Sunday, March 4, 2018

Be Careful What You Wish For

Note: An Italian translation of this post (not revised by the author) has been published by , I am grateful to them and to the many readers who twitted and ri-twitted this post, as well as those who expressed their support on Facebook (where I have an account that I do not manage well). All this gave this post an extraordinary diffusion. Thanks also to all those who offered comments: I would rather readers commented directly on the Blog rather than to me via e-mail, in which case I might post their comments under initials or a made-up pseudonym or ask for their permission to enter their name (DMN) .

Indro Montanelli (1909-2001), the prestigious Italian journalist and writer, on many occasions expressed great contempt for Silvio Berlusconi, his character and politics. Yet in 2001 Montanelli declared in an interview: “I want him to win, I make vows and give pledges to the Madonna for him to win, so that Italians will see who this man is. Berlusconi is a disease that is cured only by vaccination, with a good injection of Berlusconi in government [a Palazzo Chigi]; Berlusconi as President of Italy [al Quirinale], Berlusconi wherever he wants to be, Berlusconi at the Vatican. Only afterwards will we be immune. The immunity that is obtained through vaccination” (La Repubblica, 26 March 2001[1]).
In the 13 May 2001 elections the first part of Montanelli’s wishes came true: Berlusconi and his allies obtained an absolute majority in both Houses of Parliament. 
Montanelli should have been more careful what he wished for. His verdict on the man was correct: the lower and the appeal courts in Milan in 2012 and 2013 convicted Berlusconi of fiscal fraud. The four year sentence was later reduced to one year and three months, which he never served by virtue of being over 70, but deprived him of political rights for two years until 2019. 
"He is the most sincere liar I know, for he is the first to believe in his own lies”, Montanelli had said;  he got away with a gigantic conflict of interest (with the complicity of the Left); Marco Travaglio, B. come Basta, Paperfirst2018, recounts how he run the country.
But otherwise Montanelli had been utterly and tragically wrong: the Italian electorate, who had already a short exposure to Berlusconi in 1994-95 and repeated large doses of vaccine with his governments in 2001-05 and 2008-11, still seems inclined to make his coalition the favourite to win the elections of 4 March 2018.
Despite Montanelli's mistaken prognosis and cure, I venture a similar wish, though in different circumstances, with respect to other parties and for different reasons.
At present there is a false, self-styled social-democratic Left, justifying itself by pretending to defend the interests of working people while destroying their life chances with their hyper-liberal, austerian and globalist policies, promoting no-border movements of capital and labour, de-regulation, privatisation, the destruction of the welfare state and unprecedented inequality of income and wealth. 
Inevitably a two steps (at least) process is required to get rid of this false Left and open the Left again to being the representative of working people, of fairness, of the admittance of workers' organisations into governance, of preventing falling wages and mass unemployment, of strengthening the welfare state in all its manifestations, from education to decent health and pensions as well as its current, defective, merely safety-net functions.

If this analysis is correct, Italian socialists and socialdemocrats should vote for the centre-Right, from Noi con Italia-UDC, to Lega, to Forza Italia. They are going to win anyway this time. It is better that they should win well, preventing any attempt by the state to put the country through the repellent mess Napolitano concocted in 2011 and 2013, that has led to five years of illicit and incompetent governance and to the collapse of a proper Left position and Party.

If the Centre-Right governs well then the Left will have breathing space to construct a proper programme, a democratic Party structure, and consolidate its electorate.  They must at least step back from the caricature of the Left of Grasso, Boldrini, and old men like Bersani.  And get rid of all the contemptible collusion in corruption from Rignano sull’Arno and Laterina.  
The Centre-Right might govern well, for many of the programme elements proposed by the current Centre-Right coalition should be in a programme of the Left: lower taxes on earned income; controls on economic immigration into Italy; new relations with the  EU; a revision of Eurozone regulation and management; easing of regulation destructive of providing housing; security at home; defence of Italian interests at international level, etc., etc.  Indeed it is a shame that these issues are not part of the Left manifesto, or indeed of the so-called Lefts' many manifestos. 
A reshuffling of voters characterised by these values should be pursued and implemented, which is very different from an unholy Grosse Koalition of opposite approaches and interests held together exclusively by the pursuit of and for the maintenance of political power against democratic processes.
And if the Centre-Right fails to deliver then we return to vote again (which I believe we will) but this time, with the second step, the second consultation of the people, we can hope to have a real Left to vote for.  The 'Progressive' class and national traitors can stand on their own platform, and not as the pretend Left that is all that is on offer this time.

