Tag Archives: economics

Brighton Fringe – #MMT with the one and only Prof. Bill Mitchell #Lab17

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Many of us now realise that the scares about deficits and debt are nothing more than useful devices to justify cuts and sell-offs of our public services.  Austerity is a political choice.  There was/is nothing necessary about the last 7y of Tory asset-stripping.  If you’re in Brighton for LP conference (or any other reason) come and hear Professor Bill Mitchell explain how the economy really operates.  You don’t need to be a LP member and it doesn’t cost you anything to be informed by a world class economist.

Monday 25th September, 2pm until 5pm at the Brighthelm Centre (just a few steps down from Brighton station).

Why the ‘Magic Money Tree’ Matters

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 On BBC Question Time, the Prime Minsiter, Theresa May told a young nurse who hasn’t had a pay rise in eight years and is trying to earn a living that there was no more money, and that there isn’t a magic money tree. (See link)

The Tories know full well, that funds are available for the UK government to use as they think fit,  as we are a sovereign state, and have our own currency which the government releases for investment. But while in 2010 they made a public  fuss about a piece of paper which was saying ‘no money left’, they knew, all along’ what they wanted to do. They used this (ill-advised) joke to add credence to their Austerity agenda which has resulted in cuts so severe it has left people disabled suicidal, people homeless, and people who are working very hard, in poverty. Yet they  wanted those funds for the few, not for the many.

Since Margaret Thatcher’s cruel government snatched our children’s milk, and did not replenish our social housing, and decimated our industry,  and yet helped itself to public assets, the media has reinforced myths about mainstream economics. It continues in 21st Century, while  today’s Tories want to finish the job by, for example, cutting Police and Army personnel, and now they want to privatise our National  Health Service.

We cannot progress in redressing this imbalance  between rich and poor until these myths are exposed for what they are – just lies!

These are myths the Tories want us to believe ( see article) They are untrue, all of them

  • The state money system operates like our own household budget
  • Government spending relies on taxation and borrowing
  • The government needs to reduce the deficit, balance the books and save for the future
  • The government must learn to live within its means
  • The government has to cut public services like the NHS, education or welfare because we can no longer afford to pay for them   

The government is forever saying it’s the ‘taxpayers’ money which funds public services, and this just is not true. The government is the source of the money, and tax a tool for resdistributing  the wealth produced by our working people.   Once we accept this concept, then  we can see that Jeremy Corbyn’s Labour Party Manifesto is not a “Chritsmas Card List”, but a costed plan to invest in our society to rebuild Britain for the many, not the few. This is something which the vast majority want to see, but are still believing the Tory myths.

The Modern Money Matters website is a good source of information 

The Magic Money Tree Exists, Modern Money Matters

“Like the elephant in the room The Tree cannot be mentioned, because then the electorate might start asking awkward questions about public services — perhaps we should have some? — and taxation — are we overtaxed for the size of government we have, given that we still have people without work?

Once you know about The Tree you might have your politicians delay a casino build and build a hospital instead. You might let the rich people keep their coins, but stop them using those coins to reserve scarce doctors and teachers for their own purposes ahead of the general population.

The Tories want to privatise everything, and Labour want to hit rich people hard with taxation sticks. There are no doubt reasons for these fetishes that psychologists would find fascinating. But they are damaging to our nation. They get in the way of doing the job.”

In 1945, a Labour Government, after the ravages of war managed to invest in our society, and the will was there to do so. I believe the will is there now, but generations who have grown up believing what the Tory press have said,  do not realise this is all possible. Here is the Magic Money Tree idea of Labour’s Manifesto. Further economic explanations can be found as Modern Monetary Theory. (These are both known as MMT).

IMG_0939

Let’s dispel the Tory myth, and get the MMT idea of Economics out there. Then we start the rebuild. Our society has become so divided, we need to join together in creating a society for the Many not the Few.

 

 

 

Deficit Fetish: Just say “No!”

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Balancing Budgets: The Austerity Dogma

By John Weeks, previously published here on Piera

Twitter: @johnweeks41

Austerity NO

The Austerity dogma of George Osborne asserts that a negative balance between public revenue and overall public spending (deficit) is a problem requiring immediate policy measures to eliminate it.  He has gone further, asserting that the fiscal balance should be positive (surplus) when the economy is at or near its capacity.  His invariant form of “correction” is expenditure reduction (aka “austerity”).

