What Labour Can Learn from the Corbyn Leadership Campaign

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What Labour Can Learn from the Corbyn Leadership Campaign

by Bryan Gould

First posted 6th September 2015

No one, surely, could begrudge Jeremy Corbyn the odd chuckle or two when he contemplates, in his private moments, the consternation he has caused by his unlikely candidature for the Labour party leadership. It is not just the discomfort of his opponents, though that is sufficient cause no doubt for a little schadenfreude, but the fact that so many expectations have been confounded by someone who has been for so long dismissed as a nonentity, a fringe figure and a relic of the past.

It may be that the sweetness of his achievements so far will be as good as it gets and that the “sanity” narrowly defined by his opponents will in due course be restored. It may even be that, in his heart of hearts, he would be secretly relieved if that turns out to be the case. It would be true to his self-image and temperament that he should see himself as the catalyst for change, rather than as bearing the responsibility for putting it into practice.

But, as the possibility of a Corbyn leadership looms ever larger, it is the reaction of his opponents that is truly instructive. That reaction has developed from incredulity, then on to alarm and indignation, and finally to resentment and anger. How could someone as ill-fitted for the task, as unworthy of consideration, as out of touch with political reality, possibly be on the threshold of walking off with the party’s leadership and challenging for the role of Prime Minister?

These reactions are typical of those who feel that an impostor and an interloper has cheated them of an inheritance that is rightfully theirs. Those in the party who have steadfastly trodden the middle way, who have shown their superiority, by recognising “political realities”, over those who do not have to bear parliamentary responsibilities, have long grown accustomed to deciding the party’s fortunes.

For them, Ed Miliband was bad enough, but could, in the end, be restrained. With his defeat, they now want what they have lost returned to them. When the attempt is made to deny them that birthright, they want to vent their anger at the perpetrator by unmasking him and showing just how misled his supporters have been.

So, the “mainstream” stance on Corbyn is to focus on his lack of experience, on the skeletons in his cupboard, on his supposed inability to win a general election. And when those who have the votes and the power to decide seem unmoved by these considerations, there is nothing left but to impugn the bona fides of the voters themselves.

The Corbyn phenomenon is to be explained, it seems, because those tens of thousands of newly enthused actual and potential Labour voters who have joined the party – an unfamiliar sight, after all – are, in reality, “entryists” whose real purpose is to destroy the party and make further Tory victories inevitable.

There must surely be a more rational and constructive approach than this negativity, whatever the outcome of the leadership election. With or without a Corbyn leadership, is it not worthwhile to ask why so many people were ready to support him – not, in other words, what is it that disqualifies him as a leader but rather, what did he do and say that attracted so many to his cause?

We don’t need to look far for the answer. Jeremy Corbyn dared to suggest, along with the IMF, that austerity is an inappropriate and destructive response to austerity, that government has the responsibility to use its power and resources to strengthen the economy and share its fruits more equitably, that the OECD is right to say that inequality is not the price we must pay for economic success but a major obstacle to it, that – as the Global Financial Crisis demonstrated – the market is not infallible and self-correcting, that the drive for private profit is not a guarantor of efficiency, that we must cherish our most important resources by raising the health and education levels of ordinary people, that we are all better off if burdens and opportunities are fairly shared and if every shoulder is put to the wheel.

These may be unwelcome or unacceptable ideas in some quarters, but surely not in the Labour party? As far as we can tell, they are ideas that, however frightening they may seem to Labour’s power-brokers, have appealed to a significant part of the electorate who have not hitherto found much about Labour to enthuse them.

They are ideas that deny the mantra that “there is no alternative”, that challenge the voters to think about better ways of doing things, that look forward to new hope that a healthier, more inclusive, society and economy are within our reach.

If we were not so keen to condemn him, if we would look at what his candidature has achieved, could the Labour party as a whole – with or without a Corbyn leadership – not learn and benefit?

 

Neoliberal TINA Economics is Flat Earth thinking

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By Prue Plumridge

Belief in a flat Earth is found in the oldest writings and early Mesopotamian maps showed the world as a flat disk floating in the ocean.  Thankfully things have moved on since that time and we now accept the proof that it is indeed a sphere spinning in space.

