Like many, I was confused by Will Hutton's arguments in The Observer today, in which he argued that Rachael Reeves has given Britain “the plan for economic lift off”. Unsurprisingly, I disagree with him.
Let me summarise my argument at the outset. I think Will Hutton is looking for a job. I cannot explain what he is saying in any other way.
Then let me move to the detail. Will is arguing, as I can see it, three things.
First, his suggestion is that those who have tried to impose policy on the economy have always got things wrong. He quotes Polanyi, who he interprets as saying that it was the imposition of centrally dictated policy that gave rise to the extremist backlashes of the 1930s. As a result, he seems to be applauding her for backing away from that central planning. Doing so, he ignores his own past demands, and what most would think to be the critical economic social democratic role of any government, which is to constrain the errors, excesses and inappropriate directions of market economics. Perhaps he is, however, revealing that he really has been a disciple of Hayek all along, whilst also revealing that he thinks she is. I really can't work out what else he is trying to say.
Then, entirely paradoxically, he endorses her claim that this is an inflection point where what he describes as “a new productivist economic paradigm is emerging” which he argues is “vital for economic growth and social cohesion through higher public investment, an active industrial policy and quality public services.” Anyone who can reconcile this second argument with his first, noted above, deserves a prize.
Third, he then argues that adopting Jeremy Hunt's fiscal rules, as she is, will not in any way constrain her ambition to deliver this plan for growth. His reasons for saying so are, as far as I can work out, twofold. First, he seems to suggest that the rule is just for show because the figures can always be fudged to make it work. This might be a frank recognition of reality, but it does not constitute either a fiscal plan, or economic sense. Then, the paradox continues, because having firstly condemned central planning, and then praised it, he then seeks to reconcile his positions and the use of this fiscal rule by suggesting that the job of government will, in Rachael Reeves opinion, be to direct the way in which private capital will be invested, because the government is not going to make any available. In that way the fiscal rule is upheld but the desired growth is delivered in accordance with a plan for which Reeves can then take credit. Quite why he thinks that this might be possible he does not say, because very obviously Rachael Reeves does not know either, if that is what she really thinks.
But then, there's a great deal that Rachael Reeves does not know or say. She does not say how she will tackle poverty. Nor has she got a plan to save local government. The NHS can only be presumed to be up for sale. There is no money for education. Devolution, as ever, got no proper mention from Reeves. And apparently, all this can be ignored because the right wing press would criticise Reeves if she did discuss such issues, so Will Hutton thinks she need not do so.
I am sure, as I mentioned at the outset, that Will Hutton had a reason for writing this article, but the piece is itself profoundly confused in an attempt to endorse Reeves' own incoherence. If this is indication of the current level of centre-right thinking around Reeves (where she, herself, is located on the political spectrum) it is a pretty depressing foretaste of the disaster that Labour will be.
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Can I claim the prize you offer for reconciling Hutton’s first and second paragraphs?
In the first he says that what Polanyi criticised was not imposition of centrally dictated policy generally but a centrally dictated market economy. Incidentally I don’t think he is quoting Polanyi but is saying that she quoted him – which would be interesting if Polanyi says what Reeves says he said.
It is then not inconsistent for her to propose higher public investment, an active industrial policy and quality public services. These are not market measures.
What is my prize?
Having said that I am of course highly sceptical of anything Reeves says. But I have not seen a full transcript of the speech and Hutton makes it sound more interesting than I would have thought it would be. Have you read the whole thing? It might merit a direct analysis rather than solely by reference to what Hutton says about it. If you can find it, please provide a link.
I have read it
It does not read to me as Hutton says he heard it
But the points I raise are, I think, inherent in it
Hutton is well past his sell-by-date if indeed he ever had one. In the same Observer: Port Talbot – UK’s 2nd last primary steel production site (the other is Scunthorpe) will close absent any gov dosh. Obvs of zero interest to Hutton or Reeves (although I imagine son-of-Kinnock will be worried). The proposal is to replace primary steel with elec arc furnaces (begging the question – where does the scrap come from?).
