Lecture 6: Reorienting the Left: New Democrats, New Labour, and Europe’s Social Democrats

– I started the lecture last
Thursday by playing a clip of Michael Foot making fun of
Sir Keith Joseph who had been the intellectual architect of Thatcherism. With his conjurer’s trick, and said at the end of the day that the joke was on Michael Foot, because he thought Thatcher
would be a flash in the pan, and she went on to be Prime
Minister for 11 1/2 years and went on fundamentally to restructure the British economy and
political landscape as we saw. I want to start today
with a clip from his, his comrade in arms Tony Benn, who had been his staunchest
supporter on the left of the Labor Party throughout the 1980s. And actually ran for the deputy leadership when Michael Foot became leader In 1981 and lost narrowly to Healy. But this is Tony Benn on
the day after Thatcher has announced she was stepping down, evaluating the Thatcher legacy. – [Tony] Despite the fact we’ve been told we’re an entrepreneurial society, this is a country today that has an utter contempt for skill. You talk to people who dig coal, run trains, doctors, nurses,
dentists, toolmakers, nobody in Britain is interested in them. The whole of the so-called
entrepreneurial society has focused on the city news
we get in every bulletin telling us what’s happened
to the pound sterling to three points of decimals against a basket of European currency. Skill is what built this country, strength and it is treated with contempt. I must confess the auctioning
off of public assets, particularly the latest disgusting Frankenstein advertisements which told me more about the
mentality of the Minister who devised the scheme than
it did about the sale itself, these are assets built up by the labor of those who worked in electricity and by the taxpayer who
put the equipment in, now to be auctioned
off at half their price to make a profit from
the tax cut for the rich before the next election comes. If these were local councilors they would be before the
courts for wilful misconduct, and because they are ministers and then some of them later go on the boards of the
company’s they privatized, they are treated as businessmen who know better how to handle it as members of the board of directors than allegedly they did
as ministers responsible. The undermining of the trade unions with less rights in Britain than they have in Eastern Europe. The tax cuts for the rich and
benefit cuts for the poor, the censorship of the media, the abuse by security services the restriction of civil liberties. And when we look back in the 1980s we will see many victims of market forces. I do not share the general view that market forces are the
basis for political liberty, every time I see a person
in a cardboard box in London I say that person is a
victim of market forces. Every time I see a
pensioner who can’t manage a victim of market forces. The sick who are waiting
for medical treatment that they could accelerate
by private insurance, they are the victims of market forces. And with the disappearance
of the Prime Minister who’s a great ideologue, I mean her strength was that she understood a
certain view of life, and when she goes, and she’s gone, there will be a great ideological vacuum. It’s no good saying we will run the market forces better than she did, because her whole philosophy was that you measured the price of everything and the value of nothing. And I had one experience the other day which confirmed me in my view that she hasn’t really changed the thinking or culture
of the British people. I don’t know how many people
as I do travel on trains, but I go regularly on the trains and I see all the little businessmen with their calculators
working out their cash flow frowning at people, looking and glaring at each other. Thatcherite trains, the train of the competitive society. Coming back from Chesterfield the other day the train broke down and it wholly changed, somebody came in and said have a cup of
tea from my Thermos. Then people looked after
each other’s children and a young couple talked to me and I said after about half an hour, “How long have you been married?” “We met on the train”, they said. And a woman said, “Will
you get off at Derby “and ring my son in Swansea
because he’ll be worried.” By the time we got to London
we were a socialist train. Because you can’t change human nature. There is good and bad in everybody, and for 10 years it is the bad. And the good that has
been denounced as lunatic, out of touch, cloud cuckoo
land, extremist and militant. And that’s what the
party opposite have done, they don’t quite yet know, they think it’s the retirement
of a popular headmistress under circumstances some might regret. Actually, they killed the
source of their own philosophy and opened the way for
quite different ideas. – So there you have again a
leader of the Labor Party, deputy leader of the Labor Party who’s extremely eloquent, but in contrast to Foot a decade earlier, very bitter about the
legacy of Thatcherism. And more important for our purposes today, despite his story about the socialist train and human nature, he was actually in denial, because Michael Foot and Tony
Benn continued to believe that this ghastly interregnum was now over and there would be a resurgence of the traditional left, a
traditional Labor Party. By then of course Labor had been in the wilderness since 1979 and it would actually continue
to be in the wilderness for the next several elections and not come back into power until 1997. And when they did finally come back into the power it was under the leadership of a very different Prime Minister with very different
priorities and views about the nature of the Labor Party
and how it could govern. – Across the nation, across class, across political
boundaries the Labor Party is once again able to represent
all the British people. We are the mainstream
voice in politics today. A believe in society, working together, solidarity, cooperation, partnership. These are our words, this is my socialism. (audience applauds) It’s not the socialism
of Marx or state control, it is rooted in a
straightforward view of society. In the understanding that
the individual does best in a strong and decent community of people with principles and standards and common aims and values. A new politics, a politics of courage
