Winner of the New Statesman SPERI Prize in Political Economy 2016

Sunday, 27 September 2015

On giving advice

I was happy to agree to be on an advisory panel for Shadow Chancellor John McDonnell MP. There are only two reasons why I would say no to any major political party who asked me to give them their advice. The first is if this restricted what I would otherwise write on this blog or elsewhere. No such request has been made, although if you are hoping that I will reveal in posts accounts of what happens at panel meetings you will also be disappointed.

The second reason why I might have said no is if I thought the advisory panel was for presentation only, and all advice would be ignored. I have no reason for believing that in this case, and some grounds for thinking the opposite, which I discuss today in the Independent. In particular their position on fiscal policy is similar to the one I suggested here, although getting the message clear probably requires some work. 

One rather sad comment on the formation of this group is that those joining it will be forever tainted by associating themselves with a "hard left dinasours". Or to put it another way, its members should have said no to the Labour party leadership because they now have pariah status. As I pointed out in the Independent article, the current leadership will have to come to some kind of accommodation with the rest of the parliamentary party, and so Labour policies are unlikely to be the kind of far-left platform that many in the media seem happy to imagine. As Labour are the main opposition to the current government, and I think their macro policies are pretty awful, it would have been bizzare indeed if I had said no to this invitation.

Robert Peston has a short blog post on this new panel. He asks a very good question, which is why previous party leaderships have not done anything similar. I would quibble about one phrase in his post though, and that is this group is designed "to establish an economic ideology outside the mainstream". As I have often said, my own macro is pretty mainstream. What has happened since 2010 is that macro policy has departed from that mainstream.      

34 comments:

  1. Very brave of you.

    Other than yourself and Piketty, the list is the usual suspects. Everyone would have predicted Blanchflower, Mazzucato, Pettifor, and Stiglitz. (Stiglitz will only show for the first meeting is my prediction). As far as I know, Piketty doesn't do this kind of thing in any other country, and so getting him is a coup, as in your own way are you.

    I wouldn't be prepared to work for John McDonnell myself (for reasons which are well known), but it is certainly true that some kind of serious opposition to government economic policy is necessary, and that Corbyn and McDonnell were not going to be able to construct that on their own, or just by listening to Murphy (see Corbynomics).

    The key question for you is whether this panel is going to be listened to, or whether it is there to provide political cover. My guess is that things will go along swimmingly at first, but that if we leave the ZLB in the next couple of years and the economy recovers, your advice in particular will become less congenial. Re-fighting the 'austerity' wars of 2010-12 is going to get Labour even less far in 2020 than it did in 2015.

    We'll have the first indication today when McDonnell gives his speech to Conference. If it is still full of tax gap and corporate welfare nonsense, we'll know that there is still some distance to travel.

    Good luck.

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    1. Mind you, McDonnell just announced that it is the lesser known 'Oliver' Piketty who is on the panel

      https://twitter.com/mazoe/status/648393513457991680

      Presumably his younger brother.

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    2. “fiscal policy will be used to pay down the debt and lower the deficit"

      -J McDonnell

      in his conference speech.

      Sounds like he needs the advice asap. That is before we start on all the stuff about tax gaps and corporate welfare that is also in there.

      (Piketty had become Pilketty by the time he got to radio 4).

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  2. I assume the inspired ideas appearing in the comments here (especially mine) will be fed to McDonnell.

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  3. One hauled up from the archive, contra Robert Peston and his friends' version of the 'mainstream':

    BBC website, 'Challenging the Budget', Nick Robinson | 14:26 UK time, Thursday, 20 November 2008:

    "Margaret Thatcher took on 364 economists who challenged her 1981 budget. I've not counted how many are now opposed to David Cameron's on the need for a fiscal stimlus but it's growing. And it's not just economists or international bodies such as the IMF and EU (albeit that they say only those countries with healthy balance sheets should do it), it's also the 2 main business organisations - the CBI and the IOD."

    All that's changed since 2008 is the politics, not the economics - perhaps that's what he meant by 'mainstream'?

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    1. Sarah Montague on the Today Programme said something like "these are all known as left-wing anti-austerity economists, what is the point of hiring a bunch of people who already agree with you"? SMH.

