Where Austerity Fails, Corbynomics Can Succeed

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Why Corbynomics can succeed

By Michael Burke

Previously published here on Socialist Economic Bulletin

The debate surrounding Labour’s leadership contest is being marred by name-calling and red-baiting. Perhaps this is inevitable but it is regrettable. Britain remains in an economic crisis, which has now entered its eighth year. A more productive course would be to discuss how to end it.

A marker of that crisis is that per capita GDP is still below where it was before the crisis began in 2008, as shown in Fig. 1 below. This remains the weakest recovery on record and the year-on-year growth rate has slowed from 3% to 2.6%. This follows a period from the end of 2012 onwards when no new austerity measures were imposed. Renewed austerity on the same scale as in 2010 to 2012 means there is likely to be a similar slowdown.

Fig.1 Per Capita GDP

The Tory strategy is more of the same, which one commentator called a Captain Bligh policy, “the floggings will continue until morale improves”. This policy is supported by virtually all the mainstream press. Unfortunately, it is also supported by 3 of the 4 candidates for Labour’s leadership. They abstained on the Tory Welfare Bill the centrepiece of the government’s latest Budget. Only Jeremy Corbyn stands on a clear anti-austerity platform. His economic policy can be found here

(pdf). The Economy In 2020_Jeremy Corbyn

Longest-ever crisis

No-one alive today has ever experienced in a longer economic crisis in Britain. The nearest comparison for the length of the current British economic crisis was at the end of the nineteenth century and the Long Depression. As per capita GDP has not recovered it is extremely difficult for median average living standards to rise. On the contrary, the austerity policy serves to work in the opposite direction by transferring incomes and wealth from poor and middle-income layers to the rich and from labour to big business. So, the latest Budget included a further cut in the Corporation Tax rate to 18% while cutting £12 billion in social protection to the most vulnerable in society.

The Tory policy is straightforward. These transfers of income known as austerity will continue until the business sector is making sufficient profits for it to resume investment. The crisis will be paid for by increasing the rate of exploitation. The austerity mark II of the latest Budget is not because there is still a public sector deficit, as this will fall as it does everywhere even if there is moderate nominal GDP growth. Renewed austerity is necessary because business is not yet willing to fund an investment-led recovery.

The level of investment in the British economy was £295 billion in 2014, exactly the same as the pre-crisis level of 2007. But the economy is actually larger 4.2% larger (keeping pace with population growth, but no more than that). Therefore investment is declining as a proportion of GDP. Consumption, not investment is leading very weak growth and this is not sustainable.

Yet the profit level has also recovered and accounted for 37% of GDP in 2014, compared to 36.1% in 2007. So the Tory policy is not working. Profits have increased by 6.8% in real terms since 2007, but investment is unchanged. Fig.2 below shows the official estimate of the profit rate in the non-financial sector versus the proportion of GDP devoted to business investment. These are strikingly indifferent results for 5 years of austerity policies. The profit rate has only barely returned to its pre-crisis level and is well below profitability prior to this century. The same is true for business investment. Both of these are a recipe for continued slow growth.

Fig.2 Profit rate and business investment

The profits recovery has been greater than the investment rebound. As a result, the extremely high level of uninvested profits has actually grown. The level of uninvested profits in the British economy was £355 billion in 2014, compared to £261 billion in 2007. This is the main brake on a robust and sustainable recovery. Andy Haldane, chief economist of the Bank of England says that firms are ‘eating themselves’ by refusing to invest and instead paying out ever-greater proportions of profits in shareholder dividends. This has been a recurring theme in SEB, and we might add the enormous increase in managerial pay and bonuses which are also a factor. The remainder is deposited in the banks, where it fuels ongoing speculation in financial assets, stocks, housing and commodities.
Unfortunately, it is this Tory strategy that 3 of the 4 contenders for the Labour leadership have endorsed. They have no principle difference with the centrepiece of Tory strategy, cuts to social protection ‘welfare’, privatisations and cuts to corporation tax. The recovery from crisis will be funded by workers and the poor.

