What if Labour’s pessimists are right

Want a blow by blow account of what happened at the first meeting of Labour’s Economic

Advisory Council? Before getting on to that, I thought it might be the right time to answer one comment that I have heard a lot since I accepted the invitation. Not the ‘it will damage your reputation’ line which I have talked about before, but this rather more practical one: as the new Labour leadership are almost bound to fail at the polls (see Hopi Sen for example), why waste your time?

There are two responses which I think are perfectly OK in themselves. First, election forecasting five years out is not a precise science. I do not underestimate the obstacles that the current leadership will have to overcome, but if defeat was certain would newspapers like the Sun be wasting front pages with character assassination? If general election defeat were certain under Corbyn they should be quietly hoping that the current leadership survives to fight it.

Second, with so much wrong with current government policy, it is important that the opposition has effective arguments. As we saw with cuts to tax credits, government policy can be changed. The better the arguments of the opposition, the more that might happen.

But neither of these are the best response to the ‘why bother’ question. Suppose the pessimists are right. What will happen next? There is a danger of lazy thinking here. The thinking goes that (1) the current Labour leadership will adopt a far left programme, (2) they will fail to deliver in the polls, and (3) the centrists will return in triumph and start afresh with policy. If we accept that (2) is right for the sake of argument, both (1) and (3) are way off.

Corbyn and McDonnell have to compromise with the parliamentary party. Compared to this, confrontation will only reduce what they see as progressive opportunities. Far better to play a longer game, where they seek to gradually shift policy to the left from the top but through consensus. If you think their primary objective involves cementing their position in the party by not compromising on policy, starting an open war with the rest of the parliamentary party and wholesale deselection of MPs then you still have not got over losing the election. (Of course this may not be true of all their supporters, and one of the tasks they have to deal with is in handling that.)

As a result, the platform they end up adopting will be one that nearly all Labour MPs can sign up to. Just as important, it will be one that most of those who voted for Corbyn can sign up to. The big divide will not be on the merits of the policies but on whether those policies and the leadership can win a general election. So suppose the pessimists are right and they fail at the polls, and Corbyn steps down. Who is more likely to win the subsequent election for leader of the party? Someone who accepts the majority of those policies, but appears to have more charisma and less history? Or someone who has opposed both the leadership and their policies over the previous few years, and wants to shift policy dramatically to the right?

I think the answer is pretty obvious. As Hopi Sen notes, public opposition to the current Labour leadership from within will not be forgiven by party members, so it is political suicide. The media will do their level best to hype any hint of division, but for the most part they will find it hard work. That was why the leadership election result was so dramatic a moment. It showed that you cannot lead the Labour party on a platform which is Conservative-lite when the Conservative programme is well to the right.

Which means, in turn, that a good deal of the policy positions and ideas that the current leadership develops over the next few months and years will survive, even if they personally do not. So for this reason as well, helping to contribute to that platform is not a waste of time, even if the poll pessimists are right.

As for that blow by blow account of the first meeting, you didn't really think you were going to get one did you?. But in case you feel really let down, here is a picture instead.

When economists play political games

I saw you talking to those people the other day. You really should think twice before being seen to talk to people like that.

Similar lines could be taken from countless novels about class, race or some other form of social exclusion. When I agreed to be part of a group that would occasionally advise the new Shadow Chancellor John McDonnell on economic policy, I must admit I hadn’t expected something like that to be said to me by economists I respect. Political hacks would say it for sure, but economists interested in promoting good policy?

Just to be clear, McDonnell’s group places no restrictions on what its members can say in public about policy. We are not required to support or endorse Labour policy. Indeed, to the extent that Labour does adopt a policy that any of its members disagree with, the group gives those members a slightly higher public profile if we make that disagreement public. As the media generally fails to distinguish good economic advice from political spin, a direct channel like this group seemed like a good idea, with no cost to its members except their time. Except ...

On Monday McDonnell announced a U-turn: he would no longer support Osborne’s new fiscal charter. The media focus, as ever, was on the ‘political shambles’ of a U-turn, with only the occasional suggestion that the charter itself was economic nonsense. (The body of this FT leader was an exception.) A few economists on twitter, however, suggested that this political shambles somehow reflected badly on the members of the advisory group. One described the members of the group being ‘branded’ by association. If other economists reading this sympathise with that view, you need to read on.

As this FT piece suggests, the new Labour position of not supporting the charter is likely to find general support among the advisory group. (We have not yet met.) Indeed, as I said to the FT, a huge majority of macroeconomists — particularly if they know something about fiscal policy — would recommend opposing the charter. I have no idea if the views of any of the group had any influence on this U-turn, but if it did that means the group is having some influence, which has to be a positive thing. Indeed, as I know some of those making this ‘guilt by association’ charge actually oppose Osborne’s charter, they should welcome the fact that we may have helped change Labour’s position. Instead they are saying his change of mind reflects badly on us!? It makes no logical sense, unless something else is going on here.

As I said in an earlier post, I am happy to give advice on macro policy to any of the mainstream political parties, whether I agree with their current macro or other policies or not. Over the past five or more years I have given public and private advice to Treasury officials working for the actual Chancellor. I feel strongly that governments should and can follow good macroeconomics whatever their political persuasion. For me to say I’m not going to talk to you because I do not like your policy on X would be as silly and childish as it sounds.

So what is going on with economists who would not blink an eye at me giving advice to a Chancellor whose policies I often (but not always) oppose, but suggest that when it comes to the Labour party there is some kind of guilt by association? It seems to me that they are, knowingly or not, part of a political game. The game is to give the current Labour leadership some kind of pariah status. If we were talking about a party like the BNP, that might make some sense, but for the main opposition party in which a radical leadership is going to have to reach a consensus with their less radical MPs it does not. Unless of course your primary interest is to support another party. Which is why the government and many journalists want to foster this pariah status frame of mind. It is a shame that some economists who are parroting this guilt by association line seem not to understand the political game they are inevitably playing.