It is not difficult to imagine the reaction to those who challenged this view, such as Christopher Columbus, and the scepticism with which such ideas would have initially been received.  After all, if you’ve been told that you’ll fall off the edge of the world if you go too far, questioning that notion would have led to shaking of heads.  Those disputing the prevailing set of ideas or beliefs on the basis of “what if” would have been ridiculed, insulted or even physically attacked as fear of the new set in.

We have reached such a time in history now.  The destructive neoliberal status quo of the last few decades is being shaken to its core and there is an opportunity at last for a conversation about where we go from here and how we can bring about change.  It won’t be easy but Jeremy Corbyn has started the ball rolling by offering a radical vision which not only restores the core values of the Labour party and responds to a changing world but also opens up an opportunity for dialogue on such issues as climate change, finite resources and sustainable living.  It is a positive start.

Of course, those who have the most to lose will not let their power go easily and we are seeing that already with attacks on Jeremy Corbyn by the Establishment and business leaders and worse still, from his own party.  Only this week, an article in the Telegraph was predicting that Jeremy Corbyn’s economic plans will turn us into Zimbabwe and lead us to calamity.   We must, however, stand strong against such attacks which stem from fear and forge our future together.

People are starting to see through the decades long political neoliberal consensus which favours the magic of free markets.  But there is still a way to go and it won’t be easy.  It is vital that we ask questions and, even when, like the flat earthers, we find the potential solutions out of our comfort zone because it questions the long-accepted paradigm, we must not turn away.

Most people (including me) shy away from discussion of economics.  Mathematical equations and economic models dance before the eyes and shut down the brain like no other subject.  And yet the decisions made by our elected politicians are based on economic ideas which can wreak havoc on our lives and the lives of our families and friends or can, alternatively, be used for a public purpose to benefit those same lives.  Indeed, we are seeing the damaging consequences of those decisions today.  Dismantling our social security system, selling our publically funded public services to the private sector, deregulation, the watering down of employment and trade union rights and driving down of wages in the name of competition.  TTIP, TISA and CETA added into this mix will prove to be the final nail in the coffin of democracy.  It is, therefore, time to engage in a conversation and challenge those who have deceived us for so long.  We must ask ourselves what if the world isn’t flat at all?

Maggie Thatcher’s line “There is no alternative” is the usual excuse for continuing with the free-market ideology and the claim that continued austerity, balanced budgets and surpluses are vital to a successful economy.  We will all remember Liam Byrne’s infamous note, when Labour left power, saying ‘There is no money’.  That one stupid remark has allowed the deficit/debt reduction argument to dominate the economic and political landscape of the last five years and been used by David Cameron and George Osborne in a deliberate distortion of reality to justify cuts, the creation of a small state and private sector domination.

It is unfortunate that even some of the Labour elites are using the same loaded language which says that we must continue with such policies. Yvette Cooper, who has a PPE from Baliol College at Oxford, said recently “I don’t think the answer is what Jeremy has proposed, which is basically printing money that we haven’t got to build things”.  Her comment is symptomatic of her lack of grasp of wider economic ideas and yet, she, like many, has been a victim of the way it has been taught for decades in educational institutions. One might think that the doctrine of balanced budgets was the only game in town.

Regretfully, these ideas have been cleverly used to also deceive ordinary people that there is no alternative.  That we must accept the pain and balance our budgets in true Micawber style. The idea that the state should deal with the deficit and reduce the national debt has become a part of the narrative which is firmly fixed in the collective psyche. The problem has been reinforced by our experience of our own household budget which has to be managed to ensure we don’t go into the red or get into debt.

The first step is to ask questions. Don’t rule anything in or out – the world is a complex place much more so than even this simple presentation.

Most of us will remember from our history lessons, the 1929 crash.  The UK government’s response at the time was to balance the budget and re-establish confidence in the pound.  Public sector wages and unemployment benefits were cut and by 1931 unemployment had risen to almost three million. The march to London by the men of Jarrow is a symbol of that economic disaster which left thousands of people destitute and hungry.

One of the people who challenged that view was John Maynard Keynes who was fiercely critical of the then Conservative-Liberal coalition government’s austerity budget and wrote:

‘Every person in this country of super-asinine propensities, everyone who hates social progress and loves deflation, feels that his hour has come and triumphantly announces how, by refraining from every sort of economic activity, we can become prosperous again.” 

