What do we mean by “economic reform?”
The term ‘economic reform’ implicitly meant more government between 1875 and 1975, and has implicitly meant less government since. That’s how we can tell whether or not we are still in the neoliberal era.
When the recent financial crisis first hit I was worried that it would push us toward statism, just as in the 1930s. And indeed that seems to have occurred in the US. By the spring of 2009, however, I noticed that the rest of the world seemed to be moving in the opposite direction. Parties of the left kept losing in places like India (the communists), Argentina, and Germany. At the time many commenters said I had things wrong, that I was misinterpreting complex local conditions.
Now I think we now have enough information to know I was right. The financial crisis has turned out to be a huge problem for parties on the left. Here’s a recent headline on the election in Sweden:
(Reuters) – The crash of Sweden’s long-ruling Social Democrats to their worst defeat since 1914 highlights the decline of socialist parties in much of Europe, drained by social change, economic crisis and the rise of new issues.
Obviously Sweden will continue to be far more social democratic that the US. But the effect of the crisis has been for countries like Sweden, Denmark and Holland to trim back government.
Look at how envious the British are of Sweden:
For decades, conservatives have played an important role in Swedish politics: they are there to be defeated. They advocate lower taxes, and are duly accused of planning savage cuts. So the voters traditionally stick with the Social Democrats who have held power for seven of the last eight decades. Every other decade Swedish conservatives come on for some light entertainment, before being booted out after a term. Never in modern Swedish history has a conservative prime minister been spared this fate. Until now.
This week Fredrik Reinfeldt, a bald and deeply dull 45-year-old who communicates with David Cameron by text message, is celebrating the first re-election in history of his party, the Moderaterna. He is also celebrating the success of an extraordinary experiment. His response to the recession was to cut taxes, a move his critics said the country could not afford. The European Commission warned him it would end in tears. But instead, the lower taxes were a spur to growth and Sweden now has the fastest-growing economy in the Western world.
When elected four years ago, leading a four-party coalition, Reinfeldt had a striking slogan. ‘We are the new workers’ party,’ he said, meaning he would cut taxes for those in employment, but not for those on benefits. When faced with protests about how the poorest would be paying a higher marginal tax rate, he appealed to voters’ innate sense of fairness – and resentment at the high level of welfare dependency. At every stage, his ministers would explain the basics of low-tax economics. Cut tax on wages, and you increase the incentive to work. ‘This will increase employment,’ Reinfeldt said. ‘Permanently.’
Not that he was believed – at first, anyway. The party fell 20 points behind in the polls, and braced itself for the ritualistic electoral ejection. It carried on regardless, with tax cuts for cleaners and baby-sitters (most home helpers were paid ‘black’, as the Swedes say, because the tax was so high). Tax on low-paid jobs fell sharpest. Nursing assistants, for example, saw their tax bill drop by a fifth. The aim was to make work compete more aggressively with Sweden’s famously generous welfare state.
Taxes for the rich also came down. Reinfeldt abolished the notorious wealth tax, which took 1.5 per cent a year from any Swede worth over about Skr1.5 million (£125,000). Anders Borg, the finance minister, faced predictable protests about a Bush-style tax cut for the rich. He replied: ‘The big winners are, in the long term, all Swedes, because we must create conditions for companies to match global competition.’ So while the Tories were endorsing Gordon Brown’s plan to increase the tax on the rich, the Swedes were cutting the tax rate – in order to collect more from the well-paid.
When the recession came, Sweden was badly hurt, as one would expect from an export-orientated economy trading with a stricken continent. But the damage was limited because Sweden had properly regulated financial institutions (having been stung by a serious financial crisis in the 1990s. Banks which had embarked on misadventures in the Baltic cleaned up their own mess. The government entered the recession with a surplus. A Gordon Brown figure would have been impossible in Sweden because its laws prohibit politicians running up the national debt in boom years.
