What do the Labour Right think will happen if ‘they get their party back’?


To be honest, I’m a bit mystified by the pronouncements of the Labour ‘modernisers’. Their thinking doesn’t seem to make any sense.

In the last two weeks, since Jeremy Corbyn won the Labour leadership with 59.5% of the vote, we’ve heard Charles Clark say “It’s obviously been a very bad week for him.” (?) and that Yvette Cooper is waiting in the wings to take over as Labour leader if Jeremy Corbyn gets fed up with the job (?).

Much more ominously, there are ‘reports that elements of the British Army may rebel if Jeremy Corbyn is elected Prime Minister, and a serving general quoted as saying that “The Army just wouldn’t stand for it”.

Has it been a bad couple of weeks for JC?

Off the top of my head, he has put together a huge and an inclusive shadow cabinet, which comprises 52% women; made a very successful speech at the TUC and gained praise for his appearance at PMQs.  If that’s a bad week, then let’s have more of them.

However, as Phil Burton-Cartledge writes:

 ‘Driven by the press and then echoed by the broadcasters, the media assault on Jeremy Corbyn this week has perhaps been the most scurrilous, smeary, and desperate I have ever seen.’

Richard Seymour sees this as a continuation of what he calls Project Fear in which the Labour Right has tried to frighten JC supporters but he says:

‘.. there will be war in the Labour Party. Project Fear was just the panicked, clearly ineffectual start. And in that war, the right wing will have the backing of the media, the spooks, the civil service, and a good chunk of the membership.’

John Rentoul agrees that ‘..there won’t be defections. There will be a civil war instead.’

He continues to write of the Labour MPs:

‘How many of them could say, in their heart of hearts, that Corbyn should be prime minister?  Eagle is tribal Labour, but I know more than one MP, and there must be many more, who, asked to choose privately between Osborne, who is likely to be leader of the Conservative Party by then, and Corbyn, would reluctantly prefer Osborne.… But Labour MPs are not going to defect.  It is their party, and they intend to take it back.  It would be hard for them to fight an election with Corbyn as leader and, perhaps even more so, with McDonnell in a senior position, but they don’t think Corbyn is going to last.’

So the Labour Right’s plan seems to be at least partly based on Jeremy Corbyn getting fed up with their machinations and resigning.  Then Yvette will step into the breach, untainted by association with the Shadow Cabinet (unlike Andy Burnham who gained 2% more support than Yvette in the leadership contest).   It seems like a fair guess that the ex-ministers who flounced off (refusing to serve even before they were offered posts) intend to form a Shadow-Shadow Cabinet.  Charles Clark remarked in a television interview the party was preparing to fight the next election without the newly appointed leader.


So what do they think would happen then?  Do they think that the 49% of full members who voted for JC, and the 60k new members who have joined since JC was elected, will welcome Yvette, Chuka, Tristam, Liz et al with open arms as the saviours of the LP?

Isn’t it much more likely that they will be blamed for undermining JC and crashing the LP?

Quite apart from the logistics of Tom Watson being elected as Deputy leader and the likelihood of a new leadership contest, I would make a fair guess that there would be a mass exodus of JC supporters if Yvette were to be parachuted in… and how likely is she to be elected?  Even with Liz Kendall and Yvette’s votes combined, they gained less than 22%.

Nevertheless, according to Luke Akehurst’s ‘conventional wisdom’:

Some of his grassroots supporters will go through the same painful process of awakening and political education that led to many Bennite activists becoming successively Kinnockite then Blairite in the 1980s and 1990s. Their idealism didn’t survive repeated interaction with electoral defeat and hostile working class voters on the doorstep. It’s natural to want to win. And people get older and in many cases their politics matures.

Trade unions will get fed up with not being able to deliver on pay and conditions and public spending for their public sector members because we don’t have a Labour government (they may also get jittery if we lose councils as they would prefer to negotiate with Labour employers not Tories).

MPs will feel they have to act or the electorate will sack them.

At least, Luke Akehurst sheds a little bit of doubt – ‘if conventional wisdom does prove correct’…. What conventional wisdom?  What planet do these professional politicians live on?