He and his supporters give three justifications for this dogma.  There is the reductionist argument that compares public sector budgeting to households, so obvious to the austerity-advocates that it requires no explanation  Households must balance their books (“cannot spend more than their incomes”), and the same applies (or should apply) to governments.

Anyone who believes that households must spend no more than current income has never bought a house, sent an offspring to university or found her/himself between jobs (due to redundancy, firing or voluntary employment shift).

Statistics refute the like-households argument. Households across the income distribution spend more than their incomes, early and often.  That is why PwC projects average UK household debt to reach £10,000 at the end of 2016 excluding mortgages.  The very limited truth in the false comparison comes at the bottom of the income distribution, where households have no choice but to engage in desperation borrowing (see study by Johanna Montgomerie).

The more fundamental falsifier of the household-equals-government argument is that the UK government can borrow from itself and a household cannot. The government of a country that has a national currency is not constrained in its spending by revenue flow alone.  However, macroeconomic conditions can impose binding constraints to public spending, which I discuss at a later point.

Superficially more serious is the argument that public sector deficits put upward pressure on market interest rates.  Government bond sales compete with private borrowing, interest rates rise and private debt become more expensive and investment declines (“crowded out”).  Whether this represents an important macroeconomic interaction in general remains subject of empirical debate.

At the moment it is obviously irrelevant because the Bank of England rate is below one percent and money market rates hardly higher.  Indeed, a rise in interest rates could bring benefits, such as higher returns to pension funds.  Were the UK government concerned about “crowding out” it has an obvious way to avoid it, borrowing directly from the Bank of England (“monetizing” the deficit).

Another frequently encountered assertion is that the Chancellor should avoid public sector deficits because they generate inflationary pressures.  There exist concrete circumstances when this would happen, but at the moment the overall rate of inflation in the UK is slightly negative, and the “core inflation rate” is barely over one percent.

Finally, the deficit has been falling (albeit slowly), and for fiscal year 2014/15 was less than £60 billion (below 5% of GDP compared to over 10% in mid-2012).  With inflation at zero, government borrowing falling, and no empirical or theoretical basis for the dangers of deficits, further budget cuts would qualify as gratuitous and ideological.

Balancing Budgets: Anti-Austerity Variations

Among critics of Chancellor Osborne’s policies appear two counter proposals for fiscal policy guidelines, 1) borrow only for investment, and 2) balance the budget “over the economic cycle”.  Close inspection of these suggests that they are variations on the austerity argument rather than refutations.

The first would maintain balance or a surplus for current expenditure, and fund public investment through borrowing by sale of government bonds in the financial market or borrowing from the Bank of England.  In mainstream economics the former has no impact on the supply of money, while the latter increases it by the amount of the borrowing.  The qualifier “in mainstream economics” is necessary because a considerable portion of the economics profession rejects the implicit assumption that the supply of money is independent of the level of output.

We need not wade into the money supply argument to see that the “borrow only to invest” position accepts that deficits are a problem, though limiting the problematic role to the current budget, total revenue flows less non-investment expenditure.  In practice the distinction between current and capital (investment) expenditure is far from black and white.

By usual definition investment includes all expenditures that increase the capacity of the economy, now or in the future.  There should be no argument that much of education and health spending does exactly this, which explains the origin of the term “human capital”.  However, all but the building and equipment component of health and education fall into current expenditure.  This arbitrary definition treats activities of doctors, nurses and teachers analogously to those who repair and maintain capital equipment rather than improve human health and skills.

Finally the borrow-only-to-invest policy encounters a serious problem.  When economic contraction causes public revenue to fall below current expenditure, should a government cuts in public services and social support?  If so, this policy becomes a variant on the Chancellor’s austerity dogma.  And not making cuts implies that the policy cannot be implemented.

The second approach also considers deficits as problems needing correction, over the economic cycle rather than continuously.  The concrete guideline is that the fiscal balance can be negative when the economy falls into recession, then moves into surplus as it recovers.

In practice this policy framework flounders on several empirical and analytical flaws.  First, defining the length of the period over which the sum of deficits and surpluses sum to zero defies consensus.  Without clear definitions of the beginning and end of a cycle this framework cannot be implemented without arbitrary guidelines.

Both approaches offered as a counter to austerity suffer from the same fallacy as the dogma itself.  Any rule requiring a fiscal balance must apply arbitrary assumptions and definitions in order to define when the outcome conforms to the rule.  Supporters of budget cuts have attacked critics of austerity as “deficit deniers”.

