It is only fair I look at what John McDonnell said in his speech today, having said we do more than a new fiscal rule earlier this morning.
In fairness to John, we did get that. If I can summarise what I read into what was said (and if I ignore some unfortunate references to credit cards and balanced budgets that I would really have rather not seen because of the continuing suggestion that there is some link between the economies of a household and state that is just wrong) then I think there are four messages.
The first is Labour will borrow to invest.
The second is that Labour will balance current spending with revenue in 'normal times'.
The third is that we are not in normal times at present and as a result monetary policy does not work and so there is no choice but use fiscal policy and so run a deficit if the economy is to be kick started again.
Fourth, options one and three are both designed to stimulate growth that will increase tax revenues meaning that in combination they should result in debt as a proportion of GDP reducing not in absolute terms necessarily, but as a proportion of GDP and so in terms of affordability over a rolling five year period.
So the question is whether or not this is credible? Of secondary consequence may be whether it is different from what Labour has said before.
I think it is credible. That though is because, as I explained this morning (and as, entirely coincidentally this morning, Paul Mason does here) the multiplier on government spending is often, and always right now, greater than one. John McDonnell did not say that, but it was wholly implicit in what he says and I really hope he builds on the messaging of that as I suggested today.
I also think it wholly credible to set out different plans for the current situation and for occasions when monetary policy might work. This was welcome: it shows an openness to change that was refreshing and breaks the rigidity of many past rules (and Osborne's Fiscal Charter) that are inevitably liabilities the moment they are announced.
I can then say there is a plan in here, which is what I could not find in Dan Jarvis' speech yesterday.
What, however, then needs to be developed is the idea of industrial policy which John McDonnell is regularly teasing at, but which needs clearer explanation. The assumption that there is government and there is business and that ne'er shall the two overlap has to be shattered, for good. The speech began that. It needs to go further: we live in a mixed economy and that needs to be said loud and clear.
I admit I retain my worry about the 'normal times' current balance for the reason noted earlier today but think they are so far in the future I will not get stressed for now.
Is this plan like what went before then? I suggest it isn't, for three reasons.
First, the goals on growth are clearer.
Second, the implicit economic logic of spending to stimulate growth is clearer and rationally based within a Keynesian framework.
And third there is less reverence for the state / business divide and much more emphasis on partnership. When there is a need state assistance to reorientate from financial services that is vital.
I did not get all I wanted. Why should I have done? But I wanted more than a fiscal rule and that's what I got. I guess I should accept that.
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I think John McD’s approach is an improvement on New Labour or Ed Balls but I think he should be more radical. I’m not convinced we really need fiscal “rules” at all in the sense which John sets out; rule-based fiscal policy seems to me a fundamentally neoliberal concept. I think it’s more important to have a set of end goals – reduced inequality, widening prosperity, saving the environment, interesting and fulfilling work, etc. – and then fiscal policy (and monetary policy) should be designed to maximise the chance of achieving those goals. I haven’t articulated this idea very well here but am working on an article which I hope I’ll be able to publish next week which will set this out better.
Agreed: my point too
Let’s have a strategy
Not a tool
Agreed, Richard and Howard – strategy and vision, underpinned by hope and measured optimism, exactly what was missing from Labour’s offer in 2015.
With that in mind, it really is extraordinary how the occasion of the centenary of Harold Wilson’s birth has summoned up for many of the Labour “moderates” some wonderfully “golden memories” of a “great Socialist” whose methods and achievements “have much to teach the current Labour Party” – surely as actual contributions to those whetting their daggers as they gather round JC – not Julius Caesar this time, but Jeremy Corbyn.
This offering from Tristram Hunt is a fine example of the genre:
http://labourlist.org/2016/03/harold-wilson-at-100-what-labour-can-still-learn-from-the-former-prime-minister/
Of course, what they forget or overlook (and Hunt is too young to remember this, or even to have lived through it) is that for most of his time as PM, certainly till his return in 197474, Harold Wilson was besieged by plots to unseat him – the classic being the WMG (Wilson Must Go) movement in which the oleaginous Brian Walden was a key force post 1967, and, of course, the intemperate opposition of George Brown up to 1968.
These encomiast who now bandy around the word “Socialist”, when they would previously have rinsed out their mouths with soap if they found themselves uttering such a “profanity”, also forget that Harold Wilson was indeed sly, devious, tricky and nimble of foot and hand, but that he DID also act and argue from a deep ethical, and even spiritual, commitment, a lodestone of belief by which he steered.