It also raises the question: why not direct reduction – initially using nat gas & then once the couple of GWs of off-shore wind are built – zero-carbon H2. Fact: Port Talbot sits next to two massive gas pipelines from Milford Haven (I know watched em being built). So no shortage of gas. As for DRI using nat gas – Germany does 0.5 million tonnes per year of steel using DRI – so the tech is pretty straightforward & well understood. Of course all this would fly over the head of Hutton and Reeves – after all this is real world stuff – active industrial policy..
Indeed …..
Hi Mike.
I was born and brought up in Port Talbot, so for me the future of the steelworks is of great personal feeling. When I was at secondary school there in the 1960’s at least 80% of my class would have parents working there, and whenever I have gone back there for re-unions, etc or visits I have seen the -seemingly inexorable- decline of the town—-.And yet I believe there is a profound sense of belonging and pride in what has gone before, and that the work -and sacrifice- of the thousands who worked there ( often in very difficult situations) should not be in vain.
Hi Mike.
I was born and brought up in Port Talbot, so for me the future of the steelworks is of great personal feeling. When I was at secondary school there in the 1960’s at least 80% of my class would have parents working there, and whenever I have gone back there for re-unions, etc or visits I have seen the -seemingly inexorable- decline of the town—-.And yet I believe there is a profound sense of belonging and pride in what has gone before, and that the work -and sacrifice- of the thousands who worked there ( often in very difficult situations) should not be in vain.
PS I bought The Observer today but I haven’t had time to read it yet! Too busy lambing !!
Hello Anne,
If you have contacts in Port Talbot I would be very interested in talking to them.
I have a few idea including political ones.
Anne
If you want to be contacted let me know
Richard
Thanks very much for this post. I was hoping you would.
The thousand or so online comments related to this piece are mostly as depressing as the Oped itself, and reflect the Labour Together instrumentalist core, but with a few references to MMT and the stupidity of the credit card comparison.
I suppose that is to be expected given the Guardian/Observer reader profile.
Reeves commits herself to supply side measures only quite early on in the speech, but the new ‘productivism’ seems to be all inclusive in Yellen’s own outline, and some of the key components of the Inflation Reduction Act, which Reeves claims to admire, are definitely fiscal measures.
I am very confused by both ‘productivism’ and ‘securonomics’ which just seem to be Humpty Dumpty (when I use a word) jargon. Weasel words if ever there were ever such, designed to obfuscate not enlighten.
Agreed
Isnt the assumption that by pursuing Irish economic policies the UK too can attract lots of inward US investment and appear to be doing well. Never mind the reality.
For example the us could finance 100 new hospitals that the nhs would pay rent for. It would deliver productivity and pay for itself.
And the tories would finish the job.
The book review of the forthcoming Vassal State in the Observer at least hinted at what is going on.
If only… you are effectively cited as Chancellor in waiting., so close and yet so far…
https://amp.theguardian.com/politics/2015/sep/22/richard-murphy-corbynomics-tax-social-housing-britain
I really think you should remember I did not write this stuff
I’ve read all Will Hutton’s books and seen him lecture too . I am mystified how he seems to have slipped down a semi neo liberal rabbit hole – I feel that there must be a better explanation than his desire of some governmental job under Reeves . Something does not add up.
Inability to do joined-up thinking is your answer. Here’s a quote from his article:-
“Far from sticking to Hunt’s fiscal rules, she would change them to promote a surge in public investment. Rather than aim to balance all public spending and revenues year by year, she would strip public investment out of the equation and only aim to balance “day to day” spending and revenues over the economic cycle.”
So build a new school (capital investment) can’t staff it though because it’s current investment!
Quite…..
Staff are a cost, not an investment. This is basic economics.
Understanding the relationships inherent within a fiscal rule is also basic economics, but you clearly have not got there as yet.
