John McDonnell was asked a question about me in the Commons yesterday. This was his response:
He is not the economic adviser and never has been, because we doubted his judgment, unfortunately. He is a tax accountant, not an adviser. He is actually excellent on tax evasion and tax avoidance, but he leaves a lot to be desired on macroeconomic policy.
The result is he made three points.
The first was he praised my work in tax. Given how much he has relied on it he would have had difficulty saying otherwise.
Second, he said I was never an adviser to Labour, not that he or Jeremy Corbyn ever said that last summer when it seemed they left the whole issue of economics to me and Jeremy specifically asked me to speak about the subject at three of his rallies. And it's well known there was discussion of an appointment, but I decided I would rather be professor of practice in international political economy at City University instead, from where one of my close colleagues did sit on his advisory panel.
Third, he questions my macroeconomic judgement. And it is true, we disagreed.
I said he should not agree to a fiscal charter promising a balanced budget which is wholly economically unnecessary and even destructive. But he did.
I also argued against the fundamentally neoliberal concept of an independent central bank that takes control of key aspects of economic management out of democratic control and which was Ed Balls idea. But John bought into it.
And as a result he backed off from People's QE : he was advised that a central bank cannot create money to help ordinary people, job creation or the building of social housing. Instead John accepted that central banks can only use that power for the sake of saving bankers.
So sure we disagreed, but precisely because he was all too willing to accept conventional neoliberal thinking and I was not.
So if he's doubting my judgement because he thinks I was too left wing for his comfort I am happy to accept that reasoning on his part: I think it's true. The great disappointment about John McDonnell is he won't be the radical shadow chancellor we need. If he was and if his macroeconomic thinking was clearer then he would have landed more punches yesterday: instead he fought his whole battle on the government's territory, which is always a mistake.
Oddly this was pointed out in the house in the same debate, when SNP MP Angus McNeil said to him:
The hon. Gentleman is hinting at what we hope will be a change of direction for the Government. For far too long, the Government have concentrated more on achieving a balanced budget than on managing the economy. They have not been creating demand. They should have been listening to the likes of Paul Krugman, Joseph Stiglitz and Richard Murphy, all of whom have been giving the Government a map to follow for years. The fact that they have failed to follow it explains why we are in this situation today.
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How disappointing. I have quite a lot of regard for John McDonnell and I think he is sincere in wanting what is best for working and poor people, his long Parliamentary career clearly demonstrates that.
Maybe he judged that the political risk was too great, is the neo-liberal economic orthodoxy so suffocating that even daring to stray from it might entail political cost?
Of course the SNP dare to, but they are already in power.
This is indeed very disappointing to hear.
I’m wondering though, whether or not this was a simple numbers game – rejecting such a central plank of recent economic theory (academic or otherwise) was going to require a degree of unanimity from his advisors.
Naming no names might you venture an opinion on how many of his advisory committee agree with you on the BoE?
As far as I’m aware the remaining ones were Diane Elson, Mariana Mazzucato, Anastasia Nesvetailova, Ann Pettifor and Simon Wren-Lewis.
I’m pretty sure that Joeseph Stiglitz at the very least finds the idea ‘over-rated’, but David Blanchflower may well have advised the opposite.
I do not think it appropriate to discuss that
I think there are differing views for differing reasons
An exemplary and highly commendable display of professional courtesy from RM.
The information links below shed light on the status of the apparently now non-functioning Labour Party Economic Advisory Committee (yep, caught in the grip of neo-classical endogenous cryogenesis methinks?).