Can’t they see that whatever else happens over the next 5y, the political landscape has changed.  Globally, social democratic parties’ collusion with neoliberalism is being rejected and the electorate is polarizing between the far right and the left.  If JC fails, the LP under a Blairite/Brownite, committed to austerity-lite will, almost certainly go the way of Pasok. They had already lost 5m voters by 2005… and now they’ve lost the two subsequent general elections!

I could say more about the hubris and extraordinary sense of self-entitlement that has been revealed by the posturings of the former LP elite.  However, least said…

As far as I can see it, the choice for the Labour Right in the PLP is to join in the democratic debate and put their weight behind JC as leader, or ‘win their party back’ and reduce the LP to a hollow shell.

To improbably quote Blair’s old friend and member of JC’s Shadow Cabinet:

Asked whether Mr Blair was “right or wrong” to say that Mr Corbyn “is not going to be prime minister”, Lord Falconer said: “I have no idea. What we’ve got to do, to try to do is to make Labour an effective opposition and we need to try to make Labour a party that the public think can govern.” 

However, there is a very real danger to worry about, and it is not the rubbish about the national anthem, rugby matches and so on.

With reports that elements of the British Army may rebel if Jeremy Corbyn is elected Prime Minister, and a serving general quoted as saying “The Army just wouldn’t stand for it”, it seems that some in our established institutions regard democracy as optional.  We are allowed to make our choice, but if they do not regard it as an acceptable choice then they may feel perfectly entitled to disregard it.

As Bernadette Mearden writes:

Does the British establishment, in its entirety, really believe in democracy? Perhaps for some elements, the best reply to that would be – up to a point.

So is there any hope for Democracy?  Noam Chomsky was askedWhat is your opinion on the emergence of figures such as Jeremy Corbyn in the UK, Pablo Iglesias in Spain, or Bernie Sanders in the US?  Is a new left movement on the rise, or are these just sporadic responses to the economic crisis?’  He replied:

It depends what the popular reaction is. Take Corbyn in England: he’s under fierce attack, and not only from the Conservative establishment, but even from the Labour establishment. Hopefully Corbyn will be able to withstand that kind of attack; that depends on popular support. If the public is willing to back him in the face of the defamation and destructive tactics, then it can have an impact. Same with Podemos in Spain.

Chomsky is right.   If the public is willing to back him in the face of the defamation and destructive tactics, then a left movement which reaches out internationally, and particularly across Europe, can create the conditions for a better world.  However, the call to fascism by the army general does not argue for an easy transition.  Before we get to that point, the Labour Right will have to decide whose side they’re on.










Blair’s Coup d’Etat or Why the PLP is so right wing


In the same way, as the dark side of the EU project was exposed by the Greek crisis, the campaign leading to Jeremy Corbyn’s staggering win of the Labour Leadership has exposed the gulf between the grassroots and the Westminster establishment.  So how did this happen?  Why are the vast majority of Labour MPs so far to the right of the grassroots’ membership?

The following review of political scientist Lewis Minkin’s book, The Blair Supremacy: A Study in the Politics of Labour’s Party Management  goes a long way to explain how the left were excluded from becoming MPs during the Blair/Brown era.  It is particularly insightful because the review is written by Alan Simpson who was a prominent left wing MP who experienced first hand the Blair years.


The Blair Supremacy under Scrutiny

By former Nottingham South MP Alan Simpson

Reading Lewis Minkin’s new book The Blair Supremacy: A Study in the Politics of Labour’s Party Management is like sitting alongside a skilled forensic scientist as he dissects the multi-layered elements that contributed to the death of the body in front of him.  This isn’t quite where Blair left the Labour Party, but it’s not far short.  The book reads like a thriller.   What makes it captivating is Minkin’s grasp of the scrupulous planning that went into Blair’s managerialist coup, which, for a time, took ownership of both the Labour Party and the country.  Minkin reports a ‘wry comment from Blair describing “New Labour” as “the newest political party on the scene and the smallest.  It has about five people.”’  ‘From within New Labour,’ Minkin continues, ‘the takeover of the party by this small minority was quietly and sometimes boastfully acknowledged to be a coup d’etat over the party.’

Minkin describes it as a ‘rolling coup’ in that ‘it involved a series of unilateral major moves over several years’.  These moves are what the book reveals.

