There are three contrasting articles on the recovery in the Guardian this morning. The first is from Michael Meacher MP, who starts his article saying:
So, according to George Osborne, austerity is paying off and the economy is on the mend. If only. Britain's GDP is still 3.5% below its pre-crash level (that represents a £50bn loss of income), while Germany is 2% above theirs, the US 4% and Canada 6%. Stockmarkets, City private equity and bankers' bonuses are certainly on the up, but real average wages of the other 99% have fallen 5.5% since the crash and are expected to slip further until 2018. Joblessness is still stuck at 2.5 millions and youth unemployment still rising at over 19%. The banks remain largely unreformed and still mainly invest in property, overseas speculation, tax avoidance and financial derivatives rather than in UK industry. There has been no manufacturing revival and last year imports of traded goods exceeded exports by £106bn which is simply unsustainable. To cap it all, Osborne's Help to Buy scheme is stoking another massive housing bubble — exactly the wrong way to boost the economy. No lessons learned. Some recovery!
Michael's right (and for those who know we talk to each other, I had nothing to do with Michael's article, although I am in agreement with it).
Then there's an article by Paul Mason, the only economic commentator on the BBC anyone on the left has any real time for. He says:
With last Friday's upward revision to GDP figures, there is clear evidence for a real recovery. It may be the wrong kind of recovery, may be temporary, and may yet again hit buffers external to the UK, but it can still be all of these things and real. The latest Office for National Statistics figures show the economy grew 0.7% from April to June, with growth across all sectors. The trade gap narrowed. Salaries rose faster than in any period since the dotcom boom of 2000, boosted by a slew of bonus payments.
Now, I know he caveated this a little by saying:
Every news story about GDP prompts the claim that journalists are engaged in "propaganda"; that the recovery is either false or illusory, based on an unsustainable credit splurge, or on contingent factors such as PPI compensation. Or that it is confined to south-east England, and unreal everywhere else.
Despite that though he went on to assume that the recovery is real. But he's wrong. It isn't. He knows all the reasons why and yet refuses to recognise them:
But the economy has also refused to behave as the doomiest predicted. People have clung to jobs, even at the cost of tolerating zero-hours contracts, wage cuts, pension raids and unpaid overtime.
Is the fact that people have shown tenacity in the face of a deliberately created onslaught on their living standards a cause for celebration? Nor is this indication of real recovery:
It is true that GDP per head is stagnating. It is also true that if you measure GDP against the retail price index, instead of the government-preferred CPI, it is flat. It's also true that growth is patchy regionally — not just between regions but even within small towns. However, the headline GDP figure is important. If, in the next few quarters, its growth is sustained, the narrative of the government's critics on the left will have to change.
Does Paul Mason really think that we on the left have to celebrate the fact that for most people in this country things are getting worse just because speculation is on the increase again for the benefit of a few? I am staggered if he does, and yet that is still what his article suggests is the case.
That said, Mason's right that we do need a new economic narrative, but not one that starts by conceding the argument. That's always the wrong starting point. Why on earth does the left always want to, metaphorically, play away from home and not even by the rules that it is familiar with? That's what Mason seems to be asking us to do, but Michael Meacher is not. Nor is Jackie Ashley in another Guardian article today, where she says:
And now we have a recovery of sorts. Would it have been stronger with less cutting and more investment? Yes, but it's impossible to prove and by 2015 I wonder how many uncommitted voters will care.
And in that case what is needed is a completely different narrative from the left which recognises what Mason concludes, which is:
The long-term trend of rising output — spectacular between the fall of the Berlin Wall and the fall of Lehman Brothers — cannot return. The recovery path will be less vigorous because pure credit expansion, on the scale of the 90s and 00s, can't be repeated. And [many] places that means even the recovery phase will probably look bleak.
Precisely. Which is why the left should be saying what Michael Meacher is saying and should not chose to engage in a right wing argument as Mason seems to suggest despite the facts that he acknowledges, which can only imply he thinks we can only engage in debate on the right's terms.