Confirmed resignations from Thomas Piketty and David Blanchflower, and “The resignations have forced the remaining committee members to suspend their work …they said in a statement: “We have always seen this body as providing advice to the Labour party as a whole, and not as an endorsement of particular individuals within it.”
http://www.theguardian.com/politics/2016/jun/29/thomas-piketty-quits-as-adviser-to-jeremy-corbyn (Article dated 29 June 2016, accessed 21/07/16)
Dissatisfaction appears to have been brewing for some time, with a January 27 2016 article where David Blanchflower spoke out about the Labour Party’s problems. The article was headed “Labour must get real about the economy: is Corbyn’s economic advisory board unravelling?”
http://www.newstatesman.com/politics/economy/2016/01/labour-must-get-real-about-economy-corbyn-s-economic-advisory-board (article dated 27 Jan 2016, accessed 21/07/16).
Promises from John McDonnell at the 2015 Labour Conference to “draw on the unchallengeable expertise of some of the world’s leading economic thinkers” to rigorously test “every policy we propose and every economic instrument we consider for use” should now presumably be considered to have the same bankable value as a proverbial rubber cheque.
Ben-Piketty made it clear HIS resignation had nothing to do with internal disagreement and was to do with personal matters (can’t find link at present).
He did
More time with his family, etc…..
So, farewell then John McDonnell.
Is there anyone left (in both senses of the word) who has the guts to advocate macroeconomics that do not adhere to the gov as household analogy?
This is the very crux of the problem. The words of Ezra Pound resonate ever more loudly: “In our time, the curse is monetary illiteracy, just as inability to read plain print was the curse of earlier centuries.” And there’s no easy answer because, even with the ‘right’ macroeconomic policy, the cards are stacked against Labour. Have just read Chris Dillow’s blog from yesterday which spells out the size of the mountain to climb – at least until the prevailing ideology crashes yet again (http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2016/07/on-economic-credibility.html). How many failures and how much more misery does it take?
Chris hits the key issue of perception
And I think John McD needs to tackle this
Occupying the Tory ground will not help him: it just confirms that in the economy you might as well choose the Conservatives
After all your time & effort I find John McDonnell’s words uncharitable to say the least, even if he doesn’t agree with you.
I completely understand Richard. For what it’s worth, I don’t think that your two most recent books leave much at all to be desired on policy.
I’m not sure but does that mean you agree with my suggestions?
I agree wholeheartedly with your suggestions and look forward to many more of them.
I think McDonnell’s remarks were a little bit cheap – although I’ll give him the benefit of the doubt given the circumstances in which they were given.
This is unbelievable – it seems to mean that John McDonnell doesn’t entirely agree with Corbynomics!
I don’t think he understands them either. For me McDonnell isn’t so much Old Labour as he is Too Old Labour – Dinosaur Labour, in fact. He’s a political anachronism, he’s from the wrong era. He just isn’t capable of the thinking necessary. I’m glad this is becoming obvious as the need to remove him will soon become obvious too. The only people in British politics I can name (Steve Bell, Douglas Carswell, off the top of my head) who understand money are, ironically, firm right-wingers.
Sad, isn’t it?
… since we lost MIchael Meacher, of course 🙁
Steve Bell and Douglas Carswell, as I understand it, both endorse full reserve banking which I know is not endorsed by Richard but is a position adopted by some libertarians and by Positive Money -whether they ‘understand’ money is a moot point. They certainly understand monetary operations unlike 90% of M.P including probably Corbyn and McDonell it seems.
I do not endorse that position – which would be disastrous
It’s about as bad as a return to the gold standard
That’s why right winders like it
Why Positive Money do beats me
Indeed, Richard, Steve Baker (not Bell-I repeated Bill Kruses mistake!) seems to think that the welfare state can be abandoned and replaced by ‘mutuals’. Not sure what he has in mind there exactly but it sounds like the 19th Century 2.0 to me.
If that’s who we mean he’s horrendous
This is deeply dispiriting to read not least because I was one of those who arrived, as it were, at John McDonnell via Paul Krugmann and Richard Murphy (and McDonnell’s famous ‘I’d rather wade through vomit than vote for this…’ speech). What a shame, I thought at the time, that such a passionate and principled individual isn’t on Labour’s front bench!