The meaning of this accusatory term remains elusive, but it carries the implication that opponents of expenditure cuts “do not care” about the deficit and/or do not consider it a problem.

The counter proposals might be seen as being “semi-denials”.  Those advocating balancing the current budget deny the need for revenue to cover public investment.  The cyclical balancers deny any necessary to correct deficits in the short run.  Arriving at sensible and rational fiscal rules requires abandoning budget balancing as a goal and converting it into an outcome derivative from effectively achieving macroeconomic stability and high levels of employment.

The Role of Taxation

The various versions of deficits-are-a-problem might be epitomised in the cliché, “governments must live within their means”, with disagreement arising as to whether “their means” refers to the current or overall budget and/or the relevant time period.

Aversion to deficits comes from an analytical confusion, the commonsense generalization that the purpose of taxation is to fund public expenditure.  For the government of a country that is part of a currency union (e.g., the euro zone) or a regional or local government the generalization is valid.  These governments do not control the monetary system in which they operate their fiscal policy.  The generalization is not true for a government of a country with a national currency over which it has control either directly or via the central bank.  I call the former shared currency countries (SCC) and the latter national currency countries (NCC).

A SCC government has two methods of funding expenditure, taxation and selling bonds to the private sector (typically to banks and other financial institutions).  The SCC government must pay the debt service, interest and principle, to private bond holders from taxation for the life of the bond.  For SCC governments borrowing is similar to what households and businesses do.  The cliché “living within means” could be applied, meaning precisely that the combination of current outlays and debt service must be consistent with revenue flows.

NCC governments operate within quite different fiscal constraints, possessing an additional funding option and a quite different goal for fiscal policy.  The core purpose of fiscal policy for an SCC government is to provide necessary and discretional public goods, and fund these in a sustainable manner.  The core purposes of fiscal policy for the NCC government are to maintain macroeconomic stability and increase productive capacity for the medium and long term.  The NCC government uses current expenditure to achieve stability and capital expenditure to enhance capacity.  Any expenditure by an NCC government, current or capital, obtains its funding from taxation, bonds sales to the private sector, and/or borrowing directly from the country’s central bank (“monetization”).

The defining characteristic of borrowing from the central bank is that in practice the debt need never be repaid;  for example, the Treasury could sell the Bank of England 100 year bonds (though in practice the maturity period is much shorter), or “roll over” the bonds (issue new ones to replace those that reach their redemption date).  The Bank of England holds about 25% of UK public debt.

The short run goal of macroeconomic stability determines the mix of these three funding alternatives.  If the economy falls into recession with deflationary price pressures the NCC government increases expenditure to compensate for the fall in private demand, covering the increased outlays through monetization.  As the economy approaches full capacity with inflationary pressures, monetization ends.  Rising tax revenue from the expanding economy replaces bond sales.

Whether the public budget is in balance should be of no concern for the NCC government.  If economic activity is declining or stagnant, public borrowing should increase.  Whether this results in a deficit on current expenditure is little importance, for the policy purpose is recovery not hitting a fiscal target.  An overheating economy calls for increased taxation, perhaps generating an overall surplus.

Balancing Policy rather than Budgets

For the British government, and all other NCC governments, expenditures and taxation have different policy functions and motivations.  Current expenditure delivers public goods and services to the population, and regulates the short term stability of the aggregate economy.  Simultaneously achieving those two goals represents the main challenge of a rational fiscal policy.

The capital budget, public investment, enhances capacity and only in extreme circumstances such as the threat of high inflation would be adjusted for short term policy goals.  How our government funds any part of public expenditure is derivative from the overall goals of short term stability and long term capacity enhancement.

The rational approach to fiscal decisions is to balance policy not budgets.  The fiscal balance in itself is neither a target nor an indicator of successful policy.  Whether the fiscal balance is positive, zero or negative reflects the outcome of this rational approach.  This is not deficit denial.  It is rejection of deficit fetish.

Nottingham meets the Modern Robin Hood, Jeremy Corbyn

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Jeremy Corbyn has met tremendous support for people all around England, Scotland and Wales. This has not been seen in the Labour movement for generations.

Take a LOOK at the queues waiting to listen to Jeremy Corbyn speak in Nottingham, home to the original Robin Hood.

This has been nothing short of astonishing. LISTEN to the event here, in high quality audio.