 

It is ironic, that when the coalition came to power in 2010, they chose to repeat an economic policy that had so singularly failed in the 1920s and 30s, and the Conservatives are promising more of the same over the next five years.

‘Insanity is doing the same thing over and over again but expecting different results’   Albert Einstein is once said to have observed.  But then one could ask the question is it insanity or a deliberate strategy?

To return to Keynes, his argument was, essentially, that in order to support full employment governments must use their spending power to invest in the economy on the basis that spending equals income to someone which is, after all, what makes the world go round. So when governments reduce public spending the result can only be higher unemployment.  Indeed in the last week we have learned that for the financial year so far the deficit was down £7.3bn (23%) but in the three months to June there was a rise of 25000 in unemployment.  To make the connections if we stifle spending to reduce the deficit then this can only have a detrimental effect on the economy by reducing the amount of money available to the non-government sector.

So where, may you ask, will the money come from to deficit spend?  When Yvette Cooper suggested wrongly as it happens that we can’t print money that we haven’t got to build things she was forgetting that electronic monetary resources were created to rescue the banking system in the form of Quantitative Easing which no-one objected to then, even though, basically, it disappeared into a big banking black hole.

Jeremy Corbyn’s People’s QE is quite another kettle of fish and this time those money resources would be used for public purpose that is for the benefit and well-being of society as a whole and not just a small section of it.  To put that clearly in the words of Professor Bill Mitchell:

“People would soon see the benefits in the form of better schools, hospitals, public transport, green energy innovations, more jobs, more diverse cultural events”

The response to these ideas has been one of panic-stricken hysteria, as emotive language such as ‘debt mountain’ is used by politicians and the media to scare the general public, by reinforcing the household budget model of our state finances and economy.  Let’s not forget the irony here that George Osborne has managed to achieve a debt mountain all of his own!

Professor Bill Mitchell’s conclusion should reassure the public:

PQE is an excellent strategy for the British government to introduce. It exploits the currency-issuing capacity of the government directly and uses it to increase the potential of the economy to improve well-being.

It is astonishing to realise that contrary to common belief sovereign governments start the ball rolling by issuing money, tax revenues are not necessary for a government to spend and that our national debt is not a debt in the usual sense of the word.

So, I can hear you ask:  what then is the purpose of tax?  I’ve heard that ‘printing money’ is inflationary?  And say that again our national debt is not a debt at all?

We must start with the first principle which is that, since the abandonment of the gold standard, sovereign governments like ours can issue as much money as it needs. Remember the money issued comes first, and not taxes.  This is a key point.  Without money in our pockets we can’t pay taxes anyway.

Beardsley Rumi former Chairman of the Federal Reserve wrote as long ago as 1946:

… given control of a central banking system and an inconvertible currency, a sovereign national government is finally free of money worries and need no longer levy taxes for the purpose of providing itself with revenue. All taxation, therefore should be regarded from the point of view of social and economic consequences.

What this actually means is that tax, far from being a revenue raiser, is a mechanism for what we can call public purpose meaning, for example, redistribution of wealth from the rich to the poor.  It also has the function of managing inflation by raising taxes to dampen demand, or reducing them to increase it.

Secondly, money issue by a sovereign state is not, in itself, inflationary. Politicians parading as prophets of doom are warning us that ‘printing money’ will cause inflation.  In an effort to scare people, we are reminded of Germany’s hyperinflation after the First World War or Zimbabwe’s in the 1990s.  In both cases, the truth of the matter is that these episodes could not be described in any way as normal – they were extreme events and not remotely like the situation in the UK or the US.  Of course in Germany’s case, the imposition of huge reparations in gold under the Versailles Treaty, the loss of 25% of its industrial capacity as a result of the war and then the occupation of the Ruhr when Germany defaulted forced them to increase the money supply which did not match its supply capacity.  So when exports then slowed and Germany could not continue to pay back its debts it led to the hyperinflation which was to have catastrophic consequences for the German nation both in the short and long term.

And herein lies the clue, if you keep on spending and can’t produce the goods to meet that spending, you’ll get inflation  Spending with no regard to whether there are enough resources to match it, is the cause of inflation not the money issue in itself.  So deficit spending is not the problem.  The issue is whether we have the resources to justify the spending and if we have, how we can use them effectively for the benefit of society as a whole.