and honesty and trust. Now it means telling it as it is, it means not opposing everything every other party does for the sake of it. Politicians are looked to by
the people for leadership, and leadership is about having the courage to say no as well as yes. Now even this week I heard people say that a Labor government must repeal all the Tory trade union laws. Now there’s not a single
person in this country who believes that we shall actually do it, no one believes strike
balance should be abandoned. So why do we say it? We shouldn’t, and I won’t. I have said and I mean I am committed to the goal of full employment we will develop the plans to achieve it. But I won’t ever pretend that
I can deliver it overnight. It requires a modern constitution, that says what we are in terms the public cannot misunderstand and the Tories cannot misrepresent. (audience applauds) The next election will offer us the chance to change our country. Not just to promise
change, but to achieve it, the historic goal of
another Labor government, our party New Labour, our mission new Britain, New Labour, new Britain. (audience applauds) – So that was Tony Blair speaking to the Labor Party Conference in 1995. And the reason that was
such an important speech, once that was the speech in which, when he speaks about the new Constitution for the Labor Party, he’s talking about
getting rid of clause four of the Labor Party’s Constitution which called for the nationalization of
the means of production, distribution and exchange, and it hearkened back to
the original founding of the Labor Party in the early
part of the 20th century as a Marxist Socialist party. And there had been a battle
for the soul of the Labor Party that had gone on since Thatcher’s years, actually it was before
Blair, it was Neil Kinnock, and after Kinnock it was John Smith, but Blair finally won this battle, he got rid of clause four and reoriented the Labor Party to become a party that they thought
could be competitive in the new world that I was
describing to you last time. Now similar things were
going on elsewhere, including back here. The Democrats felt that
they had been pulled to the left too much in the decade since the McGovern Frazier reforms
of the Democratic Party which had greatly
empowered the grass roots. I’ll talk more about that later, and had produced candlelight
dates like George McGovern or subjected Jimmy Carter to a debilitating primary
challenge from Jimmy Carter which many thought had contributed to his defeat by Ronald Reagan in 1980. And there was a similar
sense within the Labor Party, within the Democrats that just
as something like New Labour which Tony Blair was
bringing into existence needed to happen in the US as
well to the Democratic Party, and there was something formed called the Democratic Leadership
Council and Bill Clinton was one of its first leaders. And the agenda of the
Democratic leadership Council was very much similar to
the agenda of New Labour, just to give you a flavor, this is Bill Clinton
actually speaking in 1988, before he ran for the
nomination four years later. – Take this fight about civil rights, the Republicans have set
up so that if you’re for the civil rights bill
you’ve got to be for quotas, so that if you’re not for quotas we have to say you’re for discrimination. It’s a bogus debate, and the White House ought
to be ashamed of itself for breaking up the honest. (audience applauds) For breaking up the honest attempt of the Business Roundtable and the civil rights
groups in this country to have a new choice you
can have economic growth, small-business vitality, you don’t wake up every day being scared to death of a lawsuit, but we protect women and minorities and people who deserve it from unfair discrimination on the job, which we all know still
exists in this country. (audience applauds) Take the debate about poor children, the way the Republican’s
set the debate up, they say the Democrats are for throwing more
money at these problems and we know you can’t throw money at them. We just said that. And we are family values. Let me tell you something, family values won’t feed a hungry child, but you can’t raise that hungry child very well without them. We need both. Do you really believe that if we permit these conditions to go
on for 10, 20 or 30 years And we permit national
politics to continue in its present relevant track
for 10 or 20 or 30 years, that America will lead
the world we have made, that you can keep the American dream alive for the next generation of Americans? I want my child to grow
up in the America I did, I don’t want her to be part
of the first generation of Americans to do worse
than their parents did. I don’t want her to be
a part of the country that’s coming apart
instead of coming together. Over 25 years ago I had a professor of Western civilization
who told me our country was the greatest country in human history because our people had always
believed in two simple things, one is that the present doesn’t have to be as good as the future, the future can always be better. And two, that every one of us has a personal moral
responsibility to make it so. That is what the new choice is all about, that is what we are
here in Cleveland to do, we’re not here to save
the Democratic Party, we’re here to save the
United states of America. Thank you very much and God bless you. (audience applauds) – So there was Bill Clinton on the cusp of his leadership
role in the Democratic Party and he would subsequently
go on to become President. And so today’s agenda is to understand this reorientation of
the parties of the left and then think about their
place in the broader scheme that we are developing as
the course goes a long. Our agenda is gonna
have three parts to it, I’m gonna start by revisiting
the comments I made about distributive politics or the psychology of distributive politics in a little more depth
than I did last time. And the reason is I’ve had a
number of questions about it, and it’s really important. It’s gonna be important
later in the course and it’s gonna be important
for today’s lecture. So I’m gonna reprise
what I said about that and extend it a little bit. Then we’re gonna come to
the heart of the matter and talk about unions,