It seems that there was a brief period a few months ago when there was cause for optimism, to think that Labour might have the cojones to stand up and engage with the electorate and explain that there WAS an alternative and to deploy respected economists…and even the occasional tax expert!…as part of that explanation. Who knows they might even have got around to explaining who was responsible for the Crash…and what the current National Debt is (£1.7 trillion ish) following six years of Osbornomics ‘paying down the deficit’. Even with a largely hostile Press one might think it would be fairly simple to get that debate onto the front page via PMQ’s, but hey ho.
It now looks like Optimism got on the last horse out of Dodge, Reason and Common Sense having already got on the last two seats on the stage coach.
Oh dear, oh dear, oh dear.
I’ve read the Hansard record of the debate from top to bottom and can find no reference to you Richard apart from Angus McNeil’s comments at the beginning.
Any idea where Mcdonnell’s about you are and what the question was from whom that he was replying to?
Do a search then because it most certainly is there
Just search if you like fir the text I quote
Yes found it now, in answer to the following question (sounds a bit like “tit for tat” to me):
Mr Stewart Jackson (Peterborough) (Con)
The shadow Chancellor will know that any critique of the Government should be accompanied by a coherent alternative strategy. On that basis, is he embarrassed that the Leader of the Opposition’s economic adviser Richard Murphy described the Labour party’s approach as having
“no policy direction, no messaging, no direction, no co-ordination, no nothing”?
I have a lot of respect for you, ever since last year, when I read your excellent paper on PQE that advocated fair taxation and even a citizen’s income (forgive me, I know it was co-written, but right now I can’t remember the other contributors). It was a very intuitive assessment which was also thankfully easy for a layman to understand. Especially your arguments on fair taxation, income tax, and how it encourages (or currently discourages) participation have become part of my world view.
I understood parts of that paper had been taken on board, and that gave me hope. Your work is one of the things that made me so enthusiastic about Corbyn. While you have always said you are not a member of the Labour Party, and I understand some of your ideas were used by the Greens too, it seemed clear to me that — at that time — Corbyn’s team were relying on your ideas very much. They were to enable bringing about the change that is needed. And that you were being asked to speak about them in the media was plain to see.
I find it quite disturbing that John McDonnell denies that reliance now.
You will forgive me, as personally I’ve been very ill over the past few months, so I haven’t followed events as I should, though I do remember noting the “balanced budget” fiasco, which was very injurious to the spirit of the economic ideas (your ideas) that got Corbyn elected. So, amongst all the “noise” your words are the ones that give me pause. I notice that the policy documents have disappeared from the jeremyforlabour website (although you can still find them if you look). At the moment I am not sure if they will be back or if there will be new ones.
And yet, the alternative is unappetising to say the least. I can’t bring myself to side with those who would sacrifice policy for power, as that power will have been gained on a reduced policy platform. The significant changes will never be made. The people who are abandoned will remain abandoned and the direction of travel since the great gains made in ’45 will continue, hardly slowing.
I am not anyone of any importance. I hold no power, either professionally or personally, but I hope I am not deficient in my ability to read and understand. I know that even if the change we need was (by some miracle) to come overnight it would more than likely be too late for me. But I want it all the same, and if Corbyn is a no go, I see no direction in which it might be sought.
That is a sad thing. If only I wasn’t an atheist, perhaps I would ask God to help us.
I will still campaign (as much as I am able) for Corbyn. As things currently stand, it’s the only option available to me. But I thank you for your candid words on this blog (other posts too). Whatever happens, I am sure that these ideas will surface again (they must), and when they do I am certain I shall be drawn to support them.
After all the optimism of last year, I am sorry it has come to this. For all of us. Your words have made me very unhappy and uncertain, I am not going to lie, but I will not ignore them.