Like most of Europe, Sweden launched a stimulus, but Reinfeldt set aside two thirds of his for a tax cut. Corporation tax fell from 28 per cent to 26.3 per cent [the US rate is over 40%], taxes on jobs were cut further still while income tax thresholds were raised. Determined not to let a crisis go to waste, he declared the tax cuts permanent. So while Brown was planning to increase National Insurance, the Swedes were doing the reverse and explaining why. ‘If you tax work higher, you will get fewer people in work,’ said the education minister, Jan Björklund. ‘But if you tax work less you will get more in work.’ This was a battle of ideas, and it was a battle that Reinfeldt and his coalition allies were winning.
In April last year, his party pulled ahead in the polls for the first time since his election. As election day approached, it became clear just how effective his tax cuts had been. Unemployment never hit the forecast 10 per cent – it was 8 per cent in July and 7.4 per cent in August. Two think tanks have confirmed Reinfeldt’s assessment that his tax cuts have created some 100,000 jobs. The deficit was tumbling as the economy recovered. Extraordinarily, Sweden has now overtaken the United States and reached second place in the World Economic Forum’s yearly competitiveness rankings.
Ask about the recession in Sweden now and you are met with a blank stare. Consumer confidence is at a ten-year high. Its recession was steep, but shorter than its downturn after 9/11. In fact, this had come to worry Reinfeldt. ‘Our medicine may have been just too effective,’ one of his state secretaries told me over the summer. ‘Voters don’t think about the economy now. The recession is becoming a distant memory.’
It helped that the deeply unpopular Mona Sahlin was leading the Social Democrats. It also helped that her party was intellectually exhausted. The left has had to embrace ‘free schools’ (the model adopted by Michael Gove) because they are now so popular among parents. The Social Democrats spent much of the campaign trying to persuade voters to forget they ever opposed them. ‘Pupils should choose schools,’ ran one of its posters, ‘schools should not choose pupils.’
The Social Democrats’ main economic argument – that tax cuts mean vicious spending cuts – was exposed as false by the Reinfeldt recovery. Ms Sahlin did not dare to propose reversing what had been the sharpest tax cuts in Swedish history.
And finally, a little comic relief from The Economist:
But Maria Wetterstrand, the Greens’ co-leader, demurred, saying her party could not support a government that “kicks sick people off health insurance, does not have a climate policy and wants to build ten new nuclear power plants.”
PS: Why did we go the other way from the rest of the world? I’ve always thought our liberals were motivated by unfinished business. We never really completed the welfare state, leaving millions without health insurance. Matt Yglesias says that now that Obama has finished the job, the real need is efficient neoliberal reforms, not even bigger government than currently forecast.
Tags: Sweden
27. September 2010 at 05:27
I guess my only questions are from what levels were the tax cuts made, and what is the overall tax burden on Swedish citizens now?
Once you know the answers to those two questions, then you can make some fairly reasonable comparisons with other countries’ tax structures.
27. September 2010 at 05:45
I don’t know much about elections outside of the U.S., but political scientists who study American politics argue that the pace of real disposable income growth in the months or year preceding an election is a strong predictor of the outcome. If growth is average or above average during that period, the incumbent political party tends to experience gains, but if growth is below average, then the incumbent party tends to experience losses.
Assuming other countries’ elections work similarly, it is plausible that the U.S. has experienced a shift to the left because the right-wing party was in power during the early phase of the economic crisis, while other countries have experienced a shift to the right because the left-wing party was in power during the early phase of the economic crisis. If so, the U.S. is exceptional simply because the Republicans happened to control the White House when the August 2008 drop in AD took place. Imagine if Al Gore had been handed the 2000 election by the Supreme Court and had been president when AD collapsed in 2008. Today, we would be witness to a new “permanent Republican majority.”
27. September 2010 at 06:16
@1
Second highest in the world…
http://www.ekonomifakta.se/en/Facts-and-figures/Taxes/Taxes-and-GDP/Tax-as-a-percentage-of-GDP/
27. September 2010 at 06:26
beezer, I know that Sweden has very high taxes, although they have lowered the top MTR quite a bit, and also tax capital relatively lightly (Their corporate tax rate is much lower than ours, and I seem to recall they lack a inheritance tax.)
