The Progressive Fix

PPI Asia Trip Report

International engagement is integral to PPI’s mission of policy innovation, going back to the “third way” dialogues we helped to launch back in the 1990s. In addition to multiple visits to Brussels and other European capitals over the past several years, PPI went to Australia last summer to unveil a unique study of the App Economy” Down Under. Underscoring the value of such global outreach, the host for that July 2014 event, Communications Minister Malcolm Turnbull, just became Australia’s Prime Minister. 

Extending our efforts in the Asia-Pacific region, we’ve just returned from a fascinating two-week foray to Japan, Vietnam, and Indonesia. Here’s a brief report on our trip, which centered on two new studies of the App Economy in Southeast Asia, as well as our work to support President Obama’s push for the Trans-Pacific Partnership (TPP). 

It began on Sept. 7 (Labor Day) in Tokyo, where PPI’s traveling party was briefed by top officials of Ministry of Economy, Trade, and Industry (METI) on Japan’s priorities for the TPP negotiations, Among other things, we discussed TPP’s importance in supporting increased trade by small and mid-sized U.S. and Japanese firms, and we emphasized TPP’s critical role in promoting the cross border data flows on which the global economy increasingly depends.

 At the Ministry of Defense, we received a broad survey of regional security concerns, including China’s “creeping expansion” and island-building activities in the South China Sea. This briefing helped to provide context for Prime Minister Shinzo Abe’s controversial new security proposals, which are intended to allow Japan’s armed forces more latitude in joining mutual defense efforts in the region, including joint exercises with U.S. forces. 

 Energy also figured prominently in our talks. From directors of the Agency for Natural Resources and Energy and Office for International Nuclear Energy Cooperation, we learned that the post-Fukushima shutdown of nuclear energy has left Japan importing an amazing 96 percent of its energy, leaving it hugely dependent on coal and Middle East oil. Little wonder that Japan is gradually bringing nuclear reactors back on line and trying to tilt its portfolio more toward natural gas and renewable solar and wind power. The United States could support these efforts by a key ally by lifting outdated restrictions on U.S. oil and gas exports. 

Other key meetings in Tokyo included a wide-ranging conversation on U.S.-Japan relations and the progress of “Abenomics” with the Japan Institute of International Affairs (JIIA), as well as a roundtable discussion with the American Chamber of Commerce in Japan on the investment climate in Japan, the government’s efforts to stimulate economic growth, and the attempts to stimulate innovation in regenerative medicine. 

PPI next traveled to Vietnam, a country in the throes of rapid economic development and modernization. In Ho Chi Minh City, we met with city officials eager to lower legal and regulatory barriers to foreign investors, as well as leaders of the city’s University of Technology and Education, an American-founded college that is trying to meet the economy’s insatiable demand for engineers and technicians. 

If Ho Chi Minh City is Vietnam’s business center, Hanoi is the seat of a government firmly controlled by the Communist Party. There, PPI released “Vietnam and the App Economy, a report by our chief economic strategist Michael Mandel. Using a methodology Mandel pioneered in measuring the number of U.S. app-related jobs since the introduction of the smartphone in 2007, the study shows that Vietnam ranks surprisingly high in app job growth – first, in fact, in Southeast Asia (including Thailand, Malaysia, Singapore, Indonesia and the Philippines). 

 The report warns, however, that new regulations under consideration – for example, a rule that would prohibit data from leaving Vietnam – could crimp the development of the country’s nascent digital sector. What’s more, the wisdom of a heavy state role in certain sectors, such as telecom and mobile broadband, was the subject of some very spirited discussions with our hosts. 

 PPI’s visit and Dr. Mandel’s report were well-received in the Vietnamese media, gaining positive coverage from the Vietnam News Agency, ICT News Vietnam, Vietnam Breaking NewsThe Voice of Vietnam, and VietnamPlus.

 PPI also released a second report, “TPP and the Benefits of Freer Trade for Vietnam: Some Lessons from U.S. Free Trade Agreements,” at an event organized by the American Chamber of Commerce in Hanoi, which included leading Vietnamese economists and economic reformers. Written by Ed Gerwin, who directs PPI’s Trade and Global Opportunity project, the report shows how countries that use high-standard free trade agreements to enhance transparency and the rule of law, adopt higher labor and environmental standards, and make other key reforms often see significant growth in foreign investment, greater innovation, and broader participation in global commerce. Gerwin’s report garnered media coverage in The Hill and the Communist Party of Vietnam’s Online Newspaper.

