What is good about the UKIP results?

For the main UK political parties the 2014 UKIP local election results are a challenge which they are unsure how to deal with. Do they cast UKIP as racist and risk being attacked as out of touch with the problems of ordinary people. Or do they attempt to recognise the valid concerns UKIP is thought to have identified? When asked about UKIP politicians from all the main parties choose their words with the same level of lawyerly care that Bill Clinton did when asked about his relationship with Monica Lewinksy. They also look about as comfortable as he did.

Crudely one might ask whether UKIP has tapped into a rich vein of base racism which they transform into a respectable concern about the strain on public services and dilution of British culture? Clearly they do seem to have found a mother load of electoral support however I believe it is more profoundly driven than a concern with too much immigration. I fear there is a much deeper malaise in British society, one which is connected to global as well as national trends where fears about immigration are symptoms not causes. Trends which are making life more and more uncertain for millions of people.

For something  over thirty years now there has been a process of growing inequality in the UK. Thomas Piketty’s recent book charts what he sees as a global process concentrating wealth and income in the hands of fewer and fewer individuals. This has largely been at the expense of the middle classes whose living standards have at best stagnated over this period of time.

One of the processes which is seen to have contributed to this concentration is the development of the “winner take all” model in more and more areas of life, and the growth of the “super managers” particularly in the financial sectors of the economy. In  the 1970’s the top 1% of earners captured 10% of national income in the US, now their take is around a third.

It is, of course, this highly paid cadre of super intelligent financiers who developed the sophisticated financial instruments which were intended to diversify away risks on securitised loans. Collateralised Debt Obligations, Credit Default Swaps and such like. For those of us that did woodwork the clue was in the names of these instruments – “debt” and “default”. At bottom if you lend money to people who cannot afford to pay it back the wheels are going to come off however complicated the financial alchemy is you build upon that foundation.

When the wheels did come off in 2007/08 the groups who had to pay the price were the taxpayers, by that I mean the PAYE tax payers and more specifically the ones without an army of lawyers and accountants between them and the inland revenue. Western economies were brought to their knees, hundreds of billions of pounds had to be provided to bail out financial institutions and the term austerity was elevated to a policy reigning back the welfare state that had done so much to improve equality over the 20th century. Contrition amongst those who were most responsible was thin, accountability virtually non existent. No sooner had the crisis been stemmed than bankers were telling us that we needed to “move on”. “Moving on” meant getting back to annual bonuses equivalent to the lifetime earning of those on the average wage.

Even as it became clear that the people who had created these financial weapons of mass destruction had failed to consider the “black swan” risks that might be associated with them, and those that had allowed them to be applied at scale had very little understanding of what they were or how they worked, the level of public outrage appeared strangely muted.

Since the credit crunch scandal after scandal has come to light as we discover that LIBOR, Forex and Gold markets were rigged. Unnecessary insurance products sold to millions of people, sophisticated interest rate swaps sold to businesses which were then driven into liquidation by the rising costs of the products and in some instances, it is claimed, bought at distressed values by the very banks that sold them the swaps. Banks were even found to be laundering the money of drug barons!

Even after all this the impetus for re-regulation of the banks is being undermined by arguments about the need to protect one of our most important industries, we must not kill the golden goose. Beggar-my-neighbour tax reductions for corporations and those on ultra high salaries we are told will reward talent, inspire innovation and attract jobs to the UK. Whilst it is rarely challenged in the popular press it should not be assumed that the population miss the fact that whilst rich people need more money to be motivated poor people need less. And it is strange that lower taxes should inspire companies to come to Britain when they arrange their affairs so that they don’t even pay them.

One might think that the public are suffering from shock fatigue. You worry that if financial analysts were found to be discerning the trends in the markets from the entrails of freshly sacrificed babies it would generate no more than a weary shake of the head. The stoicism with which the cuts to the welfare state have been accepted must have surprised even George Osbourne. The limited challenge that has been mounted to date should not, however, be seen as acceptance. These issues are moving the tectonic plates of public opinion. On the surface little may appear to be happening but deeper there are strains building which will at some point be released.

Ukip have created a fault line. They speak to the pain that the population are experiencing now and the deep unease that they feels about the future. For the elderly it is the fact that their savings are being eroded by effectively negative real interest rates, for the middle aged the date they can retire is receding, for those who work in the public sector redundancy looms, for those in the private sector their terms and conditions worsening with zero hour contracts,  all are finding their incomes declining in real terms, and young people if they can get a job certainly cannot get a house in large parts of the country.

To change my metaphor, there is a lot of tinder lying around and Ukip are providing a spark. Furthermore I think the major parties should not assume that the first past the post voting system for the 2015 general election will douse the Ukip torch. People are hurting and want out and Ukip seem to be offering them a route. Ironically they are tapping in to precisely what Nick Clegg tapped into 4 years ago.

This is not just an issue in the UK. It might seem strange to put UKIP, Occupy Wall Street, the Tea Party, and sundry proto fascist and extreme left groups on the continent together but they are all expressions of growing frustration with the way the economy is being shaped and the social and political consequences of this. The catalyst may be immigration but as I have argued the causes are far more pervasive and deeply rooted. Unless these are addressed closing our borders will provide a temporary and unedifying distraction. To be clear Ukip does not have the answer indeed they are not even addressing the right question.

Technology and globalisation are setting life defining challenges for us. Some argue that these are forces which it is pointless, indeed counterproductive, to try to shape. They accept they can often cause “dislocation” but go on to argue that the evidence from the industrial revolution and the developing economies is that eventually everyone is better off. Unfortunately, there are increasing signs that innovation is not always tied to productivity increases nor grow to the increase in new quality jobs.

One example,  I accept crude, of the future we may face is provided by Citigroup. They have advised clients to structure their investment portfolios around the growing consumer power of the super rich. They think “…the world is dividing into two blocks – the Plutonomy and the rest.” They see the economy as an hourglass with a smaller and smaller number of super rich consumers of luxury items,  (yachts and jets) at the top. And for a the rest…? The future is Poundland.

This picture of the future is not good for anyone. What we lack are politicians that have the nerve to articulate a different vision. One which challenges some very powerful vested interests and indeed at times contradicts some of the bar room certainties of public opinion. To be clear, I believe, a future which needs to remain committed to a free market system with private property rights and inequality of rewards. However, inequality within bounds that are rationally debated. The clock is ticking for a considered and structured response to these issues the alternatives are in no ones interest.

Back to where I started, what on earth can be said in favour of people voting for Ukip?  Grasping a positive from this it shows that, despite regulations and laws being made which seem to be tailored in the interests of the minority, despite the obscene salary levels being paid to an industry that nearly destroyed the western economy, despite the frailties and venality of some of todays politicians some people still have faith in democracy.  From what I have said it will be clear that I think the faith in Ukip is totally misplaced however the recourse to democracy when you are hurting is something we must strive to support.