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Premier Perspectives: The Future of Politics

23 April 2020, 16:30
Invite Only
Lord Hague and Douglas Alexander discuss the future of politics.

RUSI has a proud history of convening unique discussions, meetings and events. Alongside our publicised schedule of open-to-all and member-only events, we often bring groups together in more intimate and discreet ways. These invitation-only events and forums give participants the chance to discuss, share and engage in a closed-room environment. One such event that took place recently saw Lord Hague, RUSI’s Chairman, in discussion with RUSI Trustee the Rt. Hon. Douglas Alexander on the subject of The Future Of Politics. With their permission, we are delighted to share a transcript of this wide ranging conversation.

To find out more about our work and explore ways of engaging more directly through RUSI, please email membership@rusi.org

Transcript

Karin von Hippel: Today's event is ambitiously entitled The Future of Politics. And there are no two better speakers to talk about this subject than Lord William Hague, our chairman, and Douglas Alexander, who is one of our trustees. 

Lord William Hague: Thank you, everybody, for joining us. I'm very grateful to Douglas Alexander, one of our trustees, for joining me in this conversation. He and I are were old sparring partners. He was the Labour Shadow Foreign Secretary when I was the Conservative Foreign Secretary. We were then in a more adversarial situation, although we might still have disagreements today. And he served in Gordon Brown's cabinet. So, he has a perspective from the centre left of politics as opposed to mine from the right or centre right. Welcome, Douglas! 

Douglas Alexander: Thank you. 

Hague: Today, we will cover three broad areas in our conversation about the future of politics in light of the Covid-19 crisis. One is the role of the state, which is already changing so much, in relation to the economy, the individual and issues such as surveillance. Are we going to see a permanent increase in state power? The second is about fairness and equality, in a crisis that seems instead to be worsening inequality, and the new political ideas that will come up on the left and the right of politics as a result of that. And the third area we're going to discuss is the future of nationalism or globalism. In a crisis where many governments have closed borders, compete over scarce health equipment and tests, etc., what we are seeing is a striking lack of international cooperation in most aspects. What is the future of political attitudes to managing global challenges? 

If somebody had left Britain on a yacht in early December and came back now, and we said, well, look, now we are borrowing four times as much money as we intended, the government is telling businesses what to do in great detail, is paying millions of people directly, has offered the National Health Service [NHS] unlimited support, etc., they would say, well, obviously, Jeremy Corbyn won the election. They wouldn't be able to think of any other explanation. 

But actually, we've got a conservative government managing this and taking these actions, as has been done in world wars of the past; this massive expansion of the state, which it believes is temporary. But will some of these changes be permanent? I would say some of it is going to be permanent. Politicians who argue against a few billion extra for social care or more spending on the NHS are going to be derided in the future. And perhaps we could start, Douglas, with this question: where is the state going to be in relation to business? This should also encompass the whole subject of national resilience, which becomes much broader. 

We can't possibly be begging Turkey for some PPE equipment, while our health service is threatening to shut down because of the shortage of such equipment, as has happened recently. So, are we going to tell businesses that they have to have their supply chains in the UK, that they can't be dependent on China or elsewhere? Are we going to create big national stockpiles of some products? These things are going to massively affect the business world. Douglas, what are your opening thoughts on the state and business? 

Alexander: I expect that we will see, over the coming months and year, extraordinary innovations, both by the state but also by business. A couple of caveats as we begin this. Firstly, I was in the British cabinet between 2007 and 2010 at the time of the financial crisis. Hand on heart. None of us who were engaged in the crisis response had any sense as to quite how profoundly the global financial crisis would change the politics of the next decade. I think humility at this stage of the crisis should be our watchword. As Angela Merkel said this morning, we are much nearer to the beginning of this crisis than we are to the end of this crisis. 

I think this is akin to Brexit in this very limited extent. We began thinking about Brexit as an event, and over the years that followed, we realised it was a process. And my sense of the first insight as far as businesses are concerned is that we are suffering, if you like, a collective failure of imagination at the moment. We all are part of conversations about what the lockdown means for the public finances, for ourselves and for our families. And there's a nascent public conversation about what life will be like after lockdown. 

I actually think a better way to understand the immediate challenges for business is there's going to be a sustained period, let's say maybe of 12 or 18 months, which you could perhaps call ‘Covid-19’. It won’t be business as usual; there will certainly be a zone of innovation for businesses thinking through new ideas, but it certainly will not be business as usual as we experienced before the crisis. 