I once described how the Blairite revolution turned Labour from a political party into a Tupperware party, but I was wrong.  The description is far too benign.  No one falls out of love with Tupperware, at least not in the way the country fell out of love with Blair.  Tupperware is also as useful to the poor as to the rich.  And Tupperware never stripped meaning and values from everything it touched.  Blairism did.  In doing so, it ruthlessly exploited (and then dumped) a lot of decent people whose lives had been devoted to the Labour Party.

Even today, many of these – MPs as well as party loyalists – have difficulty acknowledging how extensively, and cynically, they were taken for such a ride.  For them, the book should be compulsory reading.

If it has a weakness, Minkin’s analysis falls short only in the absence of a meta-narrative; this is something like explaining the Chilean coup without any reference to the USA. I shall return to this later.

Reluctant admiration

The Blairite plan was never just to lead the Labour Party, but to emasculate it.  To do so, every aspect of the party’s machinery of governance had to be subjugated to the leader’s whim.  Minkin takes the reader on a step-by-step journey through this process and the machinations that lay behind it.  Minkin describes the greatest unity of the small vanguard of ‘modernisers’ as their shared ‘negative appraisal of the party, including and particularly its affiliated unions and associated collective body – the TUC.’

Minkin’s dissection covers the entirety of my parliamentary life (and more).  It always puzzled me how, despite all the warnings and bollockings, I never got expelled from the parliamentary party.  Now I know.

It wasn’t that Blair’s ultras lacked a desire for purges; it was just that they screwed up more often than they expected.  Their ‘managerialist’ obsessions, which politically house-trained the party, created a space in which MPs, whips and others still backed away from pooing on their own carpet.  The machine knew that Blair would get the blame – ultimate proof that his control‑freakery had no limits.  And since protecting the leader had already displaced promoting the party as the Supremacy’s overriding duty, the hounds always got called off.

To be fair, some of this was also down to the wiser counsel of whips such as Nick Brown and George Mudie.  Both were better people than the Supremacy deserved, and it was good to see Minkin recognise this in his description of events.  I guess that many of the Labour rebels were also saved by divisions between the Blair and Brown camps, in what was to become the running distraction throughout the Labour years in government.

The Blair-Brown distraction

For me, the friction between these two characters – equally damaged, equally obsessive – was often a manipulated divide, spun out to lock the parliamentary party into the smallness of playground politics rather than the bigger canvas of real politics.  Loyalty invariably displaced integrity (or clarity) in the debates of the day.

Minkin captures this brilliantly in his description of the seminal moments surrounding New Labour’s first internal rebellion – the vote on lone parent benefits.  ‘Dealing with the issue of a cut in lone parent benefit became a significant landmark in the early management of New Labour in government, and had major consequences.  For Blair and Brown,’ Minkin surmises, ‘showing prudence and control on this was all the more important because the left-wing Campaign group appeared to them to be the driving force of a limited opposition.  They, the usual suspects, had to be faced down and publicly pulled into line some time or the other, so why not over this early issue and now?’

Minkin describes much of this as a tactical misjudgment on Brown’s part rather than a cynical move on Blair’s.  Standing in the middle of it felt slightly different.  Many of us saw no real divide between Blair and Brown.  Neither showed an ability to step back and accept they may have got something wrong.  Both were obsessed with demonstrating their power as leaders.  Loyalty and obedience became articles of faith, outside of which Labour’s world would crumble.

In the same way that the Mafia asks you to destroy something precious to demonstrate loyalty, Labour MPs were asked to give a kicking to some of the most vulnerable in society.  This was a difficult step for many to take.

For the machine, however, it was the first big test of their ability to put the squeeze on people; and there were members of both the Blair and Brown camps who loved it.  MPs could be leaned on, cajoled, abused or bullied, all in the name of loyalty.  Many had their constituency officials phoned and told to kick their MPs into line.  Some had their families phoned and told not to get too comfortable with an MP’s life because they would be thrown out before the next election.  All were told it was New Labour (i.e. Blair) that they owed allegiance to.  Conscience was a liability, not an asset.

Both Blair and Brown may have wished to run with their ultras’ demands for a purge of the 47 rebels who ignored these entreaties, but the impact on the parliamentary party was different.  Most were reluctant to expel those who went into a division lobby that their hearts told them they should have been in too.  It established an achilles heel that was (fortunately) to remain throughout the Supremacy.

