The rational case for imposing yet more austerity on the UK has all but disappeared. Economists are almost united in saying that now is the time for substantial increases in public investment, with government borrowing costs almost negative in real terms and low real wages. Even city economists have given up trying to pretend that the market is on the point of giving up buying UK government debt: the serious market analysis talks about a continuing shortage of safe assets.
In the political world, and mediamacro, things are very different. The right pushes continued austerity for the obvious reason that it shrinks the state: some are honest about this and some are not. My concern in this post is with those on the left who insist that Labour must play the austerity tune. Their argument is straightforward: the public has become convinced that Labour was irresponsible with the public finances, so the way to win back trust is to match Osborne on austerity.
This is a strange argument. The idea that it was Labour profligacy that required austerity is false. That many people believe it is undeniable, but to argue that this requires Labour to also pretend it is true, and promise to be less profligate next time, is bizarre. Myths like this are not set in stone, and can be challenged. To fail to do so concedes defeat.
Large numbers of the public believe many myths that have been encouraged by the right. They believe that a large proportion of those on welfare are scroungers: should Labour therefore pretend this is true? The public believe that large numbers of immigrants are just here to claim benefits, whereas in reality immigration improves the public finances. Should Labour base it's policy on this misperception?
What the left should be doing is uniting behind a clear narrative that challenges these myths head on. The strategy of trying to change the subject was tried in 2015 and failed. The strategy of pretending to believe the myths both fails to convince the public who believe them (Labour politicians tend not to be good actors), and alienates those who know they are untrue.
One thing Labour can learn from it opponents is consistency and simplicity of narrative. The alternative narrative should be that now is the time to invest in the future, and the public sector must take the lead in this. The failure of the Conservatives to invest over the last 10 years, in everything from housing to flood defences, needs to be reiterated at every opportunity, together with the statistics that reveal this failure. A fiscal rule that ensures that in the medium term the government only borrows to invest, with the key proviso that if monetary policy runs out of effective ammunition fiscal policy will support the economy, not only makes economic sense but also matches this narrative.
The days that UK macroeconomic policy was run by second rate accountants need to come to an end.
"The failure of the Conservatives to invest over the last 10 years"
ReplyDeleteThe Conservatives weren't in government for almost half this period.
He may be referring to both Cons and the New Labour -- both of which economically speaking are conservatives and quite right wing.
DeleteActually I was thinking about the next election, and assuming that current public investment plans are not radically overturned over the next few years. Or maybe 6 years just seems like 10 years!
DeleteWho argues that Labour should match Osborne's austerity? Can you name me one Labour MP or other prominent member of the left more broadly, who has argued that?
ReplyDelete"A fiscal rule that ensures that in the medium term the government only borrows to invest, with the key proviso that if monetary policy runs out of effective ammunition fiscal policy will support the economy"
Now, forgive me if I am mistaken, but isn't that exactly what Labour's policy in fact was in the May 2015 General election?
In any event, we are now nearly six months into your preferred political strategy being tested in the real world.
Labour is polling an average of 30.7%. At the equivalent point in the 2010 Parliament it was on 41.9%. Down 11.2%.
Since May there has been a 1% swing away from the opposition. Almost unprecedented in polling history.
Let us hope that doubling down on your preferred strategy of challenging these myths starts to work soon.
My own view, is that there is very little relationship at all between macroeconomics and what you need to say to win general elections, and that if you want to win an election you are much better off paying attention to Lynton Crosby than Professors of Macro.
Supporters of the Corbyn/McDonnell/Milne project, which you are now playing such a prominent part in (at least on paper), will always blame the Blairite Quislings and the Evil Mainstream Media for their failure.
You are just indulging in silly factionalism. The question is: do you think the fundamental argument is true? Yes? Then go out and - with all your might, in whatever way you can - persuade people of it.