 Our schedule also included meetings with top-level officials from Vietnam’s Ministries of Foreign Affairs, Information and Communication, and Science and Technology, as well as visits to Saigon Hi-Tech Park, the U.S. Embassy, Viettel Corporation, FPT Software, and Vietnam Silicon Valley.

 From Hanoi it was on to our final destination, Indonesia. At a packed public forum in Jakarta hosted by Mastel, an association of leading Indonesian and foreign companies, we released another Mandel study, “Indonesia: Road to the App Economy.” That was followed by a roundtable featuring top Indonesian government officials, business leaders and economists. PPI’s core premise – that emerging market economies, such as Indonesia, should not overlook possibilities for growth arising from the intangible, or data-driven economy, as well as traditional, labor-intensive manufacturing – sparked a lively discussion.

 The report and Dr. Mandel’s public comments were quoted in CNN Indonesia, Bisnis Indonesia (the leading business print newspaper in the country) (the number one online news outlet in Indonesia), and Kompas Online (the number one print newspaper by circulation).

The PPI delegation included Will Marshall, Michael Mandel, Lindsay Lewis, Cody Tucker, and Ed Gerwin. We will continue to find ways to engage on policy issues globally, as the new economy being fostered by U.S. innovation needs better international understanding and increased appreciation. We hope you will find the opportunity to join us in the coming year as we push for unique policy solutions at home and abroad.

PPI WEEKLY WRAP-UP: Taxing Broadband, China’s Currency Depreciation, & Innovation Struggles

TAXING BROADBAND: In a piece for Forbes on Thursday, PPI Senior Fellow Hal Singer argues against the FCC taxing broadband in order to subsidize it.

“The Federal Communications Commission (FCC) recently proposed amending its low-income ‘Lifeline’ program—which provides a $9.25 per month credit for consumers of voice services—to permit recipients to apply that same subsidy instead to broadband services. Who could argue against increasing options for low-income Americans?

“Before critiquing the FCC’s proposal, it’s important to point out that expanding broadband access is a laudable goal. But financing this expansion through the Lifeline program will eventually lead to the perverse outcome of taxing broadband in order to subsidize it. Better to raise the funds for subsidized broadband from taxes imposed on behavior we want to discourage.”

CHINA’S CURRENCY DEPRECIATION: In a post on the PPI blog this week, Chief Economic Strategist Michael Mandel argues “that critics of China’s recent currency depreciation are missing the big picture. First, depreciation is a desperate measure which is a sign of the coming implosion of the Chinese economic model. Second, depreciation is a double-edged sword for China, because the Chinese export machine is heavily dependent on imported components that will rise in prices with depreciation. Third, the ultimate effect of a China economic implosion will be to send US interest rates and inflation soaring. Fourth, on the positive side, there may be an opportunity to rebuild the US manufacturing sector, if China’s economy is in turmoil. Fifth, the political implication is that presidential and other candidates should not expect a stable economy going into 2016, and a ‘crisis’ message may be needed.”

INNOVATION STRUGGLES: A new study by Mandel, “Where is Innovation Falling Short?: Using Labor Market Indicators to Map the Successful Innovation Frontier,” was highlighted this week in an article by Wall Street Journal chief economics commentator Greg Ip, “Beyond the Internet, Innovation Struggles.” The study was prepared for the Kauffman Foundation New Entrepreneurial Growth Conference, which took place in Amelia Island, Florida from June 17 to 19, 2015.

“In a new study, Michael Mandel of the Progressive Policy Institute notes that previous innovation waves straddled numerous disciplines: information processing, transportation, medicine, energy and materials.

“Where are the comparable advances in materials today? The Nobel prize was awarded in 1987 for the discovery of high-temperature superconductors—material that can carry electric current without resistance at temperatures above extreme cold. But as Mr. Mandel notes, few commercial superconductor applications are on the market. Nanotechnology—building materials out of microscopic particles—has found its way into tennis balls and odor-resistant fabrics but hardly measures up to steel or plastic in its breadth of uses.

“The staggering sums invested in biosciences haven’t yielded breakthroughs comparable to antibiotics in the 1930s and 1940s. The human genome was sequenced more than a decade ago. Yet as Mr. Mandel notes, there is still no approved gene therapy for sale.

“Quantifying innovation is difficult: Government statistics don’t adequately measure activities that only recently came into existence. Mr. Mandel circumvents this problem by surmising that innovation leaves its mark in the sorts of skills employers demand.

“His conclusion: Today’s economy is ‘unevenly innovative.’”