Unite the Union hosted the rally  in Nottingham and  present these Speakers:

Jeremy Corbyn MP
Richard Murphy, Tax Research UK and Economics Advisor to Jeremy’s campaign
Manuel Cortes, General Secretary TSSA Union
Annmarie Kilcline, East Midlands Unite
Tony Kearns, CWU
Nadia Whittome and Umaar Kazmi, young Labour members
Chaired by Cheryl Butler, Leader of Ashfield District Council

From this NG Digital site you can listen to the excellent quality audio of this  event, or download the file on ITunes

Jeremy Corbyn’s campaign for the Labour leadership has electrified the contest and brought new ideas to a stale political system. He is Labour’s best chance of defeating the Tories at the next election and bringing back voters lost to the SNP, the Green Party and UKIP.

Margaret Thatcher’s Biscuit Tin – and Austerity

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Margaret Thatcher’s Biscuit Tin and the Austerity Scare

From Pam Field and Syzygysue

The Austerity Scare is the greatest myth, by which the rich have deprived others of their basic needs of survival (Maslow), by some argument that those are unaffordable. How can it be justified to deny anyone these basic human rights, while others have vast resources far beyond their own personal needs? This wealth, and hence power was gained  by the systematic acquisition of resources by unjust means, much as the barons claimed land to be their own.  (Primary accumulation – dispossession of low income people from their high value land). By what right can anyone claim to have a right to own earth when others cannot?

Benn EstablishmentHaving power of the law permits reinforcement of privilege so that attempt to brainwash the public  through whatever means is available – education, press, advertisements, commercialisation  – or force. So the very rich have the means to control all the sources of food and sustenance, the media, the security and defence. Fear of destitution leads to social division, and of course with disunity no resistance can be effective. What needs to be done to redress the imbalance?

There are sufficient resources on this planet for everyone.  Oxfam  believes there can be enough food for everyone…

IF we give enough aid to stop children dying from hunger and help the poorest families feed themselves

IF governments stop big companies dodging tax in poor countries, so that millions of people can free themselves from hunger

IF we stop poor farmers being forced off their land and we grow crops to feed people not fuel cars

IF governments and big companies are honest and open about their actions that stop people getting enough food.

It is shameful that in Britain, the seventh richest nation, has 25% of children living in poverty, many people are homeless and one million people are relying on food-banks. It is a scandal created by gross mismanagement, or by wilful neglect. The Tories recall the Victorian days of Empire, like the cheering and flag waving Falkland task force, without addressing the fundamental truth.

 Any society can only measure its wealth by the poorest, and its strength as the weakest.

Having seen the horrors man can inflict on man in WW2, there was a united resolve which followed that it should never be repeated, and a determination to build a fair society fit for everyone. Rationing was accepted after the war to ensure a fairer distribution of scarce resources. Meanwhile Attlee’s Labour government invested in full employment, massive house building, a welfare state and National Health Service. There was a growth in the economy, despite the ravages left by war.

“The psychology of competition and love of Peace are uneasy bedfellows” Aneurin Bevan

One of the saddest legacies of Margaret Thatcher’s premiership must have been the destruction of optimism in society, the killing of compassion, and comradeship, and communities.  It was replaced with isolation, resentment and fear engendered by soaring unemployment, caused by destruction of manufacturing industries while attacking on trade unions, so making the working class further malleable by the ruling elite.

The idea that the nation’s wealth was somehow like the family budget, pennies hidden away in a biscuit tin in the larder, just to be taken out and spent on a trip to Margate when the factory shuts down for a fortnight in August, can be understood as people prioritise their needs by similar means.

So, unbelievably, Margaret Thatcher sold the idea to the nation, that the money which the government has to spend on schools and hospitals, is like the microeconomics of a family budget, or the ins and outs of her parents’ grocers shop. And since that time the biscuit tin idea comes into play, “There’s no money left” as Cameron carried that piece of paper to hustings in May. “The nation can’t afford it, we’ve all got to tighten our belts.”  “We’re all in it together!”

Now, where does wealth come from? It comes from the labour, skills, arts, and talents of people, from research, technology and from the natural  resources of the planet. Did Margaret Thatcher expect the nation to believe that they can be parceled up and saved in the biscuit tin?