DeleteReply to SpinningHugo:
DeleteOn naming Labour MPs who are pro-austerity: You make a good point here in that it is difficult to find explicit examples of pro-austerity Labour MPs. I just googled "pro-austerity Labour MPs" and all that came back were a couple of stories from the run-up to the May 2015 election. One was about Milliband claiming that he would have to continue cuts if he got into power, and another was about Ed Balls basically saying the same thing. I couldn't find any more recent examples.
Having said that though, the reason for Labour's bad polling seems to me to be its current split between Corbyn quislings like me and the Blairite quislings who want to undermine us. The latter seem to keep implying that they believe in austerity without ever declaring it openly, by using terms "we must be seen by the public to be fiscally responsible". It's this split between the two factions that results in the electorate not knowing where they stand, and I'd just prefer it if Corbyn had the nerve to take the issue head on. He keeps using terms like "Labour is a broad church" to imply that it's OK that it currently consists of left-wingers like himself and closeted right-wingers like Hillary Benn and Co, when really it's that open-winged confusion that's undermining the Party as a whole.
I'd be happy if the Labour Party were to be openly and honestly left wing, even if that meant losing the next general election as a result. If most of the people of Britain want right wing policies that give them lower taxes but result in greater hardship on the poor then so be it, but right now we're not being given the chance to find that out. My belief is that if Corbyn took the left wing line properly then he'd lead the party to victory in 2020, since by then the right-wing squeeze of the middle classes will force the electorate to go that way for their own interests alone, but I'm pessimistic about this choice being made possible.
You also seem to be saying that Labour should say the kinds of things that Lynton Crosby advises them to say, but while this might work for the Conservatives, I don't think it can work for Labour as well. If they were to do so they would appear as a Tory-lite party that is being dishonest about its agenda, and would lose confidence as a result. Their only real strategy is to tell the truth, and be seen as a party of integrity in the face of pressures to make them do otherwise. Saying the kinds of honest things that might seem to work against them could then have the contradictory result of gaining them support.
Also, your comment on the 1% swing being "unprecedented in polling history" seems a bit odd to me. Don't those kinds of polls vary by about 1% on a monthly basis anyway?
1. "Having said that though, the reason for Labour's bad polling seems to me to be its current split between Corbyn quislings like me and the Blairite quislings who want to undermine us. "
DeleteIt isn't. That is the excuse now being given by the Corbyn supporters for how obviously disastrous the project is. As ever, it is always someone else's fault. Look at the polling data and why people don't trust Labour. It is because
(i) the leader
and
(ii) lack of trust on the economy (mainly because the leader appointed someone with no credibility at all - John McDonnell).
Blaming Blairites under the bed, as you would like to do, has no support whatsoever in the polling data. It is nothing to do with the party appearing divided. It is because the problems that were there in the May 2015 election have got worse, and the naive claims that Labour could win if it just made its arguments really, really forcefully (eg S Wren-Lewis) are ridiculous.
"I'd be happy if the Labour Party were to be openly and honestly left wing, even if that meant losing the next general election as a result"
Thank you for being so honest. I am not at all happy with that. I think it is to betray the people Labour should be trying to help to think like that, but there we are.
3. The point about the 1% swing is you see that if you take a polling *average*. Yes individual polls bounce around, but the trend is clear.
4, Oh and Mike. I left Labour on September 12. I am not going to be arguing with all my might for the Chair of the Stop the War Coalition (sic) to become the UK's PM. Sorry about that.
SH: Stop playing the record and engage. Do you agree with the proposed policy, which with the important exception of the ZLB knockout was similar to the Balls pre-election policy? If you do, how would you sell it?
DeleteHow would I sell it?
DeleteFirst, and most obviously, Labour needs to change leadership. Asking John McDonnell to sell such a policy is ridiculous. A Labour party fronted by Corbyn, when the economic policy proposals that enabled him to be elected were ridiculous, cannot pursue your preferred strategy effectively. Until this happens nothing can be done. The longer it is delayed the further away a change of government becomes. 2020 is lost as it is.