Ram, Yes, the economy does play a role. But right wing governments are being re-elected in places like Germany (which had a very bad economy during the 2009 election) and left wing governments are losing in places like Britain.
27. September 2010 at 07:15
Actually, the Top Marginal Tax Rate hasn’t been lowered as Prime Minister Reinfeldt has feared that this would be politically hazardous. They have have lowered marginal tax rates for people with low or average income while at the same time reducing unemployment benefits and sick leave benefits. The results have been very good in terms of boosting employment:
http://stefanmikarlsson.blogspot.com/2010/03/swedish-vs-danish-labor-market.html
27. September 2010 at 07:18
The second part of the story, then, may be the increase in right-wing or nationalistic political activity that typically coincides with below average economic growth. See, for example:
http://www.voxeu.org/index.php?q=node/5047
One could argue that the Tea Party in the U.S. is a manifestation of this, but I would have to see a more specific analysis of that movement to make that claim. In any event, the two parts of the story are that below average growth during the run-up to an election predicts losses for the incumbent party in general, but it also predicts super-normal right-wing nationalist political activism. The combined effect is to throw out left-wing parties in power, but have mixed effects on right-wing parties in power. In the U.S. case, the drop in AD happened so close to the election that hardline conservatives didn’t have enough time to organize in response to the economic collapse, which is why the Republicans were rejected. Now that they’ve had time to organize, we expect the Democrats to be rejected. I don’t know enough about other countries’ elections to apply this analysis, but I think including this factor would improve my story’s fit with the recent data.
27. September 2010 at 07:45
The non-conformity of the United States in this regard may be, at least partly,a distortion of our wars and George W. Bush. Barack Obama’s new statism was ushered in by an electorate which was not as concerned with the merits of statism per se as they were with the foreign policy foibles of the previous administration. Other electorates did not have to take this into account.
27. September 2010 at 08:07
The Sweden Democrats have been stealing the center-right’s thunder. Most of the news reports have discussed their small gain in seats instead of the historic re-election of a center-right government.
27. September 2010 at 08:17
Thanks Mikael.
Thanks Stefan, Yes, I worded that comment poorly. I was thinking of the cuts that took place in earlier decades, when most countries were reducing their top MTRs. Didn’t Sweden go from somewhere around the 80% – 90% top rate to more like a 55% top rate? Was that cut in the 1980s?
Ram, Maybe, but again that conflicts with the German election, where the big gains in 2009 went to the Free Democratic party, which is the more socially liberal right wing party.
Still, I think that on average you are right about the correlation between a weak economy and anti-immigrant attitudes.
Evan, Very good point.
Wonks Anonymous, Yes, the press often spins things that way.
27. September 2010 at 10:48
I see “that tax cuts mean vicious spending cuts was exposed as false by the Reinfeldt recovery”, but no supporting details. Any idea what happened to spending? Was Sweden actually on the wrong side of the Laffer curve such that lower taxes meant higher revenues even in normal times? Did the tax cuts get them out of the recession but leave them in worse shape w.r.t. the deficit than before? Did Reinfeldt cut spending, but not “viciously”?
Re “Why did we go the other way from the rest of the world?” it’s possible that the entire world moved in the correct direction. If the U.S. were too right-wing, and Europe were too left-wing, then moving everyone toward the correct balance would produce the results we saw. Not that I think voters are this smart.
27. September 2010 at 10:58
On an unrelated note, I’m having trouble remembering to come back and see how you reply to my comments. On some other blogs (maybe just those hosted on wordpress?), I’ve seen the option to email me when there’s a new comment. I wonder if you could add something like that here.
27. September 2010 at 11:11
“When the recent financial crisis first hit I was worried that it would push us toward statism, just as in the 1930s. And indeed that seems to have occurred in the US. By the spring of 2009, however, I noticed that the rest of the world seemed to be moving in the opposite direction. Parties of the left kept losing in places like India (the communists), Argentina, and Germany. At the time many commenters said I had things wrong, that I was misinterpreting complex local conditions.
