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What if it’s not the economy, Vince? The former Lib Dem leader's amoral new book has a blind spot when it comes to China

Maybe if Dr Cable had been more interested in voters, he'd still be in power. Credit: Dan Kitwood/Getty Images

Maybe if Dr Cable had been more interested in voters, he'd still be in power. Credit: Dan Kitwood/Getty Images


January 29, 2021   7 mins

In the early years of this century, I spent a lot of Tuesday afternoons with Vince Cable. Then occupying some sort of role on the Liberal Democrat front bench, and representing Twickenham in parliament, Dr Cable MP would invite political correspondents to a room on the Committee Corridor of the House of Commons. There he would deliver what could only be described as lectures on contemporary economic issues. I remember a very good one on oil prices. It was often impressive and generally interesting, and almost entirely pointless.

The problem was that Cable, who later became an interesting Cabinet minister then a poor Lib Dem leader, struggled to connect his economic insights to practical politics. The ever-smaller band of hacks attending used to leave that room each week wondering what his seminars had to do with the Blair government, the Lib Dems’ prospects, or anything else that was then on the agenda at Westminster.

Those Commons sessions — erudite, informative, almost devoid of politics — came to mind while I read Cable’s latest book. Money and Power is good and interesting, but fails utterly to deliver on one of its key promises. The book is 16 portraits of world leaders who made a real economic impact, and if you’re looking for a brisk, slightly old-fashioned “great man” primer on modern economic history, pre-order it today. But if you’re taken by the publisher’s promise of a book “examining the fascinating interplay of economics and politics”, prepare for disappointment.

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Because this is economics largely estranged from — and sometimes wholly divorced from — politics. Time and again, the matter of whether and why economic policies and their authors are approved or rejected by their populations is an afterthought, treated like a weather event: something that just happens. And in his intelligent but bloodless way, Cable unwittingly says quite a lot about what can go wrong with economic policymaking. By omission, he points towards some things that the next generation of economically-interested politicians should be thinking hard about now.

Maybe the first and biggest question is: how important should economic policy be to politicians? Cable quite rightly notes that for most of the post-war period, countries around the world have given national priority to rising living standards and economic wellbeing. He goes on to describe how a variety of leaders have sought to do that, with varying degrees of success. Cable’s measure of success for the politicians he profiles is largely based on economic outcomes: did they deliver more wealth and wellbeing for their populations?

The importance of that barely needs to be explained: sustained economic growth in recent decades has transformed human experience in ways that were barely conceivable even a generation ago. Infant mortality has plummeted, lifespans are soaring, and the years of life we have are happier and healthier than ever before.

But is that enough? And is the pursuit of growth above all always the right thing for politics to do? Cable’s economic policymakers often come across almost as Platonic guardians, distant and superior beings making decisions about the best interests of the masses who will eventually benefit, whether they know it or not and whether they welcome it or not. One of Cable’s most revealing observations is about Margaret Thatcher: “One of her traits — and an admirable one — was to introduce and persist with measures that she knew to be unpopular but judged to be necessary.”

In this book, elections, opinion and consent are peripheral; where Cable says “politics”, he often means a leader’s ascent through the hierarchy of a party, not anything directly involving the people who feel the results of economic policies. His depiction of Ludwig Erhard, father of social market economics, is crisp, informative and challenging (I speak as Director of the Social Market Foundation) but says almost nothing about post-war politics in West Germany. He writes about Franklin D Roosevelt’s success in establishing a generation-long post-war consensus around a “strong, active federal US government, labour rights and social protection”, but he does so in a single paragraph and offers no explanation of how FDR turned economic success into political wins.

And as Cable acknowledges — but cannot explain — there is no certainty that good economics is also good politics. He profiles Leszek Balcerowicz, Poland’s finance minister at the fall of communism: his “Big Bang” liberalisation of the Polish economy put the country on track for years of strong growth and, eventually, EU membership. But Balcerowicz lasted barely two years, as Poles rejected him and his allies. By contrast, Cable notes that Peronism in Argentina “has combined one of the most abject, sustained failures in economic policy with continued political popularity, evidenced by the 2019 election of a sixth Peronist president”.

What makes the difference? Cable doesn’t know and doesn’t really try to answer. His puzzlement over voters’ curious choices is evident in his last and probably unwise profile, of Donald Trump, which appears to have been hastily finished in the strange days following the November election.

Trump’s eclectic but not haphazard approach to economics perplexes Cable (and others), who cannot understand how Reaganomic tax-cuts could sit with a fixation on protectionist bilateral trade policy and nostalgia for inefficient manufacturing — and command the support of a large section of the American electorate.