left of center parties and the median voter as they
played out in this period. And then finally we’re gonna
talk more generally about distributive politics in two-party systems such
as Britain and the US, versus multi-party systems
as prevail in much of Europe. So let’s go back to the comments I made about absolute and relative gains. I said to you that absolute
gains are self-referential, as in the Ronald Reagan
video that I put up saying ask yourself and I better off than I was four years ago. Relative gains are the sorts of things that Margaret Thatcher was
lambasting in her speech in the House of Commons
when she was saying that the left would rather
that the poor will be poorer so long as the rich were less rich. So just for people who like diagrams, some people like diagrams and some don’t, and there’s nothing I’m
gonna do with a diagram that you can’t explain without a diagram. But for those who like diagrams, imagine you’re gonna ask yourself which is better for me from the point of view of you representing the red dot. And we’re thinking about my
income on the vertical axis, and her income on the horizontal axis. So just to be clear
about what we’re saying, with absolute gains anything
above that line is better. I will be better off
than I was four years ago if I can move above that line. When we’re talking about relative gains, or other referential comparisons, then anything to the north-east of that, to the left side of that blue dotted line, I will be better off relative to her. And so we can think about
four quadrants here, we can think about up here
I’m better off either way, over here I’m worse off either way, here I am absolutely better
off but relatively worse off, and here I’m relatively better
off and absolutely worse off. So this is the difference. Now economists like to think in terms of absolute gains because they
think in terms of win-win. So this is a close cousin
of the Pareto principle, those that have taken Econ 101 will know, if we move from the status quo up here both people are better off, so that’s the realm of
market transactions, they’ll go there voluntarily. If we move from here, maybe to here, maybe because the government taxes both of us and sends the money to a country we both despise
then we’re worse off. And these two quadrants are
where one person gets better off and the other person gets worse off. And much of economic theory is about welfare economics is about whether and under what
conditions we can say that the one who gains gains more or less than the one who loses. So the reason economists tend not to like relative comparisons is that there’s no win-win with relative, there is no circumstance
with relative comparisons where both people can be better off. And so I think that’s a lot
of the reason for the distaste for relative comparisons
among neoclassical economists. But, this is not a course
in neoclassical economics this is a course about power
and politics in today’s world. And when we think about power and politics we have to recognize that although economists tend
to prefer absolute gains, relative gains are often
much more potent in politics, people make relative comparisons whether our models tell
us a good idea or not. But they don’t just make
any relative comparisons and this was the point
about many people not caring what multimillionaires make. Local reference groups, people relatively similar to me are the sorts of people to
whom I tend to compare myself, that was the upshot of
the capuchin monkey story and why I said that the experimenter misinterpreted his own results. The example I gave is a college professor will be much more upset to learn that his salary is $10,000 less than a similar professor down the hallway than to learn that it’s
half $1 million less than the attorney who lives next door. So people tend to make
relatively local comparisons. But a corollary of that that
I didn’t emphasize enough is that these local comparisons can be either invidious or solidaristic. So when we talk about the majority rule, divide a dollar game, I said if people agree upon a conception of fairness for example, that everybody should get an
equal share because it’s fair, that might breed solidarity among them to vote together if they’re
all below the median income. But the difficulty with that is that it’s vulnerable to that very logic of the divide a dollar game
that I talked about, namely that you can split
people off of the coalition by offering them some other benefit, unless there is some institution
to actually hold together and reinforce that solidarity
among a particular group, it’s gonna be too easy to pick it apart, and we will in fact see in
four-part harmony on Thursday that efforts to pick apart
a distributive coalition in accordance with the
divide a dollar game when we talk about the anti-tax movement. And so the reason we got
to talking about unions was that the thought was that unions might be an instrument for supplying some if you like institutional backbone to the solidarity of people below the median income. And I’m gonna spend a lot
more time on that topic today when we’re thinking about the
reorientation of left parties. But before I do that I wanted to make one more point about the
psychology of distribution and the way that it plays out in politics. And I want you to engage with
me in a thought experiment. Let’s say that Steve
gets a phone call one day and he’s told that he’s won the lottery. He’s won the lottery and
he’s gonna get $2 million. The next day however, he gets a follow-up phone
call and they say well actually the news is good
but it’s not quite that good, we didn’t know there was a
second ticket that had been sold, so actually you’re not getting $2 million but you’re getting $1 million. Still, it’s $1 million Steve didn’t have $1 million
before he had been called. Now Art on the other hand, he gets a phone call and he says, “Art you’ve won the lottery, “you’ve won half $1
million congratulations.” And he’s delighted. But the next day he gets
another call and he says, “The reason we told you “that you had won half $1 million “we thought there was another ticket sold “but it turns out there
wasn’t another ticket sold. “So actually Art there
is even better news, “You’ve won $1 million.” Now notice that both Art and Steve are $1 million richer than