Dixi et salvavi animam meam.

Wednesday, February 28, 2018

“A flat tax is for a flat Earth”

This was my answer to Grzegorz Kolodko, Poland’s Minister of Finance and First Deputy Premier for the Economy (1994-97 and 2002-03), when in the mid-‘90s he asked me – his adviser sponsored by the European Commission – for an opinion on the feasibility and desirability of introducing a flat tax.  I recommended instead a reduction of indirect taxation and the introduction of a tax on capital gains. To his credit Grzegorz listened to me on the flat tax, he reduced the number and level of marginal tax rates but at the same time he raised public expenditure on investment and on re-distribution, introduced an industrial policy that did not seek to pick winners but promoted high value added and export activities, and his package worked well.

The introduction of a flat tax has become a major issue in the policy discussions on the eve of Italian elections, as it is being vigorously propounded by Silvio Berlusconi and the leaders of his right-wing coalition. My views on the flat tax have not changed at all in the the intervening years.

There are two main arguments in favour of a flat tax:
1) the presumed existence of a Laffer curve, whereby government tax revenue is supposed to rise with the increase of the tax rate up to a maximum, beyond which a higher tax rate would actually reduce tax revenue, and
2) lower taxation would encourage the emergence of activities that at present evade taxation, and therefore raise additional government revenue in that way. 

According to established legend (Wanniski 1978) in 1974 Arthur Laffer, then a professor at Chicago University, drew the curve named after him, depicting tax revenue as a function of the tax rate, on a napkin at a dinner in a Washington restaurant to illustrate the effects of President Ford’s tax cuts. Except that he did not draw it on the basis of empirical evidence, but simply noting that for a zero tax rate tax revenue would obviously be zero, and assuming that for a 100% tax rate there would be a zero revenue because nobody would work or invest for a zero after-tax return. He also presumed that there would be a continuous parabolic shaped curve in between those two points and drew a maximum around a 50% tax rate. Thus you could obtain the same tax revenue with a low tax rate on a large tax basis or with a high tax rate on a smaller basis.

Laffer (2004) acknowledged that already in the 14th century the Tunisian philosopher Ibn Khaldun had noticed this possibility, which had also been asserted by many other thinkers including Keynes: “… taxation may be so high … that … a reduction of taxation will run a better chance than an increase of balancing the budget” (quoted by Laffer).
The trouble is that actual empirical estimates of revenue-maximizing tax rates have varied widely, with a mid-range of around 70% (Fullerton 2008, which fits with the “so high rate” stipulated by Keynes), while current tax rates in OECD countries average about half that rate. So much so that the IMF Fiscal Monitor of October 2017 actually recommends raising tax rates in a progressive fashion in order to reduce current excessive inequality of income and wealth, for “There is little evidence that increased progressivity reduces growth”.

More importantly, a 100% flat tax rate is plainly silly, for a progressive tax can reach fairly high marginal rates, historically even 90% and higher, without ever yielding a zero tax revenue. Indeed it has been argued that the Laffer curve might well be increasing monotonically, and in any case even a flat tax of 100% might yield substantial revenue in special circumstances like wartime or even in normal times depending on behavioural assumptions.

As for the second argument in favour of a flat tax, there is absolutely no evidence that a low tax rate – flat or not – encourages the payment of taxes otherwise evaded at higher rates. And why should it, as Schumpeter put it there is no good reason for anybody not reaping a benefit just because it is small.

Critics of a flat tax lament its lack of progressiveness.  Supporters – such as Berlusconi – are quick to point out that in most OECD countries, including Italy, there already is a flat tax on capital incomes, at a constant rate lower than the higher progressive rates on earned incomes, so that a uniform flat tax levied at an intermediate rate would be more progressive than the current system. And anyway the presence of a tax-exempt threshold maintains a degree of progressiveness, as required for instance by the Italian Constitution, art. 53; “The tax system shall be progressive”.

