The Labour Party conference is over. Overall those on the left have reasons for hope, even if being cheerful isn't on the agenda right now. Ed Balls made some sensible suggestions on the economy; Ed Miliband signalled a clear change in direction and a big idea on the economy that has the capacity to resonate with millions of people way beyond normal Labour territories.
And yet there remains this lingering feeling that if only Labour were willing to be a little more bold how much better things would be. Let's be honest. The economy is in a dire place. Growth has collapsed. Unemployment is up. The claimant count is up. Investment has all but disappeared. Real wages are falling. Inflation (partly due to government policy) is way above the rise in wage incomes for most. And government borrowing is increasing. Anyone - anyone but a fool, a Treasury mandarin or George Osborne could read just one word into all that, and it is 'failure'.
Serious economists and commentators realise this. David Blanchflower does. Adam Posen does. Samuel Brittan does. Martin Wolf too. That's serious economic firepower beginning to line up in the way Krugman has done in the States and say that Plan A is not just not working, but that it's fundamentally wrong.
Martin Wolf repeats this message in the FT this morning. As he says:
It is the policy that dare not speak its name: the printing press. The time has come to employ this nuclear option on a grand scale. The alternative is likely to be a lost decade. The waste is more than unnecessary; it is cruel. Sadists seem to revel in that cruelty. Sane people should reject it. It is wrong, intellectually and morally.
A recession looms close in the UK and other high-income countries, less than four years after the start of the last one. This would be a disaster for those who would lose their jobs or the young, who would find their hopes of work further postponed.
Yoiu can't get much blunter than that. But the emotive language is right. As I said in a speech at a Labour fringe meeting this week: we have a choice. Let's not pretend otherwise. We can choose to have people out of work. We can choose to punish the poor, the young, the elderly, the sick, the disabled, the unemployed and those on average and lower wages. And we can choose to do all that to ensure that the the wealthy and powerful do not feel remotely challenged by the risk of inflation. Or we can choose to help all those people and in the process generate real wealth that is only ever made by people at work. But let's not pretend there is no choice, because one i available.
Now Martin Wolf is not from the left and I'd never say he was. But he is saying much the same thing. He is saying that we have a choice. More than that, he's saying it would be immoral to leave people out of work when that choice is available. And he's right.
He's right to also say quantitative easing that goes straight to banks is not an option.
Quantitative easing that funds real growth - the sort I have argued for - is what he and Adam Posen now call for.
And he unambiguously says tax cuts (and I'd add, benefit rises) are also essential - although I'd also add that I do not think this true for those earning over £100,000 a year since they will simply save any benefit they get and there is no economic benefit to that as we already have a glut of saving.
And will we get inflation? Martin Wolf says:
Some will argue that a policy of direct financing by the central bank must be inflationary. This is wrong. No automatic link exists between central bank money and the overall money supply. Above all, the policy would be inflationary only if it led to chronic excess demand. So long as the central bank retains the right to call a halt, that need be no serious danger.
A far greater threat is that a prolonged period of feeble demand would undermine supply, impoverish the country and bequeath a legacy of huge public debts. The big risk, in short, is now of a lost decade. Act now. That must not happen.
Absolutely right.
Now it is time for Labour to be as bold.
And to state as confidently that strong action to boost the economy will be a win: win without downside risk, because that's the case right now.
And that message needs to be delivered, loud and long.
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QE in its many unfathomable guises was always meant to be a technocratic central bank-led option favoured by many of those economists who thought politicians would prevent extra government spending – it had the Friedman seal of approval, and Ben Bernanke seems to be its biggest proponent. It has not worked out that way, as the politicians of generation stagflation seem to think inflation is a bigger threat than deflation. Perhaps these middlewayers should swallow their pride and come out for the best option not the political option, and tell these politicians to go forth and multiply, in the economic sense of course.
Bold is not a word I’d associate with politicians. Risk appears to be entirely absent from their lexicons. If there’s a way forward out of this it’s not going to be political. I don’t know where any alternative might lead us either but it won’t be comfortable…
BB
Boldness was not something I saw much of in the Labour fold this week, Richard. Perhaps your book will prompt the emergence of a new generation of courageous politician when it arrives. Then again, I don’t hold out much hope.
What we saw this week was “politics/policy making by focus group” – as has become the norm over the last decade or more – with all the potential for innovative thinking factored out in the slavish pursuit of the what those who organise and run these things perceive to be, suggest, or would influence politicians to believe, is the “middle ground”.
Until politicians start to make the effort (i.e. have the courage) to propose and make a stand on policies that move us away from the neo-liberal norm, and question the underlying motives of those advisors/PR people/think tanks that suggest they do otherwise, we will never escape our descent into neo feudalism.