POLITICO: New Democrats plan ‘assertive’ new presence in House

The New Democrat Coalition sees opportunities this fall on taxes, trade, Medicare and others.
by Lauren French, POLITICO

In the hierarchy of the House, moderate Democrats — a minority in a party already deep in the minority — should be totally powerless.

But a group of pro-business Democrats, who allied with President Barack Obama and Republicans to pass landmark trade legislation, are angling to cut more deals with the GOP and White House as a way to assert themselves — and force the Democratic Caucus to the center.

Led by Rep. Ron Kind of Wisconsin, the New Democrat Coalition of some 50 members sees opportunities this fall on taxes, trade, Medicare and government spending. Those are all areas where House Republicans have struggled to fashion 218-vote majorities from within their own party, with a cadre of restive conservatives often rejecting leadership’s compromises with Senate Democrats and Obama.

That leaves an opening for swing moderates to get legislation across the finish line.

“We need to reconstitute the center of American politics again, on both sides. That is a crucial role we have to play, especially when it comes to the economic message and what resonates in those competitive districts,” Kind said in a recent interview.

Moderates are tired of being overshadowed in a party where liberals have long dominated the agenda, even as Democrats slipped further into the House minority after the 2014 midterm elections. They’ve accused the White House and party leaders of focusing too much on niche economic issues like the minimum wage and pay equity — policies, moderates argue, that turn off suburban voters Democrats need if they want to take back the House. And top Democratic leaders have released them to break with the party’s liberal base, in many cases an acknowledgement that many moderates come from tightly contested districts.

Early returns have been positive.

When Obama needed support from his own party to pass landmark trade legislation, he turned to the New Democrat Coalition. The group mustered just enough votes — 28 in total — to clear fast-track trade authority through Congress, despite opposition from the party’s left, including Democratic Leader Nancy Pelosi of California. It was the latest — and most controversial — instance of the group flexing its muscles.

And now moderates are staking a claim to other economic polices normally dominated by Republicans. Reps. John Delaney of Maryland and Scott Peters of California introduced a “dynamic scoring” bill — an issue normally favored by Republicans — that would encourage budget scorekeepers to score tax cuts favorably to reevaluate how Congress spends money on infrastructure, research and education. Connecticut Rep. Jim Himes is one of the most outspoken advocates for reforming the Dodd-Frank financial regulations bill, which he supports, and Delaney has worked to find common ground on foreign tax issues with both parties.

“There is a real opportunity to work with the administration and to work with the majority to try and get [our issues] done,” said California Rep. Ami Bera, a member of the group. “There is an appetite.”

Read More on POLITICO.

Does the FCC’s Open Internet Order Survive a Cost-Benefit Test? These 13 Economists Don’t Think So.

Yesterday, a stellar constellation of regulatory economists—including three economists affiliated with the Progressive Policy Institute—submitted an amicus brief to the D.C. Circuit Court of Appeals, demonstrating that the Federal Communications Commission’s 2015 Open Internet Order failed a cost-benefit test.

How could this happen?

When proposing a remedy to address a perceived market failure, a regulatory agency may fail a cost-benefit test in three ways. First, the agency can overstate the benefits of its proposed remedy. Second, the agency can understate the costs of its proposed remedy.

Third, and a bit less obvious, the agency can ignore a less-restrictive alternative that would generate the same purported benefits but at a lower cost, thereby rendering its proposed remedy inefficient. For example, if the net benefits of a proposed remedy are $10 million per year, but a less-restrictive alternative generates net benefits of $15 million, then the proposal fails a cost-benefit test, even though the proposed remedy would have generated benefits in excess of costs.

The FCC committed all three errors in its Open Internet Order (OIO). As Chris Cillizza of the Post says in his recurring award for Worst Week in Washington, “Congrats, or something.”

The amicus brief explains in great detail how the FCC committed the first two errors.

In terms of overstating benefits, the OIO fails to consider that the profitability of (and thus the incentive to engage in) discriminatory conduct vis-à-vis content providers depends on whether the Internet service provider (ISP) could generate higher profits from the promoted (affiliated) products to cover the lost margins from departing broadband customers. The anticompetitive behavior feared by the Commission has simply not come to pass, which explains why the OIO is hard-pressed to cite any recent examples of consumer harm. A very limited number of service disruptions or degradations have actually occurred—among literally millions of opportunities for such behavior—and many of these have been dealt with expeditiously through private negotiations.