These answers to critics of the flat tax lack of progressiveness are not good enough, because the first comma of art. 53 states also that “Every person shall contribute to public expenditure in accordance with their capability”.  The progressiveness of a flat tax is minimal, depending exclusively on the size of the tax-free initial threshold, and may be regarded rightly as constitutionally inadequate: the average tax rate rises slowly approaching gradually from below the flat fixed rate on taxable income, and significant progressiveness would only be achieved for extremely large tax-free thresholds, counterproductive for tax revenue. The corresponding reduction in the current progressive tax on earned income would not benefit ordinary workers but only overpaid managers, making after-tax distribution of earned incomes more unequal. While the reduction of current excessively high levels of public debt, as well as the reduction of excessive degrees of inequality of income and wealth, are best served by a genuinely more progressive tax system of the kind recommended by the IMF (2017).

On 24 January last the Washington Post reported that Mike Hughes, a 61-year limo driver from California and a flat-Earth strong believer, has been planning to launch a self-built rocket to propel himself 52 miles into space in order to be able to see for himself that the Earth is flat, for “in many months of research I’ve not been able to prove otherwise” – he said. The trouble is that the project would cost 2 million dollars to finance the building and fuelling of the rocket, a space-suit and a hot-air balloon (Mike Hughes is a bit vague about his logistics), and he was only able to raise $8,000 from GoFundMe. As he now has a fellow flat-Earther in billionaire Silvio Berlusconi, it would be best for Silvio to fund the project in exchange for a lift in the same rocket, and all will end well both in California and in Italy, in the best of all possible worlds. 

Addendum 1
Trabandt and Uhlig (2019) estimate the Laffer curves for labour taxation and capital income taxation for the US, the EU-14 and individual European countries for 1995-2007. They find that the US can increase tax revenues by 30% by raising labour taxes and 6% by raising capital income taxes. For the EU-14 they obtain 8% and 1% respectively. Germany could raise 10% more tax revenues by raising labour taxes but only 2% by raising capital taxes. The same numbers for France are 5% and 0%, for Italy 4% and 0% and for Spain 13% and 2%. Only Denmark and Sweden are on the “wrong” side of the Laffer curve for capital income taxation.

Addendum 2 
In the latest Italian elections the Lega proposed a Flat Tax at 15% over the €7,000 tax-free threshold (plus minor further exemptions on households), while Berlusconi proposed its introduction at 23%. According to the Lega their flat tax would create an initial shortfall of €63bn (i.e. €103bn tax revenue from households and €18bn from companies instead of the combined current tax revenue of €184bn from IRPEF-IRES). 

They propose to cover this shortfall first of all from 25 expenditure cuts and additional taxes (including €5bn savings on centralised public procurement, €2,5bn on military expenditure, €5bn tax increase on gas prospection, €900mn from abolition of interest charges deduction by banks and insurance companies, €800mn for official cars abolition for hospitals, €700mn cuts in "golden pensions" (of dubious constitutionality). The bulk of the coverage would come, however, from the emergence of the black economy, reduced tax evasion, additional VAT and income tax on additional transactions and incomes expected from the tax reduction. Pie in the sky.

Fullerton Don (2008). "Laffer curve", In Durlauf Steven N., Lawrence E. Blume, The New Palgrave Dictionary of Economics (2nd ed.),

International Monetary Fund IMF (2017), Fiscal Monitor: Tackling Inequality, October.

Laffer Arthur B. (2004), “The Laffer Curve: Past, Present, and Future”, 1 June, Backgrounder #1765, The Heritage Foundation,  

Selk Avi and Amy B. Wang (2018), “Can this flat-Earther’s long-delayed rocket launch be saved? We may soon find out.” The Washington Post, 24 January,

Trabandt Mathias and Harald Uhlig (2010), “How far are we from the slippery slope? The laffer curve re-visited”, ECB Working Paper Series No. 1174, April, Frankfurt,

Thursday, February 22, 2018

Piketty: “Why have democratic regimes failed to reduce inequality?”