We have almost two million people without jobs. People whose talents remain unused.  People who want to work despite the inference by government and irresponsible media that the unemployed are lazy and feckless which has become the prevalent myth, now accepted by the public as being true. The solution therefore is to invest in building new schools, hospitals, homes and green infrastructure as well as create real job opportunities so that people can make a positive contribution not only to their own well-being but that of their communities. Remember that spending equals income to someone, and so by using the resources we have, effectively and fairly, we can improve the lives of all. The deficit will only be a problem when all available resources are being used. And we are most certainly not in this position at the moment.

And this brings me, finally, to the notion of the national debt.  If, as is noted above, sovereign governments can issue money then it begs the question why do we have to borrow?  Well the reality is that we don’t.  Sovereign governments don’t need to issue debt. The real game is about corporate welfare as Treasuries and Bonds are sold to big investors who want a nice safe, risk free place to stash their money and get a guaranteed income flow.  Much like us when we transfer money from our current bank account to a savings account.   Where governments are the primary money issuers there is no reason why the national debt could not be scrapped. We wouldn’t have to worry about ‘paying it back’.  And, after all, how could you pay back the money supply?

The important thing for us to understand is that there is an alternative to the inertia of past decades.  We don’t have to accept it we have to challenge it.

The world is a complex place and full of uncertainty but we have been bewitched by a dogma that proposes freedom and everlasting growth on the backs of the people and the planet but which, in fact, is tying us in chains to the benefit of the few.  As Keynes observed in his book written in 1936:

The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.”

The Post War Consensus is long gone and the positive outcomes of that consensus, being dismantled as we speak.  The ascendency of individualism over cooperation and all that entails is almost complete.  As Ha-Joon Chang wrote:

‘Many believers in the individualist view would sacrifice political freedom to defend economic freedom”

It is clear that such unrestrained pursuit of self-interest through the belief in the magic of free markets has proved itself wanting and resulted in huge disparities of wealth, impoverishment, inequality and unequal access to opportunity.

Whilst we need wisdom too, knowledge is power and so the more we are informed, the easier it is to challenge the lies of politicians and their media lackeys. It is not necessary to immerse oneself in economic models and mathematical equations to understand the importance of economic policies and their effects on society but if we are to move forward we must show those who would lie to us that we cannot be fooled any longer.

 

Resources and credits:

Steven Hail

Governments do not need the savings of the rich or their taxes 

Corbyn should stop saying he will eliminate the deficit

Zimbabwe for hyperventilators

PQE is sound economics but is not in the QE family

Correcting political ignorance and misconceptions

Printing Money does not cause inflation

Summer of Unrest: The Debt Delusion Mehdi Hasan

Economics: The User’s Guide  Ha-Joon-Chang

The Angry Birds Approach to understanding deficits in the Modern Economy

http://ineteconomics.org/ideas-papers/interviews-talks/demystifying-modern-monetary-theory

 

The “Angry Birds” Approach to Understanding Deficits in the Modern Economy

 

Additional links:

Austerity is a Political Choice not a Economic Necessity

Like heterodox economists, Semmelweiss was ignored…

The riddle of the deficit or (deficits for Dummies)

The motives behind Corbynomics

Why we can’t spend more than we bring in but Government can

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Dr. Stephanie Kelton of UMKC explains that much of our current jobs crisis stems from a fundamental misunderstanding about the relationship between the US and its currency. She runs the blog New Economic Perspectives This lecture was given at Luther College in Decorah, IA on September 28th 2011.

Why You and I Can’t Spend More Than We Bring In, but the Government Can and Probably Should.

Uploaded on Oct 13, 2011 umkceconomists

Like the US, the UK is a sovereign government which issues its own currency.  In other words, what Stephanie Kelton says about the US economy also holds for the UK….. but it is not true of the eurozone countries because they use the Euro, which is effectively a ‘foreign’ currency.. and that is why the UK can never be like Greece!

This a similar graph to the one referred to by Stephanie Kelton in the video clip.  It shows that the different financial sectors of the economy always balance out… its a rule.