I think Mason's wrong and Ashley and Meacher are right but let's be blunt about what this means. The left has to be tribal. It has to say that for the vast majority of people - most of the young, the old, the unemployed, those outside the south east, the disabled, the sick, those not on the property ladder, and many more - this 'recovery' is meaningless. Whatever the data they are suffering inflation that is cutting their real living standards (when wage inflation, which is what we need, would increase them) and they have under this government no way out of this dilemma because as Mason notes:
Under Mervyn King, the combination of quantitative easing with consistently above-target inflation looked like a mild version of financial repression. There is a growing appetite among policymakers for a more overt version — using loose money for longer than necessary so as to prolong the process of "structural reform" — ie shrinking the welfare system and the power of organised labour. IMF boss Christine Lagarde spelled this out at her speech in Jackson Hole on Friday.
So tribalism is on the right's agenda. It should be on the left's too in that case. As Ashley puts it:
So Labour needs a new story. It's emphasis should be, as Ed Miliband has already realised, on living standards. A recovery for the rich alone is not a real recovery, and one based on private borrowing and almost zero interest rates is downright dangerous.
Most people are still desperately worried about where their children will find jobs and homes, and how they will fund their own old age. Sharpen the attack; find the words.
And as she again says, there are good reasons for that:
Above all, the party that wins in 2015 will be the one that shows itself capable of recognising the huge challenges we face: potential war in the Middle East, a likely meltdown of more European economies, an ageing population at home with ever-increasing care needs and not enough money to pay for them. Labour strategists insist that the long-term thinking is taking place on all of these issues.
I agree. It sounds remarkably like my call for a politics that delivers Freedom From Fear - which only a Courageous State can do.
Mason's argument shows no such courage. Meacher and Ashley do. Labour needs to do so as well.
The question remains though whether it will.
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I was watching ‘Edge of Darkness’ again the other day and thought that we could do with more Michael Meachers talking passionately in a sweaty rooms full of students as he did in Edge. Anything similar now seems staged and unreal, like an Arsenal FC AGM, as politicians become evermore detached from real life.
Bit late for that, you ignore the facts that Labour has been arguing :-
1) That the GDP growth figures are important and falling / stagnating because of Tory policies.
2) Future GDP growth is important to help reduce the deficit and provide jobs.
3) That a “One Nation” policy means keeping the City and the SE onside.
IF you move forward with your tribal idea that growth is not important and you should talk about other things it will make the Labour policies of the last few years and Ed Balls look stupid……worse it will look like a losers sulk causing you to go and play a different game!
If you state for three years that growth is important it is a bit difficult to then whine that it is the wrong kind of growth when it returns!…..Especially as the Labour boom years were also built on the same housing / city rise….
You forget the fickleness of people
Just as Osborne hopes people will forget the disaster of his policies
This is priceless. Michael Meacher has a breathtaking brass neck to criticise banks for investing in property and Osborne for a new housing bubble, the City for overdominance and industry for being shrivelled.
This is the man who has a several million pound rented property portfolio in London. What benefit are those investments of his to the manufacturing revival he is bleating about? Does he not think he has made his own substantial contribution to the housing bubble?
The Meachers of this world need to be roundly ignored.
I have checked your claim
http://www.publications.parliament.uk/pa/cm/cmregmem/130729/meacher_michael.htm
He has four rental properties
Does that disqualify him from commenting on any issue?
Usually I think you bring sound judgement to this site but candidly on this occasion your comment is crass. Sure he has some rental property – paid for out of earnings no doubt – which seem to only arise from parliament. Is it really surprising a man of come age has such savings? If he’d invested in equities – almost none of which give rise to real investment – would it be better, and why?
I am sorry – but if you show such small mindedness you really do belittle yourself
Don’t suppose this will make it through moderation but:
Your tweet agreeing with Alex Andreou on the issue of Jamie Oliver not having experienced ‘real poverty’ thus should shut up is exactly what you are defending M Meacher about, is it not? i.e. Meacher can comment about housing, despite owning 4 properties, but Oliver cannot comment on poverty because he isn’t poor.
Because Jamie Oliver is talking condescending crap about poverty and Michael Meacher was talking reasoned sense about what is needed for the economy
I’m sorry Richard, even though I agree with much of what Meacher says about the City, I’m utterly shocked that, yet again, we discover the ‘housing portfolio’ behind the ‘arras.’ To use second third and fourth homes as an investment whilst criticising housing bubbles as you line your wallet from them – yet again, I’m sickened and profoundly disappointed – utter lack of integrity as usual and I find your rather desperate defence of him smacking of mild cronyism.
