Labour has an economic problem – and appointing Minouche Shafik as Starmer's senior economic adviser will not fix it. Shafik represents the neoliberal technocracy that has failed for decades. She may talk progressive language, but her loyalties lie with the institutions that defend the elite. Labour is out of ideas, still clinging to a broken model that fuels inequality, debt, and ecological collapse. In this video, I explain why Shafik's appointment shows Labour is paralysed – and why we need modern monetary theory, tax justice and democratic accountability instead.
This is the audio version:
This is the transcript:
Labour has very obviously got an economic problem. We've seen that in the last few days. Keir Starmer has tried to increase the power of 10 Downing Street when it comes to economic policy. He's trying to undermine Rachel Reeves. It's almost impossible to imagine that he's doing otherwise with the reshuffle that he's put in place.
But there is one appointment that I really want to draw attention to, which is that of Baroness Nemat - or Minouche as she's commonly known - Shafik, who has been appointed as Keir Starmer's Senior Economic Adviser.
Minouche Shafik has a long track record of working for the World Bank, the IMF, the Bank of England, the London School of Economics, and Columbia University, where she was in charge, as she had previously been at the LSE, and where she spectacularly failed to manage the student risings of 2024.
But in all of these institutions, she displayed one characteristic, and that is her dedication to neoliberal thinking. As a consequence, my suggestion in this video is that she is no recipe for salvation for a Labour Party that is out of ideas. She is, in fact, the most perfect representation of the fact that Labour is in denial of the fact that it is out of ideas.
So who is Minouche Shafik? She's a career insider. After degrees at the London School of Economics and a PhD at Oxford University, she headed for the States, where she was, in fact, brought up and served with the World Bank, rising to the role of Senior Vice-President. And then at the International Monetary Fund, where she was a deputy managing director. And then to the Bank of England, where she was a deputy governor. And then to the LSE, where she was the boss in charge of the organisation. And onto Colombia, where she played the same role.
During that career, which required her to have no real engagement with the actual world beyond that of think tanks, institutions, and academia, she wrote a lot, and in fairness, what she wrote looks to be mildly progressive.
She wrote on social contracts. She wrote on tax. She wrote on international development. She wrote about how to tackle poverty and more. So all of this looks to be good stuff from the point of view of Labour. It's very clear that she would describe herself as having a left-of-centre orientation from what she has written. But, and that, but is fundamentally important, she has always written within the constraints of neoliberal orthodoxy. And let's be clear, if she hadn't, she would not have got those appointments at the World Bank, the IMF, the Bank of England, the LSE and Columbia University. Her loyalties lie with the institutions that protect the existing elites and not with the poor, whatever her academic writing reveals.
And now she's advising Keir Starmer in his role as Prime Minister to provide him with support against the Treasury. After all, we know he needs that support. He's a man who knows almost nothing about economics. And she is being presented as the intellectual anchor for policymaking and the link to Rachel Reeves.
Darren Jones might also now help to play this role, but I think it's Minouche Shafik, who's really in the driving seat now. And this signals Labour's dependence on the old neoliberal technocracy. They're looking for ideas that suggest they are credible with the financial elites of the world.
What Labour is indicating as a result is that it is terrified of breaking with the status quo. And that's despite the fact that, as we know, the hierarchies of economic power that exist in the world are clearly failing.
It's quite reasonable to suggest at this moment that neoliberal capitalism is in its death throes.
There has been stagnation.
There has been financial crisis after financial crisis, and another is to come, I am fairly sure.
There has been growing inequality.
There hasn't been an ability to tackle poverty.
Many developing countries are still deep in the depths of debt and have no way to work out how they can pay it.
And households around the world are very often in the same state. They are being left abandoned by the financial system in a way that economists from the neoliberal elite have no answers to.
Neoliberal policy has fueled inequality. It's created debt crises from top to bottom within the economy. And the ecological harm of climate change is its consequence. And yet Labour is clinging to those ideas and the illusion of control that they provide.
Its belief in those hierarchies is blocking genuine change.
