Security abroad, fairness at home

Can Britain stand up to China and improve its domestic social contract, too?

Towering columns

In The Telegraph, Ambrose Evans-Pritchard praises the achievements of Bidenomics, but warns of the enormous debt pile it’s bringing:

America won the Cold War without a shot being fired and on terms overwhelmingly favourable to the Western worldview. It was cheap at the price. Reagan’s debts were buried and forgotten beneath the peace dividend of the 1990s. Bidenomics has met similar disdain from Harvard economists: “The least responsible macroeconomic policy we’ve had in the last 40 years,” said Larry Summers, the New Keynesian high priest. 

He predicted that Bidenomics would lead to stubborn 1970s inflation and that it would take a harsh recession to bring prices back under control. That has not happened. Pandemic inflation has fallen as fast as it rose, and without a spike in unemployment. It has been a textbook supply-side response, just as the Biden White House always argued. But unlike Reagan’s variant of tax cuts and deregulation, Biden is conjuring supply by drawing people into the labour market. He is scattering state largesse to “derisk” investments in order to pull in private capital and revive the US manufacturing base. There is nothing left-wing about it. Profits are privatised: losses are socialised.

Joe Biden is fighting two wars, a big one against Xi Jinping’s wolf warrior Leninism and a smaller one against Putin, and he is going beyond Donald Trump’s erratic trade wars by pulling all the levers of economic nationalism. He is mobilising $280bn on semiconductors, nanotechnology, and quantum computing under his CHIPS and Science Act, aiming to reestablish secure supply chains in critical technology. He is spending $42bn on fast-broadband, under Buy America rules. He is building a “battery belt” – at breakneck speed, and mostly in Republican districts – to head off China’s bid to control the world’s EV lithium market.

Also in The Telegraph, Sam Ashworth-Hayes suggests China may have reached its zenith - but this may only increase its aggression:

The long term trends look worse still. Up until now, China’s growth has been powered by the dynamics of “catch up”. When you’re very far from the front of the pack, there’s a lot of low lying fruit to pick. Spectacular growth can be generated simply by building roads, getting the electricity grid up and running and opening up to do business with the world. But the closer you get to the frontier, the less this works. State-directed investment is no longer enough to get you over the hump.

In 2011, the economist Barry Eichengreen identified $17,000 as the per capita income at which the transition to slower growth begins. China passed that boundary at some point in 2020-21. Lo and behold, at the same time up crop a series of pieces identifying Vietnam, Mexico and others as the “new China”; low wage, low income economies where manufacturing could be done cheaply.

This is exacerbated in Beijing’s case by justified Western wariness about the regime’s intentions. Barely a day goes past without some new reference to “friendshoring” or “securonomics”, generally understood to mean “removing China from our supply chains as quickly as we reasonably can”. The UK is stripping Huawei components out of its 5G networks and Chinese-made security cameras from government sites; Washington is openly engaged in a trade war over microchips. For all that President Biden has broken with his predecessor in image, he’s kept Donald Trump’s tariffs in place. There are other headwinds facing China, too. Last year the country registered its first population decline since the 1960s. For all the chatter about the ageing West fading from relevance, China’s problem is worse; by 2050, the median Chinese person will be 50 years old.

In The Times, William Hague examines the mathematics of the pensions triple lock, asking whether it’s fair on younger generations:

[T]he arithmetic of a triple lock is not universally understood, even, dare I say, among MPs. If you increase a number each year by the highest of three measures, and which measure is highest varies from year to year, you will steadily increase that number by more — perhaps considerably more — than all of the three measures. Paul Johnson, director of the Institute for Fiscal Studies, explained it well in a simplified example: “If prices rise 20 per cent this year and nothing next year, while earnings rise nothing this year and 20 per cent next, each will rise 20 per cent in total while the pension will rise by 40 per cent.”

This is why the state pension will, by next year, have gone up by 11 per cent more than average earnings as well as 12 per cent more than inflation since 2010. Rather than growing by whichever is highest, it’s growing by more than anything that can pay for it — wages or prices, or taxes, or the size of the economy. Again, there has been a reasonable case for this. Pensions were arguably too low and pensioner poverty much more widespread 20 years ago, but it is not something that can go on for ever, without very large tax rises or big reductions in benefits for families of working age.

This brings us back to fairness between generations. Younger people face house prices that are now nine times average earnings, compared with an affordable four times when I was in my twenties. It is inescapable that the upfront costs of energy transition will fall on their generation over the next 20 years. So will the cost of much higher defence spending in a more dangerous world. To have an entire generation struggling to develop a stake in the economy is socially and politically dangerous. They should not be asked to pay for a runaway train in spending that the triple lock would become.

In the i, James Dickson says Baby Boomers were the beneficiaries of unique historical circumstances and government policy:

Dig a little deeper than the headline rate, adjusting for Miras, and you’ll find that today, mortgage repayments as a proportion of income – literally the pounds being taken out of your pocket by interest rates – have soared right back to the levels that followed Black Wednesday in the 1990s. The vast amount of mortgage principal that there is to pay off on houses bought at 2023’s much higher prices means that a 6 per cent base rate today renders mortgages just as unaffordable as they were at their peak in the 90s. So whatever boomers suffered through in the 1990s, the few young who have managed to buy are experiencing an identical income squeeze.