Biscuit tin

As the cuts to basic provisions became chipped away, so fear sets in, the law of the jungle, competition, scrambling to get to the top, developing addictions to more and more material goods to satisfy a lack of something fundamental – happiness. It might seem a cliché, but this is the background to the shallow, inadequate shells we are becoming, soulless commodities suspicious of some others and hatefully despising the rest.

“The successful as well as the unsuccessful are unemancipated in the competitive society” (Bevan)

It doesn’t have to be like this. Of course money is not hidden away in some virtual biscuit tin, no longer gold hidden in vaults to be hauled from place to place. Austerity is totally unnecessary and we can change it at will once we accept what is wrong.

Money is a tool by which goods can be shared around ensuring management of resources, rewards for labour and supply, and trade.  Money doesn’t originate  from the taxpayer. It comes from the government spending.  The US dollar and the UK pound are sovereign monetary systems under control of their respective nations.

Neoliberal economics have led to the greatest inequalities in human history, based on the mystique, that market forces will adjust to give the best possible outcomes.

Considering the unhappiness, poverty, and isolation, in what sense is the current state of the UK, the best of all possible worlds?

We are told that there is no money left so that public services must be privatized and government spending cut but the actual problem is that corporations are hoarding their profits, not investing in well-paid jobs in the real economy and instead are chasing fictitious capital.

Real wages have not increased since the 1970s and consequently there is insufficient demand in the economy, and increasing levels of personal indebtedness.  Forget the national debt, it is household debt that is the real danger!

This is the slowest recovery of GDP per head on record. See graph (Touchstone Blog)

As Simon Wren-Lewis writes:

‘Anyone who continues to describe what is happening in the UK as a ‘strong recovery’ either has not bothered to look at the data, or is being deliberately deceptive.’

What is desperately needed is not ‘Austerity’, but a fiscal stimulus and if the banks and the corporations will not invest in the real economy, then the government should act as ‘lender of last resort’.  In other words, a stimulus such as that proposed by Jeremy Corbyn, with investment in jobs, the NHS, education and mitigating climate change.

The allegorical Frank Baum story “The Wizard of Oz” reflects clearly how the pursuit of the yellow brick road “gold”, leading to the “Emerald City” revealed merely that there was no magician, just a helpless, powerless man who admitted the capitalist ideal was a fallacy. The main characters had lacked belief in their own limitations, lack of courage, brain or heart, and believing therefore that others had power. And in that idea, we can see that economy needs to be run for the benefit of the people, not according to the vagaries of the so-called ‘wisdom of the markets’.

So what is necessary is that

… First we need to accept that economy is something which sovereign governments have the power to organise.

… The financial system has been abused for too long.  It needs to be under democratic regulation and control.

…The economy needs to be balanced and controlled to allow people and societies to function sufficiently so that all members can afford the essentials of Maslow, live comfortably, with a little bit extra for everyone to enjoy their leisure.

…There needs to be a commitment to full employment.

… Basic needs such as food, water, energy, transport, health and education need to be under democratic control.

IT IS THE RESPONSIBILITY OF GOVERNMENT to ensure adequate distribution of these services. Therefore nationalisation, and/or transparent democratic control is necessary.  To treat food, water, and medical supplies as commodities to be gambled with is an obscene and unacceptable concession to the very rich.

Cutting spending during recession/depression only delays or forestalls a recovery.  The allegory of Alice in Wonderland describes falling down a rabbit hole, and seeing the world differently, and that is what is needed – the opposite of austerity. Jeremy Corbyn’s Peoples’ Quantitative Easing is about the government producing money, as we have our currency, the government can do that,  but instead of this going to private banks, this money goes directly to the people wherever it is needed – for building, homes, schools, hospitals – and creating jobs. In other words, a responsible state in which everyone would have access to needs being met, and poverty eradicated.

We are told that the deficit is too big but the reality is that it is still too small.  Inflation is only a risk once the last unemployed/underemployed person who wants or needs a job is employed.

Since private companies are not providing sufficient employment, we need government to invest in a job’s guarantee, a buffer stock.  This would have the advantage of underpinning a living wage that the private sector would have to match in order to attract workers.  It would also allow individuals to maintain or upgrade their skills.  It would decrease the mental health problems associated with unemployment, and finally, it would mean that all sorts of worthwhile activity, which would not be undertaken by the private sector, could occur.