Now I think we now have enough information to know I was right.”
Um, Scott, this means you were wrong. You BET YOUR WHOLE WAD on we’d become more Socialist in the crisis… it is “the reason” you said conservatives should target NGDP… otherwise we’d be overwhelmed with another FDR.
When in fact, I WAS RIGHT. The visceral reaction to greater government is profound and meaningful…. in Europe it is actually less interesting because Mundell HACKED that culture 10 years ago, they are all locked into 3% deficit spending and are afraid to raise taxes because other countries in the union become more competitive…. they are like the states were before 1913.
http://biggovernment.com/mwarstler/2010/02/17/we-ought-to-join-the-eu/
But in our own country, where we have more than just monetary union, the people are STILL STANDING against stronger Federal control, we’re that much smarter than our grandparents.
27. September 2010 at 11:51
Morgan you are seriously uninformed. The EU is very very far from a “free-trade zone.” Sure the countries compete on taxation. But whats missing from external examination of the EU is the gigantic behemoth of a regulatory super-state strangling everything in sight. Try EU Fisheries Policy, Common Agricultural Policy for a start. 80% of the legislation in member countries now originates in Brussels. They are VERY VERY far from the States in 1913. The States in 1913 did not have the Fed Guv dictate the size and curvature of bananas.
27. September 2010 at 11:53
“You BET YOUR WHOLE WAD on we’d become more Socialist in the crisis…”
And as Scott says, that appears to have happened in the US. I mean c’mon, whatever the Tea Party says, in reality they aren’t going to cut Social Security or Medicare or national defence. The Republican Pledge for America is essentially a promise to cut taxes and maintain spending levels — that’s not small government, it’s irresponsible government. (I’m not even going to say anything about the Democrats, please.)
What Scott said at the time is that in other countries — many of which mind you have implemented looser monetary policy (Sweden and Australia most notably, and which I believe Scott has written about before) — the electorate would vote for smaller government. The fact that they did (which many commenters last year were fairly skeptical about) merely corroborates Scott’s hypothesis.
If the Fed were more like the Sveriges Riksbank or the Reserve Bank of Australia, it’s quite possible the US wouldn’t be in the mess it’s in. The US may well not have tried a debt-ballooning fiscal stimulus if monetary stimulus had been more timely.
27. September 2010 at 12:13
“Morgan you are seriously uninformed.”
What are the chances of that?
“The EU is very very far from a “free-trade zone.” Sure the countries compete on taxation. But whats missing from external examination of the EU is the gigantic behemoth of a regulatory super-state strangling everything in sight.”
Dude, the point is the EU is behaving this way because of a earth-moving structural change in their monetary system.
As such, I’m less wowed by their cultural reaction to government as Scott mentions it…. after all, we distrusted a strong central government, while sharing currency a long time ago.
I’m MORE WOWED on the historical importance of our Tea Party, which is our countrymen reacting far more aggressively against government action in a huge financial crisis, than our grandparents did – that is a VERY meaningful thing. That’s progress. That’s Reagan wasn’t a pendulum swing, he was the most important President of the 20th century…. we are PERMANENTLY better. The march of modern history is a march away from government.
So @johnlmeek, you are wrong, Scott’s thesis circa 2008, indicated that conservatives were screwing themselves by not targeting NGDP, because economic crisis invited more government involvement – just like the Great Depression, and that’s not what is happening.
Lastly, get over the false choice of higher taxes of less services, the real answer is paying Public Employees far less.
Yes, we’re going to see SS and Medicare change, but on a long term path.
Forgetting stimulus, we need to shave about $400B a year immediately, and keep all ongoing costs from growing past inflation.
And all $400B of that can come out of Public Employees.
27. September 2010 at 13:29
To Morgan
I agree in theory but the problem is not public employee compensation; the real problem is that there are twice as many public employees than is needed. I actually say increase pay to attract top talent; just higher much fewer folks.