And in terms of understating costs, the OIO ignores or dismisses the economic evidence of the impact of Title II on investment in the late 1990s and early 2000s, and thereby dismisses the very real threat to ISP investment. Rather than ground its findings on economic scholarship, the OIO relies instead on the casual empiricism of an advocacy group that operates outside of the constraints of academic reputations, to reach the extraordinary conclusion that telco investment was “55 percent higher under the period of Title II’s application” than in the later period. These results hinge on which years are included in the Title II era: If one includes the years 1999 and 2000 as part of the pre-2005 period, then removal of Title II appears to have caused a decline in Bell investment. But those early years are associated with the boom and long-haul fiber glut, and it is difficult to remove Bell investments in backbone infrastructure from the capex figures.

The amicus brief spends less time on the third element of cost-benefit, largely due to a 4000-word limitation. So more on that here.

The OIO casually dismisses a less-restrictive alternative for handling paid priority disputes—namely, case-by-case enforcement—as being “too cumbersome” to enforce, despite the fact that: (1) the 2015 OIO itself embraces case-by-case review to address interconnection disputes and other conduct such as zero-rating; (2) the 2010 Open Internet Order embraced case-by-case to address paid priority disputes; (3) the FCC’s May 2014 Notice of Proposed Rulemaking would have permitted ISPs and content providers to engage in “individualized bargaining” subject to ex post review; and (4) the FCC relies upon case-by-case to adjudicate discrimination complaints against traditional video distributors. Why is this conduct different from all other conduct?

Recognizing this disparate treatment of paid priority and interconnection, the OIO argues that case-by-case enforcement “is an appropriate vehicle for enforcement where disputes are primarily over commercial terms and that involve some very large corporations. . . .” (paragraph 29). But interconnection disputes can involve small content providers as well. And if the concern is an asymmetry in litigation resources, the case-by-case regime can level the playing field by shifting evidentiary burdens and providing interim relief.

Indeed, the 2010 Open Internet Order considered and rejected a “flat ban” on paid priority in favor of a case-by-case approach; embracing the ban in 2015 presumably pushed the FCC towards its dreaded reclassification decision. This dramatic policy reversal begs the question: What happened in the intervening five years that caused the Commission to lose confidence in case-by-case adjudication for paid priority? The OIO does not give an answer.

It would seem that an overt and pronounced shift in regulatory policy would necessitate a clear and confident finding that such an alternative policy approach toward the Internet would produce better results—more innovation, more investment, and more consumer benefits. When viewed with an economic lens, the OIO fails a basic cost-benefit analysis.

What New Data Says about Debt-Free College

New data shows that young people who don’t fit within the current college system are facing great hardship in today’s workforce. This sheds valuable insight into the debt-free college debate, the charge for injecting more money into the federal student aid system at the top of Democrat’s 2016 election talking points.

With outstanding student loans topping $1.2 trillion, it’s little wonder that Democrats from Bernie Sanders, Martin O’Malley, Elizabeth Warren, and even Hillary Clinton are choosing to make tackling student debt a priority.

But student debt is the biggest problem for non-completers, who are increasingly unable to find decent work. Good job options have become so limited for non-graduates that the millions of young Americans who do not perfectly fit into the standard college mold now find themselves at an inherent disadvantage.

Indeed, my analysis of the latest labor force data highlights the plight of young people with some college but no degree. Since 2000, young people aged 16-24 neither enrolled in school nor in the labor force in June with some college or an Associate’s degree has increased by 700,000, or about 120%.  (Overall, young people aged 16-24 neither enrolled in school nor in the labor force in June increased by 1.4 million, or 27%, since 2000.) This chart considers June to get best sense of underlying trends in young people not in school.*


The implication is that we need better workforce preparedness options for those without a college degree, not simply debt-free college. The policies that comprise “debt-free college” merely throw more resources at propping up the current higher education system. For Bernie Sanders, that means free tuition. For Martin O’Malley, it means regulating tuition and expanding federal grants to schools and students. For Hillary Clinton, it’s just a conceptual endorsement that everyone should graduate college, and without debt.

Such policies are short-sighted. Rising student debt is a symptom not of inadequate federal funding, but of a broken federal financial aid system and of a higher education system in need of a shake-up. Greater transfers of money from taxpayers to students and schools will only exacerbate the challenges young people face in today’s labor market, by discouraging needed innovation in higher education. It quickly turns into an expensive and inefficient way to match workers with jobs.

Indeed, with the falling costs of information-sharing, thanks to the proliferation of high-speed broadband, and promising rise of innovation in education technology, there should be a downward pressure in college tuition. And with more people than ever graduating college, we should see an overall rise in real earnings. Yet college costs continue to rise at a faster pace than inflation, and the real earnings of young graduates have fallen 12% in the last decade.

