There's a very bizarre article in the Guardian from John Harris this morning, looking very like something that's been fed to him from the Labour policy review. If it is, it's very worrying.
First there's a ritual slagging off of those wh argue that spending is the way out of recession:
From the centre of Labour's ideological continuum leftwards, there is currently an apparent belief that the party can somehow capture power in two years' time, roll back the worst of the coalition's cuts, dig out some old A-level notes about Keynesian demand management — and spend, spend, spend.
That's not just patronising. It's just wrong. Maybe John Harris thinks he knows more about economics than Krugman, Blanchflower, Chang, Stiglitz, et al, but I strongly suspect he does not. The reality is that there is now only one way out of recession, and that is to spend more. Being rude about those who say so is not just bizarre, it's misplaced when he goes on to say:
The party will need a clear-cut, demand-driven growth plan, based on a housebuilding blitz in particular.
That's precisely what those he's just criticised are saying.
But in between the two comments he then pays homage to the confidence fairy:
Even if you managed to do [the spending], reality would then bite, agonisingly, and the fiscal predicament of the next UK government will be grim beyond words.
John Harris should note there is no confidence fairy: that's why borrowing rates for government are so incredibly low despite record borrowing. And that won't be changing any time soon.
But apparently, and despite this, Labour wants to offer a sacrifice at the confidence fairy's altar:
If Labour is to win the next election, it will have to commit to a set of iron, independently enforced fiscal commitments, perhaps to be met over a 10-year cycle, focused not just on the elimination of the deficit, but the ratio of public debt to national income — many of the consequences of which, to quote one Labour insider, could be "brutal".
This is so absurd it is incredible. First, there is no need to eliminate a deficit. That's wholly unnecessary. It's perfectly acceptable to run a deficit - and to not one at the rate of inflation actually denies the market the gilts it needs to underpin products like pensions. Second, this implies Labour will act pro-cyclically i.e. it will spend less when there is recession and more when there is boom - so guaranteeing bust or boom. Has Labour learned nothing? And third, hasn't Labour realised the whole crisis in Europe is because of artificially imposed rules that do not recognise economic reality? That is why countries are in crisis, the young are seeing their chance of employment disappearing in many countries and we now face a lost generation? Do they really want to go down the same path of creating a noose to hang themselves and the economy with? Finally - note the anti-democratic 'independent' bit which is, of course, a sop to 'those wise bankers know best, you know', which is the culture that still prevails in far too much of Labour as well as being coce for "There is no alternative' (how Thatcher would laugh).
After that the article just sinks into the sort of thing I expect to read from Policy Exchange.
If this is where Labour (and it implies, Compass) are going then we're in very, very deep trouble and the case for a new party on the left is being made as I write because as it stands if John Harris has got the message right then we have every reason to despair at the incoherence and plain neoliberal absurdness of its thinking.
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This comment may rank among the barmier ones you have had but is of comparative interest in terms of economic history. On Youtube is a clip of Gracie Fields from the film “Shipyard Sally” singing “Wish Me Luck As You Wave Me Goodbye” but first a scene of Clydebank workers and their need for work and ships to be built. It seems we have been here before. Gracie, in later life, was one of our more admired tax evaders.
Indeed
Functional. Finance.
What is the estimated size of the output gap. Given that what do we need to deploy to close that gap taking into account the fiscal multipliers *and* the implied additional savings distributions of the policies available.
We’ve got to break free of neo-liberal framing. It’s like a tractor beam dragging us into the abyss.
I say tax gap is £95bn
HMRC say £32 bn
EU agrees with me
I have prepared the EU’s estimate
Staying with Star Trek references, the needs of the many must outweigh the greed of the few 🙂
Whilst I agree that the article is economically ludicrous, I don’t see that this should lead to a “new Party of the Left”.
That way leads to electoral defeat – First Past the Post will guarantee such a result – and the continued destruction of innocent lives and the underperformance of the UK economy through adherence to failed neo-liberal ideology.
As depressing as the thought of it is, the fight against this self-flagellating absurdity will be long and must take place within the Labour Party itself.
You may be right
But when Compass capitulate – and they are I now learn – to this sort of logic we’re in trouble
COMPASS, you say? Good grief, if even they have capitulated …. I think I may consider cancelling my membership, as I’m not happy supporting what is effectively intellectual Fifth Columnism. There has NEVER been a greater need to confront, and destroy, neo-liberalism as a force – which should be easy, given that it has imploded intellectually. But with COMPASS going over? Well, what hope is there? Depressing
I have lobbied Neal Lawson this morning….I do no yet know to what effect
But we have corresponded
If Compass have signed up to this I am cancelling my membership. They are all drinking the kool aid. Harris is normally quite sensible. Cruddas must really believe this stuff and also be very persuasive to get Harris on board.