On a happier note, I will read the paper you linked to this afternoon. No doubt I will find it educational. 🙂
Thanks for your comments
The paradox of living is that to function well we have to assume we will live forever whilst knowing we won’t
If so anyone can work for change
Last year when Jeremy Corbyn was campaigning to be Labour leader many of us of a sceptical outlook believed he would be a leader of a pressure group.What swung it was his economic programme based on Richard Murphy’s ideas,since then these ideas have been watered down I.e. balanced budget.The problem is the same problem the first Labour government had which was you need to change the economic setup to carry out a socialist programme.Today Jeremy Corbyn for some reason as forgotten this essential lesson,yes he’s moved the party in the right direction but failed totally in getting his team,PLP due to incompetence and not working with his experts to remain as the leader.
I suspect you know very well what this “dismissal” – and I have to say rather insulting (if your quote is correct, which you say you are sure it is) remark relates to: your lack of support for Corbyn as leader. And the fact that you went into print with your views and have stuck to them since makes you an even worse “traitor”. The line about ‘doubting your judgement’ is deliberately chosen for that reason. But oh dear, what an admission by McDonnell, that he does in fact buy into the neoliberal economic dogma after all. A timely wake up call for all those planning to vote for Corbyn as leader perhaps.
I don’t see this as a particularly bad thing, Richard. People try to discredit your policies by linking them to Corbyn, and once he is gone, you wouldn’t want to be associated with the failure of ‘Corbynomics’. If they are actively distancing themselves from you it saves you the effort.
Ha!!!
Frit are we ? Regarding prohibition of comnents on your speech today?
Still , hardly worth criticising. It s the grindingly boring regurgitation of money printing ad infinitum/ nauseam which is already happening worldwide and is on t.he cusp of ending in tears and Armageddon.
Draghi and the Japs will lead the way you watch ….
“Armageddon”! Really?? Wow.
Armageddon outta here.
Smithomics doesn’t quit have the same ring but I’m warming to Owen. I’m hopeful that he will be much more courageous. I didn’t find Diane Abbot’s critique this morning on the Today Program very convincing; The Corbyn team seems very rattled.
Only very?
It’s going to be a long summer
Again
At PMQs yesterday when May said Corbyn calls it austerity, she calls it living within our means (a Cameron slogan), and it means not saddling our children with debt, it makes me sad that Corbyn did not say what you have said, that governments are not like households, they don’t tax and spend but spend and tax, we cannot run out of money, the massive increase in the UK money supply from bank-created money over the last few decades hasn’t led to hyperinflation so a comparatively small amount of PQE certainly wouldn’t, the ‘means’ of the country are not money, which cannot run out, but the productive capacity of the economy, which is damaged by the cuts, because as the IMF says the multiplier means cuts hurt the economy by more than they save and spending increases the economy by more than the spend amount, public sector debt isn’t bad but is the addition of wealth to the economy, and that the deficit is caused by non-government net saving.
It might not be so bad if there was some other MP who was willing to say these things, but I’m not aware of any.
Perhaps the Green party is amenable to your ideas?
I disagree with McDonnell’s approach but can see why he is doing it — fear of being accused of turning our country into Zimbabwe and wanting to be seen as fiscally responsible. But the Greens don’t have to worry about this — they’re not really taken seriously on economics anyway so it wouldn’t hurt them to talk about these things.
I’d love to see Caroline Lucas going on the Andrew Marr show with a big cardboard copy of the sectoral balances graph, explaining how it shows that according to the OBR, for the deficit to be closed there must be a corresponding increase in household/business borrowing, as is clearly shown all the lines must sum to zero, so could the Prime Minister explain why she is advocating an increase in borrowing by the non-government sector to dangerously high levels. I’m sure people who know more about voter engagement than me would tell me the public don’t like graphs, but it’s easy to dismiss your ideas with lines like “of course the government must live within its means like every household knows”, whereas it’s much harder to argue with that particular graph.