they were two days ago. But who’s happier? Who’s happier? Why? Pardon? (people mutter off microphone) Art, you tell us why are you happy? Yeah, so what you’re all
saying is exactly right, that Steve somehow thinks
he’s lost something. And this is the concept of loss aversion which economists sometime refer to as the endowment effect. This is the idea that if you have something taken away from you it bothers you more than you become happier if
something is given to you. And this is the idea
for which Danny Kahneman won a Nobel prize, it should really have gone
to him and Amos Tersky, but they don’t give it to dead
people and Tersky had died. And again for people who like
diagrams this is the diagram they called it Prospect Theory and the idea is the curve
is always the shape. The idea is to capture this notion that the prospect of a
gain does not bring as much happiness as the prospect
of an equivalent loss brings unhappiness. And so this is why if you want to motivate people to do something it’s better to talk to
them about undoing a loss or avoiding a loss then the prospect of a gain. So we will come back to this idea in the last part of the course because I think it has a lot to do With the psychology behind the politics of populism that we’ll be talking about later. So this is the notion of loss aversion. Now some people wonder
about well why is it? Because at some level it’s irrational to weigh potential loss more
heavily in terms of futility than weighing a potential gain, particularly if the things are equivalent, the endowment effect idea is if you own something you won’t take the price you would take if you didn’t own it to give it up. Again just this idea that it’s mine, I don’t want to give
it up is so important. And there’s speculation about
why people are like this. One of the leading theories is that for so long in human history people lived so close to the survival that even a small loss
might have been catastrophic from the point of view of survival and so people have built in
this idea of avoiding losses as being more consequential
than getting gains. It’s one theory, there are others. So we’re just keeping all that in our analytical bag of tricks as we work our way through
the rest of today’s lecture and some of the other
materials in the course. So, the basic challenge
for left of center parties in this new world, is that unions as institutions that can reinforce solidaristic
ideals among voters below the median income are
becoming less effective. This is the basic challenge. And the reason is why? Because unions are becoming, unions protect their members and are becoming smaller and weaker. And that means two things, they’re gonna be less effective at protecting their members, and the externalities of protecting their members when they do, the spin-offs are gonna be less, less dissent. So that’s what we are gonna be exploring, and I put this picture up last time, when we were talking about
the right to make the point that in the US people think about the decline of the unions since the 70s, but really the high point of union membership in
the American economy was in the 1950s, and it’s been falling ever since. So the UK is a comparable story, just later. You can see here union membership in Britain peaks at around 1980, ironically just as Michael Foot is becoming leader of the Labor Party and we’ll have more to say about that when we talk
about parties later. And it’s been going down ever since, so if you look here at
trade union density, that means the proportion of a sector of the economy that is unionized. Since 1995 in the whole
economy that’s the blue line, it’s gone from about 33% to about 25%. And if you look at the private sector, which is increasingly important because the public sector is shrinking, it’s gone from above
20% down to about 15%. So not as extreme as story as here, but nonetheless the size of the unionized sectors of the
economy has been falling. Now the upshot of this is that unions are decreasingly effective institutions to enforce solidarity
below median income voters. And this requires quite
a bit of unpacking. The reason is that where unions remain powerful within left of center parties they will pull them away
from the median voter. So you saw this for example in
the 1970s and 80s in the UK. Where unions were very powerful
within the Labor Party, they controlled the leadership selection process for example, that’s how Michael Foot
became leader in 1980. And the TUC, the trade union organization, had, it has less now, but it had at that time enormous power in setting Labor policy. But if you think about
union membership declining, that means that if they support unions they are gonna be pulling the Labor Party away from the median voter most of whom are not unionized. And indeed one way of
talking about this story of British politics in the 1970s and 80s, certainly until Thatcher
in the late 60s and 70s is this divergence of interest. So both Conservative and
Labor governments alike used to have things that
they called incomes policies. And incomes policies
were basically agreements that they worked out, it sometimes went under the name of liberal
corporatism among academics. You might think liberal corporatism is a contradiction in terms, when we say corporatism we
think of Italian fascism. The idea of liberal corporatism was the idea that the government
would negotiate a deal among business and the unions, and then turn it into law and enforce it. And so the Heath government, the Wilson, Heath was a Conservative, the Wilson and Callaghan Labor governments were always trying to negotiate these incomes policies with the unions. And they would agree that wage increases are gonna be capped at 6%. And then what they would find was that the unions say in the steel industry or the coal industry figure that they could actually negotiate a higher settlement with their employers, and would bust the agreement. Even under Labor governments, Wilson and Callaghan would call in the union leadership and say, why are you doing this, you agreed to hold the
line on wage increases, as part of our incomes policy. And the answer was we are
here to represent our members, we are not here to run
the British economy. And our first obligation is to our members and if we are in a position where we can negotiate
