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A call to arms

January 18, 2012 2:35 pm

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For those who stand outside the austerity consensus, reading Len McCluskey’s column on Tuesday was like coming up for air.

It is a cause of deep frustration that, as the Tories’ economic policies are shown to fail (in terms of jobs, growth, consumer confidence, economic inactivity and borrowing levels), the Labour leadership has moved to legitimise them. I’ve written elsewhere about why Ed Balls’ declaration that “My starting point is, I am afraid, we are going to have keep all these cuts” is politically disastrous, and indeed it was jubilantly used by David Cameron to beat Ed Miliband across the head with at today’s PMQs. But in truth, it is difficult for even the most diehard leadership loyalist to sum up Labour’s current strategy on the cuts and the deficit. The Tories are shaping the argument, and no coherent alternative is being offered.

What is perhaps most galling about Balls’ intervention is that it came as Standard & Poor of all institutions offered the missing coherent case against austerity as it downgraded the credit ratings of nine European nations. Justifying its decision, it said: “We believe that a reform process based on a pillar of fiscal austerity alone risks becoming self-defeating, as domestic demand falls in line with consumers’ rising concerns about job security and disposable incomes, eroding national tax revenues.” Balls has referred to it in passing, but it was of course eclipsed by the rest of his statement.

The commitment to a public sector pay freeze may have even worse consequences. Given the rate of inflation, Labour has committed to a pay cut for dinner ladies, nurses, teachers, bin collectors, and so on. A false choice is being presented – that it’s either pay or jobs. But if millions of public sector workers have less to spend, consumer demand will be hit, and considerable numbers of private sector workers will almost certainly lose their jobs as a consequence. Labour’s position is more than symbolic, though. Now the Opposition is committed to the Government’s position on pay, it completely undermines the union case against it. Labour’s leadership has allowed itself to become an outrider for the Government.

Given Labour’s failure to challenge the Tory agenda, the fact that Len McCluskey has acted as a voice of sanity at a time of economic madness is welcome in itself. Miliband talks a lot about a return to the 1980s, but McCluskey more accurately points out we’re experiencing a 1930s Comeback Tour: when all main parties converged around the same disastrous economic course. But McCluskey’s intervention is far more significant in other ways.

Many party activists and trade unionists may not happy with the direction of the Labour leadership. But the truth is that it is an expression of where we’re at politically. The left and the broader labour movement were battered and beaten in the 1980s, and never recovered. Today, there exists no left either with mass support or a coherent alternative, either within the Labour Party, or outside it. There’s lots of pressure dragging the Labour leadership towards the Tories’ position: the presence of hardened Blairite elements, a hegemonic government, the media, big business, the City, and so on. I’m afraid it also includes broader public opinion which, while believing cuts are too far and too fast, still believes them necessary: unsurprising after years of being bombarded with pro-cuts propaganda, with no alternative being offered.

If the left wants the Labour leadership to change course, it has to build pressure that currently does not exist. And that’s why McCluskey’s intervention is important and should be built on.

There is currently a divide in the labour movement between those who accept the underlying case of what the Tories are doing, with just nuances to separate them from the Government: or the Surrender Tendency as I call them. On the other hand, there are those who want a coherent alternative to the Tory agenda: I can’t think of a good label for them, so I’ll stick with the Alternatives (even though it sounds a bit like a girl band). The problem is the Surrender Tendency happen to be concentrated in the Labour leadership. The Alternatives have a lot of support in the broader membership, but they are not organised.

McCluskey’s intervention should be treated as a kick up the backside for the Alternatives. We need to organise so we can put pressure on the Labour leadership, challenge the Tory and media consensus, and shift public opinion.

McCluskey is in a good position to help lead this charge. He can’t be dismissed by Tories and Blairites as the mouthpiece for public sector “vested interests”: although his union represents thousands of public sector workers, most of its membership are private sector workers who are themselves being hammered by the crisis.

We need to get the Alternatives together: party activists, MPs, trade union leaders and members, activists from community and campaign groups, journalists, bloggers, and so on.

Then we have to move from ‘There Has To Be An Alternative’ to ‘There Is An Alternative’. We could start by calling on the likes of Nobel Prize-winning Paul Krugman and Joseph Stiglitz, both trenchant critics of the suicidal economic strategies of British and European leaders. We also have progressive economists we can draw on here, such as Graham Turner and Richard Murphy. Rather than a fragmented ideological objection to what the Government is doing, we need to develop a coherent alternative economic argument that can be communicated in a way that resonates with people. Let’s call it The Plan.

Not all Alternatives will be happy with The Plan. Some will have to treat it as a start. But we have to stick with one clear, convincing message that we can hammer away at with every given opportunity.

We’ll then push The Plan everywhere: through supportive journalists, social media, in party and union branches, stalls in every town centre, poster and leafletting campaigns, newspaper adverts, and so on. It will give the Alternatives something to unite around in the labour movement – and crucially, drag the leadership away from a course of surrender.

My fear is that – if we do not act – the Labour leadership will spend the next few years continuing to retreat to the Tory agenda. That will cement David Cameron as the third transformative Prime Minister of post-war Britain, after Clement Attlee and Margaret Thatcher. It will be argued that there is ‘no going back’, that reversing the Tories’ programme is politically impossible. Cameron will have transformed Britain irreversibly.

That’s why we have to get our act together, and why we should treat Len McCluskey’s piece as a call to arms. Let’s stop our sulking, and get organising.

  • http://www.facebook.com/profile.php?id=100001116515833 Michael Carey

    I consider myself far to the Left of the Labour Party, but I’m wondering if the significance of the shift by the two Eds isn’t in the fact that they’re looking to reform capitalism at the root so that redistribution isn’t as necessary rather than accept capitalism and seek to fiddle with redistributive tax and spend over top? This is a new coherent narrative for Labour- social justice without considerable spending, social justice through the reorganization of the economy. If the Eds seize on it fully we could be looking at a more socialist approach than we had previously. It takes the teeth out of the right-wing attack on social justice and can have the same, if not better, outcomes. A living wage rather than tax credits for instance.

    I reckon the key to getting Labour rejuvenated is to define what it can stand *for* rather than what cuts it can stand *against*- though that does have its place and the unions should fight against the cuts as strenuously as ever, I’d certainly continue to deliver leaflets and stand in protest with the unions on such measures. We need to avoid what Lenin called ‘economism’ and deliver socialist reforms.

    • Anonymous

      This is an interesting perspective that I’m suprised hasn’t received more attention.

      Ultimately, I don’t think Ed would know how to pull it off though.

      • Anonymous

        He’d have to ask Ed and Ed would read his economics for Dummies, or he pop over and ask Osborne and he’d read the book as well

    • http://twitter.com/Newsbot9 Newsbot9

      It’s an interesting theory, but I’m afraid I don’t buy it for a second.
      Labour is also making it clear what it stands for – the Tory’s shadow.

      They’re not going to change…

  • http://twitter.com/robertsjonathan Jonathan Roberts

    The big flaw in this argument is that, whichever way you look at it, the public sector is a net expenditure.  It does a vital job in administrating our society, but nonetheless, it is a net expenditure. 

    The idea that you can provide an economic stimulus by paying public sector workers more is a false economy.  You still have more money going out than you’ve got coming in even when you take into account the taxation you receive back and their personal spending, and that gap will only widen by increasing this expenditure.

    As a result of that widening deficit, there will be even less money – which may well result in job losses.

    I don’t like it anymore than you do Owen – but if a small real terms pay cut (similar to what many of us in the private sector, which is provides net income, face) is what is needed to protect those jobs then so be it.

    • Anonymous

      We are so lucky that labour worked so hard making all those jobs in the private sector, hold on a minute what jobs did labour make, oh yes they used the public sector.

      Thankfully some of us who need the public sector see people  who get paid a penitence working long hours looking after us and we think making life for them and us worse will not help.
      In the end it will be the public who will decide if labour are any good, for me I will not be voting Newer labour that’s for sure.