The anger and  resentment has been smouldering for a long time. The lack of opposition to neoliberalism and austerity has disillusioned the electorate, so many no longer see any point in even voting.  In August 2010, riots broke out in English cities, in London, and Birmingham. This August, Jeremy Corbyn has reached the ordinary people,  and has channelled that anger in such a way that people are united, and we are a witnessing the greatest political force in 64 years, a tidal wave which can sweep away neoliberalism and bring our communities back. The Labour Movement is reborn. At last, there is hope.

The politics of divide and rule, of resentment and ” benefit scroungers ” is where we have lost our way.  It is not about politics of envy.  It is about the politics of justice. We need brave political leaders to reunite our communities, put away the law of the jungle, and bring back the Spirit of ’45, the sort of social cohesion which followed WW2.

The biscuit tin myth has to be tackled,

and the sooner , the better.

Why a vote for Corbyn is a vote for electability

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Why a Vote for Corbyn is a Vote for Electability

From Neil Schofield, Previously published here

Three days before the 1983 election, I attended a rally in Oxford Town Hall. It was in the days when it was still possible to come in off the street to a Labour leader’s rally, and the speaker was Michael Foot. The atmosphere was revivalist, a packed hall cheering on their much-loved leader.  How could Labour possibly lose in the face of such enthusiasm?  But of course the result is history.

More than thirty years on, I found myself attending Jeremy Corbyn’s leadership campaign rally in Cardiff – according to media coverage one of the largest political gatherings in Wales since the Miners’ Strike.  The atmosphere was incredible – more than a thousand people crowded into the hall, standing room only, people with decades of Labour activism behind them, others coming to politics for the first time.  At its heart, a speech by Jeremy Corbyn that was passionate and powerful – but also detailed; this was not rabble-rousing but thoughtful and argued through.  He was given a massive ovation by an eclectic audience.

Jeremy Corbyn addresses a rally in Cardiff, 11 August 2015

And I reflected – could we be deceiving ourselves in the same way that we were in 1983?  Was this just an audience of the converted, wanting to be enthused, oblivious to the harsh political realities outside?

But this time the fundamentals feel very different.

In 1983 the Thatcher myth was at its most potent. A year beforehand, the Task Force was still steaming south to the Falklands. The Labour Party had been split by the defections to the SDP. More importantly, the intellectual tide was flowing overwhelmingly in Thatcher’s direction; these were the halcyon days of neoliberalism, with the economy emerging from deep recession and the sale of council houses proceeding apace. Only weeks after a crushing electoral defeat, the situation for Labour, although obviously extremely difficult, is different in a way that Corbyn’s critics – especially those within Labour claiming he is unelectable – appear not to have understood.

To understand why you need to think about the wider political background.  In Britain – as in much of the Western world – the set of ideas that is often lumped together under the name “neoliberalism” has a near complete hegemony in Government.  Policies are being pursued – especially following the economic crisis of 2007/8 – that involve reducing public expenditure, shrinking the non-coercive state,  on the promise that this is the only way to engineer a sustainable economic recovery.

But that recovery is palpably not happening.  Faced with continuing and swingeing falls in living standards, increased Government deficits in the face of shrinking economies; increasingly insecure and short-term employment; continued asset price bubbles, especially in housing, to the point where the essentials of life are becoming increasingly unaffordable; and, most of all, globally increasing inequality to levels not seen for more than a century, it’s obvious there is a huge problem.  It’s perhaps best exemplified by the fact that, in Britain at least, the number of people in full-time work who are falling into poverty is rising substiantially; the basic deal behind market capitalism, that a worker can achieve a decent standard of living by selling their labour, increasingly does not hold. Morevoer, as a strategy for reducing the deficit, it has failed spectacularly.

At the same time, the social democratic parties that presided over the welfare capitalism of the 1950s and 1960s are in deep existential crisis.  In Britain, despite the cruelties of the coalition, Labour suffered a crushing defeat in the 2015 election.  It was wiped out in Scotland, once its heartland.  The official reaction to this defeat has been to assume that Labour can only win by moving its policies closer to the Tory government – on social security, on immigration, above all on deficit reduction.  In other words, the ground over which mainstream political debate is conducted is being narrowed, while increasingly those excluded from that debate are bearing the brunt of the politics of austerity.