27. September 2010 at 14:14
@Joe C – agreed. We need to go from $1.6T to under $1.2T and 401K’s for everyone.
27. September 2010 at 15:49
Prof. Sumner, all this left right talk is all relative. If David Cameron was in the US he would be denounced as a Marxist by the contemporary G.O.P/Tea Party. The new coalition government have an accelerated deficit reduction plan compared to the last administration. However, they are raising taxes to reduce the deficit and have no plans to reduce the higher rate of tax from its current 50% level. A plan B if the world economy turns down would be useful but has not been forthcoming. The last government were statist rather than left wing. In some respects one could say the new government in some areas are more left wing. For example, they are reducing taxes for those on low pay.
I would say the whole political spectrum in the UK over the last twenty years moved somewhat to the left. What were seen in the past as issues of the left are now accepted as mainstream. Although the Conservatives are still obviously a party of the right They moved to the centre if that makes sense. The type of political social conservatism seemingly rampant in the US would gain no traction in the UK. In some respects being in coalition with the Liberals suits Mr Cameron because it effectively allows him to ignore his right wingers. Most of the government ministers are in the Blue Dog Democrats mould rather than John Boehner’s.
I can see precious little evidence that the country has moved to the right. The majority of the country remains sceptical about the Conservative Party. However, they did want a change from the centralising statism of the last administration.
27. September 2010 at 16:03
Morgan Warstler
27. September 2010 at 11:11
‘In Europe it is actually less interesting because Mundell HACKED that culture 10 years ago, they are all locked into 3% deficit spending and are afraid to raise taxes because other countries in the union become more competitive… ‘
Morgan, every member of the EMU has breached the Stability and Growth Pact 3% rule at some time. In fact, if they had applied the rules Germany would not have been eligible for membership because their debt was above 60% and rising. When they formed the euro you got in with above 60% debt if it was falling. There are no sensible sanctions so the rules are pointless. Fining a country running a deficit does not qualify as sensible. When it comes down to it each country will follow their own interest no matter what the rules say.
27. September 2010 at 17:19
JeffreyY, That’s a good point, although as with you, I find it hard to believe the world is that rational.
I’ll see about the option of notification, but don’t expect anything soon, as I am constantly in over my head, and very un-tech savvy.
If there’s something that you really want to get a reply to, let me know in the comment itself, and I’ll try to send you an email. Comments come into my email box.
Morgan, Yes, I was initially wrong, but I became right long before you got here. Within two months of starting the blog I was arguing that the rest of the world was becoming more neoliberal.
Contemplationist, I agree.
Johnleemk, I agree.
Richard W, I have a longer view that you. Over the last 31 years Britain has shifted far to the right. 50% tax rates are still lower than 98% tax rates. But I agree that in the past 10 years Britain has moved to the left (I wouldn’t say 20 years, as Blair started out as a fiscal conservative.)
Why do you think voters in Germany didn’t want a change in 2009? Germany’s economy was in horrible shape at that time.
Why does the article say Socialists parties are in deep trouble all over Europe?
27. September 2010 at 17:39
In terms of the cyclical trend I think Ram’s more correct on both the ‘throw the bums out’ impulse and the strength of nativist parties during sharp down turns. Though I think Andrew Gelman has indicated that the economic determinism is strongest in the US, because of our well established two parties. Multiparty elections tend to be less predictable.
Certainly the nativist growth is noteworthy in SwedenT, Denmark and the Netherlands.
Also, the German example is a bit odd. Remember that Merkel was in a grand alliance with the Social Dems up until the last election, though the Free Dems were not. So ‘Ins’ and ‘Outs’ is a confused concept there. Plus, as this week’s Economist shows, the Free Dems have not fared so well in the coalition, falling from 14% support to about 5%.
http://www.economist.com/sites/default/files/images/images-magazine/2010/09/25/eu/20100925_euc350.gif
In France, Sarkozy’s party lost the recent regional elections, and though those were largely inconsequential to real power, Sarkozy started deporting Roma partially in response shortly afterward.