My feeling is that all it would take is one politician who is reasonably well known with a good TV presence to start talking about this at every available opportunity. If Lucas, or anyone else, did, they would be ridiculed, accused of turning us into Zimbabwe, spending other people’s money, the magic money tree, and everything else, but I would be delighted with that because I feel it would be much better than what we have now, which is not that your ideas are ridiculed but that they aren’t even known by the wider public. Once the ideas get out there into the mainstream it doesn’t matter how much they are ridiculed, because once they are out they will stay out, and a few people will say ”actually, that makes some sense”, and Google them and read about them, so over time they will become more accepted.
I feel that the biggest and most crucial step though is the first one — from where we are now, with your ideas being generally unknown, to being widely known and ridiculed. I hope that there is a high-profile MP out there who would be willing to work with you on getting the message out.
Richard, are you aware of any MP who is willing to relentlessly say these things that you have said?
Do you see that any time soon your ideas will get out into the wider public, your ideas about how money works, spend and tax, and deficits being caused by non-government net saving?
The best I can say is I will work on it
The truth about money creation is already getting ‘out there’, if you will, it’s entering the mainstream around us while we speak. Here; http://www.thisismoney.co.uk/money/comment/article-3688507/How-banks-create-money-explains-rates-cut.html Have a think about this. It’s not from some conspiracy theory site, there’s no glaring primary colours, no bizarre use of capitals, no mentions anywhere of Illuminati or the Nephilim. No, this is from the well respected This is Money site, as mainstream as you can get. It discusses money creation in detail, how the banks make it up from nowhere in response to loan or mortgage requests, backing this assertion up with corroborations from the BofE. Author Simon Lambert ends by asking about the BofE’s proposed rate cut; “So if the Bank of England cuts rates it will be saying to banks ‘we want you to conjure up more money’. Is that a good idea? You tell me.” he asks.
I don’t think that’s what people will be asking when this sinks in. They’ll be asking, if the money I borrowed to buy my house with was made up by the bank on the spot, why am I having to pay so much interest on it? They’ll be asking, if money’s created by the central bank and the high street banks out of thin air anyway, what’s all this about ‘There is no magic money tree’ (Cameron) and ‘The country’s running out of money’ (Osborne)? Come to think of it, they’ll be asking, what’s all this nonsense about having to ‘live within our means’ (May) when it turns out our means are limited only by our productive capacity, and ‘I don’t believe in any money tree’ (Hammond). Tick tock 🙂
Well put Bill
Hope springs eternal. I agree that the ‘TIAA’ narrative could be understood by lay people if designed and presented professionally by someone with enough media presence not to be railroaded by the likes of Andrew Neil. This US presentation is not a bad place to start; it could easily be adapted for a UK audience – https://www.youtube.com/watch?v=bHQCjFebIf8. I’m not sure Caroline Lucas would be an appropriate choice, in spite of her integrity and self-confidence. Whoever it is would have to be someone with enough economic schooling capable of authoritatively dismissing criticisms based on the prevailing ideology. Step forward Richard Murphy??
That requires the chance
Richard, in this country besides yourself, how many economists are putting forward ‘the Government’s not a household’ argument? I can only think of Steve Keen and he is hardly in the public eye at all.
The fact that May can STILL parrot the ‘living within our memes’ crap and not be countered by ANY Labour M.P (this is not just a Corbyn issue as we’ve had 6 years of Tory crap going without countering).
This is surely a failure of the advisers or McDonell/Corbyn not listening – unless the myth can be firmly challenged there is NO hope of challenging yet another odious right wing Government.
Even Trump and Greenspan have pointed out that the Govt is not a household -yet Labour can’t get it -to be honest, neither do I anymore.
There’s certainly no sign that Owen-I’m a ‘normal’ man with a wife and three kids-Smith is likely to get it either so we’re stumped on that front.
Sounds like ‘another fine mess the Left have gotten themselves into.’
It’s now a question of campaigning as individual voices in the wilderness.