Second, the policy itself doesn't matter very much. Yours is a perfectly sensible policy, and despite your protestations is exactly the policy Balls would have pursued once in power. As Osborne is showing us yet again, what you say to win and what you do once you have do not bear much relation. As everyone rational expected, Osborne himself has completely abandoned his pre-election commitments, and what he is in fact doing bears a closer resemblance to the expressed policies of Labour and the Lib Dems.
Third, you need a simple line, repeated over and over and over again by everyone, until it becomes ridiculous and you are embarrassed to say it. "Long term economic plan", "Tough on crime and tough on the causes of crime." This is far more important than what the policy is.
So, your version is hopeless. As soon as you say "fiscal rule" you conjure up images of Gordon Brown. So no good. Stuff about how you need to use fiscal policy at the ZLB? Well, as a matter of policy I completely agree. As a matter of selling a political party? Forget it. "Spending the money every economist says we need to spend", or "Fiscal discipline, while investing for the future" might do (I am not Lynton Crosby).
4. You seem to ignore just how hard it is for Labour to win, even at the top of its game. As I have said before, when was the last time there was a change of government without an economic crisis? 1964? it may be that something like Balls' presentation was close to the best that can be done. If Labour had had a more credible leader that might have sufficed. Wailing about how unfair life is, and how it would be so much better if MediaMacro didn't oversimplify helps nobody. Well, suck it up. Life isn't fair. Win in the world as it is.
This character will not engage in good faith - clue's in the name & confirmed by every single comment posted.
DeleteFor post GE15 pro-austerity Labour MPs, the obvious example would be John Cruddas. Cruddas took on the role of standard-bearer for the Labour right when he issued a series of propaganda pieces based on never-published 'research'. The centrepiece was an article entitled "Labour lost because voters believed it was anti-austerity":
http://twitter.com/SurelySmMistake/status/676163839587692545
SH: I'll ignore (1): my job is not to only give my advice to those politicians whom I favour or think will win elections. On (2), what 'despite your protestations'? Absent another slowdown, Balls as Chancellor would have pursued a sensible policy, and he is a great loss to parliament. Osborne is certainly not doing what Balls would have done, and I've no idea why you think he is. On (3), I provide a simple line 'we need to invest ...' which you ignore. On (4), we are back to (1).
DeleteAs your only concern seems to be to defeat Corbyn, here is some advice. Any Labour MP who challenges Corbyn without also adopting an anti-austerity line will fail. Anyone who challenges Corbyn after a 2020 defeat and says Corbyn's mistake was to argue against austerity will fail. Labour members may be convinced that they could elect a better leader, but they will not be convinced they should adopt a policy that is causing so much harm.
(1) Yes, I know you think that. That just isn't the way your life has actually panned out.
Delete(2) Because it is your claim that your policy was not Labour's. It obviously was.
(3) No you did not. Re-read what yu wrote. Despite your claims that I am either illiterate or a stuck record, I actuallly do read what you say. And when it is about economics, learn things, You gave no such line.
My concern is, and is only, that a social democratic party of the European tradition wins power, again, in the UK. Corbyn is an obstacle to that.
Again, which Labour MPs or prominent members of the UK left support Osborne's austerity? Name them. One person. With a quote.
By saying that everyone who opposes Corbyn supports Osborne's austerity you make it much too easy for yourself, and your own choice in becoming part of the Corbyn/McDonnell/Milne project.
SH: (2) You are confusing policy with narrative. It is mainly pre-2015 narrative that I complain about, not policy. As I wrote in response to your first comment "Do you agree with the proposed policy, which with the important exception of the ZLB knockout was similar to the Balls pre-election policy?" (3) "One thing Labour can learn from it opponents is consistency and simplicity of narrative. The alternative narrative should be that now is the time to invest in the future, and the public sector must take the lead in this." I will repeat my last comment. I understand your position. But by attacking McDonnell's policies when they would be what any Labour Chancellor in their right mind would implement harms your cause.
DeleteTom Wilkinson.
DeleteYou man this piece by John Cruddas
http://labourlist.org/2015/08/labour-lost-because-voters-believed-it-was-anti-austerity/
All he does there is report research into voter attitudes. If I told you that the majority of people do not support unilateral nuclear disarmament, would that mean that I supported it?