better raises for our members why should we not do that? They are the ones who pay our dues they are the ones who are for us. So to the degree that unions
controlled the Labor Party, they’re gonna pull the
interests of the party in the direction of the unions. And so this was a reason why we had such hectic politics
in Britain in the 1970s many strikes. I lived there in those years, three day week, garbage in the streets. Eventually who governs Britain became the slogan in the 1979 election, which Thatcher won. Who governs Britain the
unions or the government? Governments both Conservative and Labor had been unable
to govern effectively. If you think about another
pretty extreme case, in South Africa we have an
extremely powerful union movement The reasons for its power will concern us in a subsequent lecture, they trace all the way back to
the transition in the 1970s, but it was extremely
powerful union movement That is part and parcel of the governing African
National Congress Alliance. And so unions protect their members and so would you have by African standards high wages in the formal
sector of the economy which is protected by the unions, but you have 30% unemployment and 50% almost youth unemployment, third highest in the world
and the rest of the economy. You have a circumstance in which textile jobs are
hemorrhaging to Lesotho, and even at one point they
were hemorrhaging to China. So unions if they can will
protect their members, but that may come at
the price of employment in the rest of the economy. At the other end of the continuum, a system that prevailed in Germany particularly in the 1980s. And still prevails in some sectors today, the system in Germany was that if the unions negotiate
a bargaining agreement in a particular sector of the economy, even the non-unionized plants or companies would
abide by that agreement. So that’s a system where unions, the interests of unions and
the interests of all workers, become much closer to aligning. If even people in the
non-unionized sectors are getting the same deal as the unions the big unions negotiating with the powerful companies are
negotiating for their members, then you can see that
unions can function better as a spine behind the solidaristic commitments of voters
below the median incomes. So to the extent that the economy is more like the German
economy in the 1980s and less like the British
economy in the 1980s or the South African economy today, unions can in the German kind of case be a source of policy that’s gonna be appealing
to the median voter, or more likely to be
appealing to the median voter. And so one of the things that we have to think our way through is that without reinforcing institutions solidaristic ideals among people below the median voter will
be very hard to sustain. So this leads to the logic of what we call sometimes triangulation. So just to give you a
couple of examples here. – They’re a new generation of Democrats, Bill Clinton and Al Gore. And they don’t think the way
the old Democratic Party did, they’ve called for an end
to welfare as we know it, so welfare can be a second
chance, not a way of life. They have sent a strong
signal to criminals by supporting the death penalty, and they rejected the old
tax and spend policies. Clinton has balanced 12
budgets and they have proposed a new plan investing in
people detailing $140 billion in spending cuts they
would make right now. Clinton Gore, for people, for a change. – So there you see the Clinton campaign moving
very far to the right. To capture the middle ground because they no longer
think that they can get the solidaristic support
of people on the left. And indeed, Clinton felt that he actually had to attack the left of the Democratic Party to get his bona fides as someone who could one in this new world. And this is his famous
speech about Sista Souljah. – You had a rap singer here
last night named Sista Souljah, I defend her right to
express herself through music but her comments before
and after Los Angeles were filled with a kind of hatred that you do not honor today and tonight. Just listen to this, what she said. She told the Washington Post
about a month ago, and I quote, if black people kill
black people every day, why not have a week and kill white people. So you’re a gang member and
you normally kill somebody, why not kill a white person? Last year she said you can’t call me or any black person anywhere
in the world a racist, we don’t have the power
to do to white people what white people have done to us, and even if we did, we don’t have that low-down dirty nature. If they are any good white
people, I haven’t met them, where are they? Right here in this room. (audience applauds) That’s where they are. I know she is a young person but she has a big influence
on a lot of people. And when people say that, if you took the words white
and black and you reversed them you might think David Duke
was giving that speech. – So that was very dishonest
in its presentation, because she had not actually said that, she had talked about a
rap singer singing that. It wasn’t her music, she was talking about a rap
song that made those claims and was talking about the claim. She wasn’t herself taking those views. But it didn’t matter, this went viral, or the 1992 equivalent of viral. Because it was Clinton distancing himself from the African-American
affirmative active agenda as it was portrayed by his critics as a way to try and move to the center. And so the thought here is, the motivating thought
is in a two-party system if you move to the middle, the people on your flank
have no place to go. So when Trump was running in 2016 and he said to African-Americans, vote for me, what have you got to lose? He was exactly saying that they don’t get any attention on the left
of the Democratic Party, so the Democratic Party can take them for granted and ignored them. And so this becomes the argument for the politics of triangulation, which I’ll have more to
say about on Thursday. But the idea is that
you move to the middle to peel off support from the other side, and enough support to win. And you might depress turnout a little bit on the left of your own party if you’re a Democrat who is triangulating, but at the end of the day
they have no place to go, and so it seems like a winning strategy. And so this idea of triangulation that was dreamt up by people
