Liberal Democracy – which way forward? – #2 Liberal economics

Liberal Democracy – which way forward?

#2 Liberal economics

I saw recently a suggestion that the party should reclaim the title Liberal Party and drop the “Democrat” bit and I have to say as a long-time Liberal radical that idea appealed to me quite a bit. I would not want to push the idea to the extent that lots of members went off in a huff, but it does occur to me that if any time was the right time to change the party`s name NOW would be as good as any for a rebranding.

For a start the brand “Liberal Democrat” has certainly been “tarnished” in the eyes of many potential voters because of the Coalition. (Yes, I know there are many voices in the party saying we should defend the principles of coalition and I do, but we do have to acknowledge realpolitik and accept that for Jo Public, the voter, the outcomes of the coalition were seen more as negative than as positive.) So, in terms of timing, a name change may have more going FOR it than AGAINST it.

Secondly the word “Democrat” carries negative connotations not only from the coalition experience but from the failure of the Democrats in the USA in defending American politics from Donald Trump. Not a big issue in terms of our domestic politics but a psychological barrier nevertheless.

Thirdly and most significantly the word Liberal with a capital L carries a host of positive psychological capital even outside the Lib Dem Party context and – importantly for me – carries the connotations of a left-of-centre party which I believe we need to maximise going forward.

The reason I raise the issue here is that I want to begin a debate to redefine the party`s approach to economics and I would prefer to define any new economic stance as radical Liberal Economics rather than Liberal Democratic Economics. I already touched upon this in my last post when I took up Richard Grayson`s point about Orange Book economic thinking leading us up the wrong path into and during the coalition. We need a break of clear water between what was, and what will become, the main economic foundation of the “new” party for the future. (I was going to say “clear blue water” but thought that might be misleading!!)

Austerity and tax?

Someone suggested in a recent FB thread that Labour`s current stance on austerity held the ground on which any radical Liberal economic policy might seek to stand – therefore we should not try to go there. Up to a point it may be the case that Labour`s wish for some redistribution of incomes and wealth might coincide with where we wish to be, but let me suggest a number of points of differentiation for a Liberal approach to be distinctive.

Before going into a little detail, let me also make a couple of general points. First, it seems to me that there would be quite a large broad base of support amongst voters for a generally left-of-centre approach, the details of which can be negotiated upon should there be a parliament sufficiently balanced for such negotiations to prove fruitful (and, no, I am not talking about a `coalition of chaos` – that title has already been taken by the Tories and the DUP).  So we need to establish the groundwork necessary to become a legitimate part of that debate. I believe we would hold more leverage as left-of-centre rather than as a centre party.

Secondly let me reiterate a point I have made in a recent FB thread about this – if we can generate the votes within the party to go along this radical Liberal economic line it will form a sound basis to future-proof the party with an influx of younger voters and members, whereas it seems very doubtful that the Labour party could follow the Corbyn/McDonnell line for very long without breaking apart at the seams. And if that did happen the Labour party would be more likely to move rapidly back to the centre-right rather than centre-left

We, the Liberal Democrats, have experimented with Orange book neoliberal economics and it has been found to be seriously wanting in pragmatic Liberal party-political terms. It has brought us so low electorally that for us the only way is up! The Labour Party has yet to go through that `life-changing` ordeal, for their current view, in power. Their stance now is a rebound from Blair`s own neo-liberal economic position but that position still holds the majority of their MPs in thrall – I reckon there is a crunch coming for the Labour Party on economic issues and there will be a lot of collateral damage when it occurs. It would be good if we were placed to pick up at least a good proportion of the liberal facing pieces!

OK – Now to the detail.

Please bear in mind this is a contribution to debate. It is not a fixed position (I am open to counter argument) and I am not an economist, but I have been dealing with sustainable development issues both professionally and in a political context for over 40 years.

The greatest threat to sustainability from an economic standpoint is inequity between haves and have nots. This is a truism both internationally and in a domestic political context. For example a very large number of migrants both legal and illegal are economic migrants seeking to find a pot of gold for themselves and their families in an overheated Western economy. Also one of the issues that destabilised “strong and stable” was the gross inequality apparent in the UK. North versus South; rich versus homeless; nurses having to access food bank to manage.


I hold to the view that we should remain in the European Union and we will ALL be better off if we manage to stay but let that be a debate for another day. Whether we stay or whether we leave, the rest of the debate in this blog-post is primarily about (re)distribution rather than absolute incomes.