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For further information, Alittleecon has written a very good explanation of “sectoral balances” on his blog There is an alternative.  He includes a similar chart, created by Neil Wilson, which shows exactly the same type of balance between the different sectors in the UK economy.

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As Alittleecon writes:

The sectoral balances approach then allows us to consider how changes in government policy may impact upon the different sectors. Armed with this knowledge you would know that for the government deficit to go down, the private surplus and/or the trade deficit would need to shrink or disappear entirely. At a time of global recession, the prospects for a massively shrinking trade deficit don’t seem good, and the prospects for an already debt-saturated private sector to take on yet more debt also seem less than positive. Both of these things imply that any attempt to reduce the government’s deficit by cutting spending or raising taxes will ultimately be futile, and that’s exactly what we are seeing at the moment.

Cameron and Osborne dwell on Bullshit Mountain, UK

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Bullshit Mountain, UK

by 

First posted on October 8, 2012 

The title of this post is an allusion to Jon Stewart’s recent debate with Bill O’Reilly (watch it here – it’s very entertaining). Stewart’s argument was that many Republicans dwell on “Bullshit Mountain”. Their view of the world is completely skewed and this prevents the nation’s problems from being solved, as complex issues are turned into simple (but false) choices. Many Tories also seem to live on Bullshit Mountain, and today was George Osborne’s turn to appeal to this demographic. This post will provide some commentary on Osborne’s speech and point out some of its logical flaws. I won’t deconstruct the whole speech, just pick out a few gems.

“The deficit is down by a quarter. There are one million more private sector jobs. The economy is healing.”

Three sentences, three misleading statements. When Osborne says the deficit is down by a quarter, he means the deficit in 2011/12 was a quarter less than in 2009/10. This is true, but what he doesn’t say is that the deficit for the first 5 months of 2012/13 is up on the first 5 months of 2011/12. So it is more accurate to say that the deficit is going up.

As for the million extra private sector jobs, that may be true, but Osborne doesn’t mention the half a millionless public sector jobs, or that a significant number of these jobs have been part time or temporary. Or that there are still less jobs in the economy than before the beginning of 2008. Or that the employment rate is still significantly below its pre-crisis level.

Osborne says the economy is healing, but we are in recession. To many people that doesn’t feel like healing.

“Our country would have been all-but ungovernable if we had not been straight with the public before asking them to cast their vote.”

If they had really been straight with the public, our country would have been ungovernable – by the Conservative Party, because they would not have won enough seats in the election.

“We’re not going to get through this as a country if we set one group against another, if we divide, denounce and demonise.”

Let’s not forget he had spent the whole morning doing just that when talking about further cuts to welfare!

“Each one of my Budgets has increased taxes overall on the very richest.

And we’ve achieved that while getting rid of a cripplingly uncompetitive 50p rate that raised no money and cost jobs.”

If the first statement is true, it kind of undermines the second. If the 50p rate is so uncompetitive, so wealth destroying, why aren’t the other supposed tax hikes on the rich equally as damaging?

“But just as we should never balance the budget on the backs of the poor; So it’s an economic delusion to think you can balance it only on the wallets of the rich.”

This plays to two of the key beliefs of the residents of Bullshit Mountain. The first is that Government is like a giant household and should try to balance its budget at all times. This is nonsense. You only have to look at the Government’s budget outcome over the last 40 years to see this. A deficit is the natural state for the UK economy. This is a neutral fact. It is neither good nor bad.

The second belief is that if you hike taxes on the poor, they will work harder, but if you hike them on the rich, they will work less!

“Where is the fairness, we ask, for the shift-worker, leaving home in the dark hours of the early morning, who looks up at the closed blinds of their next door neighbour sleeping off a life on benefits?”

Ignoring the fact that they might be sleeping off the night shift they’ve just arrived home from, this plays up to another Bullshit Mountain belief – that there are millions of people living the Life of Riley off the backs of the hardworking ‘strivers’ out there. If only there would get off their arses and find a job, we wouldn’t be in this mess. The poor are to blame! This viewpoint demonstrates an inability to reason correctly. Are we really to believe that sometime in 2008, millions of people independently from each other suddenly decided to quit their jobs and sign on the dole. Of course not! The problem is a macroeconomic one of not enough jobs. Repeatedly beating the unemployed with a stick will not help them find jobs if no jobs are available.