      • http://twitter.com/robertsjonathan Jonathan Roberts

        Treborc, I actually agree with the analysis in your first paragraph. But let’s not have another blame game debate. I think Owen’s views need real scrutiny which is why my comment was based on the substance of his article.

        • Anonymous

          The public if you will notice are playing a blame game, hence your our of power, with one of the biggest defeats in the history of the labour movement.

          We have three choices these days Tories Tories or Newer labour or is that Tories.

          • http://twitter.com/robertsjonathan Jonathan Roberts

            OK Treborc, you’re entitled to your view but I’m not going down that path.  This article provides a chance for genuine economic debate for people with varying views -  a debate I think that is sorely needed, especially as the comments sections of this site sadly lacks detailed argument on the substance of the issues we face and usually resorts to mudslinging.

            So I’m not going to get into politics.  Let’s try and keep it on the substance.

          • Anonymous

            If your not getting into Politics what the hell are you doing on a political forum, god help us.

    • Owen Green

      Clearly an important starting task for The Plan will be to overturn the neoclassical fairy tale that the finances of a monetarily sovereign government bear any resemblance to a household’s or firm’s.

      It simply doesn’t make sense to regard government deficits as problematic without reference to the context at hand. At present, it should be substantially bigger: supply-side tactics simply are not going to work if these firms have no customers because nobody’s buying stuff. The only economic sector currently in a position to stimulate demand is the government, preferably by massive direct job creation, but also (heretic as it sounds) tax cuts. 

      The claim by politicians that our sovereign government ‘has no money’ can only be based on poor understanding or fibbing. Either way, it hardly encourages one to vote for them.

      There is an abundance of rigorous economic analysis available with which to make this case. From a debunking of neoclassical theories and a demonstration that it is private, not public, debt levels that are the problem (Steve Keen); to empirically sound explanations of our monetary arrangements along with proposals for achieving both full employment and price stability (Bill Mitchell, Randall Wray, Stephanie Kelton, Warren Mosler, Scott Fullwiler).  

      A place to start could be this: Modern Money Primer

      • Anonymous

        What do you say to those who think that printing money causes inflation, leading to higher interest rates and a reduction in growth?

        • Owen Green

          I disagree with them:

          (1) That inflation arises due to contention on real resources, not simply as a function of the amount of money. We currently have almost 5 million people with less employment than they desire, which makes for a glut of un-utilised resources between us and any inflation concerns due to government spending (notwithstanding the commodity price rises we’ve seen recently). The original stimulus and subsequent QE were predicted by neoclassicals to lead to huge inflation, so why didn’t they? Ditto Japan.

          If we achieve full employment then the government has to be careful about the amount of money it spends into the economy for inflation reasons. Not, however, at the moment (hence my comment above about needing to interpret deficits in economic context).

          (2) Short-term interest rates are set by the central bank (viz. the government, unless you believe the charade of independence), not the markets (so long as the government is monetarily sovereign). If the CB so desires, they can set longer term rates also. Again, post-stimulus and QE, here we are with very low yields on bonds. Again, look at Japan.

          (3) It’s not printing, it’s keystrokes. The distinction isn’t as pedantic as it might seem; ‘printing’ reinforces the idea that there’s much of a relationship between the amount of cash in circulation and the quantity of money in the economy.

    • derek

      Jonathan,  what evidence is out there to suggest to suggest paying people in the public sector more is a “false economy” if we continue to pay people a minimum wage then there are significant social problems attached to that, lack of incentive to find work, health problems, fuel poverty, educational attainment, larger benefit claims, it seems to me that the balanced argument is in favour of paying more.

      I don’t know where you think a balanced economy should be, in terms of GDP%, I think it’s not a good idea to reduce it to below 50%, I’d say it would be consistent with other European states to keep the level around 60 to 70 %

      If we advocate a small real terms cut in income we must also take into account inflation rates and if we reduce the amount of money available then surely the knock on effect will be less spent else where creating unemployment.

      Cutting NHS contributions may not have the desired affect you think? indeed it would probably mean less frontline cash and for sure less frontline staff. I do agree that employment is paramount to the recovery and the more in employment the more the welfare spending can be reduced, I hope you don’t just gloss over the points? for every action there’s a reaction?

      • http://twitter.com/robertsjonathan Jonathan Roberts

        Hi Derek, just to clarify and reiterate. I don’t think Owen is arguing for public sector pay increases as a general aspiration. If he was I wouldn’t have quarrel with it on principle.  I’d love our servants to be paid more if there were sufficient funds to do it.   My ‘false economy’ argument is in response to his claim that increasing public sector pay will stimulate the economy.  It will not as you will still have more going out than you’ve got coming in.  Even with the fact that more or sustained high street spending from public sector employees will help support jobs, it remains a net expenditure and will, as a result, not allow for economic growth and may increase not decrease the structural deficit that is at the heart of today’s problems.

        You may be right about NI contributions – I don’t know for certain as I’ve left the old crystal ball at home.  But as far as I can see the only way we can generate sustainable economic growth is through private sector job creation – because of the inherent benefits we both acknowledge.   The Eds’ plan is the only one I’ve seen that seems proactive and credible.

        Whilst Owen is right to be searching for an economic simulus, it has to be one that is a net income, not a net expenditure.  You are also right to say for every action there’s a reaction.   In  my view (a humble one) I believe the reaction to Owen’s actions would be negative for the economy, and therefore the country as a whole.

        By the way, I’m about to go to the pub so I can’t keep our debate going – as interesting as it is!

        • derek

          To be fair Jonathan, I think your being overly motive in your reply.
          Just sticking a plaster on a gaping wound is rather pointless and reiterating the worn out rhetoric is tiresome. Platitudes and negative babbles about pay restraints wont cut through the need for positive action.

          The “false economy” that you give so much homage to, seems to be built around the ideology of private is best, where in fact it’s inability to function and create has lead to more unemployment, just by chance do you know what the government collects in “NET INCOME”

          Until you can give a credible answer to the balanced economy question, then your reasons remain under-valued.

          Enjoy your beer!  

          • Anonymous

            You’re assuming it’s beer, Derek – he sounds more like a champagne socialist to me!

          • derek

            LoL! @Alan, could be a couple of  
            Sarsaparillas and another chat with some imaginary “scrounger”

          • Anonymous

            It’s ok I’m still around…

          • derek

            LoL trebroc, good to know.

          • Peter Barnard

            @ treborc,

            ” … I’m still around …”

            That’s for sure …. :-)  

          • Anonymous

            Champagne charlie if you ask me….

        • Peter Barnard

          @ Jonathan R, 

          ” I’d love our servants to be paid more if there were sufficient funds to do it.”

          Oh, “the funds” are there, Jonathan. It’s the way that they are distributed …. think of Premier League footballers on five million a year (and there are lots more examples of the stupid way that we reward “effort” and “real contribution” these days).

          • Anonymous

            Fantastic idea!!!! Now you just have to find a way to fill a sixty thousand seater stadium full of people willing to pay to watch 22 public sector workers doing an average days work. Answers on the back of a post card.

    • Peter Barnard

      @ Jonathan R,
       
      “ … public sector is a net expenditure.”
       
      I’m not sure what you mean by “net expenditure,” but every time someone shells out a few ackers for a good or a service, he or she is paying money for a good or service received. As an economic transaction, it matters not one jot whether the good or service is provided by the public sector or the private sector.
       
      To me, this remark – and the remainder of your comment – seems to indicate an attitude of mind that would be more at home in the Conservative Party. I’m sure you’ll soon be able to contact Luke Bozier and the two of you will be able to natter over a pint to your heart’s content.

      • http://twitter.com/robertsjonathan Jonathan Roberts

        that old chestnut.