Simon
That is clearly your choice.
You will actually find I have never criticised buy to let, per se. I have criticised speculation in housing and the tax reliefs that encourage it, but that is something very different. I have not criticised the private rental market because I think it has a real role to play in the economy. To use a simple example, I am not sure how many students would be housed without it, or young single people who house share as I did, like so many others, when starting my career.
What you are not differentiating is criticism of specific behaviour from structural issues. To draw another example, I do not criticise small business; I do criticise small business that tax evades.
So I do not think this cronyism. But you are entitled to think otherwise.
Richard
Richard, if you have a housing portfolio which you expect to profit from and uses as a ‘hedge’ then you are clearly benefiting from bubbles and contributing to them, especially owning property in London (gone up 8% in last year!).
I don’t think the analogy with small business works as small business can contribute massively to our communities (when not hammered by rents) whereas the housing portfolio is entirely ‘rentier’ income. The argument that it provides accommodation is dodgy because it will provide it at excessive rents due to successive bubbles -this will certainly be ripping off students whose lives are blighted with debt already!
I respect you work, many of your values and integrity, Richard but i am surprised at your defence of Meacher on this one. meacher would have benefited massively from the last bubble under Labour and will be raking in a sizeable income from this while our communities wealth is drained.
Sorry to sound so vociferous on this but as someone in Housing Association and hit by bedroom Tax and now feeling insecure about my future in the house I live in , I feel I am one of those paying the bill for this!
Simon
I repeat – if Meacher was speculating i.e. churning a portfolio – then I would condemn it. Actually I have no more idea than you what he does.
All I am saying is that I do not think there is something wrong per se with long term investment in housing – indeed, I have proposed it as a basis for pension fund investment for a decade or more.
I think you are confusing the two and that is a fundamental mistake
Richard
Richard-If you can explain to me how Meachers’ activity is a genuine investment in Housing then I’ll rethink what I have said. He’ll get a decent pension as an M.P. and a salary that is about three times the average so he didn’t need to become a ‘rentier’. Of course, it might be that the properties he owns are run on principles that keep the rents low, I might well write to him to find out but prime facie, it doesn’t sound good.
I’ve said all I can – I know no more than you about how he manages these properties
I would posit that the fickleness of mob rule is no way to run an economy.
I have to admit I don’t see the logic of that?
Who’s talking about mob rule? I’m not! I’m saying the left has to be clear that it represents an interest group. Is there anything wrong with that?
Some questions if I may please to you Richard, and your other commenters.
What does ‘winning’ the economic debate look like?
Who do we need to convince? The voters? The politicians? Someone else?
And how do we do the convincing? Is it an intellectual argument or an emotional argument?
My view:
The politicians will only change their tune if the voters change their attitude. So we need to convince the voters. In a world saturated by celebrity, X factor etc., this is a big challenge.
And the challenge lies first in the heart rather than the mind.
And to change their minds, people need firstly hardship. This is why, like you, I am disappointed with the growth figures. We need a catastrophe, with suffering, in order for hearts to change for us on the left to take power.
Second, for us on the left to take power, we need to sow division between the people. Historically, there is nothing like stirring up some old fashioned religious hatred or class resentments to get people off their backsides, taking action. Otherwise, people get too comfortable with their lives.
Winning looks like rising real wages
It looks like closing the tax gap
It looks like improved public services
It means a truly national NHS
It means better pensions and old age care
And investment in better infrastructure, technology, training and capacity to make for the future
And yes that means winning people’s hearts and minds to think that this – which they clearly want – is deliverable – which they are told it is not
There already is an opening tax gap – between those that refuse to work and those that are locked out of the benefit system through modest assets. Until Labour can explain to people like me that the gains from extra taxation on the richest will filter down to people like myself doing the right thing I’ll stay with the coalition that didn’t put a `worker’s tax` on people like myself – ie 9k during Labour’s tenure on power.
What are you talking about?
