The three party system (crosspost from Crooked Timber)

Warning: Amateur political analysis ahead. I posted this on Crooked Timber a few days ago. It isn’t as applicable to Australia. In part, I think, this is because Rudd (along with Henry and Swan) saved us from the GFC with Keynesian policies, but then failed to defend them, leaving the advocates of market liberal reform largely unchallenged.

Looking at the way politics has evolved over the past 25 years or so, in the English-speaking world and beyond, I have developed an analysis which is certainly not original, but which I haven’t seen set down in exactly the way I would like. Here’s the shorter version:

There are three major political forces in contemporary politics in developed countries: tribalism, neoliberalism and leftism (defined in more detail below). Until recently, the party system involved competition between different versions of neoliberalism. Since the Global Financial Crisis, neoliberals have remained in power almost everywhere, but can no longer command the electoral support needed to marginalise both tribalists and leftists at the same time. So, we are seeing the emergence of a three-party system, which is inherently unstable because of the Condorcet problem and for other reasons.

Now the longer version

First some definitions. Taking the three groups in reverse order, I’m using leftism as broadly as possible to encompass greens, feminist, social democrats, old-style US liberals, as well as those who would consciously embrace the label “Left”. Broadly speaking, this encompasses anyone critical of the current economic and social order on the grounds that is unfair, unequal and environmentally destructive.

Neoliberalism is mostly used to mean one thing in the US (former liberals who have embraced some version of Third Way politics, most notably Bill Clinton) and something related, but different, everywhere else (market liberals dedicated to dismantling the social democratic welfare state, most notably Margaret Thatcher). Here I’m using it to cover both versions, which I’ll call soft and hard. The central theme is the inevitability and desirability of a globalised capitalism, dominated by the financial sector. The difference between the two versions turns essentially on whether this requires destruction of the welfare state or merely “reform”, along the lines undertaken by the Clinton Administration.

Finally, tribalism is politics based on affirmation of some group identity against others. While there are as many tribalisms as there are tribes, the most politically potent form, and the relevant one here is that of a formerly unchallenged dominant group facing the real or perceived prospect of becoming a politically weak minority, as with white Christians in the US.

Roughly speaking, until the Global Financial Crisis, neoliberalism was the only force that mattered. The typical setup in English-speaking countries was alternation between two neoliberal parties corresponding to the two versions of neoliberalism I mentioned above. The hard neoliberal (in the US, the Republicans) relied on the votes of (white Christian) tribalists and made symbolic gestures in their direction, but largely ignored them, particularly if their interests came into conflict with those of big business. The soft neoliberals (in the US, the New Democrats) relied on the willingness of leftists to support them as “the lesser evil”.

The GFC discredited neoliberalism in both its forms, but still left neoliberals holding all the positions of power in the political and economic system. But the erosion of support for both hard and soft neoliberalism has made the maintenance of the neoliberal duopoly more difficult. On the right, Trump has shown that the tribalist vote can be mobilised more successfully if it is unmoored from the Wall Street agenda of orthodox rightwing Republicans like Cruz. On the left, Sanders has not done quite so well, but has certainly forced Hillary Clinton to distance herself from her Wall Street backers.

Internationally, tribalism has gained ground nearly everywhere, mostly at the expense of the soft neoliberalism represented most notably by Blair. Soft neoliberals have also lost ground to the left, most obviously with the election of Jeremy Corbyn in Britain and the rise of left parties like Syriza and Podemos at the expense of PASOK and PSOE.

The ultimate outcome remains unclear. In part this reflects the Condorcet problem: with three alternatives, that can’t be neatly arrayed on a right-left spectrum, there is no stable outcome.

But the more fundamental problem is that none of the competing forces has an obviously compelling solution to the problems we face. Neoliberalism has manifestly failed to deliver the prosperity promised by triumphalists like Thomas Friedman in the 1990s. Tribalism is already a lost cause, given the massive migrations that have already taken place, and can at most be slowed in the future. The left needs to rebuild institutions and policies that have been in retreat for decades.

40 thoughts on “The three party system (crosspost from Crooked Timber)

  1. @Ikonoclast

    If we were really running wild we would elect the house of representatives by income deciles, so that that the top 10% of the population by income could not vote for or hold hold more than 10% of the seats and so on down the other 9 income deciles. Many classical and medieval republics limited the access of the elite (Machiavelli’s ‘grandi’) to office. Ig Machiavelli’s Florence had made such a rule they might not have declined into a hereditary dictatorship by the CEO of the Medici bank.

  2. @Alan Grieve

    Absolutely, I agree. There are many more laws of this kind which need to be made under capitalism. They might or might not be needed under other systems but they are certainly needed under capitalism.

    We need stringent wealth laws which would prevent any individual or family possessing undue wealth. A very reasonable limit beyond which wealth is deemed “undue wealth” would be 10 times average wealth. Similarly, a reasonable limit on personal income would be 10 times average income. There is no economic reason and no moral justification, within a polity, for anyone to receive more.