        To run a public sector the Government has to pay £x in salaries and running costs.  It recoups some of that money through personal taxation and through indirect means such as personal expenditure.  But it doesn’t recoup as much as it pays out, and therefore is a net expenditure. My argument is that you cannot provide economic stimulus by increasing this expenditure.  What is your argument?  Not your response to my view.  Your own actual view.

        Are you really suggesting that understanding this principle  makes me a Tory?  There is cross party political consensus for my point of view.  No major political party advocates Owen’s (and, I assume yours).  So I wouldn’t suggest I’m on the outside here Peter. 

        The difficulty on this site has become that there’s a small number of you who never contribute a single idea, but just spend a lot of time criticising those of others.

        • Anonymous

          makes you a Tory lets see, that’s difficult, but yes.

        • Peter Barnard

          @ Jonathan Roberts,
           
          “ … never contribute a single idea …”
           
          Take a look at http://labourlist.org/author/peter-barnard/

          You’ll find fifteen “ideas,” all of which – I submit –  are  a lot closer than your “ideas” of what Labour should be about.

        • derek

          Careful JR, this is one shoot out your certain to lose.

          A pub joke for U?

          Pat, Mick and TAT, walk into a local, the barmaid’ say’s’ what will it be boys, to which Pat replies, three pints of lager! as the barmaid is pulling the pints she has a little chat with the boys and finds out that their triplets’ I would never have guessed that say’s the barmaid, simply because Pat and Mick are over 6 feet tall, while TAT is about a foot and a half shorter, to which Pat replies’ “there was not TIT for TAT” 

          • Peter Barnard

            @ Derek B, 

            “Careful JR, this is one shoot out your certain to lose.”

            Your faith in my grey matter is reassuring, DB. I’ll try not to let you down …

            My best wishes to you.

          • derek

            @Peter Barnard

            , I think it’s was only a kind gesture to warn JR, that your the real deal on facts and figures. 

        • Peter Barnard

          @ Jonathan R,@Winston_from_the_Ministry:disqus 

          “To run a public sector the Government has to pay £x in salaries and running costs.”

          Oh, dear. Try,  ”To run a public sector individuals, collectively, have to pay £x in salaries and running costs.”

          And then tell me what the difference is between that and, “To run Vodafone (or Tesco, or any other organisation supplying goods and services)  individuals, collectively, have to pay £x for salaries and running costs.”

          You really don’t have a clue.

          • http://twitter.com/robertsjonathan Jonathan Roberts

            one is public money, the other is private money. One is public expenditure, the other isn’t.

          • Anonymous

            I’m sure many people in the country will be saying the same thing about Miliband why bother he’s not going to be leader anyway.

            guys.

          • derek

            Jeez! Jonathan, have you Osborne syndrome, @Peter Barnard is miles ahead. Look, I thought you wanted to engage in debate? skip that!
             Another joke!
            Cameron is on “who wants to be a millionaire celebrity charity show” he’s down to the last question and has one life line left’ phone a friend.

            The question pops up! which bird doesn’t build it’s own nest.

            Four choices…blackbird…..robin…..crow or a cuckoo!

            Cameron looks stump and say’s can I phone a friend!

            Yes of course replies Chris’ who do you want to phone’ Cleggy…Nick Clegg.

            Chris phones’ hello! Nick Clegg, it’s Chris here from “who wants to be a millionaire”

            I agree say’s Nick, Chris say’s I’ll hand you over to David!

            Right Cleggy, which bird doesn’t…repeat…doesn’t build it’s own nest.

            A Blackbird….A Robin…..A Crow….A Cuckoo!

            It’s a Cuckoo David, I’ll go with that Chris!

            It’s the right answer! congratulations, you just won 1 million smackers for your charity.

            Cameron gets back to Westminster, meets up with Clegg and say’s!

            How the F..K! did you know that it was a Cuckoo!

            Clegg replies, F…king hell Dave everyone knows that the Cuckoo lives in the Clock!!!!!!!!

          • Anonymous

            That will be written in labour next manifesto Cuckoo to be charged rent on living in clocks

          • Anonymous

            The words are in English but appear to have been strung together with no meaning, reason or rhyme…. Oh it’s Derek. That explains it.

          • Peter Barnard

            @ Joanathan R,
             
            I have not actually made any suggestion that an increase in public sector wages would stimulate the economy, so please don’t put words in my mouth.
             
            As far as me never making any suggestions, please refer to my earlier reference http://labourlist.org/author/peter-barnard/
             
            I would also refer you to, well, Google ‘Tim Harford we are all wealth creators.’

          • http://twitter.com/peterjukes PeterJukes

            Jonathan

            Please don’t leave the list. But also please don’t categorise Peter Barnard as some kind of left wing utopian. He’s a moderate facts and figures guy, and all he’s suggesting – I’d wager – is that much of this public/private  rhetoric has been captured by the Thatcherite right for many years, and makes no actual fiscal or monetary sense.

            I don’t think he’s advocating huge deficits or austerity, only a clear cold look at how the economy really works. 

          • Peter Barnard

            @ Peter J,@madasafish:disqus 

            Thanks, PJ.

            “Private sector good, public sector bad” and “the private sector pays for the public sector” have been lodged in the mind of the public for too long, and I think I see something subliminal (or perhaps a nod in that direction) in recent remarks from the Labour Leader and Shadow Chancellor.

            Very annoying ….

          • http://twitter.com/Newsbot9 Newsbot9

            Of course it’s pointless. When there’s no difference between the party’s economic policies, there’s nothing which can be done.

            Which means any change has to come from without.

      • Anonymous

        Jesus I work in the public sector and even I wouldn’t try to pretend it doesn’t cost more money to run then it gives back in tax and indirect expenditure! It’s not even in question. Only an idiot would think that the government breaks even on most parts of the public sector.

  • http://twitter.com/christof_ff Chris Ffelan

    20 years of parachuted-in yes-men (& women) means that there are no natural leaders at the head of the party. The best you can hope for from them is to put a positive gloss on their own lack of substance, but the public is now much wiser to that Blairite culture of spin – it won’t wash any more – hence the widespread disenchantment with politics in general.
    Even with massive grassroots support,  the damage done by Campbell, Mandelson and their ilk will take at least a decade to undo.

  • Anonymous

    You’re right, the left should be looking to convince the general public about the validity of its arguments, rather than simply accepting what opinion polls say and using focus groups as a guide to make policy. This is one of the biggest criticisms I have of the New Labour consensus. They were obsessed with the “median” voter, and looking to adapt policy to appease this representative voter. The goal of politics should be to shift the position of the median voter, in our case to the left. If the general public at the moment seem to agree with the fiscal contraction, feel public sector workers are overpaid and that benefits are too high, it is up to the Labour Party to change people’s opinions. Otherwise, we’re simply an administrative party whose only argument is that we are better managers than the other party, and that’s not a particularly positive message IMO.

    However, I don’t think you can rely on “progressive” economists to make this argument tbh. This is mainly because there are hardly any progressive economists around, and the vast majority are extremely devout believers of free market capitalism. This was best illustrated when 30 economists wrote a letter to the FT, and their main suggestion to improve the economic situation of the UK was to abolish the 50p tax rate, making empty statements about how it stifles entrepreneurship without any evidence.  Murphy is an accountant, and Turner’s arguments are not based on economic theory, which is so ideologically biased in favour of capitalism that it is impossible to use to justify any progressive policy.

    I know this because I’m in the final year of an economics degree, and practically all the economic models that we’re taught justify the Tories’ economic policies of deregulation, cuts in public expenditure, imposition of market-values into the public sphere, privatisation etc. I know these models are basically pseudoscientific garbage, but they still carry a lot of value in policy circles because economics is wrongly seen as an “objective” science when it’s actually just ideology disguised as science.

    If the left want any suggestions of “progressive” economists, I can only think of Malcolm Sawyer at Leeds University, but he’s another one who’s completely outside the mainstream of the discipline.

    • Anonymous

      Considering they were all paying the 50p tax that not really unexpected.