Steve Keen tweeted this blog post
Oh yes, and David Malone, who I hope we’d agree does know more than a little about economics, is currently campaigning to be leader of the Greens. That’s the tv producer David Malone who blogs as Golem XIV.
McDonnell’s uncharitable reference to you is most likely a ‘tit for tat’ response to the fact that you have posted against Corbyn’s leadership and in favour of Owen Smith. Simple and plain.
As for his disappointing policy stances – there is the possibility that it could be nothing more than the strategic,’wait-look-see’ caution that new shadow ministers often adopt in the early phase of of an opposition term.
Corbyn and McDonnell revealed their real stance with the tone of JC’s leadership campaign and party conference. Once officially in office McDonnell starves the govt. the Press and Blairites of ammunition by adopting cautiously woooden positions on selective key points, thereby dodging the “loony” tag and strategically waiting for the govt. to fail or move closer to Labour’s position. The govt.seems to have done the latter.
That’s one theory. If nothing else its fairly consistent with events.
It’s a lousy basis for asking to be re-elected now
From his point of view he shouldn’t be in a position where he needs to ask.
Corbyn was elected by the party membership and McDonnell’s strategic, defensive caution was reinforced by the shock responses of the Press and a cohort of Blairite MPs who have been actively undermining the current leadership from day one. McDonnell and JC may feel that they have been under seige from the outset and haven’t yet had the freedom or time to exercise their strategy.
I’m not saying that their approach has been ideal by any means I am merely trying looking at it from their point of view.
My point here is that this forum is cooking up a perception that McDonell and Corbyn are old-school plodders that don’t understand Modern Monetary Economics and are too scared to venture outside the square.
I don’t buy it because:
1.It is inconsistent with Corbyn’s platform, the one that got him elected to this position to begin with. Why would he communicate the distinct idea and identity of Corbynomics if he (and McDonnell) had no regard for it?
2. My ‘cautious strategy’ suggestion describes the age old idea of communicating an intention or attitude but initially depriving the opponent a tangible opportunity to attack it. In this case it fits fairly well.
I am not saying that JC and McDonnell are good at strategy but they have had reason to be defensive and it would appear that waiting may have been worth their while as nationally, key events have shifted the middle ground towards the Labour leadership.
If Corbyn is re-elected the true test for McDonnell will arrive then as key events (Brexit, new PM, PLP rebellion) will be in the past tense, replaced by the unhindered opportunity (and the pressure) to establish a firm identity.
You are assuming all MPs come into line following any leadership election?
That’s not going to happen, is it?
Hi Richard,
If Owen Smith wins the Labour leadership, who would be your suggestion for Shadow Chancellor? I’ve not come across that many Labour MPs in the current PLP who seem confident and well-informed on radical economics (unfortunately).
That’s an excellent question Howard
I genuinely don’t know
I fear it will be Angela Eagle and she is no radical
And a radical is needed
Eagle’s phoney ‘stalking-horse’ leadership bid (which she has now predictably abandoned) definitely looks like it would have been part of a deal to secure the shadow chancellor’s or deputy leader’s position if Smith is successful.
I would be one of many that can’t easily picture her as her as shadow chancellor. Deputy might be her aim.
Howard- 90% of M.P’s (Positive Money researched this) have virtually no knowledge of monetary operations and the one’s that do often have a limited perspective. I cannot see any Labour M.P’s with that knowledge-none. Tony Benn and Michael Meacher did but they are no longer with us.
pretty hopeless scenario.
As a Labour Party member I am shocked and disappointed by this.
What is the point really – if Labour are simply going to conform to the neo-liberal orthodoxy then there is nothing in the tank.
Advice that the Bank of England cannot create money for PQE is simply false as for as I can see. EU rules prohibit a government overdraft with the central bank and direct monetization of government bonds. That’s it. Any other public institution created for the purpose can be accomodated, as is the entity which manages QE presently.
Voila! Brexit clears the air for May to announce the intention of PQE-style infrastructure bonds – how fast was that?