I await to hear your verdict on Lawson, Richard, as to whether I too will cancel my Compass membership – not that I ever saw Compass as representing my views. And I will let Neal know why as well.
I m waiting for him to respond
What we need is the anti-neoliberal party, as I’ve been saying for quite some time now. When it forms it will have members from the existing Tory party as well as many formerly from Labour.
Agreed and agreed, as I’ve said this myself elsewhere on this blog. It can’t come too soon. But who is going to stand up and create it?
The Green Party seems to fulfill that request. If the BBC fulfilled its supposed function – ie to give some parity to the various parties, then perhaps there would be some possibility of a more significant break through.Instead true to its right wing neo con top brass it spends all its time giving air time to Nigel Farrage and Nigel Lawson. New appointments give absolutely no hope that the new Director General will change tack – in fact looks even worse.
It may split the vote, and yes, this could be damaging, but how else do the electorate know there is an alternative to banker-supporting misguided austerity?
A new -or perhaps a beefed up Greens – party, doing what UKIP has done for the right; putting an agenda that is important to them into focus. Give a media focus to relevant issues. Helps people remember the hurt that austerity is causing, every single day. That there is an alternative economic option, that isn’t fantasy, but evidence based.
Without a new left-wing party, the debate is between lots of cuts or lots more cuts. And as an electorate, we do not have an alternative.
“Left” and “right” labels may be the cause of the political difficulty. Pro and con neo-liberalism is the focussed issue whose time has come.
“Pro and con neo-liberalism is the focussed issue whose time has come.” Exactly. Sadly this seemingly has yet to occur to the mainstream press 🙂
‘Splitting’ might risk electoral defeat due to FPTP but what if the left are already split and effectively politically defeated within the party? What’s the point of having another New Labour government in 2015 that’s just marginally less fanatically austerian than the Tories? Sure, it might be a marginal improvement but that just isn’t good enough.
UKIP are testament to the ability of smaller parties to take relatively small margins off of bigger parties at elections (small in terms of seats won at least) and extract policy changes as a result. Witness right-wing Tories, and more or less the entirety of the press, hyping *up* the UKIP surge (overhyping it, I’d say) in order to push their own party further right.
If the only thing these reactionary cowards in the Labour party understand is poll numbers then that’s where they need to be hit – and from the left rather than the right. They think that the left will be there for them regardless so they only need to appeal to the ‘centre.’ But the ‘centre’ is a mythical creature that only exists in polling because polling is reactive, retrospective, observational – thus politics in thrall to polling can never be progressive. It can never inject new ideas, new criticism, new impetus. Poll-based politics can never *lead*.
Every idea gets focus-grouped to death with every tired press release aimed at an electoral lowest common denominator that doesn’t really exist. Basing their politics on their polls they can only ever tell people what the people *think* they want to hear – and what people think they want to hear is limited to the narrow range of *existing* narratives.
We, these same people, need new narratives. And the creation of new narratives *is* political leadership. The only real question is how Labour can be pushed into leading instead of wetly plodding along behind their hired pollstercrats; how they can be pushed into taking the risk of actually saying something *new*.
And by ‘new’ of course I don’t mean new in history, new ‘under the sun’ – I mean new to public discourse at the highest level. The required ideas – that tax justice can fund socially progressive policies, that counter-cyclical spending is the correct response to recessions, that openness, transparency and proper regulation make markets *more* efficient, etc. – these ideas are well known and, in some cases, decades old. But they are absent from public discourse in the widest sense. Absent because Labour lives in fear of being branded ‘red’ and refuses to be big enough to *put* these ideas there and argue vociferously for their value. Because it refuses to take risks. Because it refuses to trust the public’s ability to understand good ideas. Because it refuses to lead.
In short, the fact that UKIP are taking chunks out of the Tories from the right means that it’s precisely the right time to at least threaten to take chunks out of Labour from the left. I see little other hope of Labour being compelled to do the right thing.
I agree Philip. Unfortunately there is no party to do this. Most people who could form a party and have the expertise are campaign groups – we have to ask -why is this ‘party’ not happening?
Simon,
Very simple.
Money.
The most charitable explanation of the Labour party I can think of is that they’re keeping their rhetorical and political powder dry for closer to the election. If that’s the case then they’re in dereliction of their duty as the Opposition. However, even that explanation seems increasingly unlikely to me.
To be honest I’ve been not just hoping but really expecting Labour to take a more populist, centre-left stance for a while now. Every condition seems primed for that – but then it has been this way for several years. And if they haven’t taken that step yet … Will they ever pull their heads out of their backsides?
I disagree – the Greens will make further breakthroughs at the next General Election – not enough to be a ‘new party of the left’, for sure, but enough to show Labour that there is plenty of support out there for confident, progressive policy.