      But of course the mess we are in now was in a big part to  labour following Thatchers model of the free market, so  perhaps you’d be better looking at economics  which does not have a Tory ideal or view.

  • derek

    “Organising” key word and a powerful tool but who will initiate it? I don’t mean to sound rude but it’s a “meet the Frockers” syndrome, anyone on the left is kept outside the circle, so someone has to throw the stone that creates the expanding ripple? where will this new fisher of man/woman come from? If someone would lead this then millions could follow.

    • http://www.facebook.com/people/Nico-Che/637175949 Nico Che

      Healthier, more democratic would be millions leading and some ‘leader’ following. In any case, no one should be waiting for others to act.

      • derek

        LoL Nico but organisers need that bit of catalyst fire to ignite a larger flame.

  • Anonymous

    This article can be summed up as:
    money grows on trees
    the public sector deserves to be better paid than the private sector which pays for it.
    Economics for Eurozone countries apply to the UK.. (Sorry they do not : we can print money and devalue our currency: they cannot).

    If you are going to have a platform to oppose cuts, this is half baked  and makes Ed Balls look like an economics giant

    • Anonymous

      The public and private sector are interdependent;
      we all need and use quality frontline services
      and rely on the skills of the staff who provide the backbone
      and infrastructure.

      I personally think we’ve had enough of the kind of divisive politics
      so characteristic of the 80′s, eg pitching one group of workers
      against another- devaluing some but not others.

    • http://twitter.com/Newsbot9 Newsbot9

      your post can be summed at as :

      starving the poor is a patriotic duty
      the public sector is full of evil criminals who have to be worked like slaves
      this country is magically immune to general economics

      i.e.
      hyperbole
      hyperbole
      hyperbole

      Reality: 500% faster rising unemployment than the EU. Double-dip recession.

      How much more damage do you want done to this country? Your hatred for it is disgusting.

    • Anonymous

      Hi Madasfish,

      Money doesn’t grow on trees.  It is manufactured out of thin air mainly by private banks, not dissimilar to the way cinemas create movie tickets.  Do not make the mistake of thinking wealth and money are the same thing.

      The total debt of the UK is now around 950% of GDP mainly created by financial institutions in the City/Canary Wharf which have effectively bankrupted the country.  Of the four sectors illustrated below, government debt is the smallest and is the least of our current problems.  All neoclassical governments from 1975 onwards, broadly following the advice of neoclassical economists, have deregulated, privatised and removed tariff barriers resulting in a greater concentration of wealth at the top, seriously eroding the financial status of the middle class but most importantly allowing, even encouraging, investment in asset bubbles, which bring no return to the real economy, instead of capital investment in industry and innovation.  

      The size of financial debt has crippled the UK economy, not government, non-financial or household, and no tax revenue generated by this parasitic industry is worth the destruction wrought by this crisis.  As the second graph illustrates, both Labour and Conservative governments kept public spending at historically low levels, in spite of the increases in health and education spending in the post-2004 period and it is only the counter-cyclical spending of the 2008-9 period which pushes government debt up to present levels.  One can not imagine the current state of the UK economy if this action had not been taken.

      So, what can be done?  Here are a few preliminary ideas:

      First, there is no way possible for the debt to be paid off.  The financial sector have bankrupted the UK. and all the current austerity policies, an exercise in futility if ever there was, will lead to an economic death spiral which will decimate people’s lives for many, many years.  All debts need to be written off.

      Second, the government is not responsible for these debts.  The sector should be liquidated gradually, while protecting ordinary bank deposits – a difficult task due to the global nature of our financial industry.  It is likely that this will require the cooperation of foreign governments and international institutions.

      Third, new economic structures are required.  The primary requirement is a system that discourages, outlaws if possible, asset speculation.  Banking needs a complete overhaul domestically and internationally – the focus needs to be on the boring notion of developing small local businesses and mortgages and loans to individuals and families for mortgages, cars, etc. A large task, again.

      Figure 2: Morgan Stanley global debt ratio calculationsFigure 4: And you thought America had a debt bubble…

      • Peter Barnard

        @ Jason B,
         
        Monumental comment, Jason (“Money doesn’t grow on trees.”)
         
        You are absolutely correct – the level of public debt wasn’t a problem, and won’t be a problem in 2014/15.
         
        Just to add some simple information, based on (i) Public Finances Databank (ii) PESA and (iii) OBR November 2011 forecast :
         
        In 2014/15, debt interest will be 3.2 per cent of GDP and 8.9 per cent of tax & NI receipts
         
        In 1996/97, debt interest was 3.55 per cent of GDP and 10.4 per cent of tax and NI receipts
         
        In 1990/91, after Lady Thatcher “sorted out” both the economy and the public finances, debt interest was 3.55 per cent of GDP and 10.2 per cent of tax & NI receipts.
         
        (To be more accurate, NI payments – being pure transfer payments – should be deducted, but I don’t think that I can find a “clear line of sight” that connects 2014/15 to 1996/97 and 1990/91).
         
        So (please excuse my French), what’s the effin’ problem that time and  a reasonably growing economy (2.5 per cent real growth, 2.5 per cent GDP deflator) won’t sort out?
         
        As far as government finances are concerned, I’m afraid that a lot of hysteria has been manufactured, basically for political advantage (“THE DEFICIT!!!”). Coalition ministers continually tell us that we are now paying £120 million pounds a day in debt interest, without placing it in context, ie the equivalent debt interest payments in 1996/97 and 1990/91 were £136 million pounds a day ….

        • jaime taurosangastre candelas

          @ Peter Barnard,

          the “effing problem” is the rest of the world, whom you cannot ignore.  There is nothing to stop you being 100% correct (and you may well be, much as Chris Cook may well be – I make no judgement on that), but the idiots in the rest of the world will frustrate your correctness by sheer overwhelming weight of numbers. 

        • Anonymous

          Hi Peter,

          Thank you for an exceptionally informative post, which makes me wonder why the case you make above hasn’t been utilised by the Labour leadership.  It blows the Tory narrative out of the water.

          I couldn’t agree more with your statements on the government/public deficit.

          The problem is the financial deficit of 600-650% is dragging the rest of the economy down. The UK has gone from a nation of shopkeepers to a nation gambling addicts, who are preventing real growth in the real economy.  If we have the same kind of growth based on asset speculation we experienced from 1993-2007, we will be adding to the financial deficit and making any kind of recovery harder than it is now.

          We need real growth from capital investments in infrastructure, manufacturing and, most importantly, our people.  It can be done.

      • jaime taurosangastre candelas

        @ Jason Butcher,

        I can’t think of a cinema that would print tickets for you unless you first give the cinema some of your wealth.  I don’t think it is a one-sided transaction.

        • Anonymous

           

          Hi Jaime,

          The key point is a) fiat currency is just a token with no intrinsic worth of its own,  b) facilitates transactions and c) the producer of the token sets the conditions of use.

          Imperfect as the analogy may be, it does highlight how money should not be confused with real wealth. (I could also go into the problem of  having a commodity as the currency at this point, but I shall save this for another time.)

          Jason Butcher.

  • M Cannon

    Quite right!

    The obvious thing to do is to increase the pay of the public sector, not to freeze it.  This will, of course, pay for itself, because they will pay part of the money back in income tax and NI and the balance will be spent (increasing receipts of VAT, petrol duty, etc.) and stimulating economic growth (which will bring in yet more money).

    Given the undoubted brilliance of this idea, public pay should be doubled – that would produce even more growth!  Hurrah!
    Who could possible disagree with such common sense?

  • Anonymous

    Agree with most of your points Owen.   I would reject both Krugman and Stiglitz as providing potential solutions to the current crisis as they still retain a fundamentally neoclassical view of economics.  

    The belief in the efficiency of markets, equilibrium, exogenous nature of crashes allied with flawed modelling that does not acknowledge the role of money and level of debt play in the creation of growth, employment and crashes, I believe, leaves orthodox economic theory in tatters.

