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)