By perpetuating the status-quo, policies that comprise debt-free college will not enhance opportunity and social mobility for those who need it – it will only widen the gap between young Americans with and without a degree. The barriers to innovation in higher education will remain, along with a lack of incentive to provide higher education more efficiently and effectively. Instead of introducing productivity-enhancing reforms to deal with rising enrollments and falling state funding, such as customized education or hybrid learning, higher education institutions can continue to use federal student aid to fill budget holes. In fact, groundbreaking new research from the NY Federal Reserve directly ties increases in federal student aid eligibility to increases in tuition.

Without serious reform, we cannot possibly hope to realize the enormous potential coming from the tech sector to transform the design and delivery of higher education and workforce training. Happily there is promise for real progress: a Senate HELP hearing last week focused on need for breaking down barriers to innovation in higher education. Still, until Democrats move past the “debt-free college” approach, and the notion that college degrees are the only answer, 2016-themed rhetoric on college affordability will be little more than that.

*Note: Enrollment and labor force figures in June have been comparable with those in July over time, for those who are interested in complete mid-summer analysis.

Chuka Umunna: These are “perilous times” for the Left

On Wednesday, PPI hosted a lunch event at the National Press Club, “Progressives for Innovation and Growth: A Transatlantic Conversation,” on the economic challenge facing center-left parties. There, Chuka Umanna–Labour MP for Streatham and UK Shadow Secretary of State for Business, Innovation and Skills– gave the following keynote address:

Thank you so much to Will and the entire Progressive Policy Institute team for organising this gathering and inviting me to speak.

It is no secret that, as we sought to modernise the UK Labour Party in the 1990s and transform ourselves from a party of protest to a credible party of government, we drew much inspiration from President Clinton and the New Democrats. PPI was an incubator of so many of the ideas of that time which took the New Democrats into office. You were the original modernisers.

Unfortunately my party is suffering a relapse. We were established to be the political wing of working people in Britain, resolutely focused on ensuring that everyone has a stake in the future. But, too often over the last five years in opposition we behaved like a party of protest. Now we urgently need to modernise again so people can trust us to govern once more and fulfil our historic covenant with those that founded our Party.

The Democrats here have bucked the trend of progressive parties across the advanced world – the trend of losing General Elections since the global financial crisis. So, coming back to tap into your thinking and exchange views is a no-brainer.

Progressive challenge

We meet at perilous times for centre left “progressive” parties, across advanced economies.

We face a resurgent Conservative Party who have told a story about debt and deficit issues following the global financial crisis far more effectively than progressives. That crisis was a failure of the laissez-faire economic model the centre right were in thrall to and yet they have made the political weather since 2008/9.

In opposing the centre-right, we also compete with the populist left – in particular on economic policy – and the populist right – on issues of identity and belonging. I will touch on all this shortly.

The Danish Social Democrats provide the most recent example. In spite of winning the largest share of the vote by a comfortable margin in their General Election last month, they are out of power.

In May the British Labour Party went down to our worst defeat since 1983. The defeat comprised different elements: a failure to tackle Conservative hegemony in the Southern regions of England outside London; a challenge by the populist right – in the form of the UK Independence Party – in seats in the North of England; and a wipe out at the behest of the Scottish Nationalist Party in Scotland. A perfect storm.

It was England primarily that delivered the Conservative majority. We must win back support in Scotland but will need to prioritise taking seats from the Conservatives in England if we are to win again.

I cannot cover all of the reasons for our defeat but I shall make some observations on what it says about the challenges progressives face across the advanced world in this era of globalisation.

Economic competence

In the immediate aftermath of our defeat people have naturally prayed in aid arguments to suit their particular political perspective. But most agree our perceived lack of economic competence severely compromised our ability to gain the support needed to win.

It wasn’t that people like the Conservatives more than us – far from it – but they felt voting Labour represented a risk in a world of uncertainty. This was particularly so amongst older voters who vote in greater numbers and amongst whom support for Labour since 2010 dropped by eight points.

How did this come to pass?

Rahm Emanuel famously said you should never let a serious crisis go to waste. Our Conservative rivals heeded this advice, as did many other centre right parties across Europe. The 2008/9 crash occurred under our watch and they used it ruthlessly to make their argument.

In the UK the crash had precipitated a recession that brought about a collapse in tax revenues leading to a deficit of 11.1 per cent of GDP in 2009/10. This was inevitably going to have to be dealt with once demand and growth returned. So from 2008 in opposition through to government in 2010, Conservative Chancellor of the Exchequer, George Osborne reframed the economic debate in our country from one centred around the need for demand stimulus, to one resolutely focused on deficit and debt reduction.