This is an extremist economic policy. In the first phase of the leadership campaign it began with an attack on public spending of the Blair and Brown years, placing the candidates not only to the right of New Labour but to the Tories of the time, who effectively endorsed New Labour spending.
Economically, it also places those candidates to the right of Thatcher, who both spent and taxed more than New Labour as a proportion of GDP. It is perhaps worth recalling that main rates of taxation were significantly less regressive even when Thatcher left office in 1990 than they are under the current government (and that many of them were made more regressive by New Labour).

Table 1 Main Taxation Rates- Thatcher versus current

Source: HMRC

This wholesale adoption of the key planks of an economic policy of a government to the right of Thatcher has been compounded by the refusal to oppose the Tory policy of cutting £12 billion from the ‘welfare’ bill. This is widely understood as a direct attack on the living standards of the poorest and most vulnerable and will directly increase child poverty. The Institute of Fiscal Studies, which is not a hot-bed or radicalism but simply uses the Treasury’s own model of the distributional impacts of Budgetary measures, was explicit in arguing that the Budget would increase child poverty.

Yet these measures were not opposed by the Labour frontbench or by 3 of the 4 candidates for leadership. Even the Blairites used to boast that they had reduced child poverty. It is more than a rhetorical question, but also a vital political one to ask if the Labour Party supports increasing child poverty, what is it for?
 


Corbynomics 

Jeremy Corbyn is the only candidate who is not proposing extremist economics. His policy aims to promote growth through increased public investment, funded by progressive reform of the current taxation system, and attacking the abuses of the £93 billion in annual payments for ‘corporate welfare’ in subsidies, bribes and incentives to the private sector.

At the same time he opposes any attempt to make workers and the poor pay for the crisis and rightly argues that the deficit would close naturally with stronger growth. This poses a different way out of the crisis than the one supported by the Tories and the Labour frontbench. His campaign and platform corresponds to a mood inside the Labour Party and wider society. The Tories only won 24% of the electorate’s vote in May because only a minority supports their policy. Labour got fewer votes because it had no alternative.

It used to be the case in the period of economic expansion before the crisis, that to some extent ‘a rising tide lifted all boats’. Even if the labour share of national income declined continuously from the 1980s under all governments, at least living standards for the majority in work were rising. That is no longer the case. The entire austerity policy means that there will be no rise in living standards for the majority until big business sees fit to invest once more. That is, only after having made workers and the poor pay for the crisis and a renewed fall in living standards.

 It is this policy which the Labour Party frontbench has signed up to. It is a shock to many in Labour that the verbal commitment to match Tory spending is a real one, even when that means supporting an increase in child poverty. Many are quite rightly revolted by it.

By contrast, Jeremy Corbyn’s economic plan is a moderate, logical and fair one. Big business has the resources to fund the investment the economy needs and as they refuse to invest on a sufficient scale, government will use some of their resources in the interests of society as a whole. Workers and the poor should not pay for a crisis they did not cause. Jeremy Corbyn’s plan for state-led investment offers a way out of the crisis.

Thinking of Joining Labour? Join us!

Thinking of Joining Labour? Then Join us!

Many people have been surprised at the support shown for Jeremy Corbyn as a candidate for leader of the Labour Party. The truth is, he is different and refreshingly so.

Now this new-found optimism, – this spark – is igniting the hopes, and yes aspirations of thousands of caring, people around the country. Hard Left?  This is the language of the Tory press, and we need to use our own vocabulary. Jeremy Corbyn is not hard, he is compassionate. He is not extreme left – his policies are  moderate, pragmatic, sensible, socially desirable and formulated to bring justice, fairness, equality and opportunity to the people of this country. (policy link). He offers security to the disabled, sick and elderly. He gives hope to the young with policies such as building housing, protecting the NHS, of a national education system, life-long learning free at the point of use, of equality and of taking on the neoliberal exploitative banking system and tax avoiders.