    Going by world figures (I don’t have Australian figues), the ranks of politicians are dominated by the following professional backgrounds;

    Law 19%
    Business 17%
    Diplomacy 12%
    Military 11%
    Journalism 8%
    Economics 8%

    Australia might vary a bit but this is a very unhealthy and unrepresentative mix compared to society as a whole. It is very clear that most of this bunch are the uncaring and manipulative elitists of our society or in some cases (like journalism and business economics) the lackeys for hire by the capitalist system.

  3. @Alan Grieve

    Instead of trying to adjust politicians to incomes – wouldn’t it be easier to adjust incomes to politicians.

    ie tackle inequality and executive largesse.

  4. @Ivor

    No. First, I don’t accept that inequality of income among politicians is a product of executive largesse. Second, applying sumptuary laws to representation is a way to avoid or reduce elite capture of assemblies not to try and restrain income inequality within assemblies.

  5. > JQ, there is no electoral system analysis in your original post.

    No detailed statement of the macro-scale behaviour of complex self-organised carbon-based molecule agglomerates, and how the vertically-oriented ones agglomerate in larger groups than the horizontals. Nor does it start with, “a thing we can call the ‘universe’ can be regarded as existing”.

    Sometimes it’s OK to assume knowledge.

  6. @Alan Grieve

    Yes I also don’t accept that inequality of income among politicians is a product of executive largesse.

    Executive largesse is a product of inequality.

    We have to deal with this inequality in its own terms and not adjust politicians to it.

  7. You are again missing my point. The issue is elite capture of assemblies, not adjusting politicians.

  8. Alan Grieve :
    You are again missing my point. The issue is elite capture of assemblies, not adjusting politicians.

    But thisdoes propose “adjusting politicians” based on inequality?

    …we would elect the house of representatives by income deciles, so that that the top 10% of the population by income could not vote for or hold hold more than 10% of the seats and so on down the other 9 income deciles.

  9. Geoff Edwards :
    I should add that the environmental crisis (of which climate change is just one manifestation) will impose its own context for reform… The breakdown of natural ecological systems is accelerating and will overtake cautious reform. There isn’t a time for a gentle transition but we don’t have a roadmap for an urgent one, so the environmental changes will overtake events.

    If Geoff Edwards is correct, and I think he probably is, discussions about political reform seem somewhat irrelevant.

  10. Rudd & Swan and Keynesian policies didn’t save Australia from the GFC. There were three key policy reasons why Australia got through the GFC:

    1) Henry’s idea of the $900 payment to everyone. This was behavioural economic genius. Short-circuited fear cascades with ‘free’ cash and kept retailers afloat in the two weeks of real liquidity chaos in the markets. The neoliberals see it as waste but it turned out much more effective than the trickle down approach other countries took.

    2) Hawke/Keating reform of superannuation. The move from defined benefit to defined contributions removed the endogeneity between over/under funding of pension plans due to market fluctuations. As an accountant working in international banking this was a huge problem for US & UK companies. The company I was with in London had a GBP100million pension plan deficit for a company with only 1,000 staff. The reason why the US needed a bubble leading up to 2007-9 was generate capital gains to cover the gap. To give an indication of the magnitude General Motors pension plan had 3x more members than active employees – it was doomed to fail.

    3) The RBA had a tighter reign on the Australian banks than the US Fed and UK BoE. Stevens & co deserve a lot of credit for this.

    The Rudd/Swan approach was panicked & wasteful with the pink bats & BER etc.

    And to be very clear: what we have is deflation due to changes in demographics – an ageing population which has higher consumption expectations than US, UK, Japan, European, Australian economies can afford. Keynesian solutions can’t solve demographic problems – pumping money into the system doesn’t improve birth-rates or productivity. What we have is fewer workers funding more retirees and more inequity which amplifies the impact.

  11. @SeanL

    You contradict yourself in your first two paragraphs

    (1) The $800 payment was Keynesian, indeed the obvious suggestion from a Keynesian perspective. Behavioral economics had nothing to do with it.

    (2) Henry was the Treasury Secretary and had no independent power to do anything. He proposed the policy and Rudd and Swan implemented it.

  12. @John Quiggin
    1) Yes the $800 is Keynesian – I was trying to make the point that it was in fact a combination of Keynesian & behavioural economics – a combination that was very effective – and distinct from the Keynesian approaches elsewhere in other countries.

    I think there is a lot of behavioural economics in Keynes’ writings but is missing from the classical economics interpretation.

    2) We should give credit to the policy advisors who propose ideas that work.

  13. “We should give credit to the policy advisors who propose ideas that work.”

    As I did in the OP. Equally, again as in the OP, we should give credit to politicians who listen and follow good advice.

  14. Gee, it’s a summary that is worrisome. There seems no way out of the conundrum. Must people would have voted Labor once in the expectation that the worst facets of musc
    ular market economics would be tempered by common sense. Instead we got some thing epitomised by NSW Labor.

    The government of alleged centrist Turnbull has continued Abbott’s scorched earth policy re social infrastructure and you wonder whether anything will be left to be saved, before folk wake up.

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