You are quite right – we did not see boldness this last week
We saw small steps in what may be the right direction
But there is a long way to go
There is no way that the Labour Party will be bold. If we are honest we have to admit that its reputation is trashed because it would not confront the reality during the election campaign that there was a deficit problem and consequently the Conservatives expolited this. There was such a silence from Labour after the election that the right wing was able to state that the nation was maxed out on its credit card and the majority of the electorate believed this.
There is no boldness from any of our political leaders, in the UK, Europe or the US. We have completely handed over the direction of economic policy to the ‘markets’ and bond vigilantes who are unelected and no more than gamblers. Most people have not grasped that we are in dire circumstances and there is no certainty that any solution will be offered by our current politicians. It seems that we are going to experience a lost decade.
We do not have ‘chronic excess demand’,we have had a de facto sterling devaluation,we have also had QE, and we have had 3 years where the MPC con sistently misses its inflation target.Martin Wolf is entitled to his opinion, but my view is that QE just delivers stagflation, and a level of interest rates that robs the saver in favour of the borrower.Certainly it ‘saved’ the banking system and put off the evil day for over borrowed propert owners but the cost fot the rest of us is huge.
If you’d read the article you’d see he’s not saying there is chronic excess demand
Which puts all your other judgements in doubt
But your comments do something else too: they show the selfish attitude of a wealthy person who doesn’t seem to care less about people and their needs. All that Wolf said about sadists and cruelty applies to policies based on your attitude. I am sure he had such attitudes in mind
What William is saying is that despite not having ‘chronic excess demand’, we have had QE causing a sterling devaluation and hence inflation well above MPC targets. In an open economy, printing money is going to decpreciate your currency, causing inflation in food and fuel prices, which hit the poor most. Martin Wolf appears stuck ijn the theory of economics and ignores the real world effects. Precisely the type of thinking in the BOE that casued the problem with the credit bubble in the UK
QE did not cause current inflation
Oil pricing and VAT did that. How QE caused the increase in dollar denominated oil prices is beyond me
Lying about the causes of inflation does not become your argument
When he says tax cuts, I hope he means VAT and certain indiect taxation, not cuts in income tax. Though it would be undoubtedly popular, income tax should not be cut in my opinion.
Promoting growth through green QE should mean taxpayers largely not having to pay a penny towards government investment.
I would say that if we let the financial institutions keep speculative instruments, then let us tax the bejassus out of them for the privilege.
As regards inflation, as long as demand meets supply as closely as possible, it should never be a threat.
It should be remembered that, throughout history, the only way to get the economy out of recession is to invest and spend.
The great depression of the 1930s showed the folly of doing nothing. The country dragged on in depression for nearly a decade that was only really relieved by the coming of World War II.
It might help if we stopped referring to price rises as inflation.
BB
Let us hope that Ed Miliband’s small steps were tactical, because at the moment, the steps do not feel congruent to deal with the disastrous mess that Margaret Thatcher inaugerated.
http://think-left.org/2011/09/30/conference-shows-neoliberalism-lives-on/
Earlier this week you suggested that good business practice was meeting ‘real needs’ rather than ‘wants’. I inferred from this that you consider activity that meets wants that go beyond ‘real needs’ is a bad thing and ought to be stopped.
If we followed your idea and stopped supplying such ‘surplus wants’, there would be entire industries stopped dead in their tracks. For example, liquor, entertainment, luxury items, tourism. Various modes of transport. The arts. Teaching literature, sport or music in schools. Newspapers. Pure scientific research. None of these things are ‘real needs’ in any sense whatsoever — people can and do live very happily without them.
I struggle to think of a suggestion I have heard in my life that could do more than to squash growth, demand and jobs.
I am having difficulty reconciling your wish for growth, demand etc in this post, with your suggestion earlier in the week. The thinking does not appear, as they say ‘joined up’. Presumbly I have missed something.
Kind regards
You clearly don’t understand
The arts are for example essential asis pure scientific research
But you’re right – liquor is not and a great deal of long distance tourism is exceptionally harmful
What you don’t understand is that growth is not measured by GDP
And nor is employment opportunity – indeed GDP often harms that
Wait for the book
Thanks for the reply.
1) The arts a real need? I haven’t seen a play, film, ballet, opera or visited a gallery in a year and I’m fine. Not a need in any sense, definitely just a want. Long distance travel on the other hand is a need for me — my entire family lives in Australia and no long distance flights means we never see each other. That’s the reason we want businesses to fill wants rather than needs — the whole issue is in the eye of the beholder.
2) ‘What you don’t understand is that growth is not measured by GDP’. First, I didn’t mention GDP, so not sure the point of this comment. Second, when you say above that growth has collapsed, what measure are you using if not GDP?