like James Carville and others and very much also informed Tony Blair’s approach in Britain. So there the race issue is not salient in the way it is here, but as you saw when he was talking at the 1995 Labor Party Conference, he said, we are not gonna
undo the Thatcher changes to labor laws and in fact he did not undo the
Thatcher privatizations, actually they went into
additional privatizations, and the did not bring back regulation. And indeed, part of the bitterness against Blair on the
left of the Labor Party would turn out to be that they thought he was more Thatcherite than Thatcher. And so if you have this situation where the traditional source of solidarity on the left of a left party has now dissipated because of unions are too weak to supply it, or they are too segmented in their agenda is that they are gonna follow. The path of least resistance from the point of view of getting elected would be to move to the center, try and peel off support
from the other side, and know that the people who
are on the left of your party might be angry, but at the end of the day, they have no place to go. So that is in a nutshell the story about why in two-party systems we saw this logic of triangulation most dramatically with
Clinton and Tony Blair. And you can understand why the
desire to win on the actions would drive politicians to do that. But what about multi-party systems? Multi-party systems are different
in their basic functioning and in their basic logic. So the conventional wisdom about multi-party
systems is the following. Multi-party systems, people like them, they say
they are more representative. They are more representative
because in a two-party system we see the parties are
heading for the median voter. But what if you’re not the median voter, you feel unrepresented. So in a multi-party system, the Greens have their
people in parliament, the anti-immigrant crowd have
their people in parliament, the Free Democrats in Germany, the libertarian people have
their people in parliament. Everybody has a seat at the table, and so that seems much more representative how many people think
it’s more representative? How many people think it’s not? So the more representative
have it for the moment. This is a topic we’re gonna revisit in considerable depth later in the course. Because the argument on the other side is it’s more representative
at the electoral stage, but that doesn’t mean it’s more representative
at the governing stage when governments have to be formed and coalition governments
have to be put together. So we’ll come back to that whole subject. But for a long time the
conventional wisdom was that, it’s put up here, Bingham Powell’s book, “Elections as Instruments of Democracy”. But the conventional wisdom
was that multi-party systems over time the produce policies that are more responsive
to the median voter, and that therefore they
are more distributive. So if we go back to what
we were talking about, the median voter theorem
a couple of lectures ago, the claim was, and the evidence seemed to support the proposition that multi-party systems
are more redistributive because of what you would expect if you think that the people
below the median voter would want more redistribution. As you can see, Bingham Powell’s book was published in 2000. And that means that most of his data is at least several decades old now, it’s all from the last century. But this picture of inequality
that I showed you a while ago captures that intuition
and that inequality went, this is the gilded age, this is today, we all know about the U-shaped curve that we went to much less inequality in the middle part of the century, and then since the 1970s
it’s been climbing. But then if you look by national, by country you can see that the U-shaped curve is
flat in Germany and France than in the US and in the UK. So that’s consistent with the suggestion that these systems are less inegalitarian, or less susceptible to
inegalitarian outcomes then the two-party systems
like Britain and the US. Of course for me to say that this graph supports
that idea would be to commit to selecting on a dependent variable that I was talking about last time, so I’m not making a causal argument here. But this is just describing what was the conventional wisdom. And that’s indeed why
many people on the left prefer the European systems, they think that they are more
likely to be egalitarian, more likely to be redistributive. So is it the case? And the thing that we have to
start thinking about is that, Unions have also been
declining in those systems. Now why might that matter? I put up a lot of graphs that
would be too small to see, but basically you can see
them when I post them. In virtually every single
major European economy union membership has been declining in the last several decades, just as it has been declining
in Britain and the US. Some at different rates. There are a couple of outliers, I mentioned Finland. Even in Finland in the last five years, union membership has fallen by 5%. And another outlier is Iceland, Iceland is a very tiny economy and it’s not exactly clear why they have such high
rates of unionization, but even in Iceland there’s been a kind of backlash in one of the biggest unions just in the last couple of years, actually there’s been a insurgency to take over control of the union because they feel it’s too
much of a company union, too close to the interests
of the company’s. So in any case, Iceland
and Finland to one side, there’s decline of unions everywhere for the reasons that
we’ve talked about before. Namely, globalization of capital, that makes it easier for
capital to move around. The exit costs for capital are low, the exit costs for labor are high, the Hershman story. And of course increasing, increasing jobs going to technology, that indeed may be more important than globalization going forward. A McDonald’s restaurant that used to have 20 people working in it that you now see eight
people working in it, five or eight years from now
may have one person working in watching a robot making burgers. So we’ve seen this long term decline of union membership that’s been going on everywhere pretty much. And that has two implications that I want to now dig