Let’s leave it to Abbey Innes shall we (2023, p. 330):
‘While Starmer fought hard to sustain constitutional and moral norms in the face of the Johnson governments increasingly authoritative strategies, an underlying risk was that resurgent Blairites within the party would regroup on the economic and environmental front, as if the more critical economic turn under McDonnell had never happened. From the perspective of this analysis however, any return to Camp 2 neoclassical technocracy can only relegate the party to an organisation of socially conscientious, law abiding stretcher bearers within an increasing destructive hyper-capitalism: an intellectually inert position for the party political heir to the British radical tradition.’
Hutton sounds tired and old. He probably owes the Observer an article but does not know what to say. To think – the short-term investment cycle he was highlighting in the 1990s has got even shorter. It must be very dispiriting and he just seems to have given up. His book ‘The State We’re In’ was good for its time and I remember it fondly for tweaking my interest in these matters but I left it behind a long time ago.
Some people are that desperate, a bunch of ‘intellectually inert stretcher bearers’ will do apparently.
Except that it won’t.
Now – if I may – what was wrong with my contribution to your post on Gaza today?
It used language I thought aggressively inappropriate
And I am getting bored by you changing your name every time you post
You know the rules. You have posted here more than anyone else in the history of the blog. Don’t troll, please. It wastes my time, and I never thought you’d want to do that.
Towards the end he says Starmer & Reeves ‘ ” retreat after retreat, watering down after watering down, has been disheartening. Yet I left the Bayes Business School after Reeves’s lecture upbeat and encouraged. Labour could get elected, as long as its coalition of support holds – and it might, just might, be the government that feasibly and practically triggers the much-needed investment revolution, lowers inequality and revives the green agenda. Reeves does get it, only is careful and subtle about her response.”
Even if Reeves takes from Polyani that he is indeed against imposing ‘the rule of markets’ on the economy , given her ‘speak your weight’ mantras over the last year it seems quite a stretch to think she will now reinterpret Hunt’s Fiscal Rules so as to institute an investment programme in NHS, public services, green infrastructure etc and reduce/eliminate inequality / poverty .
He might have said Reeves may be opening the door a crack – but to go overboard with this kind of enthusiasm seems hard to understand, even if he is looking for a job..
Will Hutton became CEO of a thriving Industrial Society. He morphed it into the Work Foundation and went bankrupt. It’s been very hard to listen to any of Hutton’s views about how an economy should be managed since showing his total incompetence to even manage a very small element.
Thank you for this. A clear informed eye looking at I don’t know what.
Now I’m really scared.
Thinking more about why Will Hutton wrote a “Chumpland” economics article surely it all boils down to his not understanding there needs to be two types of money created in an economy an automatic reflux or netting out one and a non-automatic reflux or netting out one. These correspond to licenced banks creation of money and sovereign government creation. At root yet again is Hutton’s and Reeves’s failure to understand Sectoral Balances Accounting. Here is a Bill Mitchell explanation of SBA. Note he uses the balance sheet terminology of “netting out”:-
https://billmitchell.org/blog/?p=32396
Apologies if I am carrying coal to Newcastle but could Hutton and Reeves have been seduced by the SEZs and so called Freeports economic expansion Grand Plan ? A model expounded by the post Brexit British political ruling class.
Look at David Powell’s exposition on the exposure of the privateer corporate land grabbing and political power abuses hidden behind wide brush media PR at European Powell on Twitter/X for further information.
Hutton’s seeming inconsistencies make perfect sense if placed within this ideological framework. It is also a socio-cultural disaster in the making.
Do you really anticipate that a Labour government will be a ‘disaster’? It may not initiate the economic programme many of us would wish to see, but worse than what we currently endure? Your heading seems more than somewhat hysterical. Blame the subs.
Yes, I do think it will be a disaster as the National Goivernmment was in its time.
And it will save us from nothing we currently endure.
Hysterical? Not in the slightest.