Even if you take the demonstrably false idea that boomers didn’t have it easier buying houses relative to now at face value, they don’t half seem to have done well out of it, do they? For all that hardship, they couldn’t be in a better position on housing. Meanwhile, rates of homeownership for their children have seen precipitous declines, standing well below ownership rates for boomers when they were of the same age. It’s not a phenomenon distinct to expensive areas like London and the South East, either – homeownership among young people has collapsed nationwide, from Manchester, to Strathclyde, to Tyne and Wear.

…The state pension is subject to exactly the same heuristic hubris and mythmaking too. There is no “personal pension pot” that national insurance contributions pay into – it is effectively general taxation, functionally indistinguishable from income tax in how it is spent. And current taxes fund current state pensions, rather than the contributions of the past being invested to fund state pensions today. Coincidentally, when boomers were funding the state pension of their parents, pensioner poverty was much higher than today.

In The Times, Matthew Syed wonders whether apps and social media may have ruined our capacity for nuanced and metaphorical thinking:

But now our collective gaze is directed not upwards and outward but is buried in smartphones, scrolling through Twitter and TikTok, platforms commercially designed to strangle empathy, nuance, metaphor, allegory and complex thought. It is an artificial world of memes, soundbites and reductionist spats where communication is not about mutual understanding but virality. It’s as if modern technology is taking us back to a communicative repertoire of grunts and literal gestures. The philosopher C Thi Nguyen puts it this way: “The aims of communication are complex and many. Some of us want to transmit information or to persuade; some of us want friendship. Some of us want to join together in the pursuit of truth and understanding . . . Twitter invites us to shift our values along its prefabricated lines. We start to chase higher likes and retweets and follower counts — and those are very different targets.” He calls it the “gamification of discourse”.

And this is why even liberals (like myself) who have long shied away from regulation should confront the possibility that these apps are not merely making our children sick but corroding the fabric of contextual thought. This, I now think, is the virus, the disease, the underlying mechanism linking the otherwise disconnected travails in a world where we seem materially richer than ever before but more spiritually impoverished than ever.

McGilchrist writes: “We are beset by a tyranny of literal-mindedness — affecting our capacity to understand metaphors, humour and irony, which increasingly are being driven out of public converse and out of our lives.” Without a reset, it might destroy us.

In The Critic, Ellen Pasternack says bans on dangerous dogs clearly do work:

[B]reed-specific legislation has been very effective at minimising risks to the public from dogs over the three decades it has been in place. Pit bulls are one of the prohibited breeds in the UK; in the USA, where they are generally not subject to restriction, fatal dog attacks per capita are twice as high, with attacks by pit bulls more than making up the difference.

…It’s true that totally eradicating a certain behaviour may well be impossible. This doesn’t mean that prohibiting it is ineffective. Granted, if someone really wants to do something, they will probably find a way — but most people aren’t hell-bent on doing things. If you make something more difficult, more risky and more socially censured, fewer people will do it. A side effect might be a rise in dangerous practices from the subgroup who are hell-bent on doing the thing you’ve prohibited, be it backstreet abortions or drug smuggling. The human cost of that increase is something that must be weighed up when considering a ban. Let’s not pretend that the overall rate of the prohibited behaviour won’t go down, though, potentially by an awful lot — or on the other hand that decriminalising a behaviour, making it destigmatised and easily available, won’t make it more common.

American gun control proponents are fond of pointing out that the UK and Australia both tightened firearms restrictions in the wake of mass shootings in the 1990s — and neither has seen gun violence on anywhere near the same scale since then. If our politicians had believed that “you can’t ban guns, only responsible gun ownership”, how many more Dunblanes might we have had in the intervening years?

Wonky thinking

The Centre for Policy Studies published The Power of Ownership by Sir John Redwood, arguing for a radical increase to housing supply while reducing demand:

One of the ways people stay positive and energetic is via the knowledge that tomorrow can be better than today, that the economy can offer higher living standards to children than it did to their parents. Being able to own is an important driver of seeking growth and success. Owning your own home leads to the wish for improvements, with many people climbing the property ladder from small first flat to larger family home, or by extending and improving a place they have bought to renovate. Owning a stake in the business you work for can make an individual keener for that business to succeed and more positive about its levels of service. Working for yourself is the ultimate alignment between your aims and the needs of your clients and customers, with the imperative of good customer service obvious every day of the week as you seek to attract and retain enough customers to sustain your business.

…Surveys show that the vast majority of those who rent a home would like to own one sooner or later. They also show that few people who own want to rent – something also proved by the market, since there is little barrier should they wish to switch. We need as a matter of urgency to take measures to expand the opportunity to own a home of your own. This requires changes by the Bank of England over interest rates and bond trading, and by the Government over immigration and planning.