At no point in that piece does Cruddas endorse Osborne's policies. He says
"We can seek to change the views of the public, but it’s best not to ignore them."
It says something about the current state of the UK Labour party that that bland statement of the obvious is portrayed as unacceptable propaganda.
Again, can you give me one quote by any Labour MP endorsing Osborne's austerity? One will be enough.
S W-L
The economic policies floated by Corbyn and McDonnell have not been very impressive so far. Corbyn's ban on dividends? McDonnell's workers right to buy? I would be surprised, indeed astonished, if these things came from you or other members of McDonnell's 'panel'.
SH: Different subject: this post talks about austerity. I'm glad you do not persist in arguing that I have said things that I have not, or failed to do things that I have done.
DeleteOn Labour MPs supporting austerity, let's start with the 21 MPs who refused to vote against Osborne’s fiscal charter, including Liz Kendall, Ben Bradshaw, Frank Field, Tristram Hunt, Margaret Hodge, Chris Leslie …
DeleteI think the fiscal charter was and is a ridiculous stunt of no relevance at all. It was just a political device to embarrass Labour.
DeleteWhich is why 21 MPs abstained.
McDonnell had previously said he would back it.
So no, MPs abstaining on such a ridiculous measure is not a statement backing Osborne's austerity.
I am still waiting for one example of that.
I agree the charter was a stunt and if the MPs who abstained did not intend to indicate support for it then that's good. It's also true the McDonnell did not handle it well. His initial endorsement made so many criticisms of it that I thought he intended to propose a set of amendments exposing its stupidities one by one. In the end voting against was better: sometimes you can try to be too clever in politics.
DeleteRather than claiming there are Labour MPs who back Osborne's austerity it would be better to say that some have been reluctant to oppose it. The worst example of this was the debacle that Harriett Harman led the party into when she decided to accept cuts to tax credits. Corbyn rightly reversed policy on this with the overwhelming support of party members and indeed with enough public backing to force Osborne into a retreat. I doubt if any Labour MP would now dare to advocate such cuts.
Corbyn's election was a decisive step to defining a clear stance against austerity.
Should we have an 'open door' policy on migration?
ReplyDeleteI am inclined towards one, but that is just my prejudice.
What would be the economic consequences of letting everyone who wants to come to the UK?
UK unemployment is falling, the economy is growing.
ReplyDeleteWhat, exactly, are these 'investments' that economists are almost united in calling for?
Simon W-L: A number of people in your comments section, including myself, have pointed out how New Labourites are not and never have been on the left of politics, and as such they should be honest with us and themselves about this and leave the Labour Party to stand as independents.
ReplyDeleteNew Labour was responsible for the 2008 crash, not because of proligacy, but because they continued the right's policies of under-regulating the financial markets.
It would be greatly appreciated if you could refer to any Labour Party members who support austerity as "right wing Labour politicians" or similar, because no-one actually believes that they are on the left.
Do you think that Labour should be a broad church?
DeleteReply to SWL (Mainly Macro):
DeleteFirst, apologies for the late reply, especially given the irony of asking you to speed up the comment approvals process and then taking a week to answer your quick response to my comment!
My short answer to your question on Labour being a broad church is "No; assuming that the church is broad enough to include people with a right-wing as well as a left-wing ideology".
And the long answer:
I think that Labour should be a party of the left only and should include no elements or compromises with the right, since the problem at the moment is the notion of the centre of politics, whether it be centre-left, centre, or centre-right. All three of these so called positions represent a disavowed right-wing point of view, since they miss the point that a left wing outlook is fundamentally opposed to a right wing one as it advocates completely different forms of power structure and their subsequent economic incentives.
Since this centre point doesn’t exist, any attempt to move toward it will result in a move to the extreme right, with the resulting kinds of economic collapse that occurred in 2008. The notion that we just need to tweak the current capitalist system to make it fairer and more efficient is unwise, since the right wing power structures that it engenders, and that in turn are engendered by it, will never allow such tweaks to be made.