Mind you, Richard here is one among several who have indicated that there are ways around EU & Lisbon Treaty restrictions on monetary financing and that the will to enforce those provisions is evaporating anyway.
Perhaps: your backing of Owen Smith maybe got John McDonnell taking his rhetoric too far simply because they are convinced the battle with the coup is in actuality a battle with with establishment and a committed system which is (as Tony Benn described Gordon Brown): without ‘a radical bone in his/its body’.
If hunch correct, McDonnell should most certainly not have let emotion take over.
That would count as a bad mistake. Context can be understood, even then, when considering that McDonnell and Corbyn and a few others are taking on the whole force of the whole machinery, that – in the contrivance of a party coup – is trying desperately to stop the change that Corbyn & McDonnell, and indeed you and I, resolutely aim to bring about.
The reason the machinery throws all its force at them is not because of mere left policies – but because they would change the rigged structure that gives the bankers and corporatists and agenda-lobbyists an easy ride.
Maybe I am coming up with a view I want to believe, but I do feel that we might be seeing mistakes made simply because of the degree of task difficulty combined with the degree of perception difficulty that envelopes all radical endavour in our media-controlled society.
My hope is that John McDonnell acknowledges an emotional mistake made in current climate of pressure and awkwardness, and that Richard Murphy acknowledges that Owen Smith’s move is long-calculated and rooted in Pfizer-Progress connective history.
Neoliberal machinery will play its games and revel in its ploys. Reaching the winning post for radicals depends on the here-and-now of the Labour coup not succeeding. Recent words from Paul Mason hit the nail on the head when he accurately says ‘the last line of establishment defence is in the Labour Party.’
I have not as such endorsed Owen per se
I have said Jeremy gas to go because he cannot lead
I always predicted Owen would be the alternative candidate because I know him and think he ciyrse lead
I also think he is mych more left wing than you are giving him credit for
But I cannot foresee the future
Thank you for your reply Richard.
For clarity my leftism includes a productive mixed economy sensibly balanced provision-heavy but certainly alongside enabling the entrepreneuristic spirit to thrive.
I respect you have reached a roadblock with your Corbyn expectation.
If one examines brief histories of the two contenders and them imagine them slumping back in the chair reflecting on The Courageous State after the last page, I offer that it’s easy to perceive one would be enthused and one would disapprove/be sceptical of its radical aim.
The key factor being structual change. Smith’s objective in my view is to scupper structual change. Corbyn’s weaknesses to deliver are not insurmountable but his absence might be.
I have not heard that from Owen
I may be wrong
I have not heard it from Jeremy in reality
I know that Bill MItchell has been criticising some of the economists who have been advising John McDonell.
He says that they a New Keynesians, I think that means Monetarists with a Keynes Mask.
I must admit, I found that when I attended the Conference at Imperial College in May.
The Monetary and Fiscal workshop had Jonathan Portes and a few others. He in particular was promoting the idea of fiscal rules and controls of government spending which are arbitrary and abstract, and not really Keynesian. Balancing books seems to be the order of the day rather than having a healthy economy.
I mentioned a few post Keynesian and MMT ideas in the workshop, ie that government is not constrained, creates money through deficit spending. This was acknoweldeged at the time as accurate, but Jonathan Portes insisted that fiscal rules are necessary.
Simon Wren Lewis is an adviser who believes in Central bank independence.
The Libson Treaty has rules also about using the Central bank for direct government spending, I think it is article 104.
I still believe that John McDonell’s heart is in the right place – his history shows that.
But the enormity of controlling the nations finances, and fear of making a serious mistake, and being in the driving seat with bad advisors can make anyone end up with wrong conclusions.
He needs to listen to a wide variety of people, as Ha Joon Chang says in the video you linked.
It is a great pity that he did not listen to you on PQE. Some of the best economists think it is a brilliant idea. Michael Hudson, Bill Mitchell, and Lord Adair Turner. Turner calls it Overt Monetary Finance, I am sure it is very similar in principle.