And the truth is that the elites are clinging to neoliberalism for their own good reasons. And that's because, of course, they want to stay in financial and economic and democratic power because that is what the privileges that neoliberalism has granted to them have created for them.
At the same time that neoliberalism has created the space for Trump in the USA, Reform in the UK and worse parties sometimes in continental Europe. Far-right movements are thriving on the failure of the neoliberal technocracy that has no idea what it is really for. For example, it seeks growth, but nobody within neoliberalism can explain why, or why profit maximisation is actually suiting anyone's real interests. Growth is a metaphor for a lack of ideas.
But all of this leaves the left paralysed unless they confront these truths.
The fact is that Labour has sold out.
It has allowed economic injustice to deepen.
Redistribution has been postponed again.
It is allowing greater insecurity for workers, whilst elites are protected.
Public services are under threat again.
And fiscal rules are threatening them once more.
There is disillusionment instead of hope, and the left, unless it challenges these ideas, is absolutely unable to bring itself into the agenda.
So what do we need to do to change? We have to stop the neoliberal technocracy from being considered to be our saviours from the fate to which we're being consigned by the very orthodoxy that they have created. We have to challenge the neoliberal institutions because they are now the problem and not the solution.
We could start with the Bank of England, and we need to go on from there.
We have to confront the failures of orthodox economics and its dependency upon growth on a finite planet.
And we have to start with ideas that really work. Modern monetary theory, tax justice, democratic accountability, and even proper corporate accountability. These are the things that we need.
Minouche Shafik does not talk about those things. As a consequence, she cannot save Labour's economic policy. Labour cannot beat fascism, and nor can anybody else, until we sweep away the old and bring in the new. Labour must break from the failed hierarchies of power that have brought us to this situation.
We need better ideas rooted in the desire for real distribution, better services, the taxation of wealth, state responsibility, and economic and tax justice. Only then can politics serve people and not protect elites. Only then might we address people's anger.
So a question, are you angry? Are you angry with Labour? Are you angry with all politicians from the past? Or are you just confused about where we are? Let us know in the poll below.
Poll
What do you think is Labour’s real economic problem?
- They are trapped in neoliberal thinking (33%, 150 Votes)
- They fear breaking from financial elites (25%, 117 Votes)
- They have no new ideas at all (23%, 105 Votes)
- They don’t really care about redistribution (19%, 87 Votes)
Total Voters: 268
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Answer: Yes.
Next question?
That is a very difficult poll to respond to. One feels one needs an all of the above option. But I think I would add one more in fact more fundamental problem: I think they are absolutely committed to the status quo and to the service of existing power. It’s the reason they have no new ideas and the reason they are not interested in redistribution – your options 3 and 4. But what of your options 1 and 2 – being trapped in neoliberal thinking and fearing financial elites? I think neither get thing right. Option 1 tends to imply that they would might wish themselves to be less trapped. Option 2 tends to imply that they might wish themselves free from that fear. I don’t believe either of those things to be true.
And if you are absolutely set against challenging the status quo, there aren’t many places to go. But fascism is certainly one of them. I think the past few weeks have shown too that Labour has few red lines there.
So things are pretty grim with Labour. I think we have to entirely give up on the idea that they might be a progressive force. They absolutely are not.
I think you can tick as many as you like…
I am pretty sure I set it that way
Oh! I didn’t realise either… the normal convention for multiple choices is tick boxes not radio buttons; I guess your blog software doesn’t give that visual cue. For now, perhaps adding “multiple choices allowed” to such polls would help?
I will remember to do so…
No, you didn’t. You had better check again. At least I was unable to check more than one.
Corrected now….apologies.
“Keir Starmer a man who knows almost nothing about economics.”
Can’t even recognise the fact that democracy has to be linked with a good understanding of how money really works in particular that having legal and coercive power makes the state the top dog in how we make use of money!
Thank you. Letter sent to MP. Take off the blinkers, turn the ship, austerity is the midwife…
Thanks
I think there may be a deeper problem: the Government is not panicking enough.