This is the question asked by Thomas Piketty in a recent presentation on “Brahmin Left vs Merchant Right: Rising Inequality and the Changing Structure of Political Conflict - Evidence from France, Britain & the US, 1948-2017 (February 2018). His answer, which is documented by very extensive and useful data, is fairly complex but it could, in a nutshell, be summarised thus: in the '50s and ‘60s the Democratic Party in the US and social democratic parties in Europe were supported by a variety of voters characterised by low education and low income. Globalization (by raising the issue of internal and external inequality) and the expansion of education (creating educational inequalities next to wealth inequalities) have created new multi-dimensional conflicts about inequality and redistribution.
Democratic regimes – answers Piketty – have failed to reduce inequality because "without a strong egalitarian and internationalist platform, it is unlikely that voters by low education and low income will all vote for the same party. The division between racism and nativism is a powerful force that divides the poor in the absence of a strong unifying platform. Politics has never been a simple conflict between the rich and the poor; we need to look more carefully at the content of political cleavages." Piketty argues that since the '70s and' 80s a political system has evolved that pits two transversal coalitions against each other: the intellectual elite of left wing Brahmins against the business elite/merchant right, both sharing the divided support of a working class whose interests are radically different and are not reflected in the parties.
A similar argument, without the massive documentation provided by Piketty but perhaps more fully argued, has been provided by Jan Rovny on the LSE Europpblog on 20 February: “What happened to Europe’s Left?”  I confess that being a left-wing economist I found the argument rather appealing, so I circulated both Piketty’s presentation and Rovny’s paper to a circle of colleagues and friends who I knew would be interested. However one of them, a political scientist whose views on the subject I had specifically solicited, was provoked by those arguments to provide a long critical comment, which I thought deserved to be aired more widely. Therefore I am very glad to post such a Comment below, with the author’s permission on condition of anonymity. DMN

Piketty's enthusiasm for his discovery of political science is heart-warming. You asked me for a view:

i)  to adopt a brush as broad as does Piketty is to empty much of his argument to rest upon historical and particularly statistical data available.
ii)  comparative politics can be useful but arbitrary lumping-together of very different political systems and cultures because of accessibility of chosen data sources leads to incoherence not to affirmation of a thesis.
iii)  the same goes for taking very long data series and arbitrarily cutting them off within his time terms of reference.
So what has he achieved?  He has produced a hypothesis, reflecting journalistic speculation, that the voting behaviours of electorates formerly possible to analyse in economic and class terms have altered across groups; this is causing the collapse of parties of the Left which he views as rooted in common economic and class interests.  Electorates are no longer voting for donkeys wearing a red rosette.  Electors in positions of authority are no longer voting in their economic self-interest.
Neither of these theses are correct; nor does the statistical, behavioural, historical evidence demonstrate that there is any past time in which they were.  Piketty picks and chooses his way through his data to show that they were but the clear association of change brought about by revolution, war, or some socio-economic or other catastrophe, is telling.
iv)  identifying a Piketty-esque Europe as Europe leads to warping of supporting evidence for his thesis; so does using United States data (size, lack of common history, slavery, just for starters; I could go on - that there is no 1945 break for the US as there is for Europe, that the living standards of the US and those of Europe are too far apart for long periods even within Piketty's dates...).  For Piketty Europe is the European Union, and mostly France at that.  Even within this narrowing of the study where is the data on Germany, Italy, the low countries, the East, the far North?  He should drop the US and start considering real Europe, not the EU.  There is a European community of culture, experience, economy and development, although that Europe tends to exclude the second of his data sources, the United Kingdom.
v)  Data series for the UK go back much further than for continental Europe; those on which Piketty relies can be produced from at least the beginning of the eighteenth century and many from the seventeenth and even earlier, both for electoral behaviour and for collections of data on conditions of life, state-organised welfare systems, educational records, health systems, social and work-related housing - the panoply of the modern welfare state is present and recorded.  Its roots make the electoral results of July 1945 the product of victory in war not the poverty of defeat as experienced by continental states, including France despite their pretences.  And as soon as the war economy had served to complete the installation of the redistribution that had been taking place for centuries in the UK, even if overshadowed by the Depression in the ‘20s and ‘30s where it had been fully used and available, nevertheless, the 1951 general election swept the Labour government away. 
The UK returned to something very similar to the redistributions that had been taking place for a long time, shedding the role of the state always associated with authoritarian regimes of Left or Right. The redistributive role of an extensive welfare state was fully accepted by all political groupings, there was no post-War watershed as there was in continental Europe (where populations were widely illiterate, still working the land and often as share-croppers, and urbanisation and modern industrialisation was still to come despite the best efforts of Left and Right).  Labour never recovered, and Margaret Thatcher moved every aspect of the state's role in government on to other ground that socialism or capitalism choices, as Blair's electoral success confirmed.
So, in many ways Piketty's use of UK data is as inappropriate as his use of that of the US.  He wants to tie together some kind of factual link between 'want, disease, ignorance, squalor, and idleness' and voting Right: what the UK data show is not that.  The Five have been tackled and defeated and the people vote Right for aspiration, self-fulfilment, the barring of the Five's reintroduction into their countries via third-world immigration, and a continued growth in their living standards and capacities to learn and achieve.
Yes the decline in voting for Piketty's Left is terminal for electorates have moved on as he and his Left have not. Political parties are re-grouping, that is very clear, but they regrouping to defend the people and their life-styles against out-dated ideologies of deprivation in all its forms.
Tony Judt spoke of 'ideological over-commitment' (although in another context, that of Israel, much of his work on France and the French Left embodies this critique); Piketty would benefit greatly from reading (or re-reading) Tony Judt. Another book he might add to his to read list is: Robert Trelford McKenzie and Allan Silver, Angels in marble; working class Conservatives in urban England, 1968.