John Maynard Keynes said that we should print money and hide it in bottles in coalmines. I think he meant PQE.
It is better than helicopter money because it creates activity, jobs and domestic growth.
You have identified the right source of the problem – especially Jonathan
Is this it? I had it handy 🙂 http://www.lisbon-treaty.org/wcm/the-lisbon-treaty/treaty-on-the-functioning-of-the-european-union-and-comments/part-3-union-policies-and-internal-actions/title-viii-economic-and-monetary-policy/chapter-1-economic-policy/391-article-123.html
1. Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as ‘national central banks’) in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the European Central Bank or national central banks of debt instruments.
2. Paragraph 1 shall not apply to publicly owned credit institutions which, in the context of the supply of reserves by central banks, shall be given the same treatment by national central banks and the European Central Bank as private credit institutions.
Yes – that is the one.
Article 104 was that of restricting deficits (in the Maastrict Treaty). I have mixed them up.
The two together make Keynesianism virtually illegal.
Except in tune with EU pragamtism they are being ignored by all QE programmes, in effect
The purpose of this would seem to be to make us all reliant upon the money supply from the high street banks, underlining their authority over us and making it illegal to challenge it. I note the ECB is currently insisting on rear-to-impossible supervision regimes from the small German community banks in what looks suspiciously like an attempt to put them out of business and thus give more power to the handful of existing large German banks by making them larger and giving them collectively the shared monopoly on money creation. They’re trying to create a similar situation to the one we have here, it seems, where a handful of banks are able to run riot over the rest of us by virtue of being so big and so bound up with each other that to prosecute and jail the senior execs of any one of them would bring our economy down. Consider that action in the light of what we’ve already reminded ourselves of above; is this the real purpose of the EU, then, to carry on something set in motion after the so-called Glorious Revolution when the divine right of kings was ended in England and an effective divine right of bankers, due to their command of the economy on which we all depend, was clandestinely initiated? Is the EU a cloak for the banksters, or are they merely hitching a ride on it?
This timely blog article and comments do indicate a specific need. My own instinct initially is defensive, despairing as I do that neoliberal-Labour’s coup is all about stopping radical change in the guise of a ‘left-shift’ that is (IMO) about as sincere in creating a decent system as Cameron was about dealing with tax havens.
Despite my urge to defend McDonnell and Corbyn, I embrace the crucial point that McDonnell appears to have been been swayed on fiscal regulation.
A concentrated ‘John please listen to this’ initiative seems crucial. Else division tactics prevail, and while I see the frustration felt by Richard and other ‘macros’ the requirement is one of bombarding McDonnell with their sincerity on the issue.
I would rather trust McDonnell’s flexibility to return – whatever his level of current obstinacy – far more than the prospect of committed Labour corporatists implementing Courageous strategies.
Where is John Cruddas?
Selling ice creams in the foyer, I think
That was genuinely funny, pretty dry as well! Gave me a laugh. There was a time when Cruddarse was positioning himself for some biggish role in Labour, he seems to have sunk without trace?
Like a lead balloon
I thought I should have linked to the article that Bill Mitchell wrote complaining about the New Keynesian advisors to Corbyn and McDonnell., with regard to my comments above, just for information.
http://bilbo.economicoutlook.net/blog/?p=33152
Richard:- “Why Positive Money do beats me” (endorse full reserve banking, that is).
It’s PM’s proposed means for stopping the private banks creating (as they currently do) <97% – or indeed any quantity whatsoever – of our money, in the form of bank credit. Which would mean that money could thenceforward be created only by the BoE.
It would mean the complete separation of the payments system from banking and, incidentally to that, the removal of any raison d'être for state-backed deposit insurance.
It’s akin to a return to the gold standard and all that would entail
And shows no understanding whatsoever of money
Apart from that it’s a fantastic idea