Lies, damn lies and New Labour

One of the strengths of Lewis Minkin’s book is its description of how all the groundwork for this managerial coup had been done long before the 1997 election.  The machine may have been surprised by the scale of the Labour victory but it already knew that it would rule by manipulation and disinformation, rather than through a new era of democratic engagement.

When Blair talked of ‘an unbroken line of accountability’, he meant everyone, and everything, being accountable to him.  His (initial) personal popularity was played out in talk of ‘direct democracy’ – a leader connecting directly to the people.  It was a great way of sidelining every structure of accountability that the party had ever created.  Minkin describes this with painful accuracy.

Minkin details how ‘the Blair coup’ set out to turn the parliamentary left into ‘a sealed tomb’: one that would not be re‑opened by new, dissenting, Labour MPs entering parliament.  Under the guise of ‘improving the quality of candidates’, Blair’s machine filleted the panel of those approved for selection by ‘eliminating candidates who “appeared not to have a pragmatic line on policy disagreements”’.

At the heart of what Minkin calls the ‘rolling coup’ was Blair himself – vulnerable, charismatic, insecure and obsessive – the centrepiece of a giant political Ponzi scheme.  Truth was always a moveable feast.  Statistics, or supportive polling data, would always be found to justify the latest move to ‘marketise’ and individualise everything advanced by New Labour.  It wasn’t just Clause Four that Blair wanted shut of; it was the whole notion of collectivism.  Business, particularly big business, wanted none of it.

So it was that, under the guise of new social partnerships, huge tranches of the social fabric of Britain were transferred into the pockets of the private sector.  My only quibble with Minkin is that this was as much Brown’s agenda as Blair’s.  The debacle of PFI and PPP debts that remain tied round the neck of public services is their common legacy to the country, not just a Blairite one.

The shadow of Nuremberg

Without doubt Blair was a consummate performer, with an unparalleled ability to lie for any cause.  It is only fitting, however, that his greatest lie should be the source of his ultimate undoing. On most issues he simply moved on and the machine behind him swept contradictory evidence under the nearest carpet.  But war doesn’t work like that – not, at least, when it is a war of choice.

As the chair of Labour Against the War, I knew how far we had gone to bring real ‘evidence’ within the reach of MPs.  Weapons inspectors had come into parliament, assuring us they had no evidence of any remaining weapons of mass destruction (WMDs).  International diplomats had arrived urging more time, and more diplomacy.  We even circulated our own detailed pamphlet to all Labour MPs on the eve of the Commons debate, dismantling the claims made in Blair’s ‘dodgy dossier’.  But most of us knew that Blair had already promised Bush the war he was looking for.  Nothing was going to deflect Blair from his own jihadist inclinations.

Minkin is right in depicting the debate as one of Blair’s most outstanding parliamentary moments.  It was where he pushed ‘Trust me’ and ‘If you only knew what I know’ to its limits.  It was some achievement to get decent people to vote in ways that Nuremberg would have judged an inadmissible defence.

But the war, its consequences and the absence of WMDs turned out to be Blair’s unforgivable sin – the lie that will dog him to the end of his days.  Hubris had given the public, and the party, something to hate him for.

The meta-narrative

The only thing Lewis Minkin’s book lacks is a wrap-around.  For all we come to understand about the ‘how’ of Blair’s rolling coup, there is nothing that addresses the ‘why’.  It isn’t enough to put it all down to control-freakery.  To learn anything from this, we have to put it in a context.  Psychologically, Blair was always drawn towards wealth and celebrity, and has draped himself in more of it than can ever buy forgiveness.  His favoured acolytes all went the same way, becoming payroll beneficiaries in everything Blair privatised.  But the brains are to be found elsewhere.

My take is that Blair had long been groomed by the neoliberalism that was running away with American politics.  The agenda was not to make Labour ‘business-friendly’ but big business-compliant.  The global agenda of the time was about turning public services into corporate profit streams.

Deregulation of financial markets, the World Trade Organisation, the TRIPS agreement on intellectual property rights and a series of US adventurist wars were all part of a bigger project.  The creation of new global creatures – corporate citizens – required the creation of new cultural norms within which they could flourish.  Rights were to be transferred from citizens to corporations.  Duties went the other way.  Somewhere along this trajectory from citizens to serfs is where we are now.