He it was, after all, who said “The Labour Parry is a moral crusade, or it is nothing”. That, it seems to me, is the reason for the shifting on the tectonic plates of our current paradigm, after 35 years of ” the cowardly state”, and the hollowing out of Party ideologies.
And that is the reason Jeremy Corbyn won, and that both Bernie Sanders and even Donald Trump, are doing so well in the Primaries: people are thirsting for authenticity. That is the thirst and hunger that John McDonnell must satisfy: details and coherence, yes, but emotional and spiritual sustenance and solidity too.
I remember Wilson
He was an obvious politician
But credible and sincere
And so disliked by many in his own party
‘Twas ever thus
@ Andrew the attempts by the Labour right in the PLP to claim Wilson as one of their own are so revisionist it is laughable.
Wilson was detested by the right of the PLP in his time in much the same way as Corbyn is today. He was never forgiven for flirting with the edges of being a Bevanite and for opposing Gaitskill on a number of policies. Indeed the parallels between Wilson in his early days as opposition leader and Crobyn today are fascinating; if only Corbyn had the rhetorical flair of Wilson and his undoubted ability in the dark arts
Corbyn needs a pipe
Wilson used it masterfully to work out how to deflect questions
Gaitskill and Healey are ‘credited’ with pushing Labour into the Neo-Lib camp in the 70’s.
We need to remember (forthcoming book on this by Bill Mitchell and others) that Thatcher ‘ran with the ball’ as Labour had signed up to the monetarist dogma by 1975 with the IMF loan and ‘structural reform.’
Simon
It really is time you stopped quoting Bill Mitchell as if he is the source of all wisdom
He has merits, but not omnipotence
Richard
Richard, I didn’t quote him! Though I admit I’ve been reading a lot of his blog lately so I’m going through a Bill Mitchell ‘phase’ at present which I might need to work through! Sometimes one has to read a lot of someone to finally discover their strengths and weaknesses.
Having said that, the articles on his blog around the theme of the failure of the Left and the history of neo-liberalism are genuinely interesting with an analysis of Labour in the 70’s of particular interest.
Got the message though – I’ll go easy on the quotes from now on so as not to sound too monomaniacal!
I’ve also quoted you on this blog and others as well as publicised your book (with a possible purchase) to my CLP-so I’m still flying the Murphy banner!
I’m not for a moment saying don’t read Bill
But I’d be worried if someone believed I was the only answer
I very very much doubt I am
I didn’t see the speech to get the tone it was given in, but reading the words it was good to see that the economic policy direction now appears much more decisive and determined at last.
I am tired of apologies for the past, they’ve been made and now is time to move on to the future, forcefully and purposely.
The section on Socialism from below was what I particularly wanted to see as a start to replace top down economic thinking, action and ultimately moving financial control and independence back to where it should be.
Why didn’t McDonnell put Osbourne under present and support Cross Rail 2 which Adonis announced the other day? It is no good saying that labour are formulating a plan over the next couple of years because, as the last election shows, the Tories will dictate the narrative.
If you dictate the narrative, you will win the election.
I am not sure what a micro policy would achieve when discussing macro ideas
It would dictate the narrative and that is that the missing piece in labours otherwise excellent policy.
Richard-do you think that McDonell keeps mentioning the ‘balance the books’ stuff as a sop to the ‘bog-roll press’ (pretty much all of ’em)-or is it that the paradigm is still the same?
I hope the former
And actually if you read what he said he is suggesting no such thing
So it must be
Then McDonnell should be honest enough to be absolutely clear what he means, and seek to educate the population, and not to obfuscate and deceive them.
Pretending to want to ‘balance the books’ in order to please the press, whilst – in the detail – secretly planning not to, is being disingenuous and untrustworthy.
I think we would all agree that the entire ‘govt as household’ analogy needs to be discredited, and, as that will be a long, uphill task, this point early in the electoral cycle would be the perfect time to start it.
But he needs to trust the people – they *will* eventually get the message, if it is repeated often, and hard, enough.
But it needs to start now – not indirectly and hesitatingly, but confidently, loud and clear.
For what it’s worth I think his fiscal rectitude stuff is, indeed, McDonnell the salesman snd having listened to the BBC they seem to imply his ideas were not very radical at all.
But if he gets the rectitude message in place first he can be more radical later – although there is, in fact, ample scope for him to break his rules.