into a little more deeply. The one implication is
that left of center parties are gonna be less effective in
protecting employed workers. So why might this be the case? I said unions protect their members. But the fewer members
there are in an industry the less leverage the union
has in negotiating settlements. You see this is going on right now, this isn’t in a multi-party system, but you see this right
now going on in Detroit. Why are those workers on strike, they are on strike or
threatening to go on strike because the GM cannot compete with the foreign car makers working
in southern states of the US, the so-called right to work states that are not unionized that
are paying 30 bucks an hour, whereas the union agreement
is more like 40 bucks an hour. So these unions are less powerful in negotiating with employers, GM could choose not to produce
electric cars in Detroit and start producing them elsewhere. And so you would expect unions would be less able to
negotiate strong deals. Whether or not it’s part of
the corporatist arrangement subsequently enforced by the government. So Germany, I said Germany was in the 80s was the heyday of what
political economists were calling liberal corporatism, these big deals done between
the big unions and big business and governments would get behind them. But in the early part of this century, interestingly when Gerhard Schroder as the last social Democratic chancellor was in a governing alliance with who? The Greens. Not a grand alliance with the CDU, but with the Green party. They implemented the
so-called Hartz reforms, and the Hartz reforms
were not that different from what was done by
New Labour in the UK, and not that different from what was done under the
Democrats in the US. The new Democrats under the US, there were market friendly reforms designed to reduce unemployment, to protect unemployment, reduce unemployment rather
than protect workers wages. More market flexibility. Hartz, the author of the Hartz reforms had been head of Volkswagen, eventually actually resigned in disgrace a couple of years later
for unrelated reasons, but he had designed these
very business friendly reforms that were implemented
over the first few years. There were four stages of them. In Germany their form
of moving to the middle, so that the Social Democrats even when their only alliance
partner was the Greens couldn’t resist this tide. They were no longer in a position to force more generous settlements to their workers as they had been in the past. And by the way, even though Schroder implemented the Hartz reforms, it still didn’t stop him
from losing to Angela Merkel in the 2005 election, and she’s been Chancellor
of Germany ever since. So the move to the center, even in a multi-party system
with a labor oriented party was in the driver’s seat of the government was unable to do any better because of the declining
power of the unions. And the other implication is that to the extent you can
protect unionized workers, that may impose costs on
others below the median income. Service sector workers who were notoriously difficult to organize even though these economies are all increasingly becoming
service second economies, and the long-term unemployed. Because if you think about the union it’s going to protect the
short-term unemployed, namely their members who might recently have become unemployed and might be going back
into the workforce, but they don’t have an interest in protecting the long-term unemployed. On the contrary, there may be a trade-off between creating employment
for the long-term unemployed and protecting the wages
of unionized workers. So it’s not surprising that
even in multi-party systems you might think that unionized workers as represented by traditional
left of center parties Are going to be less well protected and less effective as
instruments of solidarity Among others whose income
is below the median voter. So, how might this play out
in a multi-party system? In a two-party system as I’ve said, the path of least resistance
is to head for the middle and let the people on the
flanks of your party stew. Multi-party systems are different because there are plenty of
people to form coalitions with. And so this is, I should say that the slides
that I’m gonna show you now are very much from work
in progress that I’m doing with Francis Rosenberg
and some economists, postdocs, that is somewhat tentative but there are some pretty dramatic conclusions I think on some matters. So you can see on here,
this is from 1960 to 2020. 26 OECD countries, the vast majority of
them multi-party systems. The number of parties
represented in the legislature, the number of parties differs from the number of different
effective partners, only in that effective parties
weight them by their size. But what you can see is the number of parties in the legislature has gone up. We see fragmentation of political parties. And if you look at the left parties in these 26 OECD countries, what you can see is that
while the voting share, which is the black line
is pretty much flat, it’s gone down a little bit since 2010. The number of parties
has gone up dramatically. Why might that be? Why might we think, given what
I’ve been talking about here, why would one think that we would start to see more parties, fragmentation just means more parties? Yeah, you’re gonna have to yell, we forgot to get the microphone today. You’ll have to scream. – [Man] If you move to the center then somebody can move to the
left and take your left flank? – Bingo, that’s exactly right. So just to give an example, the Social Democrats moved
somewhat to the center. And alienated people on their left and those people then were up
for grabs by other parties. It’s not the case that
they have no place to go. And so one possible cause of this is just another way of saying, what was said at the back of the room, that as industrial jobs have gone down. We can see here industrial jobs falling over this period quite dramatically, the number of parties has gone up. And so as these parties become weaker and represent fewer workers and therefore move in search
of new coalition partners, other parties are gonna emerge because they can get some seats and they can get a place
in the legislature. And it’s interesting that if you look at fragmentation of right-wing parties there’s no systematic shape,