All of which leads to one of the questions Cable doesn’t ask, but which emerges clearly on reading his book: what happens to economic policy when people decide there are more important things in life than economics?

To be fair to Cable, he’s hardly alone in this. All sorts of people — politicians, journalists, academics — have been keen to try to explain the politics of recent years in solely economic terms. Trump won in 2016 because white non-college incomes fell and jobs disappeared; Britain voted Brexit because of austerity.

And economics may have been one factor for some voters. But that economics-first view overlooks other things, the cultural and the social, which some people consider more valuable than GDP growth. Philip Hammond used to say that none of the 17.4 million who backed Brexit voted to be poorer, but some of them did. Some were quite happy to forego some portion of future economic growth in exchange for what they saw as sovereignty, national pride, a sense of control.

That’s not a choice I’d have made, but I think people who make policy need to accept it as a valid choice. They also need to think more about why some people feel able and compelled to make such choices: free trade made America richer in aggregate, but didn’t benefit everyone, or make everyone feel happier about themselves or their country. Economic policy should acknowledge such perceptions and experiences and reflect them more, rather than — as Cable’s analysis sometimes seems to imply — regarding voters’ irrationality as an inconvenient obstacle to be overcome or just avoided.

Here, I should note that I have a lot of sympathy for Cable’s Platonic view of policymaking: both as a columnist and a think-tanker, I’ve often argued for politicians to do unpopular-but-sensible things. (And I still do: the sooner we start taxing housing assets to fund social care the better.) But my guess is that it’s going to become even less viable to make economic policy by doing complicated and contentious things for the greater good of the electorate in the hope of securing their weary consent later. I suspect electorates empowered and (sometimes) informed by social media and possessing a very(historically speaking) high level of wealth and comfort are only going to expect more from their leaders than sound economic management.

My bet is that sooner or later, that’s going to mean people in politics start talking a lot more about central banks. A conversation about their role in modern economics — and politics — is surely overdue. Our elected leaders have handed vast power to technocrats whose legal mission is to do what’s best for the masses, not what they want. There’s nothing wrong with this — it’s better than the alternatives — but where’s the political process to deliver consent? The economic guardians of monetary policy routinely make decisions with profound political consequences: ultra-low interest rates and quantitative easing are effectively transferring great wealth to older property-owners, at the expense of younger people struggling to buy a home and amass decent pension. Yet in the UK at least, politicians barely talk about any of this. In QE, economics trumps politics to such an extent that politics is barely present.

That cannot last. Cable several times cites Bill Clinton’s campaign slogan — It’s the economy stupid — as a truism that explains all politics. Not anymore.

There’s another even deeper canyon on the politics-economics faultline that Cable highlights without apparently noticing. Can economics be used to suppress politics? Can you provide enough wealth to buy your way out of the political need to win arguments and elections? These questions arise in Cable’s analysis of east Asian leaders, in which he has disappointingly little to say about political freedom.

His portrait of Lee Kwan Yew, for instance, has more to say about the academic background of Lee’s economic advisers than about the people of Singapore and their view of a leader who delivered economic growth and an increasingly authoritarian state.

And then there’s China, which is posing one of the biggest questions of all about politics and economics. Is it possible to make a country and a people rich without making them free? Our entire idea of the West is premised on the assumption that economic growth and political freedoms proceed together: as people own more stuff, they demand and acquire legal rights over that stuff, and in due course a say in how those laws are made. Educated, property-owning masses cannot be denied political freedom forever, we trust.

China is doing a depressingly good job of proving us wrong on that. The CCP’s embrace of the market has made many of its people — by global and historical standards — rich. Hundreds of millions of Chinese people have smartphones and flatscreen TVs, but not one of them has a vote. Effective economic policy is trumping politics.

This is the stuff I’d like to read about in a book that offers to guide our understanding of the future relationship between politics and economics. Sadly Cable barely touches on this and his book sometimes goes beyond being simply apolitical and borders on the amoral. His chapter on Deng Xiaoping treats Deng’s role in Mao’s mass murder of their countrymen — and direct responsibility for the Tiananmen Square massacre — as mere factual context for the man’s views on markets, industrialisation and agricultural reform.

The results are jarring, especially when Cable writes blandly about the catastrophic Great Leap Forward, when private farming was banned and crops seized by the state. This horror took place when Deng was one of the three men running China, yet Cable presents it as little more than a bump in the road to economic success:

 “…countless millions died in the famine: 45 million according to some Western sources; 16-17 million on Chinese official estimates. It was an epic disaster which appears to have persuaded Deng (working with like-minded senior leaders) to press for ‘adjustments’: radical economic changes designed to raise living standards.”