You may be correct on the secular neo-liberal trend. But if unemployment remains high in Europe and the US for much longer, I wouldn’t be surprised if new countervailing trends didn’t begin to emerge.
27. September 2010 at 19:52
‘ Richard W, I have a longer view that you. Over the last 31 years Britain has shifted far to the right. 50% tax rates are still lower than 98% tax rates. But I agree that in the past 10 years Britain has moved to the left (I wouldn’t say 20 years, as Blair started out as a fiscal conservative. ‘
Yes I agree on deregulation, privatisations and tax rates it has moved to the right. Those things are now generally accepted as mainstream. The social issues that used to be seen as left wing are now mainstream Conservative thinking so I suppose there has been a convergence on the centre. Morever, this Conservative government are far more liberal on social issues compared to the Thatcher governments who were authoritarian conservatives.
I thought raising the top rate to 50% was a terrible idea but it is interesting that the government have no plans to reduce it. They seem to be genuinely worried at being portrayed as favouring the wealthier if they were to cut it. That would not have bothered the Thatcher government. So I’m not sure where that places them. Their overriding concern seems to be to reduce the deficit.
‘ Why do you think voters in Germany didn’t want a change in 2009? Germany’s economy was in horrible shape at that time.
Why does the article say Socialists parties are in deep trouble all over Europe? ‘
I get the impression Angela Merkel is personally popular. Whereas Gordon Brown was deeply unpopular. If Labour had changed their leader as seemed likely on a few occasions there is every chance it would have been them in coalition with the Liberals. David Cameron is personally popular but the election was more about rejection of Gordon Brown rather than much enthusiasm for the Conservatives. I tend to vote for the Liberal Democrats, but the last Labour government were not Socialists. They were tinkerers who could not stop interfering. I wonder how much the demographics of ageing societies is impacting the voting patterns in Europe?
27. September 2010 at 19:56
My speculation about why we went the other way is that it wasn’t necessarily on ideological grounds, it was a continuation of the realignment that was already taking place (since 2006 midterms) hastened by anger over the economic crisis. The Democrats already had control of congress in 2008, thanks to Bush messing up Iraq. McCain was a poor presidential candidate, and there was virtually no leadership coming from republicans at all during the crisis – they all ran for the hills. Obama filled the leadership vacuum in addition to being something of a historic candidate on top of it.
Many on both sides wanted something different than what they had gotten from the neocons. It likely wasn’t what Obama said that made so much difference in the election as the fact he was not one of them, and we only get a choice between one or the other. At least I don’t remember Obama being disingenuous about what he wanted to do during the campaign, and yet he got tons of opposition over everything from nearly the moment he took office and it wasn’t just from conservatives. Indies and some Democrats joined into the fray as well.
From where I sit, the Obama/Pelosi/Reid trio has turned out to be the greatest recruiting tool for the conservative movement ever. Many life-long Democrats have shown up to Tea Party events wanting to know what they can do to help and will be voting republican for the first time in their lives. As long as I’ve been active in politics I’ve never seen so many converts and people who have never paid any attention to politics wanting to become involved. And of course from my point of view, they picked the right place to go to get involved.
27. September 2010 at 20:05
Incidentally Labour’s new leader is an Oxford and LSE economics graduate so maybe you could offer him some monetary tuition.
27. September 2010 at 21:26
Scott, TEN YEARS AGO I cheered Mundell fixing Europe and knew we’d have to see it tested by a Greece… when I got here, I insisted we could trust the Tea Party to hold the line, and you responded that conservatives would be worse off from the recession.
I go much further, I believe that the winning die was cast by Reagan, that Repubs have intentionally ON PURPOSE deficit spent in order to short circuit the winning Democrat strategy from 1913-1979:
1. vote for me.
2. get free stuff.
Massive conservative deficit spending is a gambit that cannot be defeated by liberals as long as the Fed refuses to debase the currency…. and even then that won’t last long.
How many new waves of young voters must go through the promise of #1 to get screwed on #2, before they stop believing like idiots in a free lunch? You are born, no one owes you shit. Get over it.