We have been so used to listening Labour Party entrenched in fear. We need to challenge that fear. It has been a struggle to fight from within but the tide is turning, and Blairites are  in the minority. The Tory press are petrified of Jeremy Corbyn – a good sign! He speaks honestly and truthfully. The Tories cannot cope! Heaven forbid the people might discover what has been going on. But ordinary people do know, and understand and that is why fewer and fewer people have supported Labour at the ballot box.

jeremy house of commons

This is not about one man, Jeremy Corbyn speaks of a team – it is about “we”, a Labour movement, where people matter and people will be listened to. So please join us, we need people just like you. And welcome! The future is ours.

Either by:

1. Becoming a full member (check out discounted rates for students and others):

http://join.labour.org.uk/

2. Becoming a ‘supporter’ by texting ‘support’ to 78555 (texts costs £3) or online here:

http://support.labour.org.uk/ (this is also the case if you are a member of a union which is not affiliated to the Labour Party)

3. Registering as a member of an affiliated union (free if a member of an affiliated union – see list here: http://www.labour.org.uk/…/trade-union-and-labour-party-lia…):

http://support.labour.org.uk/ (choose member of affiliated organisation option)

Please note, for all types of membership, you will need to agree to the statement:

“I support the aims and values of the Labour Party, and I am not a supporter of any organisation opposed to it.”

The deadline to register:

August 12th (but do it now!)

Disgraceful Academy Chain Head was *Sick* at GOOD OFSTED rating

Latest Twist on saga of Academy Chain Inspiration Trust

Latest News on Academy Saga

Previously posted by Jamie Smith here

“Leaked emails to a national newspaper show head of the Inspiration Trust felt sick at a Norwich school’s ‘Good’ Ofsted rating. ‘

There are increasing reports that Academisation has failed, and has always been a veil for back-door privatisation. Recently, Cameron suggested “coasting schools” could also be targets for his Academisation Programme. Academy sponsors clearly do not see schools as educational establishments, merely yet more public assets to be sold off. Hewett school’s OFSTED report is a tribute to the hard working children and teachers, and should be celebrated.  Clearly Dame Rachel De Souza does not agree.

The email correspondence seen by the Guardian newspaper between the head of the trust, Dame Rachel De Souza and its chairman, Sir Theodore Agnew in 2013 has lead to anti-academies campaigner and Norwich South Labour MP Clive Lewis to raise further doubts about the trust’s suitability as a sponsor for the Hewett School.”

Clive said:
“Why would a so-called leader in education feel sick at a school being graded as ‘Good’ by Ofsted?  Imagine how the children would feel if they knew the person who could be running their school next year felt ‘sick’ at them being graded as Good.”

“Being ‘Good’ is a cause for celebration, not dismay, and Dame De Souza should apologise for her remarks. Such comments will only increase resentment amongst the parents and community of the Hewett school who overwhelmingly stated they do not want the Inspiration Trust involved with their school.”

“I shall be writing to the DfE on this matter, questioning why they believe Inspiration and its chief executive are fit to run this school or any other for that matter. It also raises questions again about the politicisation of Ofsted gradings.”

The Hewett has been at the centre of a row locally, with a decision due imminently from the Secretary of State on whether or not the Inspiration Trust takes over the school.  Recent results from a local consultation overwhelmingly showed that local people were against the plans.

Clive has been supporting the “We Back Hewett” campaign.

From Cradle to Grave – Jeremy Corbyn’s National Education System

From Cradle to Grave – Jeremy Corbyn’s National Education System

It is seventy years this week, since the Labour Party achieved a landslide victory after the war. It must have been so exciting looking forward to peace, to the promise of a better world for ordinary people. Homes for all, and a National Health Service, a Welfare state.

Daily-Herald-27-July-1945Daily Herald “Labour in Power” 27th July 1945

Those days were remembered, in Think Left’s blog Academisation and the Demolition of our Education System

After the war, the hope was that the Labour Party would introduce policies which would change the lives of working class people, leading to a fairer society, and a fair education system was on their list.

It was not just the working class who knew things needed to change. It had been clear that there was a shortage of skills during the war, and this led to the 1944 Education Act  which led to the provision of free state education for all children from 5 -15.

