Some thoughts on the open v closed divide

By BAGEHOT

ONE of the most popular interpretations of modern politics is that it is increasingly defined by the difference between open and closed rather than left and right. Openness means support for both economic openness (immigration and free trade) and cultural openness (gays and other minorities). Closedness means hostility to these things.

The Economist explored this argument in a cover article on July 30th 2016. The case for this way of differentiating has been reinforced by a new think tank that is called, appropriately enough, Global Future. It has commissioned an opinion poll, whose results suggest that the most salient political division is between open-minded and closed-minded voters, and that this division is also a generational one. On the question of whether immigration is a force for good there is a 51 percentage point difference between the 18- to 44-year-olds and the over-45s. On multiculturalism, the EU and overseas aid the difference are 48%, 60% and 53% respectively.

There is clearly a lot of force in the argument. Donald Trump won the American presidency by offering a diet of America First nationalism against Hillary Clinton’s globalism. He recently made good on his promise of protectionism by saying he would raise tariffs on steel and aluminium, making exceptions to friendly countries such as Canada and Mexico. Brexiteers won the 2016 Referendum by offering to “take back control” from the European Union.

But we should be careful about taking the distinction too far. The “drawbridge up” or “drawbridge down” dichotomy looks a bit too self-serving for comfort. The people who make the claim aren’t just engaging in dispassionate analysis. They are players who are engaged in a political battle: “closed” is used as a pejorative description (“closed-minded”) and “open” as a term of praise. There are also far too many difficult facts that do not fit into this pattern.

Take Brexit. Supporters of “openness” regard Brexit as the classic example of the revolt against the open society. But a significant number of Brexit’s leaders supported Brexit precisely because they thought that it represented a chance to advance openness against the closedness of the European Union. The likes of Daniel Hannan and Douglas Carswell are old-fashioned free-marketers who regard the European Union as a protectionist trade block, surrounded by a customs wall and devoted to supporting cossetted industries such as agriculture. They want to see a world of free trade and a small state.

Advocates of openness retort that Mssrs Hannan and Carswell are part of an unrepresentative elite and that what “really” drove large numbers of people to vote to leave was fear of immigration. Yet 17m people voted to leave while, at the height of its popularity, only 4m voted for the UK Independence Party (UKIP), the main anti-immigration party. A poll by Lord Ashcroft of 12,000 Leave voters found that the most common reason that they gave for voting to leave, with 49% mentioning it, was democratic self-government. By their own lights they were voting against the closed elite of the EU in favour of democratic and accountable government.

Or take Italy’s Five Star Movement. Five Star is open in the sense that it is a network rather than a party and that its raison d’être is opposing the closed establishment. But it is also closed in other ways: it is opposed to immigration and sceptical of the European Union’s insistence on open movement.

The great divide
The first problem with all this is that the open-closed divide is very slippery. Few people support entirely open societies: it would be perverse, for example, to allow Ebola victims to cross borders unimpeded. By the same token few people advocate becoming a hermit kingdom on the model of North Korea. Most people think in terms of points on a spectrum rather than in terms of absolutes.

Nor are open and closed necessarily opposites: having a strong border might make people more open, for example, because it might give them a sense that they can manage openness. Historically, most of the world’s great centres of commerce have been walled cities: Constantinople, the cross-roads between the West and the East, and the Islamic and Christian worlds, boasted not just a formidable wall but an outer and inner harbour. Athens, the fountainhead of Western civilisation and the most open society in ancient Greece, had a wall.

The second problem is that different forms of openness do not automatically go together. The same is true of closedness. Jeremy Corbyn, the Labour Party’s leader and a cult figure for thousands of young people, is open when it comes to lifestyles. He recently appointed a transgender person, Munroe Bergdorf, as advisor on LGBT questions, though he was forced to withdraw her name because she had said all sorts of foolish things. He is open about immigration. But he is closed when it comes to economics. He thinks it better that the British public, rather than foreign companies, should own utilities. He does not like the idea of rich people buying houses in London that they do not live in, or of hiding money in the British Channel Islands.