3) You still haven’t even reconciled the issue I have raised. Your suggestion that businesses should just fill ‘real needs’ would put millions out of work, and send living standards right back, not to mention sending much of the economy into the black market (and tax evasion by the bucket load).
And with the greatest of respect, there’s just about not a word of that with which I agree
With which bit don’t you agree? That my lack of consumption of the arts has left me fine? That I don’t have parents and siblings in Australia to visit? That I did mention GDP in my post above? That you have attempted to reconcile the issue I have raised.
Read my book when it comes out
Adrian –
“I haven’t seen a play, film, ballet, opera or visited a gallery in a year and I’m fine.”
Utter, utter, complete and total rubbish. Seriously, you’ve never turned on a television in the last year to watch anything other thean news (and even then, you’ve filtered out the arts reports)? You’ve gone a full twelve months without seeing a statue, or a painting, or anything vaguely decorative? Even architecture isn’t 100% functional – architects are artists too.
I wouldn’t say you’re lying per se, but selective ignorance designed to bolster your ideological position is a cheap trick at best.
Without the arts you’d maybe survive, but you wouldn’t live. It’s as important as the air you breathe. Everybody knows this. Stop being silly.
And also, Richard isn’t saying that we can’t fund ‘wants’, he’s saying that we must fund ‘needs’. A decent approach to public funding and spending would mean that there’s no reason we can’t do both.
Richard –
What’s the estimated date of release for The Courageous State? I’ve just finished reading Nick Shaxson’s excellent “Treasure Islands” and Naomi Kline’s “The Shock Doctrine” (which I advise everybody else reads too) and I am just about in the mood for a book which will outline a workable plan to scupper scary right-wing economics!
The final edit goes to the publisher today….hoping for November launch
And thanks for your comment – bang on!
I can understand a differentiation between “real needs” to be provided by the state & “wants” to be provided by private enterprise.
The problem with the state providing “wants” is that it will always, by definition, be unimaginitive.
The problem with private enterprise.providing “real needs” is rather greater, in that it will always, by definition, **** up. Confronted with extreme human want, PE will always respond by liquidating the Co & starting again.
How extraordinary you are
People who work for the state are unimaginative
Those who work for private enterprise aren’t
Tell that to teachers, lecturers, doctors, nurses and so many more besides
How amazingly blinkered a view
And how wrong you are
Don’t like Richard’s comments on essentials – Old Speckled Hen seems essential so far as I’m concerned !
I didn’t say beer is not a need
I don’t think most spirits are
Bee has long been a need
Most spirits are simply the product of advertising generated demand
It’s really not hard to spot the difference
But I’m not saying wants can’t be provided
I do say needs must be met first
Richard
I certainly wouldn’t say that anyone working in the public sector was “unimaginative”. That would be silly.
What I said, & would stand by, is that the public sector tends to be unimaginative, partly because of the weight of history & partly because people simply can’t take the same chances (i.e a social worker responsible for the welfare of children can’t say “well, I’m not sure about this but let’s give it a go”).
My comment on beer was “a joke”. All too many of us on the left wouldn’t seem to recognise one if it was juggling balls & wearing tights.
Adrian
do you accept there is such a thing as man-made global warming ?
(Tick Moron/Not Moron box)
As much as I enjoy going to the theatre, reading a book, watching a film, going to a jazz club, there is no way any of these are “essential”, any more to me than having a pint of beer, going on long haul holiday, buying a new car or anything which I’m guessing you would describe as froth.
Many people would still subscribe to the view that only food, shelter and cloth are real needs, anything else is fluff which may improve our lives but is not essential to life and death. I have never heard beer described as a need but other alcoholic liquor as a want before, and I think if we were to apply that kind of thinking across other areas it would rapidly generate into absurdity. Many people don’t like beer or even alcohol at all so I’m amazed it could even be considered a need.
We could of course go back to that old-fashioned principle of letting people buy what they want and if they don’t want to buy it they don’t have to without the state telling people what their needs and wants are (which frankly sounds Stalinist).
Oh I think you have heard beer and sprits differentiated before
The tax system does it now
And it could do so still
But the big mistake you make is assuming people can choose what to but a) many don’t have the resources b) advertising massively distorts decision making
It’s the duty of the satte to correct such market imperfections
Perhaps we should remind ourselves here it was an oil-dominated state (America) which decided that alcohol and particularly brewing your own spirits was to be outlawed, as the latter is here still. Apparently this was because early cars could be fuelled either by very expensive petrol or very cheap home-distilled spirits. I understand that with some relatively minor modifications cars can still be run on booze even today. Difficult not to think that then and now the state was working for the interest of its sponsor Big Oil against those of the electorate.
BB