The incoming socialist Labour government, led by Attlee, and inspired by Bevan, brought in popular policies, especially the introduction of a universal National Health Service, and an extensive social housing building programme. To the disappointment of many, a universal National Education Service was not an outcome, and this omission led to decades of disruption to an education service which, as I write, is now at a point of re-privatisation.

attlee mug

Attlee’s government did not go far enough to eradicate the class-ridden divisiveness caused the by privileges from private education and public schools. The state-funded education system introduced was a tripartite system of grammar, secondary modern and rarer technical schools. Selection at eleven would determine the course of a child’s life before even reaching puberty. Meanwhile, the rich and privileged continued to send their children to private and public schools, which opened the doors to an elitist society and via Oxbridge right into the heart of our political system, maintaining class divisions.

Had Attlee’s government made the brave decision to solve the problem of private and Church schools, and introduced a free universal education system for all, and eradicated private education, I believe it would have led to a fairer, and much more settled system which would have benefited all as the NHS has done.

But seventy years on, that dream is still alive. Jeremy Corbyn wants to see a National Education System. Corbyn wants to see investment in education system from cradle to grave. Education is not about training for a job, about ticking boxes and league tables. Education is about enriching our lives – and life long learning. It is fifty years since Harold Wilson’s inspirational Open University which opened doors for so many.

Sadly, Tory cuts and fees have taken the “Open” away and closed doors to this university without walls. Education should not end with a school certificate. There is so much knowledge and skills to share. Education benefits us all. Corbyn’s Education policy will put an end to tuition fees, and restore grants. Building on that, his plan for an NES and a life-long learning service will open up  education for everyone and enrich our lives and our society. And we can start this dream at the very beginning of an incoming parliament. This is exciting, positive politics and the spirit of ’45 is alive again.

Jeremy Corbyn writes  for Labour List

“The case for investing in early years education towards universal free childcare is overwhelming. A study by PriceWaterhouseCoopers a decade ago told us that in the long-term universal childcare would more than pay for itself – due to extra tax revenues from those in work and productivity gains. Politicians like to dress up in hard hats and hi-vis jackets on their pet construction projects, but lack the same enthusiasm for investment in social infrastructure.

In 2020 we should start by reversing the cuts to the adult skills budget and expand it into a lifelong learning service by adding 2% to corporation tax (still comfortably the lowest in the G7). This funding would be hypothecated to expand adult learning into a lifelong learning education resource. The extra tax revenues brought by a high skill, high productivity and high pay economy will fund further expansion.

A National Education Service will give working age people access throughout their lives to learn new skills or to re-train. It should also work with Jobcentre Plus to offer claimants opportunities to improve their skills, rather than face the carousel of workfare placements, sanctions and despair. We need a return to ambitious joined-up government.

While slashing college funding, George Osborne boasts of increasing apprenticeships. Yet too many are low quality, failing to give young people the transferable skills they need to get on.

It is clear that some employers are using apprenticeships and traineeships as a means of circumventing minimum wage legislation. This has to end. The minimum wage must be equalised across the board – with no poverty rates like the current £2.73 per hour apprenticeship rate.

Under a National Education Service, colleges should work in partnership with employers to mutually accredit apprenticeships and courses that offer high quality transferable skills. Councils and government agencies should also use public procurement contracts to guarantee good apprenticeships.

The best employers understand the business case for investing in staff – in increased employee productivity and staff retention – and that’s why it is right to ask business to pay slightly more in corporation tax to fund it, while still leaving UK corporation tax the lowest in the G7.

Government must play a strategic co-ordinating role in a modern economy. For too long the UK approach has been to stand back, ‘let the market decide’, then hope for the best. A National Education Service will be a lifelong learning service for a lifetime of opportunity.

How refreshing to hear positive , sensible policies from Labour. Jeremy Corbyn speaks, honestly, pragmatic, socially desirable policies. He challenges the Tory myth of austerity, and these are the policies people have been calling for. All Labour supporters should sign up and vote for Jeremy Corbyn, who is just what the Labour Party and the people of Britain need. He certainly has my vote, my best wishes, and hopes.