Blair was not the architect of this.  His shallowness, vanity and venal interests just made him a willing partner.  The real Supremacy lay elsewhere.

Accolades to the invisible

Some, in parliament, understood this.  And it is in a tribute to them that I want to end this review.  The Campaign group of Labour MPs barely figure in Minkin’s book, but they were the only bolt-hole of real political thought that I found throughout my parliamentary years.  Some of their leading voices get no mention at all, yet they were the MPs you would always find on picket lines, at trade union and social movement rallies, on anti-war marches and at the forefront of campaigns to restore rather than exploit the planet.

Epitomised by Tony Benn, these were the Labour MPs – socialists – who set out to explain that we always had bigger and better choices open to us than the Supremacy would have had us to believe.  Of course, it is sad that neither the trade union movement nor the party had the courage to wrap itself around those holding out this bigger vision.  But if Labour is to salvage anything from the superficiality of the Blair experience it will be the knowledge that we cannot manage our way out of the current crisis, any more than we can shop our way out.

The world is locked into a series of crises for which corporate feudalism has no answer; crises not susceptible to individualised solutions.  Tomorrow’s security will only be found if we grasp just how interdependent we really are.  Solutions will have to be on the scale of a new post-1945 settlement – with the planet as much as ourselves.

Tony Blair was never going to be relevant to this.  But the very thing whose removal came to symbolise his rise to the Supremacy – Clause Four of the Labour Party constitution – could well be.  What if common interests and common ownership/stewardship turn out to be the only viable form of tomorrow’s politics?  Think about it: the return of Clause Four – in local, national and global terms.  Now that would really piss him off.

The Blair Supremacy: A Study in the Politics of Labour’s Party Management by Lewis Minkin is published by Manchester University Press. Alan Simpson was the Labour MP for Nottingham South from 1992 to 2010

Campaign briefing – CLPD Autumn edition 2015 issue no. 79

First posted in Red Pepper 

Related post – http://think-left.org/2012/06/04/new-labour-excluded-the-parliamentary-left-in-a-sealed-tomb/


Who says what about the NHS – Labour leadership contenders


With under a week to go till the Labour leadership election closes, how much do we know about the candidates’ positions on the NHS?

“PFI on steroids”?  More like an NHS debate on tranquillisers

By Caroline Molloy

first posted 4 September 2015 at openDemocracy

In last night’s last televised Labour leadership hustings, Yvette Cooper launched a broadside against Jeremy Corbyn’s idea of a ‘People’s Quantitative Easing’ to fund hospitals and other vital infrastructure, calling it ‘Private Finance on steroids’.

It’s obviously a soundbite she’s proud of, having used it earlier in the week.

But it’s a senseless, illogical critique.

Corbyn’s proposals to pump government cash into investment in vital public service infrastructure to boost jobs and the economy – are the mirror opposite of Private Finance, which sought private alternatives to government cash, even at the cost of inflated interest rates and inflexible, long-term maintenance contracts.

And logically, Cooper’s criticism only makes sense if you think private finance (PFI) schemes are ‘a bad thing’. (After all, you don’t criticise an opponent by calling their plans a super-powered version of a good thing!).

But – whilst Corbyn himself has put forward a powerful critique of PFI, and widely-praised proposals to save hospitals from it, Cooper shows no sign of thinking PFI is a bad thing.

Cooper was Chief Secretary to the Treasury in 2008/9 whilst it signed off nearly 50 new PFI schemes, including many in the NHS.

In 2009, she told parliament “PFI projects have consistently demonstrated value for money and high levels of user satisfaction in vital areas of public service delivery….” She added that it was best to stick with the PFI structure because the private sector will “continue to bear the risk of cost overruns and delays” (even as she handed the private firms a £2bn public bailout).

The Commons Treasury Committee disagreed, saying “Private Finance projects are significantly more expensive to fund over the life of a project…We have not seen clear evidence of savings and benefits in other areas of PFI projects which are sufficient to offset this significantly higher cost of finance.”

But Cooper appears never to have accepted these criticisms.