After all, what other response could a good economic policymaker have to helping cause the worst famine in human history than to seek to raise living standards for those still living? Deng may have been, in Cable’s phrase, an effective economic architect, but he was a gravedigger too. Shrugging off a state’s murder of its own people because it made the ones it didn’t kill richer is the logical, dismal conclusion of a worldview that accords economics priority over politics.


James Kirkup is Director of the London-based Social Market Foundation

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Howard Gleave
Howard Gleave
3 years ago

“Britain voted Brexit because of austerity”. I take it you didn’t vote for Brexit James, or you’d know that wasn’t true.

Fraser Bailey
Fraser Bailey
3 years ago
Reply to  Howard Gleave

To be fair to James, he is quoting the views of others.

Guy Holme
Guy Holme
3 years ago
Reply to  Howard Gleave

Thank you, Howard.

George Lake
George Lake
3 years ago

An excellent essay, in which the last three words of the first paragraph neatly encapsulate Vince Cable’s life in the political arena : “almost entirely pointless”.

Ethniciodo Rodenydo
Ethniciodo Rodenydo
3 years ago
Reply to  George Lake

VC is not pointless. He recently tweeted this;

“You don’t need to be a Communist or even a Socialist to recognise the positives as well as the evils in Lenin’s rule. Not least, his New Economic Policy established pragmatic market socialism which eventually succeeded in Deng’s”

He and his ilk are dangerous.

George Lake
George Lake
3 years ago

Sadly I have to agree. Far, far too many of his generation held similar deluded opinions, in fact in many ways they are the progenitors of today’s ‘woke’ sub-culture.

At the time (the 60’s) it was so fashionable to espouse liberal/socialist views, that even the so called Conservative Party was infected with the poison. Just at look at Ted Heaths and a plethora of other feeble Tory cretins.

For me, the seminal moment was the suspension of capital punishment in August 1964, and the subsequent atrocity perpetrated almost exactly two years later in Shepherds Bush. The State had abrogated its power to chastise with utterly predictable and foretold results.

Fraser Bailey
Fraser Bailey
3 years ago

To compare Lenin’s NEP to China’s economic policy is absurd, just absurd. The NEP was very small scale and did little more than enable a few entrepreneurs to make various goods avaialble for a couple of years. China’s capitalism is on a vast scale.

Fraser Bailey
Fraser Bailey
3 years ago

An interesting article containing a lot of truth. I am slightly surprised that Cable seems unable to see that there might be more important things than economics. He always struck me as having a little more depth than that, although I believe he was an economist for an oil company.

Having said that, the triumph of money and the economy has been with us for some decades now and has swept up almost everyone in, say, the top 50% of the population. I include myself to some extent, before I started to wake up over the last 15 years or so.

stevewhitehouse62
stevewhitehouse62
3 years ago

oi tosspot we did not vote brexit cause of austerity..we voted cause we have witnessed yrs of repression from the EU that differed from the economic union we voted into in the 70s and watched successive gvmts take from us over the yrs..do not put ur bile to our lips

Guy Holme
Guy Holme
3 years ago

beautifully put, Steve, Thank You.

Tom Hawk
Tom Hawk
3 years ago

My first fegree was economics. The classical definition of which is the study of how a society allocates scarce natural resources to one of a number of possible uses.

Towards tye end of my studies, I came to the notion that economics is really about providing an intellectual justification for a political objective. Usuallywhere the political objective was the advancement of those who ere supporting the economic idea.
Afam Smiths invisible habd was no more than a justification to shift power from the landed aristocracy towards commercial enterprise. Likewise, Marx argued to take power from those who had it by dint of owning factories etc in order to replace power with those without such ownership.

Call me a cynic if you will.

croftyass
croftyass
3 years ago
Reply to  Tom Hawk

Cynic then !The very clear difference between positive and normative economics was drummed into me at A level and then at the LSE..I focused on the former and very much took the view that it was a source of research for political science-not the other way round.Having said that,most economic debate currently appears to be characterised by sloppy thinking and an absence of any scientific method.

David Morrey
David Morrey
3 years ago

I used to be one of the naive souls that thought a strong economy (which meant a good chunk of free market economic policy) could only be grounded in a reasonably free and open political system. I am older now, and I know that for a fiction – not because of China (or somewhere smaller, like Singapore) proving me wrong, but because I now understand the power of the modern state to dictate how people think, quite frankly to manipulate it, through and with a media which is for its own reasons allied to it. The current propoganda on Covid is just the latest example – but based on opinion polls there doesn’t seem any doubt that it is highly effective in exerting control.