What will some of those changes look like? Certainly, there will be all kinds of changes in terms of adaptation of technology as we are witnessing in this conversation. I don't think we'll return to the mass transportation that we had previously anytime soon. Secondly, I think it's likely that, as you suggest, there will be a greater premium on resilience and on security of supply chains than we had during the more open phase of globalisation. And I think that's true both for government and for the private sector. 

But we also have to recognise this is going to be a profound change for the state. Basically, debt-to-GDP ratios in the UK, were about 40% before the financial crisis, then climbed to about 80% after the financial crisis. I would anticipate we're going be comfortably above a 100% debt-to-GDP ratio as we move through that next stage of this crisis. So, I think we also need to recognise that the focus of the British government is going to be on trying to get what's left of the economy through these challenges, dealing with very significant levels of unemployment. There's going to be a very different political and economic conversation in the next 18 months than we had in the last 18 months, which reflected, if you like, a politics of anger and populism that was shaped by the global financial crisis. 

Hague: And what do you think, Douglas, about the reaction on the Left of politics? You know, if I look at how the Right is reacting, people have read this morning about conservative MPs meeting yesterday. They are very anxious about getting businesses back to work and are very worried about the expansion of the state that they are accidentally presiding over. Is this scene similar in the Left, do you think? After all, Jeremy Corbyn was quoted as saying that the current crisis proved he was right; I think he was referring to health service spending specifically. 

Alexander: I think Jeremy Corbyn exhibits what you could call coronavirus confirmation bias, which is that an unprecedented global pandemic appears to confirm a commentator's view of what he believed anyway. And that is certainly a problem present on both the Left and the Right at the moment. 

I think a better reference would be the London riots in 2011. If you remember, they almost came out of a clear blue sky. None of us in politics at the time were entirely clear as to why riots had suddenly broken out. Ed Miliband very effectively declared this was a consequence of austerity. David Cameron, the prime minister, described this as simply being juvenile criminality. And Alex Salmond said, we don't have riots in Scotland. These are English riots. I think there's a real risk on the Left and on the Right that we're all struggling to catch up with how profound these changes are. 

If I was to make a prediction about Keir Starmer, I think his central electoral objective between now and the next election more than four years away, is to replicate the strategy that your Conservative Party used, to bring the Tories to power at the time of the financial crisis a decade ago, which is to say that the government ‘didn't mend the roof while the sun was shining’. Starmer will spend the next four years complaining about a decade of austerity, which is already behind us, plus attempting to bind the Boris Johnson government to the record of the David Cameron and Theresa May governments because he will be fixated on the 2025 vote. So, at the next elections he’d say: ‘we’ve now had 15 years of conservative government’. Ironically, therefore, the electoral strategy on the Left will be to establish a continuity of Conservative leadership. 

You know the Conservative Party a thousand times better than I, but my sense is that despite the fact that they've got a big majority and that Boris Johnson is very popular in the opinion polls at the moment, there's quite an acute and difficult choice facing Johnson and conservative electoral strategists in the next few months. Essentially, that choice is over their judgement at the start of this parliament that they could increase spending without increasing taxes. That may well be the strategy that they try to adopt as we move through the current crisis. But I think the risk for the Conservatives is that they could become embroiled in a war of attrition over the next five years as to whether the preparations were made to meet a pandemic, and whether the response was adequate while also facing sluggish economic growth and higher social expenditure with lots of unemployment and people struggling to make ends meet. 

I think there's a second – maybe more radical – option and you would be better able than I to judge whether that will be adopted. [This] will be to accept the income background of many of the new conservative voters and really move to a different approach, which is to say, yes, we will increase spending growth to manage borrowing and to try and improve public services and invest in infrastructure - the levelling up agenda - and thereby try and squeeze the Labour Party by [how] the Conservative Party will actually raise taxes at the upper end of the income scale. That would require them distancing themselves from the austerity agenda. Whether it’s ‘cut spending and we're nasty to the poor’ or ‘we are increasing spending and being nice to the poor’ – I'm not sure which judgement Johnson wants to make - but he's certainly got some big choices in the months ahead. 

Hague: I must say I think that's a very good description of the likely political strategies of the party that he really encapsulates and how the Labour Party will approach it. And the choice facing the Conservatives? Whether they raise taxes and, if so, where.

And is this tax burden imposed on some better-off people or is it spread as a burden on all? But, of course, they're not really going to be able to raise sufficient taxes to cover these deficits. And so, the real question is where politics goes with these vast deficits. You know, as you said, more than 100% of GDP, but probably 150% will be our total debt burden when this crisis is over. And in some European countries, the burden will be more than that. 