Many Brexiteers are at the opposite end of the spectrum. They are “closed” when it comes to traditional values such as gay marriage. They are hostile to immigration. But they are “open” when it comes to foreign ownership of “British” companies (including water companies).

An international example of the way that open and closed can go together in complicated ways is provided by Singapore. The island state is one of the most open economies in the world when it comes to commerce: the regional headquarters of global companies overlook one of the busiest harbours in the world. But it is much more qualified when it comes to other parts of the “cosmopolitan” formula. A highly meritocratic elite plans the economy by deliberately moving it up the value chain. Democracy is “managed”. The state clamps down on poor habits such as littering.

The third problem is that the young cosmopolitans celebrated in the Global Future report are not quite as cosmopolitan as they appear. Their tolerance often extends only as far as ideas that they broadly agree with: try opposing gay marriage or abortion in a college bar and see how far you get. This is Herbert Marcuse’s “repressive tolerance” given real meaning. The starkest examples of cosmopolitan closed-mindedness is provided by radical students who “no platform” people who have views that they do not share. The most insidious examples come from unspoken prejudice. In America conservative academics routinely point out that they do not mention their political views for fear of not getting a job or a promotion. Conservative students practice rigorous self-censorship.

The fourth problem is that people’s attitudes change over time. Global Future’s report makes much of the fact that the future is open for the simple reason that close-minded old people will die off. “As generations of young people who have grown up comfortable with a diverse, multicultural Britain get older, we can expect to see Open voters becoming the majority in older and older age groups in the future”. This makes the heroic assumption that people preserve the same attitudes as they get older. In fact, young people who have few responsibilities are likely to have tolerant attitudes towards drugs, loud music or general social mayhem than older people who are bringing up children. People who have not bought their first house are likely to be more hostile to the green belt than people who have bought their first house. James Tilley of Oxford University has discovered, on the basis of studying thousands of people over time, that people’s tendency to vote Tory increased by 0.35 percentage points every year.

The biggest problem with the argument, however, is that people’s support for openness and closedness is dependent on their interests and circumstances—they support openness in so far as it advances their economic interests and, with the exception of a few ideologues or idealists, no further. The advocates of the open/closed theory frequently argue that professional people—that is people like them—are more comfortable with globalisation because they are more educated. Education makes them more able to sell themselves on the global market and more able to retrain when the economy changes. The policy implication of this is that we need to invest more in education so that everybody can be as successful at managing globalisation as the elites.

The real reasons
But there are less enlightened reasons why middle-class people are more open to globalisation. The most obvious is that globalisation has gone much further in the manufacturing sector than in the service sector. Manufacturing industries have either been reduced to husks of their former selves, like steel, or completely transformed, like cars. Service-sector jobs have been largely protected—completely so in the case of public-sector jobs. Middle-class people are more “open” than working class people in part because they have not experienced the sharp end of globalisation.

The other reason is that many professions have deliberately rigged the market so that they are protected from global competition. They can support openness in theory because they have succeeded in protecting their own chunks of the economy with moats and drawbridges. In their book, “The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth and Increase Inequality”, Brink Lindsey and Steven Teles demonstrate that many people are successful precisely because they are so good at what the authors call “high-end rent seeking”: constructing elaborate barriers to competition and then recycling some of their super-profits to lobby governments and licensing authorities.

The financial services industry is a case in point. The obvious problem with the industry is that it is happily global when the market is on the up, but then turns to national governments to bail it out when things go south. The problem is actually more extensive than this: the industry invests heavily in supporting an army of lobbyists and in keeping the revolving door turning, with bankers going into government jobs and ex-government employees given jobs in banks.

That is only the beginning. Large numbers of middle-class people, particularly in health-care, education and law, use licenses to restrict competition. Intellectual-property holders have extended the length of copyrights and patents to extract the maximum value. Lawyers have been particularly successful at preserving closed shops. In America they have ruthlessly harried anybody who tries to impinge on their territories. LegalZoom, an internet-based company, faced legal challenges from eight different state-bar associations as it tried to offer cheap legal advice online. In Britain barristers have developed several defences against open competition. They have constructed a system of pupillage that makes it almost impossible to qualify as a barrister unless you have an independent income. They have also prevented solicitors from appearing in court. The result is a classic rigged system: the prizes of a successful career are huge, but you have no chance of getting access to those prizes unless you come from a very narrow range of society.