So, no, to the extent that a strong economy gives rise to a strong state, a state which is capable of dominating any communication medium it chooses to, I am quite certain that the example of China is not an aberration, it is quite capable of being the future for all of us.

Fraser Bailey
Fraser Bailey
3 years ago
Reply to  David Morrey

‘China is not an aberration, it is quite capable of being the future for all of us.’

And that future is approaching fast. The US and the EU are clearly heading in the direction of a China-style society, while literally handing over their assets and markets to China. The same is true of Canada. Whether or not countries such as the UK and Australia can somehow hold out as islands of democracy and some sort of freedom will be one of the great questions of the years to come. As you say, our mainstream media is now in lockstep with the state, so the omens are not good.

Robin Lambert
Robin Lambert
3 years ago
Reply to  Fraser Bailey

Sadly I believe You are mostly Correct! ”Bladerunner” Style of Woke Capitalism and Chinese communism Societies , awaits the next Debt ridden generation?….”There is hope.”.thought Winston as he entered ‘Victory mansions’…

Graeme Laws
Graeme Laws
3 years ago

So the author is quite convinced that property assets – he means houses – should be taxed. He makes no attempt to explain why this wealth tax – which is what it would be – should apply to just one asset. A person with a million pound house is taxed on their wealth. A person with a million pound share portfolio is not. This is sensible? How does this economics expert propose that his tax will work with legal partners, for example husband and wife, each owning half the asset? It makes no sense and has never worked anywhere. And in any event, we already have a wealth tax called IHT. To raise more revenue, the Government, any Government, is going to have to look at the big number taxes: income tax, National Insurance, and VAT.

Robin Lambert
Robin Lambert
3 years ago
Reply to  Graeme Laws

The Author obviously hasn’t heard of Council Tax,or death duties on Income /inheritance of £240,000 or above

rosie mackenzie
rosie mackenzie
3 years ago
Reply to  Graeme Laws

I’d favour internet sales. And a tax on FATGA.

rosie mackenzie
rosie mackenzie
3 years ago

Taxing housing assets? Do you mean taxing people out of their houses? Where are they to go? We aren’t exactly flush with spare flats.

Adrian Smith
Adrian Smith
3 years ago

Did project fear fail because people thought other things were more important than personal wealth and wealth of the nation or was it because many saw it for the utter bullshit it was.

Where is the economic logic of staying tied to 7% of the worlds population – a 7% that sees its share of global GDP decline year on year, compared to sacrificing some of the benefits of being part of the 7% in order to seek new and better opportunities with the other 93%? Those who argue for staying with the 7% are defeatists that have no pride in or ambition for their country.

Martin Davis
Martin Davis
3 years ago

“Effective economic policy is trumping politics.” Except that no-one to my knowledge says that there is no politics in China. In fact I am sure that the CCP itself would say that ‘the leading role of the party’ guarantees that ‘politics is in command’. Deng’s turn toward ‘capitalism with Chinese characteristics’ was prompted by politics; the prospect that the party would lose power if it did not improve the people’s standard of living in an East Asia which was on the march, developmentally. South Korea and Taiwan show that China’s particular brand of party-state is not the only political route to prosperity, even in Asia. What should stimulate our concern is not China’s success, but our own current failures, both economic and political.

johntshea2
johntshea2
3 years ago

Mr. Kirkup is broadly right about China, but:-

“(And I still do: the sooner we start taxing housing assets to fund social care the better.)”

As if Britain does not tax “housing assets” already! And that a particular “new” tax can be reserved for a particular purpose.

rosie mackenzie
rosie mackenzie
3 years ago
Reply to  johntshea2

Not only does HMG already tax houses, but VAT is levied on building repairs. That is a huge tax on essential annual maintenance which should be encouraged, not discouraged.

rosie mackenzie
rosie mackenzie
3 years ago
Reply to  johntshea2

One supposes stamp duty doesn’t count as a tax either.

George Lake
George Lake
3 years ago

..

simon taylor
simon taylor
3 years ago

Vince cable is a numpty, as is James Kirkup.

Steve Gwynne
Steve Gwynne
3 years ago

Idiots like Cable have no comprehension of sustainability, resilience and sufficiency whether on economic, political, cultural or ecological levels.

Similarly, very little is understood in terms of the economy being an energy system and how the rising energy cost of accessing and distributing energy is increasing. This is reducing the supply of surplus energy to create meaningful prosperity which is why living standards have laboured since before the Financial Crash.