    Instead of listening to those economists who argue for a comparatively small variation of the failed orthodoxy, and who did not predict the crisis, we should choose to take our advice from Post-Keynesian and Evolutionary Economists, Steve Keen, Roubini, Bezeker, who not only predicted the crisis, but offer solutions to the debt crisis and  how best to restructure domestic and international economies.

    We can also judge the Shadow Chancellor by the company he keeps.  Balls cited two noted neoclassical economists during his Fabian Society speech last weekend: Self-proclaimed ‘New Keynesians’ Larry Summers and Gregory Mankiw.  Summers played a major role in the repeal of the Glass Steagall act in the mid-90s before leaving government and making a fortune on Wall Street. Mankiw’s first year economics course at Harvard has been the subject of protest by students for its poor standards and his textbook the subject of ridicule.  

    The ‘New Keynesian’ approach is based on the  methodology of John Hicks, that he later recanted,   is bastardisation of Keynes’s ‘General Theory’ inelegantly squashed into a neoclassical orthodoxy. This outlook Balls shares with his two good friends Summers and Mankiw, is as redundant and ideologically driven as any professed by Hayek, Friedman or any of their ‘Chicago Boy’ acolytes.  These theories, and any policies derived from them should, therefore, be rejected as a total anathema to Labour Party ideals and values.

    It is now a priority to organise through the party and trade unions a plan for political action but also, in the best tradition of social democrats the world over, to educate as many people inside and outside the movement as we can as to the real economic alternatives that are on offer.

    Steve Keens’ book, Debunking Economics, is not a bad place to start.

    • Anonymous

      Jason
      I read your well written piece with interest.

      Unfortunately you did not see fit to even mention “the real economic alternatives that are on offer” so I am as dumb now as I was before I read it.

      In other words, it meant absolutely nothing to me. Of course LL may be full of people who understand what you are talking about.. 

      • Anonymous

        Hi Madasafish,

        Unfortunately, most people are in your position and unaware of post-Keynesian and other alternative economic models.  Until very recently, I was in that same position.
        If you truly wish to find out more about the alternatives on offer, it is better you consult the experts in the field rather than someone of my comparatively little experience of the concepts.  I hope you appreciate that I am not in a position to reduce economic theory into convenient soundbites.

        As stated in my opening paragraph, the economists to consult are Steve Keen, Roubini et al. whose articles and interviews are readily available on the internet.  Debunking Economics is a good starting point for an in-depth analysis of both the  problems with neoclassical theory and the various alternatives on offer as are the works of Hyman Minsky, Schumpeter and Fisher.

        For a crash course you can start here: http://www.youtube.com/watch?v=75kFhBAI8Bo&list=UUM1ubsbE-tG9ru61mc3zX8A&index=4&feature=plcp
        and here: http://www.youtube.com/watch?v=vIE-it6K2co&feature=related

        Hope this is of some help to you.

        Jason Butcher.

        • Peter Barnard

          @ Jason Butcher,
           
          Great comments.
           
          In defence of Gregory Mankiw (I have his “Principles of Economics” 2001 edition on my bookshelf) – he does mention the “Theory of efficient wages,” ie wages above the “market clearing rate” : the “market clearing rate” is beloved by the classicists and neo-classicists.
           
          He also mentions “Henry Ford and the very generous USD5-day-wage” of 1914.
           
          He also writes, “ …there is no consensus among economists about whether unions are bad or good for the economy. Like many institutions, their influence is probably beneficial in some circumstances and adverse in others.”
           
          My economist of choice is the late J K Galbraith. His scepticism regarding the “conventional wisdom” was incisive. And, his “Culture of Contentment” accurately goes a long way to explain the political stance of “New Labour” and, it has to said, Mr Miliband (E) and Mr Balls.

          • Anonymous

            That’s very kind of you Peter.  Thank you very much indeed.

            I share admiration of Galbraith – The Great Crash… was extremely helpful in one of my early essays and his work plays a central role in my political and economic thinking.  Needless to say, I agree with your assessment of Miliband and Balls re: Culture of Contentment.

            I also appreciate your spirited defence of Mankiw and I take on board the points you make.  From the comments that Keen makes on his work in Debunking Economics, it would appear he still has some ground to make up when it come to some of the fundamental elements – the demand curve springs to mind in this instance.

          • http://twitter.com/peterjukes PeterJukes

            Now there are two grown ups in the room.

            I wish politicians would read more real economists, than the semi-digested regurgitations of the Op Ed pages of the Times. 

          • Anonymous

            The op-ed pages can be summarised  as ‘much sound and fury signifying nothing’.  I could say the same thing when it comes to PMQs when I think about it, too.

            There is a serious challenge to the current conventional wisdom that needs to be made seriously by politicians and all those who take an interest in related issues.  The problem is that so many in positions of influence are so utterly clueless and completely unaware of the fact.  

            That, more than anything, is why we find ourselves in the current mess.

          • http://twitter.com/peterjukes PeterJukes

            That’s one thing Peter B and I agreed on when we met on this blog 3 years ago. The Thatcher Reagan Neoclassical model had been permanently ruptured. We’re still struggling in the rubble – but your video links really help to make some sense of the dust and noise

          • Peter Barnard

            @ Jason B (and Peter J),
             
            I think that there are at least three like minds here … good stuff.
             
            If I may pop in a personal plug, the FT seems to intend to publish a letter of mine in the magazine section this coming Saturday. The letter was a response to points I made to Gillian Tett following the article that she wrote last Saturday.

          • Anonymous

            I shall keep an eye out for it.

          • Anonymous

            The model should be ruptured, but dangers still remain – if we on the ‘left’ don’t don something about it.

            Zizek has made the point that there is the potential for a more authoritarian liberalism/capitalism, remember the phrase ‘muscular liberalism’ the PM used not so long ago, fashioned on the Singaporean model.  

            Glad you find the links useful.

        • http://twitter.com/gonzozzz dave stone

          Thanks for the Steve Keen links, Jason.

          If Keen is right, and he has been right before, then things are going to get very difficult indeed.

          Here’s Keen again, with a brief overview of the current crisis:

          http://www.youtube.com/watch?v=7F2FKxxN_IE 

          • Anonymous

            Thank you for the link Dave.  I did watch this interview a number of weeks back, but it was very good to see again.

            I hope the post-Keynesian material proves informative.

      • http://twitter.com/Newsbot9 Newsbot9

        Of course, there can be no alternative to writing off millions of people.

  • http://twitter.com/gonzozzz dave stone

    Top post from Owen. He says what needs to be said.

    We all know about economic incompetence – the better we get to know Cameron and Osborne, the more familiar we become with disastrous economic policies.

    As Owen says, a coherent alternative needs to be presented PDQ. There’ll be no shortage of support, from Nobel Laureate economists to school dinner ladies, to those in the private sector beset by the absence of economic activity, they’re all beginning to sing from the same song sheet.

    Let’s get to it while there’s still time to save the country.

    And finally… why isn’t Owen an MP?

    • Anonymous

      God he’d make them look like a bunch of Tories, which of course they are not, sadly they are not labour either.

    • Anonymous

      Could the problem be that both major political parties in government end up consulting the type of economic expert?

      Let me know what you think Dave.

      • http://twitter.com/gonzozzz dave stone

        Yes, I think that does happen. In ordinary times both parties will consult those who are regarded as expert in the prevailing orthodoxy – which, in recent times at least, has been common to both parties.

        But in extra-ordinary times, like now – with capitalism having gone dysfunctional  - the prevailing orthodoxy can be seen to have failed.

        So it seems everything is up for grabs. And there’s a whole bevvy of beguilingly beautiful economic models competing for attention.

        So, which one to go for? I was impressed by the Steve Keen links you posted and would hope that his research is given significant attention.

        But, as Keen suggests, no leadership of any country, is as yet prepared to confront the seriousness of the problem and, unfortunately, will probably only do so  following widespread protest/upheaval.