Even as she berated Jeremy Corbyn for ducking her questions about “free money” at last night’s Sky hustings, she ducked his question about whether she would pursue still more rip-off PFI, as her “credible alternative” to “printing money”.

And what of the other two Labour Leadership candidates?

Shadow Health Secretary Liz Kendall of course is always right on the New Labour message that Private Finance schemes were the only way to rebuild hospitals that had crumbled under Thatcher – an argument rejected by the BMA, the medical Royal Colleges, the National Audit Office, and campaigners, who point to the spiralling long-term costs now pushing hospitals like Peterborough and Barts to the brink of ruin.

Shadow Health Secretary (and former Health Secretary) Andy Burnham’s mood music has been different , and he has admitted that some PFI schemes were bad value (though when OurNHS asked him, he couldn’t name any that were good value). And when we asked him whether he would commit, at the least, to no more PFI, his team told us “that was a matter for the treasury” – hardly reassuring.

It’s a pity that in the debate the media has failed to properly grill the candidates on their position on PFI – just as before the election, they failed to ask Ed Balls if, having abandoned the idea of ‘invest for growth’ in favour of ‘no new government borrowing, even for capital projects’, he was still wedded to the ‘off-balance sheet’ trick of PFI (though experts suspected that is exactly what he meant).

Much of our media is befuddled on the NHS issues more generally – from privatisation and funding to staffing and the big questions of entitlement to comprehensive health care.

Corbyn is the only candidate to have signed the “NHS Bill”, developed by Professor Allyson Pollock alongside many other campaigners, and put forward as a cross-party bill by Caroline Lucas.

The Bill – which has won huge support amongst NHS campaigners – calls for THE restoration of the Secretary of State’s duty to ensure a comprehensive health service for all, which was finally abolished by Cameron’s 2012 Health Act.

The loss of this duty was behind situations like that in Devon, where last year the unaccountable and cash-strapped local ‘Clinical Commissioning Group’ tried to ban all obese people and smokers from having any routine operations on the NHS. And it’s behind the mounting rhetoric about the ‘undeserving’ (starting of course with politically unpopular groups like migrants, fat people and addicts) who should be made to pay for their health care.

Burnham has signed a Labour bill put forward by Clive Efford which provides some similar wording, and did manage to get a commitment to ‘restoring the Secretary of State’s duty’ into the health manifesto – though not the wider Labour manifesto.

Burnham won many friends amongst NHS campaigners for saying that “we let the market in too far” and that the NHS should be the “preferred provider” (along with charities). And for beginning to talk about privatisation (though too often the language was of ‘fragmentation’ or ‘top down reform’, which seemed a lukewarm language). Such language appeared a welcome respite from the Blairite mantra (still espoused by former Health Special Advisor Kendall, of course), that “what matters is what works”. The extensive evidence of privatisation’s unnecessary expense and failures is dismissed as ‘ideological’ by these ideologues.

But the Cross-Party Bill signed by Corbyn goes a lot further in saving the NHS from expensive privatisation. The NHS Bill calls for the hugely expensive and bureaucratic NHS ‘market’ of ‘Trusts’ competing with each other and private firms – a system Burnham and Cooper consistently voted for, and Corbyn consistently opposed – to be largely scrapped, as it has been in Scotland.

Meanwhile Burnham has repeatedly refused to say just how much the market and private firms should be allowed in to theNHS, or to speak out against plans currently underway to turn a clutch of NHS hospitals into independent ‘social enterprises’, or to address concerns that merging the NHS into already privatised social care might undermine our ability to see off further compulsory privatisation under existing EU law.

This integration of health and social care remains Burnham’s “big idea” for the NHS – an idea echoed by Kendall, Cooper, and indeed the Tories and Lib Dems. It’s a holy grail that has been chased for years, of course.

But worryingly, Burnham has been a lot clearer about his desire to leave a legacy of a ‘National Care System’ than he has about his commitment to ensuring that, whatever happens to social care, our ‘National Health System’ will remain comprehensive and taxpayer-funded, as polls show the public want.

Burnham told a Kings Fund audience that we would have to “have a big conversation” about what social care and health care we were entitled to, and how we pay for itafter the General Election.

And he recently told the Guardian that he wanted a “means-tested levy” to pay for his “integrated health and social care system”.