I haven’t a clue
This debate is becoming tedious. The important issues are not about individual commentators,but about the expression of views that transcend the myopic views of our modern juvenile representatives.We desperately need a discussion which engages with the future of our democracy and engages with the values of an inclusive society not just with particular interest groups.The intolerance towards free speech is currently the most obvious manifestation of the political malaise endemic in our society
mark- I agree that partisan politics should be over! It is no longer right/left but crony capitalism/plutocracy against democracy and genuinely free markets that people can influence by free choice.
“Because Jamie Oliver is talking condescending crap about poverty and Michael Meacher was talking reasoned sense about what is needed for the economy”
Well that is honest at least……….if you agree with what someone says then he gets a pass for all his wealth (especially BTL wealth which you normally loath) but if you disagree then he should not be allowed to speak because of his wealth privilege!
Were you not just defending the human right of free speech and democracy on this blog just a few days ago?…….Seems only if you like what they say!
Perhaps this blog does need a bit more transparency and regulation…..
I am not for one minute criticising Jamie Oliver’s right to free speech. He has an absolute right to say what he wishes. I have the absolute right to say it is complete rubbish, as it was.
If you cannot see the difference you have a very big problem.
Richard, I take the point that my argument and yours are different. However I just want to clarify what I am saying. I think there are people on the left who are going to be very disoriented if growth is sustained and will try to bridge the gap with denial. There are loads of people who keep telling me growth cannot be real – yet what I am trying to to say is that it can both be real, and not felt by large numbers of people.
On the deficit, here’s what I think: Labour was right to stimulate the economy in 2009-10. Darling’s deficit reduction plan would probably have worked, but even he withdrew crucial investment spending to keep current spending from harsher cuts (in the plan). However a combination of austerity and Europe have caused a double dip – incidentally I predicted the double dip and still think effectively it has happened. In addition we are finding out the economy lost a lot more capacity during the slump phase.
However I have always thought the OBR wrong on the output gap. It was a highly convenient fact for the Coalition to then hike its austerity plan. If the OBR is wrong on the output gap, the economy should be growing if credit is finally getting pumped through, both from housing and FFL and from QE.
I think the left has a total blind spot on monetary policy. A sophisticated monetary policy can do a lot of things fiscal stimulus can’t. You can tank your own currency, inflate the debt away and even, as we’ve seen, pocket the interest off QE money into the Treasury. You could go further, doing helicopter money – ie with the people’s QE.
I don’t see the need for a Labour meaculpa on the deficit: it is the failure to regulate the finance system, and their slow, half-hearted anti-crisis measures – compared eg to the TARP – that they need to be self-critical about. Going forward, much as attacking the tax avoidance/evasion gap is a huge opportunity, there is also the opportunity to play a nationally defensive monetary policy – and to seize on upwardly revised growth projections to cancel adherence to the Coalition’s deficit reduction plans.
Cheers
P
Paul – why is credit for private housing growth? It inflates house prices and is a form of inflation in one area and debt deflation in another leading to less money circulating. it’s an hallucinogen in other words!
Growth does not record that credit
It does record the consequences of it in the rest of the economy
There seems to be a bit of wandering off from the main points.
No problem with the Left asserting it own case. But in its purest form I think it will never get elected in the UK. I don’t like to label myself, like many people I am a mixture.I can be persuaded by good argument, and dogma turns me off. I suspect this is true of many people. I think consensus can be reached for example on certain
economic reforms. What the right just love is a dogmatic Left, it is so, so, easy to demonise and marginalise it. From experience I have found that people on the Left are not natural Managers and Leaders. The Left needs people from other persuasions,
it can’t progress on its own.
To quote AL Kennedy from today’s Guardian and at the risk of offending homeopaths and their adherents:
“Many politicians are now the political and intellectual equivalent of homeopathic remedies — they do us no good, and may even keep us from the help we need. I believe this is not a good thing.”
What’s needed is the equivalent of what good doctors always, in my not inconsiderable personal experience, provide, the facts, whatever they are, and a plan for dealing with those facts.
Perhaps the 50th anniversary of Martin Luther King is a timely reminder not to give up on worthwhile dream, but to share it and be steadfast and unwavering in pursuit of making it a reality.
http://www.youtube.com/watch?v=smEqnnklfYs
Agreed!