Dealing with this debt overhang is an issue of generational fairness as well, because this is money we are spending to keep older people alive today – to put it crudely – to be paid off in the decades to come by the young people of today. And the same young people expected to pay those debts in the future are also the ones most likely to be losing out on crucial job opportunities today, or losing years of their education that can't be replaced. So, there's this amplified issue of generational fairness in the accumulation of vast national debts. And it seems to me here we're going to get a lot of political pressure on the Treasury and the Bank of England, mainly on the Left, but perhaps on the Right as well to just cancel some of this debt by simply inflating it. Some politicians are bound to argue that, since we issue our own currency and a lot of the debt is in the hands of the Bank of England, why don't we just forget it? That might happen in the US, where we are talking of trillions of dollars of debt. Theresa May’s much-derided ‘magic money tree’ may actually become a very attractive part of politics. 

Alexander: And in the next few years, what seemed implausible before the crisis rapidly became plausible after the crisis. And of course, the big monetary innovation back in 2008–09 was ‘quantitative easing’. I think the role of monetary policy in this crisis is somewhat different because rather than monetary policy being in the lead, fiscal policy is actually in the lead now. You see the Treasury taking on an extraordinary burden of responsibility and paying the wages of very significant numbers of British workers, effectively nationalising a significant number of workers in private firms. So, I think the question is, what are the consequences of that? If you looked at the Debt Management Office numbers this morning, they were just eye-watering in terms of the amount of debt that the British government is now putting out to the private markets. So, it is certainly a possibility that we see a new monetary policy emerging as a consequence of this. 

The independence of the Bank of England has been hard-won, [and] was one of the proud achievements back in 1997 maintained as part of a new settlement by your government. I think there will be new pressures on the independence of central banks as a consequence of this crisis. That would be one observation. Secondly, I do think we're going to face some pretty acute challenges as to where public expenditure was going to go in the old pre-Covid-19 world. We were going to have a spending review this July with a very significant increase in capital expenditure. Big infrastructure spending. 

I think one of the early tests of this crisis will be what happens when that spending review happens. I would expect it in the summer of 2021, not the summer of 2020, because I think, frankly, health will be one of the biggest winners in terms of public expenditure. But truthfully, with an ageing population, health expenditure was always going to increase. I think one of the other real tests will be [whether] we see very significant additional expenditure on social care in particular. And if you were looking for institutional innovation in managing this crisis, my bet would be on social care, whether that is greater integration into the NHS, whether it's a national care strategy. Either way, there are spending and unnoticed fiscal implications, not least whether national insurance rises. But I would have thought one of the lessons from this crisis will be that social care has been a Cinderella service for too long. And, as you said in your introduction, my sense is the public's tolerance for the neo-liberal state has gone and actually there will be a much greater premium on state capability after this crisis. One of the biggest drivers to that new monetary thinking will be the fact that my gut tells me Boris Johnson will judge another decade of austerity is politically intolerable for the electorate and so will look for other ways of financing this historic level of debt. 

Hague: Yes, I agree with that. I don't think the Conservatives will go back to austerity. It's not like the debt after the financial crisis of 2008. This debt will be treated in a different way, particularly as it's so common across the whole world, as it was to some extent during the financial crisis. But it's particularly true in this case. So I think there is a lot of common ground between us. 

Just going back on the issue of the power of the state, what we haven't talked about is in relation to the individual yet, because it looks like, for instance, as of this morning, the government in this country is moving towards creating a comprehensive infection contact-tracing system that has been deployed in South Korea, for instance, one of the most successful countries in coping with the crisis. So when we've got this going, we can trace everybody's contacts and know exactly who has been in the radius of whom over the previous couple of weeks, an absolute mass of data that does intrude into the privacy of the individual. And then, of course, we can expect different countries to treat this mass of data in different ways. Because it may turn out that if we looked at that data, we could prevent a terrorist attack, and then it might turn out when a murder is committed that we could solve that murder if we looked at that data. So once governments have this treasure trove of what everybody is doing and who they've met, it takes tremendous political will not to look into it. I believe that in the UK, we probably will manage to summon up that political will to place the constraints on the use of the data, or have ‘sunset clauses’ ensuring that it all expires after a time. But you can imagine a lot of governments in the world that are just too tempted to mine this data. What reflections do you have on this issue? 

Alexander: Firstly, I think there's two ways to think about this Covid-19 crisis. One is as a huge accelerator of innovation for states as well as for businesses and individuals. And secondly, rather less positively as a massive stress test for the effectiveness of the state. And as I said at the beginning, these are very early days of what's going to be a prolonged crisis. But the early emerging evidence is that there are some countries, the city state of Singapore, Taiwan, Korea, Israel, to an extent, Germany, who have by a combination of the use of data tracking and testing, achieved significantly enhanced results. So, I would strongly expect, as you suggest, that Britain will move in that direction. That throws up exactly, as you describe, some very profound questions. 