Perhaps Burnham didn’t mean to suggest that health care provision would in future be means-tested, just like social care. His personal manifesto, released a week later, was more carefully worded. But his lack of clarity and – yes – bite worries campaigners. When OurNHS exposed that the government was planning an inquiry into funding the NHS through means-testing, co-payments, insurance or other means than tax, Burnham’s response was curiously muted. Did the Shadow Health Secretary build on the widespread outrage at this apparent back-tracking on all Cameron’s lofty pre-election promises about protecting NHS principles? No – he merely asked for the “terms of reference” of the inquiry.

And whilst neither Burnham nor Cooper have shown quite Liz Kendall’s enthusiasm for an NHS funded through ‘Personal Budgets’ (an idea strongly redolent of Thatcherite vouchers and clearly opening the door to co-payments as with social care), there’s been no criticism from Burnham of this scheme, currently being rolled out by the NHS boss to millions of the sickest patients.

It is perhaps a little unfair to criticise Burnham for his silence on these issues, without acknowledging that (apart from Kendall’s cheerleading) the other candidates haven’t said an awful lot about them, either.

The failure here is the media’s. Despite being the number one issue before the election, little of this has come out in the debate. The candidates get away with mentioning the NHS only as part of a litany of great things about Labour they are proud of. They usually add in an emotive mantra about relatives that struggled in an era before the NHS, or couldn’t have survived without it.

This is no more convincing when it’s Yvette Cooper’s great auntie than when it’s David Cameron’s son. Without strong commitments to a comprehensive, universal, quality, ethical, timely and tax-funded, NHS, such mantras are merely a haze.

To be fair to Burnham, neither Cooper nor Corbyn have fully engaged with these issues, nor would they really be expected to understand the detail of issues outside their briefs. But Corbyn’s willingness to listen to the united voices of NHS campaigners who said “THIS Bill is a big part of the solution”, bodes well, if he should win.

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Corbynomics is the antidote to Speculation and Bubbles


Corbynomics and Crashes: Investment versus Speculation By Michael Burke

First posted 2nd September 2015

Words matter. But in economic discussion as elsewhere they are frequently abused. In economic commentary one of the most frequent falsehoods is to describe speculative activity as investment. Stock market ‘investors’ are in fact engaged in speculative activity. There is no value created by this speculation. The claim made by its apologists that it provides for the efficient allocation of capital to productive enterprises is laughably untrue in light of both recent events and long-run history. In fact, a vast number of studies show that that there is an inverse correlation between the growth rate of an economy and the returns to shareholders in stock market-listed companies.

The chart below is just one example of these studies, Fig. 1. The research from the London Business School and Credit Suisse shows the long-run relationship between real stock market returns and per capital GDP growth. The better the stock market performance, the worse the growth in real GDP per capita. The two variables are inversely correlated.

The Economist found this result ‘puzzling’. But it corresponds to economic theory. The greater the proportion of capital that is diverted towards speculation and away from productive investment, the slower the growth rate will be, and the slower the growth in prosperity (per capita GDP).

Fig.1 Stock market returns and per capita GDP growth


This is exactly what has been happening in all the Western economies over a prolonged period. SEB has previously identified a declining proportion of Western firms’ profits devoted to investment. The uninvested portion of this capital does not disappear. Instead, it is held as cash in banks and the banks themselves use this to fund speculation and share buybacks by companies (which simply omits the banks as intermediaries in the speculation). The effects of this are so marked that some analysts believe ‘financialisation’ is the cause of the current crisis, when instead it is an extreme symptom of the decline in investment and the consequent growth of speculative activity.

Stock market crashes

It is now customary in the Western financial press to routinely ascribe all aspects of the Great Stagnation to some failing in China. So, China’s fractional currency devaluation has been identified as the culprit of the recent stock market plunges, even though the 3% devaluation of the Chinese RMB followed a 55% of the Japanese yen and a 27% decline in the Euro.

The claim that the crashes were caused by China’s currency move has no factual basis. Fig.2 below shows the closing level of the main US stock market index in August. The S&P 500 rose from 2,083 to 2,102 in the 4 days after the RMB’s 3.2% devaluation which finished on August 13 (first arrow).