New Labour, as guided by Anthony Giddens, is the perfect example of a group of people who are trying to fool either themselves or the electorate (or the big Other) into thinking that they hold a non-ideological point of view of the world while at the same time promoting policies (such as the continued under-regulation of financial markets and Public/Private Partner Initiatives) that are obviously right wing in nature.
If both major parties of a country are on the right of politics (and with one of them using the term ‘centre left’ to disavow its true position) then the feedback loop of the rich becoming proportionally richer will get worse, and the only realistic way to counter this is a via left wing system of market regulation and wealth re-distribution.
I’m not for one second saying that such a system would be easy to implement given the current political environment, but it seems like we’re reaching a point where the present financial situation might last indefinitely or somehow get worse, and more and more people are getting desperate for change as a result. This increase in people being opposed to the current situation and its underlying politics (a rejection of the notion that ‘you can’t beat the system’) could succeed through sheer numbers and good organisation, since the 1% consists of around 99 times less people than the rest and the internet is providing communications processes that weren’t previously available.
So the need for a purely left-wing and non-broadchurch Labour Party is driven by two main factors:
1. The electorate needs to be given a greater amount of choice between various political outlooks, with the main ones being ‘left’ or ‘right’. At the moment the Labour Party has a left-wing leader who is being gradually influenced by its right-wing members to compromise on his and his supporter’s position, so if that carries on then the electorate will not get a straight choice between left and right, and then we as a country will not know what the majority really want.
2. A need to stop the collective disavowal where we pretend that the right-wing nature of Blairites is somehow hidden from everyone except us. It might be arrogant for me to assume that everyone sees the world the way that I do, but it would be more arrogant to assume that they don’t. Hillary Benn and Co are right-wing politicians and everyone knows that they are, so they should have no place in a large-scale left wing political organisation. No-one is convinced by the pretense, so let’s stop pretending that they are.
Sorry that this comment went on a bit long. Maybe it’s time I got my own blog.
I have enjoyed listening to junior doctors who voted Conservative at the last general election (and presumably the one before) saying how they have come to realise the effectiveness of the propaganda machine that has been used against them by the Conservative party and its media in the face of the evidence (see LRB blog, 'Jeremy Hunt’s Way with Statistics'
ReplyDeletePaul Taylor 10 February 2016 for a corrective).
By the time the next election comes along, those hard-done-by junior doctors will be fully qualified and are likely to have a different outlook again.
DeleteThe usual leftist paranoia.
ReplyDeleteAgree with all that Simon, except for the government borrowing bit. The government, in the form of the consolidated Treasury and its wholly owned Central Bank, does not have to borrow its own currency, it has a bottomless pit of the stuff. It can spend up to the limit, at which the private sector can supply goods and services at stable prices and full employment. Taking account of the rate of credit creation it allows by private sector lenders.
ReplyDeleteQE did, its job in as much as it raised asset prices, and that is all it could do. The fact that it did not increase aggregate spending in the economy, has confirmed that monetary policy is a blunt, inefficient, central bank tool. Fiscal stimulus is far more effective, but unfortunately is controlled, currently, by laissez faire, neo-liberal politicians of the Dickensian era. Hence, austerity and deficit hawks; plus, a slice of public sector asset stripping and flogging off, to the Conservative party's, spiv city of London mates!
The Treasury does not have to borrow its own currency from anybody. The Treasury does not have to issue Gilts and Treasuries to match its deficit spend; it does this voluntarily! The Treasury does not have to pay interest to anybody; it does this voluntarily. The private sector has no "risk free" assets of its own, the Treasury gives it a tit to suck on.
It is time to take the central bank, back into the Treasury and use the base interest rate tool "for emergency only".
Learn how to use taxation properly. "Tax bads not goods" as Prof Randy Wray says. A central bank can only ever vary the average maturity period of fiscal assets; there is little else it can do.