The Japanese government has started an ambitious fiscal expansion, on top of one of the largest national debts in any advanced country. As a result the interest rate on their ten-year bonds has exploded to … oh … 0.6%.
Labour must enter the next election with a coherent recovery programme. Not some limp lets-cut-VAT-for-a-few-months garbage – something that will use corporate and public reserves to bring forward programmes to renovate our roads and homes, and fund jobs and technical education of our young people.
However, their currency has collapsed buy 30% and continues to do so. That means the 60% of food that is imported is now 30% more, the almost 100% of energy costs imported are now 30% more. Can you imagine wht this is doing to the evryday cost of living for people whose salaries aren’t rising. Is that what you want for the poor in the UK, being pushed further into poverty?
Japan’s programme may jump satrt the economy, but it won’t be without its costs to people and those won’t be borne by the rich who have seen their equity holding double!
Could you explain why unemployment in Japan is about half of ours?
“However, their currency has collapsed buy 30% and continues to do so.”
That would allude to rising inflation, yet despite its best efforts, the Japanese haven’t been able, vertainly in the recent past, to get inflation going!
By the way, what do you think is happening to our currency due to QE? That is one of its main goals, to push down sterling and get ahead in the exports race.
I do not think that is its aim – its aim is to create liquidity and bank solvency and de facto cancel government debt
It is certainly reducing government debt despite the fact that the government pretends it isn’t.
However, there is evidence to suggest that, as in the US too, this is also an exercise to push down sterling and make our exports cheaper. The danger with this is it risks totally crashing our currency in the process.
I am all for QE if it was directed where it should be. Imagine more than £375 billion of much needed money unleashed into the real economy.
The way QE is being used at the moment, and I strongly suspect deliberately, is to solely benefit the rich.
Bankers, definitely
The stock market too
And it should be in a Green New Deal
I think there is some research by Richard Werner that shows that QE does not encourage bank lending to SME’s and thus gives nothing to the real economy.
I understand from what Professor Werner’s said to have said that this isn’t actually QE, it’s actually reserve expansion for the banks, something quite different. I don’t know why we’re all calling it QE.
My knowledge is pretty limited here as I’m involved in an autodidactic project – I’m just going off page 83 (foot-note) of’Where Does Money Come From’ co-authored by Werner.
Frankly, Labour will not win the next election with this kind of agenda. People must be offered hope that there is another way out of the unholy mess the British economy and for that matter the EU economy is in. Labour’s policy wonks, eg Cruddas, and after seeing him at the Fabian Conference last year my opinion of his ability leaves much to be desired, need to get out into the real world and speak to some economic regeneration practitioners (people who have actually delivered on policy not those who just talk about it). There is far too much of this nonsense in the Labour Party and I expect in other parties. If the left focuses emphatically on the ‘problems’ of immigration I will be extremely displeased. This constant drift towards fascism is extremely worrying and Labour, especially Miliband the son of a Jewish migrant, should make it clear that such comments from UKIP as ‘migrants with unpleasant diseases’ (Farage on TV recently) are totally unacceptable.
This first past the post business… if a new party forms as I suggest I can’t see that it will face the problems traditionally associated with new parties. It’s going to be made up of familiar faces from both sides of the political spectrum and don’t forget, a vote for the anti-neoliberals will also be a vote lost from the Tories and from Labour. I was just reading over on the CAG forums that people will try desperate things in desperate times. The reference was that people are trying to do away with debt using (they say) bizarre Freemen on the Land remedies. The situation, so tragically illustrated over the weekend by the bedroom tax suicide, is for many people growing increasingly desperate. If a whole slew of known political figures split away from the main parties into a brand new one and claimed they had the key to ending austerity, which we here know is a sham anyway, then I believe desperate people would give them a try. In the ridiculous situation when you have all three main parties spouting the Thatcherite TINA mantra I reckon people would jump on any alternative which presented even a shred of credibility. But, as I’ve also said before, it could be that there won’t be any election, just an amalgamation of the neoliberals from all parties and a declaration that elections were from now on unnecessary as we had the best of all possible worlds, or else Labour will storm in and carry on dismantling the country as the Coalition are now which would kind of amount to the same thing. In which case the anti-neoliberal party will no doubt manifest ready for the next one. Meanwhile, get comfy and have the popcorn handy!
I don’t think it is any longer a case of left or right, that terminology needs to go. I think we should be using ‘social justice’ as the ‘flag’. Neo liberalism pretends the economy is like the weather rather than a human construct. i think Labour has to take a real risk and link with greens and like minded independents – even if it means sustaining a crucifixion by the ghastly press. There might well be a groundswell here. Will they do it – of course not which is why so many of us can’t vote for them
But ‘social justice’ is already coded as a ‘leftist’ concept in most people’s minds. It’s always problematic putting new wine in old bottles (as one must struggle against old prejudices) but the problem is that most words in English already have a political coding of this sort. Many people will read ‘social justice’ but hear in their minds ‘leftist social engineering’.