        Labour faces a similar problem internally. There’s the Surrender Tendency, probably a majority in the P.L.P., who think we should mimic the Tories because they won the most seats at the last election – as if we’re playing a football match like a bunch of untrained kids: ending up in a ball-chasing convergence – and then there’s Owen’s proposed Alternative which can respond to the seriousness of the situation and set an agenda not determined by the sleepwalking Tories.

  • Anonymous

    A good rule of thumb that Labour should use is to see what policies economists are suggesting, and then do the exact opposite. I think the party needs to move beyond looking to find economists to agree with your policies. The only policies that they’ll agree with are those that are effectively Tory-lite policies. Ignore the economists and do what you think is morally and ethnically justifiable based on your underlying philosophy. Forget economics, it’s simply a pseudoscience that evolved in the 18th century to justify the status quo, and it’s serving the same function in the 21st.

    • Anonymous

      Well  Labour  already tried ignoring economists. Keynes said: save money in the good times. They did not.

      And look where it got us. No money left.
       
      “Forget economics” is the slogan of those who can’t budget..

      I recall this kind of debate in the 1970s. The IMF were called in.. That’s what you get when the Government has no economic sense and runs a deficit it has not the wit nor the will to curb…

      Strangely enough it was  a Labour Government..  (Healey had to go to nightschool to learn economics.. He was not very good as Chancellor)

      • Anonymous

        The reason Left government’s seem to end up looking economically inept is because the ground rules are set by economists who are ideologically invested in sustaining a free market capitalist system. The same with the IMF, who are full of right wing economists who make the rules which sovereign governments have to abide by. Again, there’s nothing particularly wrong or right about running deficits, but that’s beside the point. Left wing governments are inherently at a disadvantage because the international financial institutions have stacked the cards against them, based on pseudo-scientific economic theories that are simply untrue.

        It’s probably better if you have a chancellor that doesn’t have an economics degree, and hasn’t had to suffer the same brainwashing that someone who does. The theory that justifies free market capitalism (called competitive general equilibrium theory) is so full of holes it’s laughable. Moreover, all economic models make the a priori assumptions that labour can be treated simply as a factor of production and a commodity (even though this is morally abhorrent for many people) and that the market simply exists as if it’s a natural state of being, rather than a mechanism that has to be protected by governments through private property right and legal enforcements (which are, surprise surprise, never seen as illegitimate government intervention, even though income redistribution and nationalisation is)

        Labour need to question these fundamental assumptions that underlie all the economic models that are being used to justify Tory economic policy. Why should labour be treated as a commodity, in the same way as capital? Why should private ownership of the means of production be the status quo? Why should markets exist? Who’s interests are markets serving?

        These fundamental questions are never asked by economists, because they’re too uncomfortable and would expose their rotten theories for what they are, ideologically tainted rubbish.

        • Anonymous


          The reason Left government’s seem to end up looking economically inept is because the ground rules are set by economists who are ideologically invested in sustaining a free market capitalist system

          On that basis, the USSR would be a thriving economic success..

          The reason Left government’s seem to end up looking economically inept is because  they are inept being incapable of controlling their expenditure. 

          Period. Fact. Proven by history.

          • http://twitter.com/Newsbot9 Newsbot9

            Oh yes, because all leftists are totalitarian nuts who torture their political opponents. By the same measure, you’re praising the BNP and EDL.

            Quit the hyperbole. Because you revisionism is getting to Orwellian levels.

        • Anonymous

          I think you will find the reason labour look inept is normally because they are in this case.

      • Duncan

        He was Britain’s first monetarist Chancellor

        • Anonymous

          Healey was an abject failure. He did inherit a bad hand: Barbour when Chancellor (a Tory) in 1971 made a “dash for growth” and screwed it all up.

          Then there were the miners’ strikes and Heath lost and Wilson inherited a mess. He made it worse and buckled to the Unions and inflation soared.

          They were very difficult times.. But it required a Conservative Government to sort out the economic mess and rein in the Unions..

          Labour Governments in the UK  tend to run away from difficult decisions. See Tony Blair: a whopping majority and his two three main achievements were Iraq and abolishing fox hunting…and making G Brown his successor. What a litany of success..

          • Anonymous

            Gosh Wilson buckled to the Unions, bloody hell I must have missed that one, was that the time that we had a massive strike and the Labour party refused to settle, nope  could not have been

          • http://twitter.com/Newsbot9 Newsbot9

            “Sort out the mess”.

            Ah yes, that’s what impoverishing much of the country and ensuring that millions die in poverty means to you. Don’t worry, this lot are doing precisely the same thing again.

            YOU’LL be warm. YOU’LL be fed. Never mind anyone else!

          • Anonymous

            I expect The Fishy One™ pays his taxes, beyond that what do you do?

  • Anonymous
    • derek

      @Alan, and when Ed wasn’t for backing the strike action, Alan Johnson did on TV?
      The inconsistency just grows and grows. @Alan, It looks like it will all end in tears. 

      • Anonymous

        Yes Derek, When the ghastly old Blairite waxworks creep out of the crypt, it brings back the stench of the past. I always recall, when Johnson was Blair’s minister for Work & Pensions, he had the wheeze of wanting to put Jobcentre representitives in G.P’s waiting rooms to  “encourage” the unemployed: of course this would have meant breaking doctor/patient confidentiality as it would have entailed the receptionist having to tell the official who was, and who wasn’t unemployed.

        Of course the plan never came to fruition, because Johnson hadn’t thought it through properly. But that’s always been Johnson’s problem – he always opens his mouth before engaging his brain. 

        • Anonymous

          Never mind I think the Tories are already smelling success and I think Labours people are smelling defeat, come the next election I suspect the middle class will decide to go with a winning team and Cameron’s  going to walk it.

          The fight is with the Tories you have spent so long talking to them doing deals with them you have forget what the hell opposition is.

          After all the offer is labour cuts and the working class paying off the deficit.

          Tories Cuts and the working  class paying off the deficits, but we did not cause this mess did we.

      • Anonymous

        In the end the Tories must be screaming with laughter, and sadly it shows we have a leader unable to  pull the party along, you have  MPs openly  saying look Miliband is a nice bloke he a great friend, sadly he’s not a leader, I suspect if Johnson comes out to protect you watch your back…

    • Anonymous

      It would be of course great to see the zeal labour fights it own people, actually  spent fighting the Tories. The problem is Johnson Balls and Miliband are basically failed politicians they lost the last election, they are not man enough to accept this and find a reason to hit the Tories, so they attack the people who vote for them.

      What a bunch of loser a second rate group who have no policies except a silly five point plan ask what it means and the will whisper we cannot tell you the Tories might steal it.

      Sorry the Union asked for this.

    • http://twitter.com/Newsbot9 Newsbot9

      Well of course, the left are delusional now.

      …

      More and more to the right, kids!

  • http://www.facebook.com/people/Nico-Che/637175949 Nico Che

    Count me in. Have just joined the Labour party, convinced by your suggestion to change it from within!

    • Anonymous

       Just  where have you come from who were you with before, or are you just joining now because Miliband looks cuddly.

      • http://www.facebook.com/people/Nico-Che/637175949 Nico Che

        Hahaha! Cuddly!

        I have never been a member of a party (sounds like an answer to a question by Joe McCarthy but ain’t!), I’d consider my views leftwing, whence the utter repulsion with New Labour, yet, given the current crying need for political representation for something neither neoliberal nor fascistic I was convinced reading Owen’s article: http://owenjones.org/2011/03/02/why-labour-is-the-lefts-only-hope/

        -Specifically by the idea of changing the party from within rather than try and start a new one.

        • derek

          Good luck Nico Che and welcome on board, great to have you with us, I’d suggest you ignore me to a certain degree and follow fellow posters Like, @Peter Barnard, @Peter Jukes, @Alan Giles @Joanne and do engage with @Jaime.  