On August 19, the Federal Open Markets Committee (FOMC) of the US central bank released the minutes of its most recent meeting (second arrow), which was widely interpreted as indicating a strong likelihood that interest rates would be increased in September. The prior closing level for the S&P500 was 2,097 and it fell sharply thereafter. Following speeches by a number of governors of the US Federal reserve (who vote on the FOMC) questioned the need for an increase in rates, and the market has recovered in response. Yet other speeches pointing once more to a rate rise led to stock market falls once more, and so on.

Fig.2 S&P500 Index

But this uncertainty over US rate increases is only the proximate cause of the crashes. This sharp fall is a stock market verdict that it cannot easily absorb higher US interest rates. The current valuations for the stock market are based on official short-term interest rates of 0.25% and a dividend yield on S&P500 stocks of 2.24%. Even if rates were only doubled to 0.5% the level of the stock market becomes much less attractive. If rates were to rise towards 2%, the risky stock market’s dividend yield looks extremely unattractive compared to risk-free short-term interest rates.

There is a separate matter that the US economy does not look robust enough to absorb any significantly higher interest rates, but this hardly concerns stock market speculators. Fig. 3 below shows the pace of growth in US industrial production versus the same month a year ago. Production has slowed for a year and is down to a snail’s pace in the last 3 months, averaging less than 1.4% from the same period a year ago. The latest data show that the US economy is experiencing only modest growth, with GDP in the 2nd quarter just 2.6% higher than a year ago.

Fig.3 Growth In US Industrial Production


Despite the widespread hype about the British economy, the equivalent data on industrial production is growth of 1.5% for the latest 3 months compared to a year ago. For the Eurozone it is 1.2%. In China, industrial production has grown by 6.3% in the latest 3 months compared to the same period a year ago.

Corbynomics and crashes

Since 2010, the major central banks of the US, Japan, and the Eurozone have created US$4.5 trillion, Yen 200 trillion and €1.1 trillion in their respective Quantitative Easing programmes. The Bank of England has added £375bn of its own. Over the same period short-term official interest rates have been at or close to zero. Long-term interest rates have also plummeted. This has not led to a revival of investment in the advanced industrialised economies. After the short-lived stimulus in some Western economies to end the 2008-2009 slump, total fixed investment (Gross Fixed Capital Formation) has slowed to a crawl in the OECD as a whole, as shown in Fig.4 below.

Fig. 4 OECD GFCF, % change 1996 to 2013

Yet over the same period, the main stock market indices in the OECD economies have soared. The stock markets and real GDP are inversely correlated. The S&P500 index has effectively doubled since 2011. The Eurofirst 300 has risen by 55%, the Nikkei 225 in Japan has risen by 125% (boosted by currency devaluation) and the FTSE100 has risen by 25% (a poorer performance held back by the predominance of weak international oil and mining stocks). Data for 2014 is not yet available but the total cumulative increased on OECD GFCF from 2011 may not have reached 10%.

Corbynomics is the policy of attempting to address an investment crisis with an increase in investment. Its critics repeatedly claim that this policy will cause financial turmoil. In light of recent events this assertion ought to cause a wry smile. At the very least, the most powerful central banks in the world have to reassess their intentions on policy simply because of the wild gyrations in the stock markets. These have been accompanied by further large movements in global currency exchange rates.

The reason stock markets are so febrile, and policy so easily blown off course is that a bubble is being created in financial assets because of the combination of monetary creation, ultra-low interest rates and weak investment. Capital that could be directed towards increasing the productive capacity of the economy is instead being used to finance speculation; the worst of both worlds. This policy has caused inflation in financial assets such stock markets, in house prices and (previously) in commodities prices. But continued economic stagnation means that deflation is now the greater risk in the OECD economies at the level of consumer prices.

Corbynomics addresses those risks because its aim is to raise the level of investment in the economy. By increasing the productive capacity of the economy through investment-led growth it overcomes the weakness of the economy. By redirecting the flow of capital from speculation towards investment, it deflates the speculative bubble. So, to take an obvious example, by building new homes it provides housing and employment while deflating the house price bubble.

The root of the objection to Corbynomics is the insistence that the private sector, private capital must be allowed to dominate the economy in its own interests. But the current Western economic model is a combination of shopping and speculation, leading to stagnation. Corbynomics is the antidote to these; prosperity through investment-led growth.