This is a 100 year old line of dominoes toppling. This is about long term functionally altering the “horribly imagined possibilities” of a bad people, much like getting rid of slavery, or letting gays marry.
Say it another way: you really think the disaffected will rise up to end disparity as long as they are well fed and have 500 channels, and four new movies released every weekend?
Its fine to have some monetary cards up our sleeve, but we owe it to Ronnie, we owe it to the Tea Party, we owe it to the likely voters, we owe it to the Europeans, we owe it to the Chinese peasants, and we owe it to our children to stop letting our incompetents earn what they are earning. Public employees are meant to be servants, they ride in the wagon and monetary policy is not FOR THEM, it is for us – and by “us” I mean millions of local small businessmen who own the stuff in their community. Big fish in small ponds… that’s what the currency is for!!!
Until we throw the public employees out of the wagon, we will not be able to properly target NGDP.
27. September 2010 at 21:43
Swedish MTRs were cut several times in the 80s ending up at 50% before they were raised again to 55% in the early 90s during the financial crisis. It’s still 55% but the point where it kicks in has been moved up over the years.
Reinfeldt has mostly cut income taxes on lower incomes if it comes from working. The rich has mainly got their tax cuts from the removal of the wealth tax and the introduction of a new property tax which is much lower for more expensive houses. All house owners in the big city areas and attractive summer house areas at the coasts have seen their property taxes go down a lot. The inheritance tax was removed by the social democrats before 2006.
Of course we still have high taxes but I think the direction matters too. You also have to remember that education, healthcare and other welfare costs are included in the taxes when you compare with other nations. I think Reinfeldt will continue to cut taxes over the next few years without risking a deficit.
27. September 2010 at 22:37
I think our problem with the Left now is ideological stickiness. Despite healthcare reform, a lot of the Left views (what I think are superficial issues) like gay marriage or don’t ask don’t tell as important culture milestones which need to be passed. Until they are passed, they will view the current power structure as corrupt (power meaning Wall Street, not the White House) and lump into that corruptness the idea of tax breaks for the rich (nevermind what that means). Yglesius is brilliant but he expresses what he wishes the Left were not what it is.
I think what is missing most from both parties is the key concept of sacrifice. Why can’t an American politician, from either party, run for office and simply say “Nobody is going to get exactly what they want. Nobody ever will. But we can continue to be a great country if we are willing to sacrifice the minor issues for the major ones.”
Unfortunately, Al Gore used the word sacrifice — to superficial effect — in his chicken-little documentary. Sure, he may have been right about the dangers of global warming, but he played his hand too hard and on a single issue, and offered nothing other than a profoundly cynical outlook.
Why can’t we talk about sacrifice and be positive in the same sentence? We managed it in WW2.
If the Left could sacrifice the idea of economic equality for the sake of economic improvement for nearly everyone, that would be an enormous political leap forward. (I realize that language is loaded.)
If the Right could admit that it is better to die on our feet in freedom than live on our knees in fear then they may be able to persuade some liberals that their economic way of thinking isn’t all about making the masses live on their knees.
Of course I am mixing together social and economic issues, but that is the whole point. The monolithic idealogies view them as one and the same.
How about I trade you one openly gay marine for a slight decrease in marginal tax rates? It would be a start.
28. September 2010 at 05:33
OGT, I really think people are missing the forest for the trees. I just read another Economist article that pointed out that socialist parties are declining in every European country except France.
Richard, You said;
“Yes I agree on deregulation, privatisations and tax rates it has moved to the right. Those things are now generally accepted as mainstream. The social issues that used to be seen as left wing are now mainstream Conservative thinking so I suppose there has been a convergence on the centre. Morever, this Conservative government are far more liberal on social issues compared to the Thatcher governments who were authoritarian conservatives.”
Yes, but I was clearly talking about economic issues. Neoliberals are to the right on economics, and to the left on social issues.
I think the election of Obama can be explained in a single word: Bush.