Never keen on either Hutton or Reeves attempts to misappropriate Polanyi.
Here’s an alternative, discovered serendipitously …..
“Modern Money Theory as a Foundational Component in Polanyi’s The Great Transformation”
Devin T. Rafferty and Valeria A. Moreno
https://www.aeaweb.org/aea/2022conference/program/pdf/14625_paper_TrEyiek4.pdf?display
I had assumed that because Hutton was present at the lecture he had picked up detail not included in the advance press releases. All very frustrating though for the rest of us, when senior Guardian commentators (Polly Toynbee as well) tell us Labour will do things that sound great but are nowhere in their public pronouncements.
But the indication Reeves might change the (entirely arbitrary) “fiscal rules” is welcome.
Interestingly another Guardian columnist over the weekend appeared to have read your postings about taxing wealth: https://www.theguardian.com/commentisfree/2024/mar/23/inflation-millionaires-tax-taxation-spending-rich-wealth
I have asked a number of people and no one seems to understand what Hutton is talking about
A Polanyi expert tells me he definitely dfoes not undertsand Polanyi
Have you seen this article? I thought you might be interested if you hadn’t.
https://www.crikey.com.au/2024/03/12/nobel-laureate-economist-angus-deaton-capitalism-power/
Yes
I am confused by Hutton’s avant-garde interpretation of one of the fiscal rules. According to Hutton “the national debt should fall five years after every annual fiscal event, but it could rise in years one, two, three and four. Given that the OBR is legally obliged to base its five-year forecasts on announced future spending plans, this is a rule that can always safely be met.”
This would mean that in year two debt could rise in years two, three, four, and five, but would have to fall in year six. Which means that debt will have to be falling in year five, but it’s also OK for debt to rise in year five, which makes no sense. It’s the economics equivalent of those pubs with a sign that says “free beer tomorrow”; you come back the next day and ask for your free beer and the barman points to the sign and says the free beer is tomorrow. According to Hutton, debt will forever be falling five years from now, but never in the present.
Even if this is applied to a single five-year parliament instead of a rolling five-year period it still makes no sense. If debt only has to fall in the fifth year then for years one to four you could have debt of £1trn, £2trn, £3trn, and £4trn, and then so long as debt was £3.99trn in year five you meet this interpretation of the rule, which would make it a pointless rule for lowering debt.
The only way this rule works is if debt is lower in year five than it is in year one.
As you note, the article is a mixture of explaining how Labour wouldn’t greatly increase public investment while praising Labour for how it would greatly increase public investment. Reeves criticised the coalition government for not borrowing to invest when interest rates were so low, and said a Labour government would increase investment (through the Green Prosperity Plan, National Wealth Fund, and Great British Energy). Hutton appears to believe that this means government investment spend would be high, but if you listen to what Reeves says in the speech, she is not calling for heavy investment, only a bit more investment than the Tories (hardly a high bar), with the majority of increased investment coming from the private sector – as she said in the speech “The reality is we are already stumbling blindfolded into an era of a bigger state … Securonomics advances not the big state but the smart and strategic state.” How exactly is Hutton’s belief in an intention to greatly increase investment reconcilable with what they have done with their £28bn green commitment?
He notes that Sharon Graham responded to speech by claiming she said only a “sustained rise in public investment in infrastructure can turn the tide on decline” (a slight misquotation of what she actually said). Hutton then suggests that after Graham made these comments in response to the speech, Reeves confounded her in delivering the speech, which means the Reeves made her speech both before and after Graham’s comments. But aside from that, Hutton is saying that Reeves showed that Graham was wrong to suggest that we need much more public investment, while at the same time arguing that Reeves’ speech was great because it showed we would get much more public investment.
I feel like I should stop there as there is a lot more that could be said about the article. Like others have noted in the comments, I had previously found that Hutton talked a lot of sense so I am not sure what happened here.
You are right to be confused
Most especially on the supposed fiscal rule what Will Hutton said makes no sense at all to me