As I remarked to an unemployed friend last night, the economy is far more f*cked than the Government realises. It would still be recoverable with some Keynesian measures, but by the time the reality penetrates the Westminster bubble, things will be a lot worse.
The only thing this Front Bench seem truly to have a grip on is their own grifting.
No steer Keir, with all the gear, but no idea.
Slightly off topic,but are you now writing editorials for the “Guardian” or are you one of those Youtube influencers ?
Yesterday’s ‘Guardian’ editorial was basically a redraft of your “MMT and the rules of government borrowing ”
It stated that Liz Truss fell not for borrowing but for incompetence.The example of Nick Leeson bringing down Baring’s bank with his failed bet v Japan,demonstrated that states shape markets,not the other way round..
Your fingertips were all over the idea of
the UK running a fiscal deficit to adopt an ‘industrial green strategy .’
I await either a ‘Guardian ” editorial about the delights of birdwatching or some trendy fashionwear worn on one of your videos.
Not me
There is an MMT editorial writer at the Guardian
Power for powers sake.
Most of them seem to be paid by lobbyists.
None of them know what they want.
I read Shafik’s (spellcheck changes to shark…) and as you say, she makes the right progressive noises but in practice she seems to behave like a fully paid up member of that club who have shaped economic policy and politics for the last 30-40 years. And today’s Labour are in thrall to that club with Reeves being another member.
As a bit of a systems thinker, I do see a feedback loop which is at the core of our economic and other problems. Put a little crudely:
– Economic Policies of the last 30 plus years that have privileged Finance (and the Treasury) at the expense of other sectors/regions
– Excessive growth of the Finance Sector (and its bailing out), leading to financialisation and concentrations of Wealth at the top
– That Wealth leading to concentrations of extreme Power, individual and corporate – most obvious in USA but also in UK
– The Power (and Wealth) being used to influence Politics in its own interests
– Politics choosing to adopt particular Economic Policies, boosting asset prices cutting public expenditure … and so on
The nexus of Westminster, City, Treasury, BofE, Tufton Street, et al …
It points towards where interventions are needed to change things:
– Redirecting Finance, at least the banking elements, towards the wider economy and restraining its ’socially useless’ activities
– Potentially splitting Treasury and changing its make up, outlook and culture to consider the whole economy and country
– Tackling extreme wealth – taxation
– Reducing the influence of big money and corporations on politics
– And – changed economic policies, away from obsession with the market
In other words, it needs recognition of the underlying system and the changes needed to it, not just the odd intervention. Labour are just hand-wringing at the moment, afraid to tackle that ‘system’ and the elite that drives it. Too many of its advisors are part of that system.
There is plenty of evidence that large sections of the public see the ’system’ as being loaded against them. They are not wrong. They still dislike the bankers and suspect Westminster. Whilst Reform divert and point them at immigrants as the cause of their problems.
Thanks
“And the truth is that the elites are clinging to neoliberalism for their own good reasons”
100%
And that reason is simple. The vast majority of voters still believe the neoliberal model. I estimate that <5% of voters understand how modern monetary systems work
None of my friends:acquaintances are in that 5%. They totally reject my alternative view.
No political party will stand for something that is rejected by the vast majority of voters, irrespective of whether it’s correct or not.
How then do you think change has ever taken place?
Through crises??
I see no evidence among media (traditional and social), among politicians or among voters that an alternative to neoliberalism is accepted. At least not yet.
Schools and Unis are also still locked in teaching an out-of-date and flawed model. So future generations of voters have no reason to challenge the status quo either.
I have no idea how long this will take to change. But in the meantime I see no
Motivation for any political party to change their narratives.
The next election will be fought on the same false narratives compounded by the rise of Reform which only makes matters much worse.
It’s grim
It’s grim
But if we give up it’s much worse.
What would you prefer I do?
It is indeed grim, but we cannot yield. If you are the only person who knows the truth, you have to hang on to it. If the King is naked, you have to say so.
But try to go gently in the midst of the hubbub and speak your truth.
Remember, it is only the truth that can set you free.
Read ‘If’ by Rudyard Kipling.