“Some of the biggest issues in British politics, so big people thought them too controversial to fix, we have been prepared to tackle. A state that had become too expensive to pay for. Public sector pensions we couldn’t afford. People earning low incomes but still paying income tax. Business fleeing Britain because our taxes were too high. ”

These are all pure Bullshit Mountain. A state that had become too expensive to pay for? What does he mean? We can afford any size state the people in our democracy decide we want. Public sector pensions are always affordable. Their size is a political decision. It has nothing to do with affordability. People earning low incomes are still paying income tax. Which businesses are fleeing because of excessive taxation? Certainly not ones whose loss we should mourn.

“They think that extra borrowing could pay for spending, or indeed tax cuts, in an attempt to put money in the pockets of consumers. But the extra borrowing would come at the cost of higher interest rates and everyone would know there would be higher taxes to pay for it, coming down the track. The higher interest rates would pick the very pockets of the working people you are trying to help and the fear of extra taxes would undermine their confidence.”

TINA is back! This is the only argument Osborne has left now. Even though the deficit is going up, because he is not doing it on purpose, the markets have confidence in him, but if he were to increase the deficit on purpose, they would turn against him. Not very convincing is it? Our low interest rates have nothing to do with austerity. They are low because we have our own currency so the markets know there is no default risk on UK bonds. Even if the markets did start to lose faith, they can’t hold us hostage. All the BoE need do is announce a target interest rate and commit to buying and bonds that go unsold at this rate. End of the problem of the markets.

“Now, as well as those critics saying we’re cutting too fast, there are those who say we’re cutting too slow.”

The only people saying that are those living at the very top of Bullshit Mountain. No serious person would say that.

“Our published plans already require us to find £16 billion of further savings. As I have said, the broadest shoulders will continue to bear the greatest burden.”

Apparently £10 billion is to be cut from the welfare budget. Not sure welfare recipient’s shoulders are all that broad.

“Nor am I going to introduce a new tax on people’s homes. It would be sold as a Mansion Tax. But once the tax inspector had his foot in the door you’d soon find most homes in the country labelled a “mansion”. Homes people have worked hard to afford and already paid taxes on. It’s not a Mansion Tax it’s a Homes Tax and this Party of home ownership will have no truck with it.”

What does Osborne think council tax is? All he need do is introduce a couple of extra council tax bands to ensure someone living in a £10m house doesn’t pay the same as someone in a £500k house.

“We have never argued that you stop what economists call the automatic stabilisers operating – the lower tax receipts and extra government payments that follow if, for example, the global economy turns down.”

What does he think welfare payments are? The are automatic stabilisers designed to prevent the economy from sinking into the abyss when it is hit by a shock like the financial crisis. He is already weakening them and is proposing to weaken them further. This will unsure the next crisis will be much worse.

Osborne finished his speech with some supply side bullshit. This is music to the ears of the residents of Bullshit Mountain. Business taxes are too high, regulations to tough, we want people to aspire blah blah blah. Osborne even thanked Adrian Beecroft for his piss-poor report! Our problems are absolutely not due to business taxes or regulation. These are ideological demands from people whose interests differ dramatically from the vast majority of the population.

So to end then, here are a few facts for the residents of Bullshit Mountain:

1. Government is nothing like a household. A balanced budget should never be a policy goal;

2. The reason the deficit is so high, is not because Government is recklessly spending too much, it’s because the private sector is not spending. So we can either tax the excess savings of those who are hoarding money, or we the Government can spend more. Those are the only two choices if we want a swift recovery.

3. The vast majority of benefit claimants are not out of work because they are lazy, or ‘scroungers’. They are out of work because there are not enough jobs. Repeat after me “We demand aggregate demand!”

4. Our business regulations and taxes are already some of the lowest in the developed world. Don’t believe me? Check out the stats for yourself on the OECD website. Cutting them further will not strengthen our economy. Quite the opposite. It will only speed up the transfer of resources from the bottom to the top, and hasten the arrival of the next crisis.

We should never pander to Bullshit Mountain, as Labour currently seem to be trying to do (Liam Byrne anyone?). If we could all agree on these four things, we can start to talk about actual solutions to the problems we face. I’ve outlined some approaches we could take here:

There’s No Money Left?

The Work Programme. Is this the best we can do?