So…
Just drop the “social” & call it justice!?
If Compass are adopting this kind of nonsense then I can no longer be a member. John Harris is usually quite sensible. Cruddas must really believe this stuff and also be very persuasive for Harris to fall for it.
The core problem is one of public understanding. Of course, anyone with a basic understanding of macroeconomics knows that a national economy does not operate like a household, and that a state’s deficit is not the equivalent of an increasing personal overdraft. However, what percentage of the population have a basic understanding of macroeconomics? 5%? The vast majority of people go by intuition. Reality is counter intuitive whereas neoliberalism is an idealogy designed to sound intuitive.
With an election in less than two years, Labour has to try to make a case using the language familiar to the public. Of course, the problem arises from their complete failure to educate the public over the years when they had the opportunity to do so. Perhaps we also need to ask the question – what percentage of the leadership of the Labour Party have a basic understanding of macroeconomics?
John Harris has form…cast back to the last election and his absurd love in with the Lib Dems for a “progressive” future. The Guardian is performing its well established role. Anything but the left.
Eliminate a deficit? How about running a country on a zero deficit? That is, no borowing but relying on tax income for the year only instead?
Happily, even this lot in charge now are not quite insane enough to try that one out. It would show in no uncertain terms how restricting the money to an economy can completely crucify it!
Why the surprise? European Social Democracy has been firmly leaning its career ladder against the wall of neo-liberalism for the past twenty years or more. If the wall is now obviously crumbling, then they will certainly not demolish it, but be the first to assist with fresh brickwork and pointing. How else are they to rise upwardly? No wall, no ladder.
This post from Bill Mitchell is spot on: Neo-liberalism — the antithesis to democracy (http://bilbo.economicoutlook.net/blog/?p=23891)
“South Korea was caught up in the 1997 Asian financial crisis, which exposed weaknesses in its system of industrial development. The 1997-98 crisis began at a time when the world considered the Korean economy and policy settings to be approprite. It has strong real growth, a small surplus, contained low inflation and low public debt. The exchange rate was deemed appropriate.”
A good article, but it seems to have largely ignored evidence that, particularly in Maylasia, that the Asian crisis in the mid-90s was helped in large part by the actions of hedge fund speculators who, using heavily leveraged funds, short sold a huge amount of Asian currencies. This caused other countries to dump these currencies too. I don’t think this was ever conclusively proved, I hasten to add, but there seems to a fair amount of evidence to suggest this is what happened. It is reckoned a mere 6 months previously, all the economic indicators in Maylasia looked absolutely fine. Six months later, its economy was in total disarray! There had been evidence of strange goings on, with certain countries pulling millions of their funds out of the country. Then Maylasian stock market and currency was thrown into disarray, again there is evidence to suggest that speculators were short selling the currency on a massive scale.
Few commentators seem not to acknowledge the power of international finance to totally destabalise a nation in this way.
It is about time they did!
Just to add, those of us wondering how an effective (electoral) opposition and 2015 government is to be organised might like to look into the ‘Coalition of Resistance’, and esp the ‘People’s Assembly’ being held this June. The reason it is interesting is that senior Green Party figures, a handful of dissident Labour MPs, trades unions, personnel from various organisations (e.g. New Economics Foundation), as well as a slew of economists (inc Ha Joon Chang), and cultural figures (Ken Loach, Tariq Ali, Owen Jones, Mark Steele, John Pilger et al) are either leading it or are associated with it. I think what’s happening is people are going to a 3000 strong conference (tickets online), where next steps are to be discussed. There is talk of unions withdrawing their financial support from Labour, and this is indeed a historic moment : as has been said lately, we are in a third world war, that between humans and the climate, which we have to win.
Politics as usual won’t cut it, and surely, with the examples of Italy (role of social media) and others before us, there is an opportunity here to construct something new together, with organised activity in wards and neighbourhoods, T-shirts, posters, stickers, media setup (breakfast show, website, social media, roadshows), and so on. It needs to fill people with hope, belief, confidence, and there is no reason it can’t be uplifting, joyful, fun etc into the bargain. It needs to make our present politics look as extreme and strange as it is, and we need to confidently communicate our vision and understanding (let’s make austerity and those who tout it – whether politicians, headline writers or academic scribblers – irrelevant by our actions).
Labour, the watered down Tories.
Hi there Rosie here from Compass- very happy to chat to anyone about this article and any concerns people have. Thanks rosie (rosie@compassonline.org.uk)
This was circulated among my local Labour Party members a few days ago, although I hadn’t opened it till today after a call from the Chair. Perhaps it had some influence on the Harris piece: http://labourmajority.org.uk/wp-content/uploads/2013/05/Majority-Rules1.pdf.