Osborne argued that the Labour Government’s domestic spending before the crash had threatened our economy, and went on to argue – successfully – through the last Parliament, that if elected again, we would borrow, spend and tax more than the Conservatives. In so doing, our values were attacked too – they argued that not only were we incompetent, but that we were reckless and irresponsible too.

It was a ludicrous argument. We had reduced the national debt from 42 per cent of GDP in 1997 to 37 per cent of GDP on the eve of the crash in 2007. Before the crisis hit the deficit was small and unremarkable, averaging 1.3 per cent from 1997 to 2007 compared to 3.2 per cent beforehand under the previous 18 years of Tory rule. Indeed, so relaxed was Mr Osborne about borrowing before the crash that he signed up to our spending plans in 2007.

No matter. Mr Osborne’s argument stuck. As you would expect, he was greatly assisted by the fact that – notwithstanding the fact that the Labour government did not cause the crisis – the crash occurred whilst we were in office. But this was compounded because, once we left office, we failed to sufficiently concede where we went wrong – not properly regulating the banks and rebalancing our economy so we weren’t so exposed when the crash hit; in turn this compromised our ability to communicate what we got right.

At the general election just passed we had good policy to better balance our economy between sectors and regions, and to improve our trade position, but this was drowned out by the noise being made in relation to our alleged past economic misdemeanours on the deficit.

We were also not helped by some of the rhetoric the party deployed which gave the impression that we were against wealth creation and the productive businesses we would need to help us reform the economy if elected

Going forward we will need to ensure any weakness in our fiscal position is dealt with. It starts by asserting again and again that reducing our borrowing is a progressive endeavour – much as Democratic Nominee Bill Clinton did in 1992. We will need policy positions consistent with this goal. But, we must relate this to our values: compassion to ensure all have the support they need to get on; a responsibility to run sound public finances so we have resources to invest in people.

A vision of the future

We also failed to set out a vision of the future of our economy and our country that all could rally around.

Much of what we said focused on how terrible the country was and how we would regulate and clamp down on the many vested interests that we identified as being the source of all ills. This was hardly an optimistic, positive and patriotic story about what our country is and could be in the future. So, little wonder that even if voters did not believe the economy had improved under the Tories, too few believed it would get any better under Labour.

As globalisation has marched on and left too many behind, there has been an increasing sense in our country that the economy is not being run in the interests of people who work hard, play by the rules and do the right thing. In the absence of a positive narrative to explain how under a smart, enterprising Labour government every person and family would be empowered to take advantage of the opportunities the new digitally connected world can bring, social security and immigration dominated.

The social security bill was consistently one of the top three issues throughout the last Parliament. We spend more than £200bn a year – almost a third of all government spending – on the welfare state and this is not sustainable in the long run.

The Conservatives have chosen, in the main, to target entitlements the working poor and vulnerable receive to help make work pay – as the best way of reducing the social security bill. This is not something we would entertain. But we failed to set out an alternative way of reducing the benefits bill that convinced. In fact, we voted against every single social security measure put through parliament which helped reinforce the notion that we were not serious at getting to grips with this.

The price of successful politics is a constructive alternative and we did not have one. We need to rebuild support for our welfare state by setting out an alternative that puts notions of contribution and responsibility at its heart – where we all have a responsibility to work when we can and contribute in to the system if we want to we take out. That is what most people mean by fairness.

In addition to this, Ukip have sought to place blame for the lack of fairness in the system with immigrants. Many blue collar workers have understandably been troubled by the impact of immigration on our labour market. Whatever arguments are made by business of the necessity of immigration, for many blue collar workers it has meant more competition for jobs and the undercutting of their wages. The funding of public services has also been too slow to take account of population changes, putting local public services in some areas under pressure. This has proved toxic and provided fertile terrain for the populist right to use for their own divisive agenda.

The solution is not to pander to anti-immigrant sentiment or ignore it but to ensure proper enforcement of labour market rules and that new arrivals contribute into our system before they take out.

But, if we are to tackle the underlying causes of concern about social security and immigration, we must implement modern industrial strategies to stimulate innovation, grow the industries that produce better paying jobs, give people an education that match the needs of our industries, and give them the skills to connect into the digital global economy. Our education systems currently are simply not up to the job of giving workers the skills to adapt throughout their working lives to multiple career changes and constant technological advance. Again, we defended the status quo.