Pour encourager les autres I’ve written to the local Blairite Labour MP to say how impressed I was with the speech…
As an aside, it is frightening how the media still devalue the message. (As they almost used to say).
I’m beginning to have some confidence in this analysis.
I only heard what was reported on BBC, but whilst I recognise that much of the public blame Labour for the economic downturn of 2008 and therefore credibility needs to be restored, I do wish McDonnell had said something along the lines of – the public continue to blame Labour for a world wide banking crisis stated in the USA – the way he put it seemed to be accepting that it was Labour’s fault – and as this is what Labour has tended to appear to conceded ever since 2010, why should the public ever trust them again? Surely the false narrative should be rebutted.
I agree
Richard
Send Jihn McDonnell a copy of your recent paper with Ronen Palan “Why the UK’s Fiscal Charter is Doomed to Fail” which has a good analysis of the “Big Lie.” (That it was Labour rather than the US triggered bank crisis that caused the 2008 crash). Clearly the dark arts at work here. the Tory’s seem to believe that if you say something often enough, loudly enough, consistently enough and confidently enough people will believe you eventually even if it is total garbage. Sadly this strategy seems to work with many people
I assure you he has had it
I agree-can’t understand why there is a deafening silence about this – yet another enigma that seems to surround Labour.
And one that it is now widely recognised undermined Miliband from the outset, Simon. Perhaps they (ie. Labour MPs) do actually believe that that stupid jape by Liam Byrne – ‘there’s no money left’ – was true.
Deeply worrying if they do
Agreed Simon. I could see what Newlabour (Blair) was up to from an early satge, as my mum would say ‘little buggers’, but Ed Miliband’s reign of silence was deafening and disappointing. The lack of strong analysis (message) from Labour through Brown’s and Ed’s times prompted many to defect to the Greens in the run up to the last election. Corbyn’s election was a watershed and also attracted some members back from the Greens and especially from the wilderness, however it is clear Labour MPs are divorced from the active membership base. I hope we can build anti-neoliberal alliances or a single anti-neoliberal force. It takes time to shape and convert intellectual ideas into effective political message, McDonnell is just one man with limited resources, unlike the neoliberal empire with ‘The Money’ from rich donor sources and think tanks, press, public/private ‘revolving door leadership’ behind the Tory party (“TOP”, perhaps an apt new title, like the Republican party’s “GOP”). It will take time to build these ideas (Simon’s valued Overton window) and currently led by a small cadre of academics, economists, union leaders and some business voices do. However time is limited Tory party is closing the door on democracy and our freedoms further shacked by global forces (not capitalism any more) through TTP and TTIP, and other secret [open] organizations and deals.
For a one-man operation Richard, you are effective — your ‘multiplier factor’ is >> 1. I read you blog to be informed and thus to challenge the current debate.
On the other hand one has to acknowledge the damage Osborne and Cameron are inflicting on the weakest. This morning’s Telegraph openly celebrates the TOP’s frontal attack. Today its disabled people, of which no [extended] family is unaffected. TOPs still see our less fortunate friends and relatives as “the disabled” etc.
12th March, The Telegraph:- “Benefits payments to the disabled to be cut by more than £1billion – Move could allow Osborne to cut taxes for the middle classes in the Budget.“ http://www.telegraph.co.uk/news/politics/georgeosborne/12191676/George-Osborne-clears-path-for-tax-cuts-in-Budget-with-1bn-benefits-raid.html
Tony-B, you make a vital point when you say “However time is limited Tory party is closing the door on democracy” and then list some of the most recent additions to the list of cruel and vindictive cuts.
There isn’t much time-and yest we are faced with a situation in the Labour Party that could take some years to transform – a truly appalling prospect. Punishing the poorest and most vulnerable to inject a ‘feel-good’ factor into the middle-class is a ploy that they know will ‘work’ (in their terms) and creates further social division as a deliberate policy tool.
“I do wish McDonnell had said something along the lines of — the public continue to blame Labour for a world wide banking crisis stated in the USA”
But, of course, Labour was to blame for the impact of the crisis in the UK – and, through London’s global banking influence, for helping transfer the crisis from the American market to being a worldwide crisis. By the time the full crisis erupted, Labour had been in office for 11 years. Brown and Blair had totally aligned the UK with the Clinton and Bush administrations on macroeconomic policy and banking regulation.