Rovny is ponced-up Piketty.  There is a flat refusal to accept the role of Conservative working people in the construction of organisations, in institutions, in governance that has been present always (i.e. since records in the Piketty form) have been available.  It is the securing of decent wages, the legitimising of trades unions, the achievement of access to health care, the educating of every child to competent literacy and numeracy, the universal suffrage, pension support in old age, insurance, ... all the stuff the Left claims - it is all the product of skilled working people and the arrangements and agreements they have set in place over the centuries yes, centuries in the case of the UK.
The ideological Left cannot cope with the truth of this.  Their function has been to create revolutionary, i.e. war-like shocks that disrupt so much there must be destruction and then a settlement.  If the Left cannot produce a revolution then the Conservative working class can manage much better without them.  And often better than with them frankly.  There has to be technical backwardness, widespread illiteracy, gross deprivation of democratic governance, low life expectancy, and the general presence of the Five before revolution and the Left is required.  
Europe has been revolutionised and warred into what the UK did with working class conservatism (admittedly after the 17th century revolutions as a start-up shock, but that is a very long time ago) since capitalist industrialisation and urbanisation.  Even the localist organisations listed by Rovny are the result of municipal conservatism – why do you think it's modern Labour that individualises the social consumption of social provision, or closes pools, libraries, parks, evening classes etc. etc?
The Left is ineffective and very ugly.  Unless there's a revolution or a war to be raged.

Tuesday, October 31, 2017

Ths Rise and Fall of Socialism

The DOC (Dialogue Of Civilisations) Research Institute, Berlin, has funded a research project led by Vladimir Popov on “Inequality: Economic Models and Russian October 1917 Revolution in Historical Perspective”. The project (an earlier full draft of which is here) seeks to examine why capitalism was successful for several centuries, why it failed in the XX century and was replaced by socialism in about one third of the world, and why socialist societies did not succeed and eventually made a transition back to capitalism.

The project’s key hypothesis is that the income inequalities associated with capitalism initially raised savings and investment promoting economic growth, but later their negative implications dominated.  Soviet-type socialism failed, but rising inequalities of capitalism today are bound to generate rising social tensions eventually becoming unbearable and leading to a costly social revolution. A better alternative is the successful establishment of a “new socialism” “that will not necessarily mean a total elimination of markets and private property, but is likely to limit both substantially for the sake of achieving lower income inequality” - with the pursuit of redistributive policies, more regulation and taxation, more public property. The introduction of such “new” socialism in a few countries in a capitalist world would make them more competitive and drive their less enlightened competitors “out of business”.  Thus Popov stands “socialism in one country” on its head, turning it from a handicap into a competitive advantage.

Vladimir Popov, a distinguished Russian economist known to this Blog’s readers from several guest posts already published, was brave enough to assign to me a paper on “The rise and fall of socialism”, and I was unwise enough to take on such a daunting task for presentation at the Berlin conference of 23-24 October. 

My Berlin Conference PPT Presentation is available HERE. Comments welcome. 

Friday, June 9, 2017

Michael Ellman on the UK Elections

Professor Michael Ellman, of Amsterdam University and an old colleague, co-author and friend, appears to have become our resident phsephologist. He promptly sent me his valuable comments on the UK elections, authorising me to publish them as a Guest Post on this Blog, which I am delighted to do at once. Here is Michael's assessment on the day after (DMN).