Above all, we need a system which doesn’t just treat people as commodities but where we value the work people do – the vocational and technical as well as the academic – and give them more of a say and greater employee engagement in the work place, fostering a greater sense of power and security in an uncertain, fast-changing world. This was not sufficiently central to our message – it must be for all progressive parties.

In other words there is work to do; real heavy lifting on the relationship between the economy and welfare if we are to win again.

National identity and belonging

The debate on immigration is symptomatic of the wider impact of globalisation.

People feel increasingly powerless in an age of globalisation that has brought about insecurity for so many. As a result, issues of belonging and cultural identity have taken on an increased importance as people search for security and solidarity in a fast changing world.

They are also increasingly mistrustful of a political elite who they believe is remote, passing laws and pulling levers at the centre, at a time when people want more power for themselves and autonomy for their communities. Progressives ignore this at our peril. If we do not address it, nationalism will flourish, which brings me to Scotland.

Although we were on the winning side of the argument in the September 2014 Scottish independence referendum, we lost 40 of our 41 seats there to the Scottish Nationalist Party at the General Election this year.

The rise of nationalism there was a factor that has deep, cultural roots. But, more than that, the constitutional issue of independence had become intertwined with issues of social justice. Whereas the English have tended to be slightly to the right of the Labour Party on economic matters, Scottish voters tend to the left of the party. The 2014 referendum campaign did not deliver the result the SNP desired, but it did give them the opportunity to set out a vision of the kind of independent Scotland they wished to create. In 2015 they successfully argued that an independent Scotland would be more progressive, stand up and protect them in a changing world.

In a sense, what we are witnessing – as the psephologist who came closest to predicting the UK result, Professor John Curtis of Strathclyde University, has argued – is the end of British electoral politics as we know it. He argues that the first break came in the 1970s when the links between Northern Ireland’s politics and the rest of the UK’s were broken; he argues we have just witnessed the second break where Scotland’s politics takes on a different character to that of the rest of UK, powered by issues of national belonging and cultural identity.

I think we can maintain the union but we should embrace people’s natural desire in our different nations to have more autonomy over their own affairs and give voice to the different cultural identities in the UK, whilst maintaining the benefits that the pooling and sharing of resources across the constituent parts of the UK brings. This is why I believe we need a more federal structure for the nations of the UK with a new English Parliament to sit alongside bodies in Scotland, Wales and Northern Ireland. We need a federal Labour Party too which recognises the unique character of each nation.

With a federal UK structure no nation will feel left out; each nation’s voice can be properly heard whilst maintaining a UK parliament that will be stronger as a result. To facilitate this we should establish a Constitutional Convention with all elements of political and civil society willing to participate, to settle this issue this Parliament. This is bread and butter for you here where the constitution takes pride of place. It would represent radical but much needed change in our country. It would be constructive of our renewal – government of the people, by the people, for the people perhaps.


I want to conclude in making a final observation. Our offer and the debate during the election was far too parochial.

If one considers what has had the greatest impact economically on people’s wallets in the first half of this year, it was the price of oil per barrel coming down to around $58 – an international phenomenon. The multinationals we seek not only to work with but ensure pay their fair share and play by rules, know no borders. And the biggest challenges we face, be it environmental or global terrorism, cross borders in a way they did not before.

This says to me that we can only ultimately build a fairer more equal world in an era of globalisation if we as progressives become far more organised and co-ordinated at a supra national level. For the UK that starts with maintaining our membership of the European Union in the coming EU referendum, but it extends beyond that to other institutions like the UN, the WTO. A better networked state in the modern age will be better placed to help its people thrive in this new era.

I look forward to working with you, in common cause and for the Common Good in the years ahead.



PPI Statement on Iran Nuclear Deal

Progressive Policy Institute President Will Marshall today released the following statement after the announcement of a landmark nuclear agreement between the United States, Iran, and five other world powers:

“Even before today’s nuclear deal with Iran was struck, President Obama’s critics accused him of giving away the store. Now the burden of proof falls on them to show why no deal is better than this deal.

“No deal means no constraints on Iran’s ability to enrich uranium and produce plutonium, giving it two paths to nuclear weapons. How will perpetuating this dangerous status quo make America or its allies safer?

“In contrast, the agreement reached in Vienna today between major world powers and Iran closes both paths to the bomb for the next decade. It also extends the embargo on missiles and bars Iran from designing warheads and testing nuclear detonators. Crucially, Iran has agreed to submit to more intrusive inspections than required by the Non-Proliferation Treaty.