        • Anonymous

          You can take my place I’ve left after 46 years, including miners strike and  CND and god know who many miles shoving leaflets through doors, Enjoy your stay.

        • http://twitter.com/Newsbot9 Newsbot9

          And I think you’re nuts. Look at Die Linke in Germany. THAT’S what we need here, now, not an attempt to force a disinterested party in probably terminal trouble into stopping shadow boxing and returning to a power base it dosn’t want.

          • http://www.facebook.com/people/Nico-Che/637175949 Nico Che

            I would, but Wikipedia is down! I confess ignorance, how to describe them?

            What’s terminal, I hope and trust are neoliberalism’s final stabs at smashing a largely unconsenting society. That I hope will bring the demise of said sector of Labour (New Labour).

            I personally think every means available has to be used at the same time, including using existing political parties as a vehicle for leftwing ideas.

            If more from the left join, it won’t be “forcing” it’ll just be “voting” etc. no?

            Is there anything there actually preventing pursuit of your preferred option?

          • http://www.facebook.com/people/Nico-Che/637175949 Nico Che

            This disproportionately informs my outlook, but I’m also thinking of how the Kirchners have been using the old rotten Peronist party in Argentina to turn it away from Menem’s neoliberalism and towards social welfare and wealth-distribution programmes.

            I wouldn’t consider efforts to form a parallel leftwing coalition or party (if that was your German reference) as contradictory.

            Think of all the people disaffected from Labour after it went Tory, joining and trying to turn it into something they might even vote for…I don’t see them condemned to be a voiceless minority.

          • http://twitter.com/Newsbot9 Newsbot9

            They tried something alright. They tried the LibDems. Who delivered them to the Tories anyway.

            No, we need an unequivocally left-wing party to carry the flame. The heirs to Atlee need not carry the Labour name – that IS (and it’s an abused word) tribalism.

            Because anything less than that left-wing party is going to see those left-wingers refuse to come out to vote. Many of them are embittered, but if they can be hauled out for a last try…perhaps this country can still be saved.

          • http://www.facebook.com/people/Nico-Che/637175949 Nico Che

            “No, we need an unequivocally left-wing party”

            Absolutely. Either build a new one or change an old one into that.

            If Blair could turn the party from centre leftish to right wing, there must be a way to recycle the old thing as something useful…

          • http://twitter.com/Newsbot9 Newsbot9

            Neoliberalism is winning the argumen in the UK. They’ve got all three major parties to sign on.

            Wasting time trying to force left-wing ideas into them has failed. Miserably. Repeatedly. It’s a waste of time and effort.

            If they want to reach a rapprochement and merge with a left-wing party in the future, that’s certainly possible. But they’d have to remember their roots in the process…

  • Duncan

    I think this has to have been one of the most frustrating weeks to be a Labour member in quite a long time (since the election, anyway).  There was a real sense that the fairly narrow and unsatisfactorily timid position we had on the cuts question was starting to get some sort of resonance, and was being backed up by significant economists and the facts on the ground, and then suddenly we got this mad reverse from the two Eds.  What was it all about?

    When you read the detail and the subsequent explanations it is probably fair to say that it was more a change of emphasis than a change of policy, but it was a hugely significant and strategic change of emphasis, and a massive error.

    If we accept the argument that the Labour Party today cannot predict the economic situation in 2015 and therefore it would be irresponsible to make specific spending commitments today, that’s one thing.  But nobody was asking them to make specific spending commitments today.  What’s more, this was followed up with a specific cutting commitment – the public sector pay freeze. 

    There have been calls from Peter Watt and Paul Richards for the leadership to be more nuanced – if this got more nuanced we’d just stop speaking.  Nuance is not a particularly effective strategy, anyway.  You can’t really escape the idea that this was a response to the pressures coming from certain voices to the right (the least significant of which chose to defect on the same day as the emphasis change, thus neatly illustrating its futility).

    You see, nobody was asking anybody for specific commitments for 2015 – emphasis, message, broad-brush analysis is what we needed, and it is on this territory that we have witnessed an appalling retreat.  We have ceded miles of territory to the Tories.

    I totally agree that we should organise the alternative.  It’s going to be difficult.  If the leadership seems to sway under “union pressure” then  – while that’s a perfectly sensible thing for them to do – that will be a presentation nightmare.  That’s another way in which the two Eds have boxed themselves into a tight and unenviable corner.

    The right will keep coming for them and they’re burning their bridges with the left with increased relish (“that’s tough!” said Miliband).  We’ve got to win the cuts/deficit debate in the country and that might just deliver Labour a victory whatever old nonsense the leadership are coming out with.  They depend on us winning that debate, but they’re not going to help us win it.

    • http://twitter.com/peterjukes PeterJukes

      Pretty much summed up my feelings.

      I think the two Eds were bounced into this by the mainstream press and some poor advice, which made ample sense in the days of triangulation in the 90s, with a rebounding economy, but hardly match up to the systemic crisis we face now.

      I preferred Ed M to all the other leadership candidates because he seemed to be asking the right hard questions about the direction of the country for 40 years.

      But let’s not forget both Eds were Spads schooled in the fearful ways of New Labour, and the temerity is hard to dislodge

      • Duncan

        That is the essential problem.  I do think both Eds have some of the right instincts, but their political education was very much a New Labour one; the parameters of thought and behaviour have been set pretty tight.  John McDonnell’s letter in the Guardian today is very good, but it’s hard to imagine one of the ex-New Labour Spad Brigade daring to risk a big break with consensus; from where they’re standing, talking about “responsible capitalism” is a big, risky leap in the dark – and then it’s hard to understand how Nick Clegg and David Cameron can come out and talk about the same things.

        But I can understand the temerity.  What I can’t understand is the boldness in the wrong direction.  If you had to come up with only one solid proposal for after 2015, why would it be to preserve the government’s public sector pay freeze?

  • Anonymous

    It would be good to start the discussion on alternative ideas. Some of my thoughts are below and  I welcome your critique :)
     
    One of the key issues that has been overlooked, are costs and the relationship between public need and private sector need for maximising profit. For far  too long subsequent governments aimed to expand people’s spending power, either through wage increases ( with benefits) or provision of cheap credit and yet wouldn’t dare question the level and extent of profits which inevitably lead to higher costs. Housing is good example. The private sector, aka the market, has absolutely failed to deliver housing (affordable or not).  I doubt there are many that would deny it. Currently, mutualism and fresh take on social housing are part of Labour’s thinking strategy  (I have noticed that we are pretty quite on any house building commitments at the moment). ‘Affordable Housing’ has become a sexy expression.  The aim is to bring rents/mortgage payments to within 30 % of income. Though I truly believe this to be a praiseworthy aim, the reality seems to be pointing towards the outgoings, being around 40% of income, which is only a fractional improvement to the market conditions. Due to lack of appropriate legislation we are somewhat  far from viable mutual sector. Hence it seems to me that we, Labour have very few options available (I mean with recent announcements on cuts, public spending on housing by this leadership is out of the question). However have we really looked at all the possibilities? NO!!! Private sector rent caps!!! Let me say this again: PRIVATE SECTOR RENT CAPS.   WHY? There aren’t many people in UK who would consider provision of healthcare as privilege. Thankfully we all agree that it’s a right!! Why should roof over our head be any different? This is an issue of morality and values rather than economics (just look at the US debate on healthcare).By building new homes, capping rents and by  making it easier to create cooperatives we not only meet one of the most important human needs but also allow opportunities for long-term, safe investments ( see Ken’s manifesto on housing).
     
    I fully appreciate that many in the party would see this as a political suicide but I disagree. Over the last 20/30 years not many have championed collective rights, especially when these are juxtaposed to the individual’s right for maximum profit. It’s time we start doing that, it’s time we remember who we are!!!!  

    • Anonymous

      Before suggesting solutions, why not ask the real question – why did the private sector fail to deliver enough housing?