There is a comment usually ascribed to Karl Rove about the politics of the liberal social democratic opposition to neoliberalism: “when we act, we create our own reality. And while you’re studying that reality – judiciously, as you will – we’ll act again, creating other new realities, which you can study too, and that’s how things will sort out.  We’re history’s actors …. and you, all of you, will be left to just study what we do.”  Change that last “study” to “follow” and you have New Labour’s dilemma expressed with brutal clarity – it’s still fighting a war when the battlefront is elsewhere.  And people can see that; its language no longer inspires because reality has moved on.  Talk of “electability” is two elections out of date; it has nothing to say in particular to those who have walked away from political engagement in bewilderment and, quite often, disgust. In 2015 the Conservative Party gained a Parliamentary majority with 24% of the electorate; Labour was wiped out in its Scottish heartland by a party offering the appearance (if certainly not the reality) of being anti-austerity; but its leadership still says that electoral success lies in adopting the language and framing that wooed barely a quarter of the electorate, while millions of the young, the poor, the most vulnerable stayed at home – or voted SNP, Green or (especially in Labour’s traditional heartlands) in despair for UKIP.  Labour held millions of conversations, but, it appears, at no more than the most superficial level. Labour activists and organisers talk about the doorstep; but often seem to me to be afraid to have real conversations that offer challenge and hope.

What the Labour leadership election has done is blown that open.  In previous elections, candidates from the left have stood – and even encouraged from the Right to stand – in order to ensure a “debate”, after which the inevitable win for a centrist candidate has ensured that Westminster usiness as usual can be carried on with an apparent mandate.  Corbyn’s candidacy – apparently conceived in the same vein, as the means to a debate – has changed everything and brought people flooding into the Party.

Why? Because, for the first time in decades, a candidacy in a Labour leadership campaign has connected with intellectual, political and social currents outside the immediate Labour Party – something far bigger than the Labour Party has in recent years become, but – I’d argue – something much closer to the purpose for which Labour was founded.  It’s not about Corbyn as an individual – decent and principled though he undoubtedly is – but about the values he espouses, and most of all about the fact that he articulates a challenge to the politics and economics of austerity, in a way that reaches out to a far bigger audience than existing mainstream politics.  This is about taking control of the political narrative; about offering, not a reaction to neoliberalism but an alternative to it.  Corbyn has tapped into value systems that have remained confined to the fringes or expressed quietly by Labour members in defiance of their Westminster masters; a value system that found expression in the vote for the SNP in Scotland.

And it won’t do to talk about entryism – it’s just not credible.  Michael Crick of Channel 4 News has offered a fine and useful analysis – summed up in a sentence, there just aren’t that many Trots.  This is something bigger, to which the Labour mainstream appears to have no response whatsoever.

There is a narrative that states, Tony Blair won three elections for Labour. We can therefore only be electable from the centre.  That first of all misunderstands the nature of triangulation – it was about the use of conservative language to provide space for progressive political measures; something that New Labour achieved significantly in its pre-Iraq phase.  But more importantly it misunderstands the fact that the economic fundamentals have changed.  New Labour was based on harnessing growth from a largely functioning economic system to pay for moderate redistribution; but, after the 2007-8 crash that option has not been available – the extent to which market capitalism is broken is much more obvious. Real wages have fallen to the point where in-work poverty is rampant (making talk of being “the party of work” basically frivolous).  There is, in the UK, an effective investment strike in which capital stock is not even being renewed.  Given that the UK has a sovereign currency, all of these issues are far more significant than the deficit; yet Blair’s successors seem unable to move beyond that.  Their mindset is in the mid-1990s, unable to come to terms with what has happened since then.

Electability comes down, in the end, to relevance.  Corbyn’s insurgency, going way beyond the mainstream Labour party, has connected with trends and thinking that lies completely outside the Westminster bubble.  Above all, it has been founded in hope – a belief that things can be different and that the Labour Party can be, once again, the vehicle to make that change. In the meantime, conventional social democracy is, throughout Europe, in crisis because it cannot break out of the neoliberal framing of economics and politics – it allows itself to be defined by its opponents.

That brings huge challenges.  To win elections, form governments and effect change you need structures and discpline.   The Green Party’s disastrous track record in Brighton shows what happens when you have neither; Green councillors, faced with tough decisions, either threw a strop or threw in the towel.  Labour is a party of Government – its unique genius has been to bring together a broad progressive group of often diverse people and to build on that diversity to deliver in office – and has to do so much better than that, and the need to take tough decisions in the face of conflicts and trade-offs is going to require discipline from supporters and, from its leaders, a commitment to openness and accountability a world away from New Labour’s top-down institutional authoritarianism.