“There’s no question, in short, that the deal moves Iran back from the nuclear threshold. Capping nearly two years of hard bargaining, it is a major diplomatic achievement for President Obama and his two Secretaries of State: Hillary Clinton and especially the indefatigable John Kerry.

“But it’s also a victory for collective security. The United States alone could not have wrung concessions from Iran without strong backing from its negotiating partners, Russia, China, Britain, France and Germany. Congress needs to keep that fact in mind as it takes up the accord. Unilateral action by U.S. lawmakers risks cracking the extraordinary united front the international community has maintained against Iran’s nuclear program.

“The agreement is far from perfect—no diplomatic deal ever is. Large questions remain about how and when sanctions on Iran will be lifted, and what happens 10 years from now when Iran resumes nuclear enrichment with more modern equipment, ostensibly to fuel civilian nuclear power. But the President has made undeniable progress, and he deserves progressives’—and the country’s—support.”

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LeBron James and the Do-Something Democrats: Support for Democrats “In the Arena” on Trade

In this year’s NBA Finals, LeBron James cemented his reputation as one of the greatest basketball players of all time­—becoming the first player in Finals history to lead both teams in points, rebounds, and assists in every game, and averaging an astounding 35.8 points, 13.3 rebounds, and 8.8 assists for the six-game series.

In addition to his basketball prowess, Lebron is also a student of oratory and leadership. When faced with criticism and second-guessing, he’s frequently cited Theodore Roosevelt’s 1910 address on “Citizenship in a Republic,” popularly known as the “Man in the Arena” speech. Like Roosevelt, LeBron believes that:

“The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, and comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds. . . . “

In Washington’s ongoing trade battles, there’s a group of Democratic House Members and Senators who are displaying the type of grit and determination that both TR and LBJ would almost certainly admire. These are the 28 House Democrats and 14 Democratic Senators who’ve voted to advance Trade Promotion Authority (TPA) legislation, often in the face of intense criticism from anti-trade forces.

These Democrats support a forward-looking trade agenda that includes critical priorities for progressives, including strong and enforceable labor and environmental standards, and new rules to protect innovation, to assure open digital commerce, and to “democratize” trade for small business and consumers. As pro-growth Democrats, they understand that increased trade can tap a burgeoning global middle class and help power more inclusive economic growth for middle class Americans.

These Democrats are also realists—and doers. They understand that writing modern rules for liberal trade is a messy and often-thankless task that requires hard work and perseverance. They appreciate that trade is always a negotiation and recognize the need for principled compromise among Congressional colleagues, the Administration, foreign governments, and the many and varied interests that make up America’s economic and social fabric.

While these Democrats know that they won’t achieve everything they seek, they also believe that it is vital to stand with the long line of Democrats—from FDR and Truman to JFK and Bill Clinton—who have progressively built an increasingly effective rules-based trading system that has fostered global peace and prosperity, lifted millions worldwide out of poverty, and continues to deliver substantial benefits to all Americans.

Many Democrats who have opposed TPA say that they support increased trade and stronger trade rules, and that they want to achieve the best deal for America. These TPA critics may be sincere, but they often offer only nebulous ideas on how to achieve these important ends.

Pragmatic, do-something Democrats, on the other hand, recognize the Trade Promotion Authority offers the only realistic, near-term means of achieving the outcomes that so many Democrats claim to want.  They know that our negotiating partners will never table their best and final offers to open markets or raise standards without TPA. And they understand that the United States will never achieve anything meaningful in trade if our trading partners must effectively negotiate with 535 members of Congress. This is especially so after last’s week’s spectacle in which labor and anti-trade groups prevailed on House Democrats to kill worker adjustment assistance—a six-decade Democratic priority—in a cynical bid to scuttle TPA and the overall trade agenda.

Pro-trade Democratic Members understand that key portions of the progressive coalition, including Democrats (58%), millennials (69%), Hispanics (71%), and mayors, believe that trade deals are good for the United States. But they’re not asking Americans to sign a blank check for new agreements. Under the leadership of Senator Ron Wyden, Congressman Ron Kind, and others, they’ve worked hard to assure that TPA includes unprecedented new transparency provisions, including the requirement that the text of any new trade deal be posted on the Internet for months before it is ever brought to a vote.

In a news conference before the NBA Finals, LeBron offered a pithy addendum to his favorite Roosevelt quote. When asked to guarantee a championship, LeBron said that he could only guarantee that “we will play our asses off.”

It’s time for Democrats who say they support expanded trade and progressive rules to get off of the sidelines—and to join the do-something Democrats who are “in the arena” sweating and striving towards those vital goals.