Idiotic moves like negative interest rates prove the point. A negative interest rate is a tax on bank reserves. The very reserves that QE has been trying to increase!!! That cost on the banks business, can only be recouped by getting its customers to pay for it on loans. Banks have no room to reduce retail interest paid below the miniscule rates they currently pay to savers.
"One thing Labour can learn from it opponents is consistency and simplicity of narrative."
ReplyDeleteThis is, I think, what did for Labour at the last election. I mean if you've managed to be detrimentally and convincingly labelled as both anti-austerity and austerity-lite then something has gone seriously wrong with the message.
The SNPs position, ironically, is the one that they should have adopted; have a simplistic anti-austerity message up-front, and then a more nuanced position that could be left to the small print. Having the nuanced position up front just failed to inspire their base and confused everyone else.
Exactly. In a way I wish that this were not so for many reasons. But as long as one side replaces sensible economics with pre-Keynesian homilies, and the media takes them seriously, I see little choice but to fight on the same ground.
Delete"One thing Labour can learn from it opponents is consistency and simplicity of narrative. The alternative narrative should be that now is the time to invest in the future, and the public sector must take the lead in this."
ReplyDeleteWell said. And I will add that the same dynamic has played out in the United States. One of the more egregious political errors the Obama Administration has committed in recent years is to rhetorically concede to austerians on the desirability of deficit cuts in the short term. As a result, we've had continued concern about "out of control government spending" at a time when interest rates are at record lows, discretionary spending as a % of GDP has reached record lows, and the output gap has been allowed to persist for far too many years. All that while opportunities to improve energy, water, transport and telecommunications systems abound.
I have just returned from the US, and driven on your roads, so I know what you mean.
DeleteThis is no longer between right and left, but between neoliberal and the anti-neoliberal. There are many neoliberals in the Labour party, there, one imagines, as a fifth column. They are certainly not there because they're on the 'left'. Corporations now are so large they can reward self-interested politicians far better financially than the electorate can. Perhaps the days when obeying laws made by central government was a sensible approach to the social order are behind us.
ReplyDeleteI think this is unfair. There are many who genuinely feel they cannot win an election based on an anti-austerity ticket, but are in no way neoliberal.
DeleteIf this is true (that 'many' on the left are 'in no way neoliberal', are genuinely anti-austerity BUT think this policy direction will not win a General Election) then they are, as Sir Humphrey would put it, 'under-briefed' and deserve to be sidelined or bypassed until they catch up with what you have been teaching. The fact that you may like them as people does not alter their poor grasp of the subject, does it?
DeleteVery much agree. However , given that most journalists and politicians are not economists, what is needed is a simple statement and narrative showing that current austerity policies do not make macro economic sense. Economists being ( almost) united is unfortunately not enough; a simple yet persuasive narrative needs to be created and then repeated until the predominant media narrative of "there is no alternative" / balance the books is genuinely challenged. I know it's not intellectually challenging; I know it's an argument that I ( for one) thought had been won in the 70s and 80s; but it clearly needs to be restated and the academic economists have the opportunity now to do a great service.
ReplyDeleteI agree totally. But the harsh, political reality is that, even if Labour manage to frame a succinct narrative, the leadership team - because of their person political histories and the confusion of the past 6 months- are too vulnerable to attack from the Tories to be the ones to take this message to the electorate. It's going to take an extremely skilled politician, who has the required gravitas to be instinctively trusted by public, to turn round Labour's economic reputation and halt the juggernaut of the Tory message that has been ploughing on for years. Most of the electorate- particularly those that Labour must target to win in 2020 - vote on sentiment, backed up by facts, rather that the other way round. Labour does have a couple of people who stand a better chance of success than JMcD and JC, but, in the present situation, they cannot develop a high enough profile.
ReplyDelete( I am not an economist, and I really appreciate your blog).
My analysis is relevant to anyone in the Labour party, and not just to Corbyn supporters. Indeed, the sooner anti-Corbyn people join the anti-austerity fight, the more likely they are to win back power.
DeleteA very powerful blog from a leading macro-economist. All Labour MPs and SPADS should take note.