But the possibility is there.  For Labour, this looks like a choice between a high-risk vote for a leader who can lead its adaptation to a very different world to that faced by Tony Blair twenty years ago, and who can help it to lead the debate, and electing a leader who cannot see the changes going on outside the Westminster bubble and offers no real alternative to the neoliberal value system.  For me, the latter is simply a guarantee of further decline; it is the former that offers the way to move the debate away from neoliberal territory and to reconnect with the voters who have in their millions turned against a political system that simply doesn’t offer an alternative.

Obviously I do not know what the outcome of the election will be, and I suspect it will be a much closer affair than the media currently suggest.  But whoever is Labour leader will have to face some fundamental decisions; the genie cannot be rebottled.  The choice seems to me to be simple – a choice between harnessing and leading the surge in support that has brought hundreds of thousands into the Party – high risk but with the possibility of effecting real change –  or a turning away back inside the Westminster bubble and a slow but inevitable decline.  I want to see the Labour Party as a force that can deliver real change, and which does not accept austerity as inevitable; which can react to the fundamental changes in political discourse the Corbyn surge exemplifies.  And that’s why I’m backing Jeremy Corbyn as the electable candidate.

The Motives behind Corbynomics – Tax Research UK

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The Motives behind Corbynomics

As seen by Economist Richard J Murphy, of Tax Research UK,

Previously published here

I had this article in the Islington Tribune (Jeremy Corbyn’s local paper) whilst taking a couple of days off:

RATHER like Jeremy Corbyn the economics that has in the last week or so, been dubbed Corbynomics is not new.

What’s new is that for the first time in years a politician who is willing to speak out for policies that might really change the wellbeing of most people in this country has hit centre-stage.

There are three key ideas at the heart of Corbynomics.

• The first is that austerity is not necessary. 

This sounds really radical when, for example, at the last election all three major parties competed to argue who could cut the deficit the most.

In fact though very large numbers of economists, including Nobel laureates Paul Krugman and Joe Stiglitz, have pointed out how bizarre this is.

There is, they say, no chance of a recovery if we deliberately reduce our government spending by enforcing government cuts.

And as they add, balancing the budget is not necessary, especially when right now government borrowing is so cheap that it would be crazy not to invest in our future.

Corbynomics in that case is what makes sense, revealing austerity as just bad politics.

• The second theme is that reducing inequality increases wellbeing for everyone, including the best off. 

Again, this is not radical.

The International Monetary Fund agrees with this claim, which is based on the logic that if you want to grow an economy fast the people who need money most are those who spend their incomes.

That’s the least well off, because the best off save, by definition. So redistribution pays when you’re recovering from a recession.

• The third theme is that it’s just not true that markets do everything well and the state does everything badly: the reality is that great people can do great work in either sector and the job is to pick the right organisation for the job that needs doing.

So how does this pan out? In four ways.

• The first is in ensuring that the money to pay for essential government services is available.

This would be done by increasing some taxes on those best off, and for large companies.

It would also come from investing heavily in HM Revenue & Customs to crack down on tax dodgers.

• Second, it would come from investing new government money to kick-start the economy by building schools, hospitals, transport systems and in creating sustainable energy systems.

This is called People’s Quantitative Easing because it’s a variation on the £375billion programme used from 2009 to 2012 to keep the financial system afloat, but this time the money is used to benefit ordinary people. Funding investment activity in this way makes it much easier to balance the government’s books in the long term.

• Third, where it is essential that to get best public service that the state co-ordinate an activity Jeremy Corbyn is not afraid to say so.

Rail services are the obvious example.

• And last, Jeremy Corbyn is committed to beating inequality, whether from unemployment, low pay, disability, or discrimination or from lack of access to education, housing and other needs people have.

What he’s quite willing to say is that if this requires a bigger state sector than we have at present, so be it.

He is saying that may be vital to all our wellbeing and we can afford it.

The UK is, after all, the sixth richest country on Earth.

What is more, the well off would really benefit: there would be growth for them too, while the risk of inflation is virtually non-existent until such time as people in the UK are as well paid and productive as the French, who beat us by 20 per cent right now.

It’s different so it seems radical. But I will give the last word to the Financial Times. Last week they said Corbynomics “could actually be a decent idea”.

As one of its authors, I can live with that.

Reproduced under a Creative Commons Attribution-Non Commercial 3.0 Unported License. –

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