…If we want to expand home ownership, the Government needs to restrict legal migration into the UK more, and complete its plans to end the flow of illegal migrants across the Channel in small boats. Inviting in an additional 600,000 people a year, as we did last year, places a huge strain on housing, and is well in excess of the rate of new homebuilding. The position is even more acute in some areas. Whereas emigrants from the UK may come from a wide variety of areas, many of the new arrivals wish to live in a limited number of cities, making the pressures there far more acute. Many migrants of course need rented accommodation, often leading to higher purchase prices paid for properties which are then adapted for more people to live in, to support the higher prices paid.

The New Conservatives published a new plan to upskill Britain, arguing for a radical overhaul of universities and a shift to skills-based learning:

In order to upskill Britain, proper attention needs to be shown to quality technical Further Education, with funding to match. Money needs to be redirected from the bloated university sector and channelled into developing the skills of the British public, helping businesses train the talent they need in the process. No longer should A-Levels and Bachelor Degrees alone serve as the ‘gold standard’ of educational attainment, but equal importance should be shown to technical and academic learning alike, as is successfully demonstrated by countries like Germany, where more than half of school leavers enter the job market via an apprenticeship programme.

Further Education plays a vital role in providing the skills needed to revive the manufacturing sector and level up the country. There have been some strides made, such as T-Levels and the Lifelong Learning Entitlement. Similarly, Government initiatives like the Skills Bootcamps scheme, which works with local employers and authorities to fill skills gaps and vacancies in a local area, should continue to be expanded. But so much more could be done if a greater share of the skills budget was available.

At the heart of the problem is this issue of funding, which skews the post-16 education system in favour of universities. In 2017/18, the Government spent £8 billion on 1.2 million undergraduates but only £2.3 billion on 2.2 million Further Education students. Funding for level 4 and 5 technical and vocational education qualifications desperately needs to be improved. Although students who opt to study A-Levels receive full funding from the Government, if they were to pursue an apprenticeship then their employer would be expected to cover some of the costs.

As well as increasing choice and funding for Further Education, the institutional landscape also needs to be transformed. It is vital to address the gap in provision of higher technical education – a challenge that has arisen since 1992 reforms that turned polytechnics into universities. Some of these institutions should be allowed to offer shorter and more flexible courses, encouraged to work with local businesses to plug skills gaps and train up young people. The overemphasis on university expansion at the expense of technical offerings has caused the UK to lag behind countries like Germany and the Netherlands, which boast strong technical and vocational learning provision. The shift away from classroom-based learning is much more common in these countries, with over half of young people in Germany embarking on technical or vocational education.13 In order for the UK to compete, the institutional landscape needs to change.

Book of the week

We recommend Heresies: Against Progress and Other Illusions by John Gray. In this rhetorically powerful essay Gray criticises our faith in technological progress and the ideologies that idolise it:

The twentieth century was an age of faith, and it looks as if the twenty-first will be as well. For much of the century that has just ended, the world was governed by militant political religions, each promising paradise on earth. Communism promised universal freedom and prosperity; it succeeded only in adding another chapter to the history of human misery. After the fall of the Berlin Wall, the cult of the free market promised all the communism had failed to deliver. The neo-liberal era lasted little more than a decade. The post-Cold War interregnum was shattered by the attacks on Washington and New York, and the American attempt to export democratic capitalism worldwide is meeting a brutal end in the killing fields of Iraq.

Both communism and neo-liberalism were messianic movements, using the language of reason and science, but actually driven by faith. Seemingly deadly rivals, the two faiths differed chiefly on a point of doctrinal detail - whether the final perfection of mankind was to be achieved in universal socialism, or global democratic capitalism. Just as Marx’s revolutionary socialism had done, the global free market promised an end to history. As could have been foreseen, history continued - with an added dash of blood.

Like most Enlightenment ideologies, both communism and neo-liberalism were obsessively secular. At the same time they were deeply shaped by religion. Looking to a future in which all mankind would be united in a single way of life, each was rooted in a view of human history that is found only in western monotheism. Marxism and the cult of the free market are only the latest in a succession of Enlightenment faiths, in which the Christian promise of universal salvation reappears as a political project of universal emancipation.

Quick links

A House of Commons staffer was arrested on suspicion of spying for China.

…and MI5 warned the Conservative Party two of its candidates could be spies.

The economy shrank by 0.5% in July, spurring fears of recession.

The UK’s trade balance in goods and services widened to £18.8 billion due to a fall in exports.

The Government has finalised a £500 million support deal for Tata Steel at its Port Talbot site, but thousands of jobs will still be lost.

Polling for ConservativeHome suggests voters do not want a smaller government.

Labour voted to block housebuilding.

…and said it would be open to accepting an EU-determined quota of illegal migrants.

Wages are growing at 7.8% despite a slowing jobs market.

A poll found Labour to be leading the Tories by 20 percentage points.

The chair of the Social Mobility Commission said youth are facing a worse future than their parents.

BMW will make a new electric Mini after securing Government backing.

The UK is now the eighth largest manufacturer in the world - but it was once the sixth.

Former Defence Secretary Ben Wallace said human rights laws are protecting terrorists.

Brussels has launched a probe into Chinese state subsidies for electric vehicles.

The BBC pulled a scheduled programme of songs by Singer Roisin Murphy following critical comments she made on social media about puberty blockers.