Consequently, QE and other forms of monetary stimulus are effectively subsidising the increasing energy cost of accessing and distributing energy in order to avoid a prosperity crash.

Essentially, Western economies have reached secular stagnation and monetary stimulus is life supporting a system that has reached peak prosperity in relation to fossil fuels.
https://surplusenergyeconom

This puts greater emphasis on ecological, cultural and political wellbeing.

Idiots like Cable think they know best but it is always the working class who are experiencing reality on the ground.

Paul Marks
Paul Marks
3 years ago

It is not just V. Cable – the international establishment is generally in love with the Communist Party dictatorship of the People’s Republic of China.

Listening to Klaus Schwab of the World Economic Forum fawning over “President” Xi’s speech to the international elite about “freedom and democracy” would be funny if it was not so tragic. The international establishment assume that a Social Credit system of censorship and control (denying people with the “wrong” cultural and political opinions, employment or the ability to trade) will only be used against people they dislike – never against them themselves.

As for Donald John Trump – yes the election was rigged, but he seems to have had no plan about what to do if it was rigged (even though many people warned him that the election would be rigged), Not planning out what to do if the election was rigged, was a massive failure.

On trade the policy of President Trump was straightforward – free access to the American market IF a trading partner gave free access to its market. President Trump was not interested in one-way-trade (with America importing but not exporting) – he wanted two way trade (open both ways). Hardly rocket science – so I am surprised that V. Cable does not understand that the objective was always to “make a deal” – get access for American exports.

Douglas Redmayne
Douglas Redmayne
3 years ago

The role of quantitative easing is to finance budget deficits when the tax base is too low. It funds welfare and while the bond market is dysfunctional it is a free ride off the surplus countries. The last thing that is needed is populists or ignorant members of the public interfering with it with their views reflecting their vested interests. Its adverse distributional consequences are best deal with by using fiscal policy to tax the windfall gains it produces.

Tom Krehbiel
Tom Krehbiel
3 years ago

I’m not convinced that China is proving much of anything wrong. They have about 4 times the population of the US, yet are still behind it in GDP. It’s always easier to play catch up when you’re well behind than it is to continue making fast progress when you near the target. Assuming there’s no revolt against the regime for losing the Mandate of Heaven, we’ll have to see what they can do in the next few years. I’m not as concerned as the author or some of the commenters here. Of course, I may be wrong.

G Harris
G Harris
3 years ago

Having just watched the brilliant documentary on the BBC about the Delorean affair, anyone who thinks that economics can ever be divorced from politics shouldn’t be seriously involved in either.

Albireo Double
Albireo Double
3 years ago

An interesting review of both the book and its author.

Politicians (and others) who live by the “economy is all” theory are taking a rather psychopathic view. I think that this applies to many modern politicians and, indeed, it may be a necessary qualification for long term political success. More and more, their ideology (including this particular ideology) seems to trump every other consideration.

One sees plentiful displays of ostentatious humanity, but I think most of us are capable of seeing the difference between the true and the false in this regard – in fact, I think that most of us see that rather more clearly than our politicians do.

Charles Hedges
Charles Hedges
3 years ago

If we want an economy like Germany or Switzerland then perhaps 70% of the population is going to have to change it’s attitude to trade and technology. One take a horse to water but one cannot make it drink. What proportion of the British population have the same attitude and academic attainment as the Swiss entering their various technical institutes?

Jonathan da Silva
JS
Jonathan da Silva
3 years ago

It is fascinating to me as growth has slowed over the last 45 years (blame EU loony Tories Brown all deserve credit) in the UK and indeed seems to have got slower by the decade if I could put a chart here I’d demonstrate…. Yet we saw Labour win 2 re-ections and accepted from a coalition Conservatives win 3 re-elections twice.

a 10 years line is better i.e mapping last 10 years but this does it note fewer but deeper recessions and no actual booms lately

I was minded by the Labour leaders debate where I saved time and did not watch and read someone comment on the Trans discussion and I said did anyone ask their economic ideology or discuss economics? Nope. Not a factor.

As Austerity (OK pedants it’s not what you define as austerity but to question terms is a fallacy argument as you know what I mean) showed in 2010-Pandemic really people do not blame slow growth more unevenly spread necessarily even if decent economics would make things better. 1% or 2% growth can be seen on a graph and maybe if you live in side by side countries that differed but clearly does not hit people in the eyes. TBF some of it is timing Clinton was a disaster and led to 2008 but he was long gone and his pointless budget surpluses (seriously they served no purpose in the 90s USA) etc were not obvious to all but economics professors.