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  4. Well, you've certainly put in the ground-work.
    Good luck.

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  5. I do not understand why both the Sunday Times and Robert Peston seem to think you are on the official list of the six names mentioned by Labour for their economic advisory panel, when you are not.

    Why would the Sunday Times and Peston thought you were on the list, but you were subsequently not confirmed. Planted leak? Does the Murdoch Press want you on the panel, rather than someone they consider "more dangerous"? Interesting questions.

    You mentioned reasons not to be on it, like you would not participate if your advice is ignored. I think that is a bit churlish. If I was the chancellor or shadow chancellor, I might especially want advisers with whom I do not agree, and whose job it was to question all my decisions, and bring good arguments why they would be wrong. I might at the end still ignore their advice, but I would want to hear it.

    Now, should discussions in this panel be public? Or made public afterwards? I would think it is a good idea to make everything as open as possible. What is the point of having behind closed door meetings about economic issues.

    The political decisions subsequently could be made behind closed doors, but the economic advice of the panel should be made public, in my view.

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    1. "... you are on the official list of the six names mentioned by Labour for their economic advisory panel..."

      I am glad that it was mentioned in the speech that you are actually on the panel. Congratulations.

      (I must have mis-read the original Labour press release yesterday)

      And I hope you change your mind from "PQE is dangerous" to "PQE is a very good policy to bring about better equality".

      Here another post to change your mind:

      https://radicaleconomicthought.wordpress.com/2015/09/27/how-to-finance-the-hinkley-point-c-nuclear-plant/

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  6. Simon, I am very skeprical about the zero current balance idea. The UK economy is 80% service based, leakage to imports is high and due to deprecation and interest payments there are nasty feedback issues.
    You can build hospitals and schools, but you can't staff them. It's nuts.
    This article offers a good critique:
    http://www.3spoken.co.uk/2015/09/corbynomics-and-current-budget-balance.html?m=1

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  7. "As Labour are the main opposition to the current government, and I think their macro policies are pretty awful, it would have been bizzare indeed if I had said no to this invitation."

    Some rather confusing ambiguity here - it's not at all clear whether "their" is intended to refer to Labour or the current government...

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    1. Nitpicking aside, congratulations on the appointment and I look forward to seeing the results of the panel's advice being reflected in Labour's fiscal plans.

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  8. Really glad you are on panel. Peston describing members as 'lefty' economists highlights a huge problem for modern economics.

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    1. Not just 'lefty' but "ideologically left-wing". !!!

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    2. With 'views not shared by *many* economists of the centre (who knew?) and right'...

      I guess when your own point of view is ideologically one way or the other, cognitive dissonance has you label yourself the centrist - conveniently exluding other views to the fringes.

      Anyway, thank god. It looks like we might finally get some debate on economic policy in the UK.

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  9. This is excellent, I've long enjoyed your posts here and they've gone a long way to expanding my understanding of economics as someone without formal education in it. I wish you, this advisory panel, and Labour, the best of luck.

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  10. Great news and best of luck in your confrontation contest with MediaMacro within the Labour Party and without.

    If we do prevail - in the UK and elsewhere - it will be a lengthy process.

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  11. This is such great news. Congratulations.

    I'm hoping this means a sensible (i.e. not purely ideological) approach to economics in mainstream UK politics - although I suspect that is wishful thinking. Cynicism aside - this reason alone may be enough for me to join the Labour party for the first time

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  12. I'm thrilled to see you and Mazzucato on the panel. I have spoken about you both at Labour meetings over the last year and I am delighted to see real macro-economists get full consultation.

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  13. Fantastic news that you're going to be advising Labour on economic policy. It's very encouraging that we're consulting such knowledgeable people and I really believe now that we can develop a credible alternative to the government's approach.

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  14. Yes this is great news - I even see curmudgeonly approval from Spinning Hugo above.

    And what a REF impact case study! (I hope at least....)

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  15. I for one was heartened to see your name on the list.

    I am not au fait with the degree to which cabinet responsibility typically extends to advisors on the policies pursued by those to whom they offer advice, but suspect that the challenges arise when you do not approve of particular economic policy stances.