I think that, first of all, there is a difference in attitudes towards privacy that predated the crisis on different sides of the Atlantic. So, while I know that Google and Apple are both working on apps in the US, historically, the European Commission has been very sceptical of ‘big tech’ in America and has looked to alternative solutions. Last week, for example, the Dutch government held a ‘hackathon’ live on television to citizen-source data for contact tracing. And I think we will see that kind of innovation here … I think one of the challenges for us is that, pre-crisis, citizens were pretty relaxed about handing over information to private companies. And historically, we're more sceptical about handing over information to public authorities. My sense is that the average individual on the street right now, if there was an app that would keep them safe, would happily download it onto their phone. But I think there's also a further opportunity for institutional innovation here. Could we see the emergence, for example, of data trusts that sit between the government and the major tech companies, the Googles and the Apples of this world, who are able to be the arbiter of the use of data and who can command public confidence? We are only in the early days of the use of this data, but my expectation is that public demand will overwhelm a lot of public concerns. 

Hague: I agree that you're raising an important issue that we could have data trusts. When I spoke at another RUSI event a year before last with Yuval Harari – many of you will know his writings – he argued that the ownership of data is going to be one of the big political issues of the next 20, 30 years. So, here we are already, now really getting immersed in big questions about the ownership of data. Douglas, let's just have a couple of minutes on this question of nationalism and globalism. 

You know, you and I are both from the parts of our parties that believe in global solutions, from the orthodox view of British foreign policy. Really, our rules-based international system and seeking global cooperation and supporting global institutions. Now, that's not going very well in this particular crisis. Somebody told me the other day, though, the first thing George W Bush did in the financial crisis was to call Hu Jintao, so that the US and China were in close cooperation throughout. Well, that's pretty different now where you have governments closing borders, making sure they get equipment before others. But to me, having spent years like you have in foreign policy, the most striking thing about this crisis, the most frightening of all, is the remarkable absence of international cooperation. Yes, there's some cooperation among central banks and tremendous cooperation among scientists around the world. So, we can't say there's no international cooperation, but among governments, [there is] really a striking absence of international cooperation. And ironically, of course, this crisis makes the case for us that we can only solve global problems globally. 

All the pressures of this crisis, the need for national resilience, the rise in unemployment that we're going to see – is that going to give us a new wave of nationalism, or are all those of us who say that the crisis just proves the point about global cooperation on climate change and other global issues going to prevail? 

Alexander: I think you have to see honestly that we will know by the end of the year which path the world is going to take. There is certainly a plausible, perhaps most likely scenario where you see Donald Trump re-elected, resurgent nationalism in Beijing and ... a continued fractious debate as to who is the ‘anchoring power’ of the global order in the years ahead. Rather, more optimistically, you could see Joe Biden elected as president in November and you could see the re-emergence [of what] somebody described as a kind of pragmatic, internationalist rule of ’Rooseveltanism’ from the US. I think Roosevelt is very relevant here, because let's look at where he began in 1932 and then managed in 1945: the post-war order of the Bretton Woods system, the United Nations that we've all grown up with. The truth is, it was the shared experience of the First World War, the Second World War and the intervening period of the depression that proved the need for such institutions to the world. The isolationist, nationalist, unpopular sponsors of the past were inadequate for the kind of world we wanted to build at that time. It was the lived experience of that generation that many hoped would have been impossible for Franklin Roosevelt to achieve in 1932 that became, if not inevitable, at least possible in 1945. 

In my brighter moments amidst this pandemic, my hope would be that the seeding experience of this, the fact that the only way we can keep ourselves safe locally is to act globally, will prove to be a teachable moment for the global community. But there is no certainty on exactly as you suggest. It is possible that a politics of isolationism, nativism and anger could triumph after all. 

Hague: I would add to that that a major missing factor now in the world is a framework of cooperation between the US and China. Without that, so many other things are not going to work properly, from the World Health organisation to the UN Security Council, to future arms control agreements. 

I would argue that while this crisis amplifies the evidence that we mustn't be strategically dependent on China, it also shows we can't solve the world's problems without China. And therefore, we need to establish that framework of cooperation and a common interest on climate change, on arms control, on many health issues. The thing I'm passionate about and have done a lot of work on is stopping the illegal wildlife trade, which funnily enough was probably the origin of this whole health crisis. It will be a major test of political leaders over this next year as to whether they can project a better world in the future out of this crisis. As Douglas said, the immediate period after the Second World War is an example of what can be accomplished. That, in my view, needs a change of president in the US. But we must not lecture; we must not tell Americans how to vote. 

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