Universities provide a perfect example of how skin deep openness can often be. They regard themselves as being in the vanguard of openness. In Britain university towns voted overwhelmingly for Remain. In the United States they mostly voted for Hillary Clinton. They pride themselves on their bohemian ethic and support for progressive causes such as greenery and sexual tolerance. But look at their behaviour and you find a more complicated pattern. The most highly prized commodity in academia is tenure—the right to keep your job for life regardless of changing circumstances. That is closedness on stilts.

Universities are in many ways the last of the medieval guilds: you gain membership on the basis of serving a long apprenticeship with a master, and jumping through a succession of academic hoops (a PhD followed by articles in scholarly publications). The offer of membership is primarily made on the basis of academic skills but, given the high demand for tenured positions, is frequently given on the basis of your willingness to adopt the mores of the academic tribe as well, including support for the notion of “openness”. Academia is also rife with rent seeking. A small clique of academic publishers, most notably Elsevier, Springer and Wiley, rake in profits in excess of 35% by engaging in several sorts of rent seeking at once: they get their content for nothing because academics have to publish to get jobs and then sell their copies to university libraries, which have little choice but to buy them, at prices that are rising much faster than inflation. No wonder the number of (often worthless) specialist journals is growing all the time.

Towns where knowledge workers cluster tend to be plagued by strict planning laws which limit access to one of life’s necessities. The best data for this comes from the United States. In 1970-2000 construction costs in Boston and San Francisco rose by 6.6% and 5% respectively but house prices shot up by 127% in Boston and 270% in San Francisco. Edward Glaeser, of Harvard University, calculates that the “regulatory tax”, driven by restrictions on land use, is roughly 50% of the value of a house in Manhattan, San Francisco and San Jose. But it is clearly also true of Oxford and Cambridge where house prices are soaring, and getting planning permission is a nightmare equivalent to getting a PhD thesis.

Many of the supporters of openness thus occupy the best of both worlds: they live in fortified islands when it comes to their jobs and the value of their most important asset, with formal and informal barriers reinforcing each other. But they can also benefit from competition when it comes to employing nannies and cleaners, getting their dry cleaning done or going out to dinner. Attitudes that look virtuous and open-minded from one perspective look opportunistic and self-interested from another.

So things are not always as they seem. People who boast about openness can often indulge in all sorts of closed practices. And people who pledge eternal allegiance to free trade can find their attitudes changing as the logic of globalisation extends from goods to services. I suspect that middle-class support for open economies will change radically in the future as middle-class people find themselves challenged by two forces—clever machines that reduce the supply of cerebral jobs, and clever people from the emerging world who compete for their jobs. Emerging world companies such as Huawei are moving up the value chain and challenging companies such as Ericsson. Rich world companies are exporting jobs to the poorer world. And emerging world universities are turning out more and more people who are educated to Western standards. Middle-class protectionism will be the wave of the future.

Meritocrats"R"Us
My final reason for criticising the open-closed division is that there is a much better way to understand modern politics: that is through the prism of meritocracy, in particular the divide between those who pass exams and those who do not. Passing exams gives you an opportunity to enter a world that is protected from the downside of globalisation. You can get a job with a superstar company that has constructed moats and drawbridges to protect itself from global competition. You can get a position with a middle-class guild that has constructed a wall of licenses. You can get a berth in the upper-end of the state bureaucracy or a tenured job in a university.

Exam passers combine a common ability to manage the downside of globalisation with a common outlook—narcissistic cosmopolitanism—that they pick up at university and that binds them to other members of their tribe. Failing exams casts you down into an unpredictable world where you are much more exposed to global trends such as the shift of manufacturing jobs to cheaper parts of the world. Exam failers are also bound together by a common outlook on the world: anger at the self-satisfied elites who claim to be cosmopolitan as long as their job is protected, and a growing willingness to bring the whole system crashing down.