ReplyDeleteThis is illustrative of the post-perestroika crisis within the global left: The so called knowledge workers, as a class, took over the management of society and declared politics and politicians to be redundant. Political economy or the concept of economic management based on political consensus was declared a dirty phrase along with socialism and economic planning. The vast experience and theories of socialist planning and construction, as well as the management of socialist enterprises organizations were declared as Satanic hearsay or intellectual sins. Even the unconventional wisdom of Prof Galbraith who theorized on the convergence of apparently diverging systems has been long forgotten. The new generation of economists, social scientists and the so called knowledge workers are under compulsion to look at politics and socialism as blocking economic development and consider these as sins against humanity. I think we have plenty to learn from the past experience of socialist countries and multilateral institutions.
ReplyDeleteDo you mean 'over the last 5/6 years' of Tory government?
ReplyDeleteYes - see reply to first comment.
Delete‘Invest in the future’ is the best forward-looking narrative but we also need a convincing story of what went wrong under New Labour. I would argue that inadequate financial regulation permitted over-indulgence in speculative bets with other people’s money that then went wrong, crashing private credit markets and forcing up public debt. Osborne is wrong not just on austerity but also in rolling back financial controls imposed since the crash.
ReplyDeleteAn important link between these two stories is housing, with inadequate supply and excess debt-driven demand driving up prices and creating securitised assets ripe for speculation. Rising property prices are also a major factor in rising inequality. The exact story varies from country to country (restricted supply is a larger factor in the UK than elsewhere) but financial markets extended the risks globally (e.g. European banks investing in US sub-prime markets). So the forward narrative should emphasise ‘build more homes’ as a central element of ‘invest’, not just to meet growing need but also for its macroeconomic benefits.
A clear story on financial regulation also supports the case for co-ordinating monetary and fiscal expansion by addressing the risk that this could become inflationary, which still bothers many economists even though it is today a distant prospect.
now your bit about moderating comments doesn't appear (when I share this on Facebook), but nothing else seems to either, which is a pity. I think you have hit the proverbial nail.
ReplyDeleteThe Canadian election was fought in part on this ground, with the New Democrats (traditional democratic left) arguing for balancing the budget to gain "credibility." Canadian liberals ran explicitly on running a deficit for public investment, and won (three-way election, but still...) NDP in Canada lost a lot of credibility with their austerity claims.
ReplyDeleteI think this is important evidence for those who believe that austerity rhetoric always wins.
Deleteof course, the conservatives have only been in office for 5 years, so it seems a bit harsh to have a go at them for 10 years of underimvestment.
ReplyDeleteExcept that their plans are for 10 years of underinvestment!
DeleteYou’ve got to be right that the anti-austerity message can’t just be based on a macro-story. Nobody has found a convincing one that penetrates the media firewall.
ReplyDeleteIt’s a pity, because maintaining social spending and local public services must be one of the better ways to keep up GDP in a recession, and faster-working than investment.
I still think that one macro argument which might have some traction is based on a story about the changes in the financial balances of the economy in a recession - if households are cutting spending in order to reduce their own debt, and if companies are hoarding cash rather than investing, then cutting the public sector deficit can only make things a lot worse. People might also connect with the consequences of deficit-cutting for the balance of payments. The government could do everyone a service by keeping its own spending up or cutting taxes, and still cut the deficit/GDP ratio in reasonable time. No-one really explained that, apart from the SNP, and their credibility didn't suffer.
Labour’s austerity-lite just added to the lack of credibility of its own leader, and did nothing to address people’s disgust at the cosying-up to bankers that went on under Gordon Brown.
To back up a clearer anti-austerity message, something based on ‘investing for the future’ has to be a reasonable starting point.
But the problem is that few people have confidence that the money won’t be wasted. “Give us your money and we’ll invest it wisely” won’t play well with voters who feel that their own budgets are really squeezed.
Especially if people remember things like HS2, the NHS computer system, the Millennium Dome, the public-private partnership for the London underground, individual learning accounts, personal pensions, Trident missiles and most other defence projects….