at least not since 1990s. If you try to draw a line through that it would be pretty much flat. So it’s really more
fragmentation on the left. And if you look here, where has the SPD’s vote gone to? It’s gone all over the place. So this is comparing, this is the 2013 election,
the 2017 election in Germany. And you can see they have lost votes to the Alternative for Deutschland, they’ve lost votes to the Free Democrats, they’ve
lost votes to the Greens, and they’ve also lost votes to people who stopped voting down here. So as the effects of the
Hartz reforms and this move in the neoliberal direction
in the SPD has accelerated, by 2013, by the way they were in a governing grand coalition with the CDU. So it was a very different
kind of government. And many of their traditional
supporters indeed thought that they had been selling out, giving away too much to
Merkel to be in the coalition. And as I said to you in the
very first lecture of the class, that in 2017 when they got hammered, they said we’re not going back
into another grand coalition because all we do is erode our base because of the agreements we have to make to be in a grand coalition with the CDU. And it was only after
seven months of Merkel failing to make other
coalition arrangements while the AFD was increasing
its popularity in the polls, frightening everybody at the
prospect of another election that the SPD finally went
back into a grand coalition. It didn’t help by the way, I mentioned to you in that lecture that the following year
in the regional elections in Hesse and Bavaria that both the SPD and the CDU continued hemorrhaging support. Mostly the SPD to the Greens and mostly the CDU to the
Alternative for Deutschland. Since then we’ve had local elections where the AFD has again cleaned up. So that is not gonna abate any time soon. So just again to, I don’t want to talk about a lot of this but this again preliminary results. One of the things you see
in that circle is that what might be, again this is not causally established, but what we’re observing in this data. What might be the case that when left governments are in power as part of coalitions, unemployment actually has not gone up in these 26 OECD countries
by about a percent. So again, this is not a causal argument, but it’s consistent with the thought that these left parties
are less able to protect the people below the median voter. That they’re protecting a
shrinking labor aristocracy less and less effectively and with fewer and
fewer positive spin-offs for people around and close to them in the income distribution. So the upshot of this is that
unions in multi-party systems are protecting shrinking
groups of industrial workers less well than they used to do. And party fragmentation
makes solidaristic ideologies among voters below the median voter more difficult to sustain. And this is why we see
the hemorrhaging of all of these voters on the
slide I put up earlier. So just to finish out the German story, what happens is that as the SPD starts to lose voters, Merkel thinks oh, I could
pick up some of these voters, so she also moved toward the middle. That then opened up space on her flank for the emergence of the Alternative
for Deutschland party, and so to some extent
fragmentation on the left will produce fragmentation on
the right in response to that. And make it more difficult for parties on the right also to form predictable compilations. And so the sorts of
outcomes we have been seeing in European elections in the last few years are
not that surprising. Namely you get inconclusive results in many of these elections, or you get situations where you need three or four
parties to form a government. And the traditional in Germany since we we’re talking about Germany, traditionally in Germany
the two biggest parties were the CDU and the SPD, and they were, it wasn’t that different
from a two-party system, it was very predictable that they were gonna dominate center-left and then center right,
and then center-left were gonna dominate coalitions over time, so they operated more or
less like two-party systems. Now all bets are off as to who will be in that coalition next time. Mostly because of the decline
of center-left parties. And you can look in country
after country after country where the left of center
party traditionally always would come in first or second. It doesn’t matter if it’s Germany, it doesn’t matter if it’s Holland, it doesn’t matter if it’s Israel. The Labor Party in Israel
always came in first or second. Now these parties come in fourth or fifth reflecting their much weakened state as representatives of organized
labor within the electorate. So party fragmentation means that to the extent unions
and the political parties that are answerable to unions are sources of solidarity of voters below the median voter, that has really gone away. And that means that even though it’s a sort of commonly repeated mantra that PR systems are more redistributive, PR systems are more responsive
to the median voter, the truth in today’s world is that PR systems are simply vastly less predictable than they used to be, because of the proliferation of parties, nobody has any idea who is
gonna be forming the government. And sometimes, so we have a grand coalition
in Germany right now, but it could be parties
from the two extremes as happened in the
Greek elections of 2015. When you have a far left Populist party making a coalition with the
far right populist party. What they shared in common was
their antipathy for Europe, but very different alternatives to your membership being envisaged by them if they will actually in the position to implement their policies. So the traditional advantages of PR, which produces multi-party systems seems very much in question. So the last implication of this discussion is that the proliferation of far right parties in
these systems is worrying, we talked about this in
the very first lecture, but at the end of the day
it’s not that surprising because it’s been driven by the logic of competitive politics in this new world that has
emerged since the Cold War. Next we will talk about
shifting the goalposts, the anti-tax movement
in the United States. See you on Thursday. (gentle music)

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