It has been demeaning to watch the Tories try to justify stealing money from International Development Funds – where consecutive governments have tried to live up to the 0.7% of GDP target set by the United Nations as a fair contribution to International Development – to try and ease the way to leaving the EU. They may still try to do it, so we must do everything we can to stop them.

My second point relates to the arms trade, one of the most shameful aspects of international trade this country has involved itself with since the slave trade was abolished. Setting aside for a moment our obvious “skill set” in making these foul implements and the huge profits that accrue to the armaments industries and the large positive `balance of trade` the country supposedly `benefits from`, the fact that many small countries spend inordinately huge sums buying weapons of war they probably do not really need skews global trade and generates a large part of economic inequity.

I know we will not win the argument in the short term, but that should not deter us from making the argument in and for the long term that the UK should be far more restricted in choosing customers for our undoubted skills in armaments manufacture. We should move towards the Scandinavian model of international relations and promote true sustainable development which would hopefully obviate much of the perceived “need” for countries to arm themselves to the teeth. In order to cope with the inevitable shouts of “creating unemployment” there should be a compensating investment in alternative manufacturing opportunities – green energy obviously springs to mind.

If we really want this to happen, we also have to acknowledge that it is unlikely to happen if we leave it entirely to “market forces” simply because of the large comparative advantages the UK armaments industry has in terms of the skill set and experience I referred to above. We could make an early start here, though by making sure that the industry actually follow the rules that are already in place and did not sell arms into warring areas or to countries with questionable human rights records. Saudi Arabia for example.

Really my key point is simple – if countries spent less on arms they could spend more on useful infrastructure. And this sort of expenditure is more likely to generate a positive multiplier effect.

Second suggestion for a radical international economic policy. Instead of spending 0.7% of GDP in ID, let us increase that to a full 1% of GDP. OK – I can already hear the howls of right wing thinkers (“for goodness sake don`t spend any more on Johnny Foreigner”!!) but my belief here is that the more we invest the more economies will be raised from the depths of subsistence to actual working economies. A Keynesian approach to global economy should raise economic activity, provided it is approached in a sustainable development framework. Also, if we instigate this raised level we will, in all probability be early beneficiaries of reciprocal trading that will eventually result.

Domestic economics.

We need to have a thorough formal party debate on all aspects of domestic economics in the light of the failures and problems associated with the Orange Book approach and the general rightward movement of economics over the last 40 years. I favour a serious look at Universal Basic Income (UBI) in the light of the recent Finnish experiment and experience, since this may act as a key redistributor of income to individuals (the Liberal view) provided the underlying taxation is sufficiently equitable to share the burden between the working population and business models that rely not on a workforce but on automation to make a profit.

We must move away from an overwhelming reliance on a younger smaller workforce when the population is ageing. Inter-generational equity is important. Intra-generational equity is important, too, and those who are better off should bear a much greater share of supporting the public purse than they do now after benefiting from years of right-wing, privilege-based Tory economics, sadly supported to an extent greater than I would have liked by the coalition.

We also need to clarify and cost a realistic nationally instituted Land Value Taxation (LVT) system which has been at the heart of potentially radical Liberal Economics as long as I have been associated with the Party and its fore-runner Liberal Party. The fact that Asquith and Lloyd George and Churchill all advocated LVT adds to its longevity as a good idea but it has never seen the light of day in the realpolitik world of UK politics. We need to work on it to get the exact mechanisms correct but there is now a considerable quantum of real experience in Australia, Canada and some States of the USA to draw on. There are considerable sustainable development benefits that would flow from LVT too, which is probably why the Green Party also advocates it.

I mentioned UBI above and there is work to be done in terms of using it as a potential basis for developing fair systems of social security support, disability support and so on. We also need to integrate it with a progressive tax-raising system that would claw such contributions back from the well off and the wealthy. Some people have referred to negative income tax as a similar system to UBI – there is after all an Inland revenue administrative system in place which knows out NI numbers and could (and does) give money out as well as collect it in. The old age pension is a form of UBI for older folk and works reasonably well, at least in principle!!

Feel free to feedback comments here or in the Lib Dem`s FB threads. I will try and deal with wealth redistribution in a future post.


About Keith Melton - Green Lib Dem

Retired English liberal environmentalist living in Nottinghamshire; spent six years in Brazil. Author of Historical Novel - Captain Cobbler: the Lincolnshire Uprising 1536. Active member of the Green Liberal Democrats - (pressure group in Liberal Democrats) - was Founding Chair of GLD in 1988
This entry was posted in Environment & Sustainable Development, Politics, Radical Liberal. Bookmark the permalink.

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