Brown’s famous ‘abolished boom and bust’ claim was a reflection of how much he bought into the theories underpinning the subprime mortgage explosion and the collateralised debt obligation scam.
This was a crisis manufactured in Washington and London. The reluctance of the Labour Party to admit this helps London’s casino bankers hide their contribution to the mess. It also takes the pressure off the Tories to protect taxpayers money from the next banking crisis.
The fact that Alistair Darling (Baron Darling of Roulanish as he now is) has joined Morgan Stanley is beyond parody. Just another New Labour taxi waiting for corporations to hire his contact list and a mouthpiece in the world’s fastest growing legislative chamber.
Labour has admitted this
Maybe too much
But only maybe
Darling is beyond disgusting-that last time I heard the vacuous mannequin interviewed he was pushing his book and bleating about the banks being in ‘better shape.’
You couldn’t make this garbage up if you sweated blood trying! Brown bought the crap as did Bernanke with his ‘great moderation’ paralleling president Hoover’s prophecy of incessant boom just before the crash in ’29:
” We in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poor-house is vanishing from among us. We have not yet reached the goal, but given a change to go forward with the policies of the last eight years, and we shall soon with he help of God be in sight of the day when poverty will be banished from this nation. There is no guarantee against poverty equal to a job for every man. That is the primary purpose of the economic policies we advocate:”
Nietzsche’s ‘Eternal recurrence of the same!’ At least the bastards don’t bring God into it these days.
Labour should have defended their record a lot better in the money they spent on Housing that was well below standard, when they spent 2 billion in shape up as many houses were not fit for purpose, with Hospital and Schools also falling apart and out of date facilities. Yes they made mistakes with PFI’s so where was the governments accountants to advise this was not a good idea. We need to also understand that we are paying more now with all our silverware sold of under a Conservative government over many years, because their ideological beliefs that public can’t run their own businesses etc ?
I watched Channel 4 News last night about the speech with gritted teeth.
Even Matt Frei was repeating misinformation and bad facts as well as their capable Political correspondent. Frei just wanted to bang on about a possible coup against Corbyn.
They had the usual rent a gob Tory pretty boy in to talk about ‘balanced budgets’.
I have to say that I was very dis-heartened by it all. It is like being stuck in an intellectual vacuum.
Labour has a lot to do and need to get cracking. But that is if they get a fair hearing from the media.
The prognosis is not good. Without the media doing its bit for democracy, it can only lead in the end to confrontation from people who frankly have got frustrated and have had enough.
What with the filibuster on the NHS yesterday, we are in a very bad situation indeed.
I noticed that too
The misinformation on what was said was massive
Glad I don’t watch the standard media outlets anymore-the despair would finish me off.
Psr, for the sake of your mental health I’d advise watching RT and Afshin Ritansi’s ‘Going Underground’ for a better analysis of what’s going on in Britain. The mainstream (even C4) is finished and simply feeding the monster myth machine.
Personally, I distrust any UK politician or journalist who has worked or studied in the US.
Something seems to happen to them there….
I don’t understand McDonnell’s strategy and it does seem very reminiscent of what Ed Balls tried to do.
Surely it is much more coherent to argue for a better understanding of borrowing and deficits in order to secure an a more nuanced economic understanding of both terms. While McDonnell agrees to ‘balance the books’ he fails to contest the fallacy that deficit = bad and this is the premise that so much of the conservative argument relies upon.
I am very disheartened. This message is confusing and so similar to the mistake of the last Labour regime. Shatter the concepts of deficit and debt, make the country understand they can mean more and not less. McDonnells’ statement does the opposite, it instead reinforces another form of deficit denial – that deficits can not be useful and desired in some economic contexts.
I agree-McDonell is improving in the sense he is now talking about a ‘new economics’ but he’s not re framing the language-if we need another decade before we can do this, the suffering and vacuity of our culture will be unbearable.
The Labour party ought to blame their economic strategy under Blair and Brown as in the main they were wholly neo-liberal. Their retort at their economic failure should link with neo liberal capitalism.
I want this labour party to be well removed from the one Blair and Brown presided over.
The crash was caused by policies which the likes of Osborne and Cameron have etched into their DNA. They have no issue with Boom and bust, it’s a natural occurrence it brings about order in the markets and cements the divide between the have’s and have nots.
Ah yes, that old creative destruction, beloved of brave entrepreneurs (with the help of limited liability). No matter about the waste of resources, both capital and labour.