    I would find continual enquiry as to whether a particular policy was one which I had designed, approved, or with which I disagreed. For you will be attacked most severely on those policies that are weakest and hardest to defend in economic terms but have political legs in an effort to discern or create disunity.

    Good luck - and improve the quality of the debate for as long as you can!

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  16. Typical misrepresentation by Peston. One more effort to present the TINA narrative as somehow being normal. It really is time history's dusty bin claimed him and all his shabby ilk.

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  17. I second everyone's good wishes. This is the right thing to do - if the public is to make informed decisions, politicians and the media must start to reflect the current debates in economics, not those of forty years ago; and this new panel is a step in that direction.

    McDonnell also mentions in his speech that the opposition doesn't have access to the Treasury models to test their policies against. I was surprised by this - I would have thought models paid for by the tax-payer should be public domain. In any case, McDonnell seems to think he can change that, although I imagine he'll have zero support (or even interest) from the media and the public. Let's hope he can do it; it'll be another step towards running the economy on rational principles, and not the ideologies and whims of whoever is the current chancellor.

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  18. Pleased that you are on the panel. Its about time we have some commensense policies to be put forward. The indication is that you will bring an orthodoxy and independence that has been lacking in mainstream economic analysis.

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  19. All the best with this very worthy challenge. Ultimately I think it is the calling of all economists to get involved in the policy making process. I have some disagreement with you over some things - namely I think the foundations of macro-theory are very flawed, but my political instincts are in the same place.

    One thing is you must offer something new. We do not want a repeat of New Labour. This will not engage, let alone fire up the public, and in the end will only help fringe parties. You must admit that the financial crisis and growing inequality was a result of a policy failure, a very big one. One that would not have happened if mainstream economists had listened a little less to Lucas and Sargent and paid more attention to Keynes, Minsky, Kindleberger, Tobin, economic historians and even Adam Smith. There are good examples of central banks getting involved in credit allocation decisions; you need to look historically at why some of these historical cases were successful and others were not. There are dangers in such a strategy, but as you say, it makes sense in an environment of low interest rates. Also is Jeffrey Sachs on board? He is someone that Corbyn would definitely find interesting as he argues there is a danger in simply throwing liquidity at problems, and the authorities need to make some decisions on where credit is allocated.

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  20. It brightened my morning considerably to read that you would be on McDonnell's advisory panel. Since I started reading your blog in April, which has explained my feeling that the Coalition's policy was economically as well as socially wrong, I have been wishing more and more that Labour would ask for your input, on message as well as policy. We have needed sound economic advice and arguments for some time (as have the Lib Dems - if they'd had it in May 2010 we could be in a different world…)
    I did not vote for Corbyn, but have been heartened by the way he is handling his leadership for the most part. He seems to be working from the basis that it is unreasonable to expect the majority PLP to line up with him, just as it was unreasonable for them to expect him to line up with the PLP. I am really hopeful that with some sound economic arguments Labour will convince many more voters than anyone expects of Corbyn. 

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  21. Noted ex-IMF Michael Kumhof (co-author of "The Chicago Plan Revisited") has joined the BoE?
    Who is the arbiter of "mainstream" anyway?

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  22. It's no good, all you Keynesians are wrong anyway. That nice man from the BBC Mr Peston has explained it here: http://www.bbc.co.uk/news/business-34402234

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  23. It is not clear to me why Simon thinks the Government's current macro-policy is 'pretty awful'.
    Given the economy is now growing and the Bank of England is contemplating interest rate rises, surely he does not believe the government should now be engaging in fiscal expansion?
    Indeed, the government's macro-policy amounts to leaving stabilisation of the economy to the BOE, while gradually reducing the deficit.
    How can he possibly argue that is anything other than a sensible macro-policy, given current economic conditions?

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  24. Ah, sorry, it is Labour's policies you think are awful, not the government's. English never my strong subject/object/clause at school.

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  25. I'd be interested to know what you think about Corbyn's statements today on the balance of payments deficit, and its implications for the national debt. If you're allowed any more, that is...

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