Morgan, The new Republicans look pretty much like the old ones to me. Government got bigger under Bush.
mattias, Yes, and they did an earned income tax credit to give low income people more incentive to work. Private sector jobs have actually increased. And they are more neoliberal than the US in inheritance taxes, corporate income taxes, schooling, and some types of privatization.
rob, You said;
“How about I trade you one openly gay marine for a slight decrease in marginal tax rates? It would be a start.”
I’ll double the offer.
Yes, I think you have diagnosed some of the political problems we face. And I agree that Yglesias is a cut above the average leftie (but not necessarily the lefties that read this blog–who are also a cut above.)
28. September 2010 at 10:26
“Morgan, The new Republicans look pretty much like the old ones to me. Government got bigger under Bush.”
So then you expect government to get bigger 2011-2012?
By what measure?
28. September 2010 at 12:45
Sumner-If we’re going to play dueling Economist stories, I think it will be pretty inconclusive. I just finished one on Britain showing Labor caught up with the Conservatives already (linked below).
As I wrote, I think you’re right about the secular trend of the last thirty years. But it’s generally a mistake to make straight line predictions based on recent trends.
I think demographic changes in Europe and the US along with the rise of the emerging countries could challenge the current consensus in a number of ways, some of them very troubling if not addressed right.
Of course, I write this as a guy who’s boyhood hometown just voted to require all would be renters to get a Rental License from the police station to prove they are not illegal immigrants. Yea, Small Government!
http://www.economist.com/sites/default/files/images/images-magazine/2010/09/25/br/20100925_brc328.gif
28. September 2010 at 13:32
Scott, I must admit to being mildly confused. I thought you predicted the end of fiscal policy as the world recognizes the total dominance of monetary policy. This story is all fiscal, gives the full credit to lower taxes, and in the country that won’t listen to your favorite central banker.
29. September 2010 at 11:58
Morgan, No because that’s coming off massive stimulus. Even of Obama was dictator I’d expect a small dropoff in 2011-12.
OGT, Yes, but I’d expect the Conservatives to drop off a bit after the announced budget cuts. So that’s no big surprise. I also think the British people are more anti-market than people in some other European countries. I’m told the Conservatives would never dare propose for-profit voucher schools, as they did in Sweden. And of course UK health care is much more socialistic than on the continent.
D. Watson, This story mixes up several issues, involving cyclical and secular growth. I think that long term growth (and even short term to some extent) is strongly influenced by supply-side factors. Sweden has done some of those supply-side reforms, and hence has become more efficient. I predicted an end to demand side fiscal stimulus, just increasing the deficit to try to get more spending. That’s the sort of fiscal stimulus that makes no sense if you use monetary stimulus. But I agree, we aren’t there yet, even in Sweden.
By the way, Sweden did do some monetary stimulus. Their currency fell, while the Danish currency was stable. They also did a tiny bit of the negative interest on reserves (although mostly symbolic.)
29. September 2010 at 16:56
> Parties of the left kept losing in places like India (the communists), Argentina, and Germany. At the time many commenters said I had things wrong, that I was misinterpreting complex local conditions.
You are highly confused here. Most democratic countries have something labeled “left” and something labeled “right”, and in long run each gets to run every country about half of the time.
Even if we disregard local issues and map all parties onto global left-right scale, differences between countries, and within country by time are ridiculously vast, while differences between mainstream left and right in each country at any given time are tiny.
If you look at actual policies (not rhetoric) of “Xlandia/Yistan 1980/2010 left/right” governments you’ll see 4 clusters – “Xlandia/Yistan 1980/2010” – and you’ll have to look very carefully to even notice that left/right points within each cluster differs.
30. September 2010 at 05:54
Tomasz, I am not at all confused, I’ve often made the point about each side winning about 50% of the time.
In India, the more left wing party was re-elected, what made the election meaningful is that they could now govern without the communists, who had previously blocked all economic reforms.
In the short run, when the zeitgeist is moving one way or another, the party that best reflects the voters moods is likely to win. That is now parties on the right. Over time the left adjusts its views so that you get the 50-50 split in the long run.