Maybe I’m unduly influenced by Crewe and King’s recent book ‘the blunders of our governments’, but they reviewed a lot of these projects and conclude that the Westminster political system is peculiarly bad at delivering large-scale public investments.
What seems to matter in avoiding these sorts of disasters is careful planning, wide consultation and time spent on serious preparation. These are also vital elements in convincing the public.
So taking time to prepare a well thought-out investment plan, having convincing examples and being able to explain this clearly will be very important for the credibility of the anti-austerity message.
"Maybe I’m unduly influenced by Crewe and King’s recent book ‘the blunders of our governments’, but they reviewed a lot of these projects and conclude that the Westminster political system is peculiarly bad at delivering large-scale public investments.
ReplyDeleteWhat seems to matter in avoiding these sorts of disasters is careful planning, wide consultation and time spent on serious preparation."
Project failures are common in this country and take place in both public and private sectors, under all political parties, and the reasons for failure are well known, and never learnt, and usually located in poor top-down management.
Today we have the ongoing disaster that is Universal Credit. The latest being the announcement that benefits claimants must use the Internet to apply, or pay for a premium rate phone call - as though everybody can use the Internet, and has enough money to afford it or the premium rate lines, especially if they are stuck in the inevitable queue.
I think equating public investment with only large scale projects is a big mistake. Ask some of those whose homes have been flooded for example.
DeleteTo Simon WL: A couple of things:
ReplyDelete1. Is it possible to lift the waiting times between us writing comments and you approving them? It just seems like we can't get a decent discussion going on here with other commenters. I find it strange that a company owned by google (blogger.com) doesn't have sufficient measures in place to automatically filter out the bad stuff, and save you the need to check through every comment before publishing them.
2. The solution to the problem of the (New) Labour profligacy myth is for the current leadership to admit that the 2008 crash _was_ their fault; not because they overspent but because they allowed our gamblers to take too many risks with our money.
This would allow them to discredit both the Blairites who are currently undermining the party's return to its core ideals (the one's who seem to be all over the place by never explicitly saying they are pro-austerity, but will imply it by saying that they should be 'seen to be economically responsible' by the public), and the Conservatives who are still under-regulating the markets. Seems like a win-win solution to me, and I can't see why Corbyn and Co wouldn't make use of it.
1. Can anyone help on this. I would love not to have to moderate comments, but I started doing so after my site was blocked by some filters because of links contained in span that got past the blogger firewall. Any suggestions?
Delete2. That is exactly what Miliband did, but it sounded like 'yes it was our fault'!
Reply to [Mainly Macro19 February 2016 at 04:18]:
Delete1. Thanks for looking into this; if you can get it working I think your blog will benefit hugely from the increased discussion. I kind-of assumed that blogger's filters would work like gmail's anti-spam filters and as such would be easy to implement, but perhaps not.
2. Instead of sounding like "it was our fault" he should have actually said "it was our fault...for behaving too much like the Tories!". Corbyn's surge shows just how much support there is for an anti-Blair, anti-right-wing-in-disguise strategy to work right now. Miliband might not have felt that it would have worked in 2015, but he at least changed the party's electoral system to allow Corbyn to try it out (pity that Corbyn keeps compromising with the people that he should be outing though).
Now even The Economist is endorsing the essentials of a radical expansionary macro approach - see leader and briefing in tomorrow's edition. It's all there: fiscal/monetary fusion, helicopter money, more borrowing, more investment, higher wages.
ReplyDeleteThe austerity case is collapsing around its supporters as the deflationary risks multiply.
But this message has not got through to the political commentators in the non-partisan media.
DeleteThat's why it's so important to develop a credible narrative that can be expressed concisely and explained briefly, then to repeat it at every opportunity from doorstep to TV studio. 'Austerity-lite' (whatever it meant) could never do that but 'invest in our future' can.
DeleteBy the way, in case you missed it, a more sophisticated apologist for austerity emerged here: https://www.gov.uk/government/speeches/permanent-secretary-to-the-treasury-on-the-general-theory-at-80
ReplyDelete