I wrote the other day that the division over Brexit suits our rulers just fine, because it helps to distract from the class division. This sounds like a conspiracy theory. But it’s not. It reminds us that we should think of politics as being a bit like natural selection; mutations/policies emerge randomly and the environment selects among them so that only mutations/policies that are suited to the environment persist. Take, for example, Thatcher’s privatization programme which has been called “her most important and enduring economic legacy.” This, however, was not originally intended to be so transformative. As the Institute for Government says (pdf), the first of Thatcher’s privatizations – of some shares in BP and of British Aerospace and Cable and Wireless - “were treated as
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I wrote the other day that the division over Brexit suits our rulers just fine, because it helps to distract from the class division. This sounds like a conspiracy theory. But it’s not. It reminds us that we should think of politics as being a bit like natural selection; mutations/policies emerge randomly and the environment selects among them so that only mutations/policies that are suited to the environment persist.
Take, for example, Thatcher’s privatization programme which has been called “her most important and enduring economic legacy.” This, however, was not originally intended to be so transformative. As the Institute for Government says (pdf), the first of Thatcher’s privatizations – of some shares in BP and of British Aerospace and Cable and Wireless - “were treated as discrete sales whose aim was to raise revenue for the Exchequer.” And Jon Stern says (pdf) the first big privatization, of BT in 1984, “was largely driven by the need to get BT’s investment programme off the Public Sector Borrowing Requirement.”
We can think of privatization, then, as being like a random mutation. It was a policy adopted for one reason that became successful and long-lasting for other reasons. The environment selected for a randomish mutation.
Thatcherism provides other examples. Her using the 1981 recession to smash trades union power was accidental; the recession was unintended and unpredicted. But it worked. And Big Bang was not intended to kickstart the financialization described by Grace Blakeley; it was seen at the time as an attack on another restrictive practice. Again, it was a mutation that thrived.
This isn’t to say that Thatcher’s mutations all succeeded; the poll tax was one that was killed off.
Nor is it to say that even successful mutations survive forever. A nice example here is the wage-led economic regime (pdf) of the post-war era. In the 50s and 60s rising wages and the promise of high demand encouraged firms to invest more and so the economy grew well. For many years wage-led growth was a successful mutation. But in the 70s, this ceased to be the case: a squeeze on profit margins deterred investment and reduced growth. The environment then selected against wage-led growth and – in the US and UK at least – in favour of profit-led growth, whereby a reassertion of capitalist power restored growth. Today, however, this mutation is in doubt; perhaps wage-led growth would now work better (pdf).
If so, what we have here is a process a little like the population cycle in biology: a successful species can eventually deplete its environment and so die back. Andrew Lo has shown how such a thing happens in financial markets: as investors pile into successful strategies, these grow too big (causing the mispricing to disappear) and their profitability wanes. But then, when the strategy/species is small enough relative to its food source/profits, it begins to grow again. The performance of small stocks fits this pattern. They did well in the 80s as investors realized they had been under-priced. But as the “buy small caps” strategy expanded it depleted its food source with the result that small caps under-performed in the 90s. By the late 90s, though, they had fallen so far out of favour that the strategy could again pay off – until 2007 when they became over-priced again.
Politics might be similar. The environment can select for a policy in one period, against it the next, and for it later.
But what is the environment that’s doing the selecting? It is not economists’ idea of optimal policy. Instead, it is admixture of capitalism and the media-political system (two things which of course are not separate). A big aspect of this is that policies that seriously endanger profits and growth get selected against - eventually.
The selection need not, however, be fierce. Just as some mildly maladapted species can survive, so might policies: there is, as Adam Smith said, a great deal of ruin in a nation. Austerity might be an example of this.
One complication here is that profitability isn’t the only thing that determines whether a policy is adapted or not. What also matters is legitimacy. Policies and institutions can persist if they jeopardize profits if they help to sustain the legitimacy of the system.
Perhaps Brexit fits this. No Tory ever thought "let's divide the country into Leave and Remain so that people are distracted from class politics." The Leave-Remain divide is a random mutation (from the point of view of capitalism) that has been selected for - so far.
The Tories’ populist turn can be seen as trading off some accumulation in order to achieve greater legitimacy, in the sense of more hostility to the left. One reason why many capitalists are sceptical of this, however, is that they aren’t sure the trade-off worth making.
Is it? I don’t know. Just as natural selection is a random and unpredictable process, so too perhaps is policy selection – which is why so much political forecasting, long-term and short, has failed. The question: "what is the right policy?" doesn’t necessarily yield the same answer as: "what policy gets selected?"
Now, I concede this framework is vague – hey, it’s only a blog post, a first draft. But I think it has at least one virtue. It enables us to speak of policies as favouring capitalism without having to invoke conspiracy theories or the idea that we are ruled by evil geniuses.