(1) Theresa May took a gamble and lost. She was misled by opinion polls that showed a huge lead for her party before the election was called and also by the fact that a majority of Labour MPs had no confidence in Corbyn.

(2) Nevertheless, the Conservatives can form a new government and carry on. The Conservatives will be the biggest party in the new House of Commons and have almost half the total number of MPs. Together with one of the Northern Ireland parties (the Democratic Unionists) the Conservatives will have a (small) majority and will be able to push their legislation through Parliament (provided that their own party remains united).

(3) May's own personal position has been seriously undermined and she will not be able to last five years as Prime Minister. Some other senior figures in the Conservative party (such as Boris Johnson) will seek to take over. Even for her to last 12 months will be very difficult.

(4) The Conservatives got 42% of the vote. That shows that there is a solid block of the population (private sector, professionals, business people, the elderly) who back them.

(5) The Labour party got 40% of the vote. Thuis shows that there is a solid block of the population (students, public sector employees such as teachers and nurses, tenants facing high rents, low-income groups, minority ethnic groups) that opposes austerity and cuts to the public sector. Allowing for the 3% gained by the SNP (Scotttish National Party) which has a similar economic outlook to the Labour party, this shows that slightly more people voted againt austerity than supported it.

(6) Jeremy Corbyn ran a very successful campaign. That shows that in the UK and USA a candidate to the Left of orthodox opinion, such as Bernie Sanders or Jeremy Corbyn can enthuse a large part of the population, especially the young. (Turnout rose a couple of percent compared with the last election.)

(7) The decline of the SNP in Scotland and the improved showing there of Unionist parties, notably the Conservatives, make the break-up of the UK less likely.

(8) As far as Brexit is concerned, about half the population (supporters of Labour, SNP and the Liberal Democrats) voted for parties that would prefer a so-called soft Brexit (e.g. membership of the European Economic Area à la Norway) to the complete break that Theresa May seems heading for.

We live in interesting times.

Sunday, June 4, 2017

Michael Ellman: An Update on Dutch Elections

I received the following Update on Dutch elections from Professor Michael Ellman (Amsterdam University) and I am delighted to publish it as a guest post:

Dutch politics have vanished from the headlines after the party of Wilders failed to become the biggest in the lower house of Parliament. However, up till now it has proved impossible to form a new coalition government. 

After some weeks of negotiating, the first attempt to do so has collapsed on  the issue of migration. The right wing parties (Rutte & his Christian Democratic friends) wanted strict control over non-EU migration. The Green-Left party (which did well in the recent elections) was against this. However, I expect that one way or another a coalition will be cobbled together (the public does not want new elections and regards it as the obligation of the politicians to overcome the difficulties). 

Even if it proves impossible to form a coalition with a majority in Parliament, it is always possible to form a government with a large number of seats but still a minority (considering the divisions among the opposition parties) but this is generally considered undesirable since it makes it very difficult to pursue coherent and consistent policies (if the opposition parties unite they can defeat any government proposal they do not like). A coalition with a majority is obviously much more desirable and has a reasonable chance of being realised after further inter-party negotiations. 

Prolonged inter-party negotiations after elections are normal in the Netherlands. They result from a proportional representation system without a threshold (such as 5%) and which therefore enables any party with more than 0.67% of the votes to get a member into the 150 seat lower house. This has the advantage that it enables all shades of opinion to be represented (for example, there is an animal rights party, and two Calvinist parties, amongst others in the lower house) but makes forming a majority government difficult. The strong position of the Wilders party and the Socialist party (both regarded as unacceptable coalition partners by the mainstream) obviously makes coalition-forming more difficult than usual.

Thursday, March 16, 2017

Michael Ellman on the Dutch Elections

The Dutch elections of 15 March have been widely interpreted as a “resounding defeat” for populism. This is very hard to reconcile with the government coalition losing 37 (8 out of 41 Rutte’s VVD, in spite of having moved towards Wilders’ agenda – “Be normal or Begone” - and 29 out of 38 Labour Party PvdA) i.e. almost half of its former 79 seats. Rutte will need new allies to form a government. Geert Wilders’ Party instead gained 5 seats and rose by one third to become the second party of the Netherlands. "Everyone is entitled to his own opinion, but not to his own facts" (Daniel Patrick Moynihan). So I asked Professor Michael J. Ellman, of Amsterdam University, for his assessment of the results. Here is his reply, which I found particularly enlightening, and which I have his permission to reproduce as a Guest Post on this Blog, with many thanks.

