – resulted in just one seat in the Commons.
The first-past-the-post (FPTP) system has its defenders – mostly in the established parties which it benefits – but can hardly be described as democratic. It is particularly unsuitable in a country which also lacks a separation between the executive and the legislature. As a result, Mr Cameron – like Tony Blair and Gordon Brown before him – can now exercise almost unlimited power even though 63% of the electorate voted for other parties.
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Be that as it may, the selection of a new government creates both hopes and fears. Some of the fears are justified, but others are unfounded. Mr Cameron is not going to be held to ransom by his own MPs, for two reasons. First, such is the fragmentation of the opposition that it is hard to see any sort of Parliamentary coalition being formed against him.
Second, Mr Cameron’s success makes him a giant amongst midgets in a political elite remarkably devoid of talent or charisma.
The SNP’s 56 seats confer little or no Parliamentary power on the Nationalists, whilst the government has time enough to finesse the promised referendum on Europe.
Hope, of course, is pinned primarily on the fact that the Conservatives can now govern without the brake so often imposed on them by the Liberal Democrats. This, optimists think, may now enable the government to cement the economic recovery, and to tackle the issue of immigration.
With this come justified fears, many of them concentrated on the contradictory promises made during the election campaign. The government is committed to eliminating the fiscal deficit, and to legislating to tie its own hands over the big money-raising taxes, none of which must be increased.
But, far from specifying the cuts that will be necessary to make the numbers add up, the government is instead committed to handing out money, notably to the NHS, pensioners and first-time house purchasers. This suggests that unprotected departmental budgets may face severe cuts, most notably in the funding of conventional defences which have already become dangerously inadequate.
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To look at how this might pan out, our best guide is the observation that the Conservatives, like Labour, are a corporatist party.
Whilst commentators examine every political twist and turn to determine whether Britain is moving to the Right or the Left, the far more relevant direction has been the shift towards corporatism and away from individualism.
Corporatism, it must be noted, is by no means confined to the private sector, but emphatically includes state organisations as well. The remarkable immunity to consequences that has protected irresponsible bankers and miss-selling businesses has applied equally in instances of public sector failure, of which Stafford and Rotherham are but two examples.
Essentially, corporatism empowers the big battalions, be they private or state, and confers enormous powers, privileges and immunities on those who run them.
This said, it is the power of the private corporates that needs to be subjected to particular scrutiny in the current environment. This will, for instance, be the touch-stone where the European Union is concerned. The corporate elite is strongly in favour of continued membership, which provides both market access and a price-lowering supply of labour. What the elite does not want from Europe is interference in Britain’s deregulated financial services industry, which is one of the key-stones of the ‘corporate economic preference’.
This economic preference is internally-contradictory, in that it wants both low-cost labour, on the one hand, and free-spending consumers on the other. It is this contradiction that has mired Britain in debt, because low-earning workers can only be high-spending consumers as well if the gap is filled by borrowing.
Successive governments have delivered this combination, together with the deregulated banking “flexibility” needed to fund it through easy lending. They have also delivered extensive corporate immunity, and huge state subsidies in the form of “corporate welfare”. The latter was estimated at £35bn by a recent study, a number which does not include the additional subsidy provided by in-work benefits paid to millions of low-wage workers. It is striking that, despite the minimum wage, zero-hours contracts and unpaid internships continue to be tolerated.
You will not need to be told that I dislike corporatism – in principle I am always on the side of the individual, not the organisation – but I should stress that, objectively, corporatism is bad for the economy, and for society more broadly.
In economic terms, corporatism is bad because it stifles competition, and also because it promotes a low-wage, high-consumption economy, surely a dangerously-conflicted economic model.
Obviously, the combination of cheap labour, high consumption and easy access to borrowing has driven Britain (and, for that matter, America) dangerously into debt. But it has also biased the economy away from output that can be marketed globally, and towards internally-consumed services instead. Since 2000, manufacturing output has decreased by 26% in real terms, and the broader category which I call “globally marketable output” (GMO) has fallen even further.
For these reasons, Britain now needs to borrow £100bn annually from overseas just to keep the consumption party going. Strikingly, the trade deficit is now compounded by big net outflows of interest and remitted profits, reflecting the role played by asset sales, as well as by borrowing, in an effort to sustain an economic system that, whilst internally contradictory, suits the corporate play-book to a T.
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Could it be different? The answer is yes, but defying the corporatists would involve an unprecedented political conversion back to the individualism that, in the past, was an integral part of Conservative DNA.
Britain could, for instance, redress the balance by increasing the minimum wage, enforcing the law rigorously, and encouraging employers to pay the living wage. All of this would help the economy by increasing earned (rather than borrowed) spending power.
At modest cost, the small- and medium-sized businesses which drive innovation could be exempted from the archaic and increasingly iniquitous system of Business Rates.
The “revolving doors” between government and the corporate world could be blocked by setting a high (but strict) limit on the earnings of those who leave government for the private sector. The message would be that government service can (and should) be rewarding – but is not a road to riches.
Government could strengthen competition laws to benefit the consumer. It could vow to clamp down on corporate misbehaviour, dropping the seemingly-innocuous term “miss-selling”, and holding executives, rather than hapless shareholders, responsible when misbehaviour occurs. It could apply the same logic to the public services, to ensure that senior managers are held responsible for major failings.
It could prosecute tax-evaders as rigorously as it already prosecutes those who cheat the welfare system. It could end the “non-dom” tax concession, because opportunity – rather than tax-shelter – would be the offer that attracts desirable foreign investors to Britain.
In order to finance industrial regeneration, government could start to tap the vast amounts of potential investment locked up uselessly in the “capital sink” of an over-valued property market. It could inject high-return stimulus by enabling local authorities to go back to building affordable properties for rent (something which could, in part, be funded by dropping the HS2 white elephant).
Please note that none of these proposals involves “attacking the rich”, because better treatment of working people, and the injection of earned (rather than borrowed) spending power into the economy, does not require an incentive-eroding onslaught on the successful.
Meanwhile, the interests of the corporatists – be they private or state – should be subordinated to the good of the country as a whole.
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These are things that could be done, all of which would stimulate investment, innovation and skilled employment. They are workable but, it must be admitted, are extremely unlikely to happen.
It is no consolation at all that the ‘low-wage, high-spend, borrow-the-difference’ model will in due course be brought down by its own contradictions.