From Michael Ellman (16 March 2017):

It seems to me as follows, subject to the fact that currently we only have preliminary results and the final results may differ somewhat.

(1) The turnout rose significantly. This indicates that in addition to the people who normally vote, there were some additional people who strongly wanted to express their disapproval of the policies of the ruling coalition and others who strongly wanted to express their fears about Wilders.

(2) The coalition which has ruled since the last elections (in 2012) has done badly. They have gone down from a majority (79 in a 150 seat Parliament) to a minority of only 42. This indicates that the majority of the population rejects the policies of the last four years (fiscal orthodoxy/austerity).

(3) The main loser is the traditional Social Democratic party, the Labour Party or from its Dutch initials PvdA. This party has played a major role in Dutch politics since 1945 but fared dismally in these elections. I think the main reason is that it was the junior partner in the coalition and went along with fiscal orthodoxy/austerity which hit many of its traditional voters who turned elsewhere to express their dissatisfaction. For many years now it has been a 'New Labour' type of party and not a home for victims of globalisation. This has not pleased many of its traditional voters. It is also a culturally liberal party which also did not go down well with many of its traditional voters.

(4) Prime Minister Rutte can feel pleased with himself. Although the coalition which he led did very badly, his own party did not do too badly, losing only 1/5 of its voters and becoming by far the biggest party (at the last election it was only just ahead of the Social Democratic party). In addition, many of the votes he lost went to the Christian Democrats who are ideologically close to his party. Furthermore, Rutte's party did substantially better than the party of Wilders. As a result, Rutte's party will play a dominant part in the negotiations to form a new coalition.

(5) The mainstream parties won 2/3 (102) of the seats. This indicates that Dutch politics and society are quite stable. The coalition negotiations may well take some time (this is quite normal) but the resulting government will be a mainstream one.

(6) The election was largely fought on cultural/identity issues. Traditional economic issues played a lesser role. Dutch national identity, the role in the Netherlands of ethnic minorities, migration, and the role of the Netherlands in the EU were the main topics. (Of course migration also has an economic aspect.) The resulting Government will be very sceptical about plans to increase EU integration or expand its membership (in 2 referenda in the past, on the proposed EU constitution and on the Ukrainian trade agreement, majorities rejected the EU-preferred policy.) This means, inter alia, that the Netherlands will be hostile to plans for an EMU bank union or a transfer union. One of the 6 founder members of the EU is now opposed to deeper integration.

(7) In order to win and beat Wilders, Rutte took over some of his main themes. The need for immigrants and their descendants, if they want to be welcome, to assimilate, abandon some of their customs and accept Dutch ones, was strongly emphasised by Rutte. Also the stand he took against Turkish ministers holding open-air election rallies in the Netherlands was popular and probably won him votes.

(8) Although Wilders can be pleased that some of his themes have entered the mainstream and are repeated by the Prime Minister, he must be dissatisfied with the result. It is true that his number of seats has increased by a third. However, whereas at one time it was thought that his party might emerge as the largest one, it remains a long way (20 to 33) behind Rutte's party. Hence Wilders has not the slightest chance of entering the Government and becoming a minister.

(9) The other populist party (which gets less publicity outside the Netherlands) is the Socialist Party. This is a traditional leftist party in favour of more public expenditures, higher wages, lower rents, higher taxes on the rich and on companies etc. It seems that it will fall from 15 seats to 14.

(10) The result of the relatively poor showing of the 2 anti-system parties is that politics as normal, subject to a cultural/nationalist shift to the right, has won. For 'Brussels' that might be reassuring, but the lack of support for further EU integration and expansion, and the general acceptance of a more nationalist stance will not seem so positive.

(11) What policies the new coalition will agree on is highly uncertain at the moment (in the Netherlands the parties forming a coalition have to agree on policies, set out in a detailed written Coalition Agreement, before the new Government is formed and takes office - in the meantime the old ministers remain in office but are expected not to take any radical measures). To what extent the popular rejection of austerity and concern for national identity will influence future policy remains to be seen.