      Private, public, mutual – it doesn’t matter who is building the houses, ultimately you need land and then permission to build on the land before you can build a house. If that permission is restricted and difficult to secure, making building land scarce, then the cost of land goes up and the cost of housing follows.

      You only need to watch an episode of Grand Designs to see it in action, a little square of land worth a few thousand as farm land, costing hundreds of thousands with planning permission.

      The private sector can turn out all manner of goods in any quantity required, that it fails with housing suggests a problem specific to the housing market rather than a problem with the private sector in general. The only difference between houses and other goods is that housing requires permission for everyone you build.

      • Anonymous

        Acre of land in my area is  going for £1.2 million with planning, a field has just gone at auction for £4.2 million. The old Rugby field has just been sold in my town for £8 million and the planning was put in for 100 houses and they only just found out it’s on a Flood plain.

      • http://twitter.com/Newsbot9 Newsbot9

        Why? Because there’s a very finite number of interested investors, and they’re interested primarily in certain regions. You can throw cash at the issue, all you’ll do is fund the private house builders. You WON’T get a significant amount of houses for the poor built. Period.

        Planning permission is FAR easier to get for brownfield sites, but there’s VERY little private interest in those…

      • Anonymous

        That’s oversimplifying the matter. There is the issue of Brownfield vs Greenfield sites as mentioned in other comments.  The land, construction and management of the private sector build is underwritten by a bank loan obtained on the ‘competitive’ financial market, even on its own it is a far greater factor contributing to the high cost.  Furthermore, this is a business venture, usually conducted by large companies whose shareholders are not prepared to invest unless they see returns of 100/200%.   This is a major contributor to the cost.
         
        It is amusing to hear that lack of houses in Britain is down to planning permission.  It reminds me of US right, blaming over regulation of the financial markets for the collapse.

        • Anonymous

          Your analysis is simply wrong.

          Housebuilding is potentially open to a vast number businesses, from small construction firms all the way down to self-builders. Compared to most industries it is relatively easy to set-up as a small housebuilder, building one or two properties.

           The question you need to answer is why these businesses don’t start building houses, why more people don’t self build.

          If you asked that question – you’d quickly see that it is the cost and availability of land which is the limiting factor. It is land availability and the cost of it which stops people self-building, which stops smaller firms building houses.

          The US is an interesting example because of course, in many areas it does have lax planning and house builders went on a building spree and it now find itself with a surplus of housing.

          The US private sector delivered a surplus of housing, so the idea that the private sector always under-supplies housing is baseless.

          • http://twitter.com/Newsbot9 Newsbot9

            The US private sector delivers very selectively. Primarily in places where they can build on cheap greenfield sites, because some of their cities have vast areas of un-used land surrounding them.

            They’re car-cities, with long commutes, yes, but…

          • Anonymous

            “It is land availability and the cost of it which stops people self-building” thats right the cost of the land is prohibitive!!! withholding land from the market only increases its value.who owns the land?

            never thought DM would come in useful but have a look:
            “ A group of 36,000 individuals – only 0.6 per cent of the population – own 50 per cent of rural land. ”

            Read more: http://www.dailymail.co.uk/news/article-1328270/A-Britain-STILL-belongs-aristocracy.html#ixzz1jzh5Dp1f

             

          • Anonymous

            Small pieces of agricultural land, fractions of an acre upto several acres are readily available on the open market at a cost of <£20k per acre. Typical building density is 20 houses/acre, so potentially less than £1k/house for the land.

            You, I, any of the other readers of this site, could if it wasn't for planning law buy a piece of land and erect houses at a cost that would make them easily affordable to people on average incomes.

            The pinch point in the current system is planning permission, it is the planning permission itself which becomes valuable and that value goes to the person owning the land when permission is granted.

            The private sector is quite capable of producing affordable houses but it cannot produce affordable planning permission, that requires action by government to increase the supply of 'permission' and hence drive down the cost/value of it.

          • Anonymous

            Are you really suggesting that in a developed economy, a market that is consistently ( over a period of at least three decades) fails to meet demand, does so simply because of overregulation?? Seriously? :)

    • http://twitter.com/Newsbot9 Newsbot9

      Yes, rent caps are sensible. Been saying this for several years now. Yes, you need to also have a tax on unoccupied housing and brownfield land to keep the supply of houses up given rent caps.

      I’d note even the US uses rent caps in many cities.

      You’re not going to persuade the Labourites though, UKAzeri. Why not seek like minds on the left? Time to stop beating heads on Labour’s brick wall and for the left to go our own way.

  • Anonymous

    All of the analysis here seems to assume that we have a ‘closed’ economy unattached to the rest of the world.

    Has ‘globalisation’ passed you all by ? do you think that the UK could either reverse it or isolate itself from it?

    If not then all attempts to extract significantly higher taxes from those who are highly paid or have wealth will be futile – they and their wealth will simply move elsewhere and you will cut of your nose to spite your face.

    I know, tax me much more heavily and I will gladly go elsewhere. You cannot dream up solutions or alternative paradigms without reference to the fact that we are part of a wider world.

    What we are seeing in action is a simple – we are not owed as of right a high standard of living – either individually or collectively – we have to compete with others around the world by being more creative and more efficient than they are.

    Creating schoolboy models of alternative universes will achieve precisiely nothing.

    And that I think sets out the essential difference between those who are getting on with competing and winning and creating wealth and employment that you can tax and reduistribute and those who just talk and philosophise whilst creating precisely nothing.

  • http://twitter.com/robertsjonathan Jonathan Roberts

    OK Alan, Treborc et al.  You win.  I’m done with Labour List.  You continue to think
    your views are the pinnacle of common sense and that you all are the
    bastions of Labourness.  But some of you aren’t even members.  The
    truth is, the reason why you never get your policies put in to action is
    because very few people in the country want them.  It really has never
    crossed your mind that you could be wrong.  At least I try to understand other views, but people are more interested in arguing than debating – you shut down debate by criticising others but God forbid you might offer an argument of your own.

    I’m lucky to have a life. I’m off to live it, including campaigning for a Labour Party that can actually win elections and help decent people. Fellas, good luck plotting your utopia.  Even more good luck getting anyone to vote for it.  You’ll need it.

    I’ve got no hard feelings and wish you well – feel free to say ridiculously over the top and out of order things in response.

    • Anonymous

      I hope not Jonathan; I personally have valued your moderate and common sense approach. We need a whole range of people on board.

      My advice would be not to take to heart other people’s positions;
      I know how hard it can be not to respond at times if people can appear
      a bit provocative and argumentative.

      It’s up to the individual if they wish to respond or not, and I think people have a right to express ideas, so long as within respectful dialogue and consideration towards posters.

      It takes a while to get used to not getting caught up in arguments.
      Sometimes just logging off and having a break clears the mind!

      So just wanted to say, I’m sure there are many here who would
      be happy and willing to debate and discuss without getting into point scoring
      etc. Just stick with people you feel comfortable with?

      Hope you don’t mind me saying Jonathan- it would be a shame to lose such a good poster on LL in my view.

      We might take different views or differ on spectrum of opinion,
      but I guess that’s what makes debate lively and interesting!

      Good luck anyway- and have a good break!

      Jo

      • Anonymous

        He’s not beyond being provocotive and arfgumentative himself, Jo.

        I fear Mr Roberts is one of those who enjoy dishing it out but is unable to take it.

        A bit like his great hero Tony Blair in fact

    • Anonymous

      Grow up Jonathan. Are you suggesting that the only “decent” people (a favourite word of yours) are those who agree with your right wing views?. The rest of us are “indecent”?.

      By the way you have twice now (once on Twitter and once here on LL) bought up the fact that you are off to the pub. You obviously think it is important enough to mention.

      You come over, if I may say so, as a very immature rather pompous man – the Charles Pooter of LL.

      The other day in response to Bozier’s final LL post, before decamping to his natural home you wrote: “Spot on, Luke”.

      I’d respectfully suggest you join him with the Conservatives, because there genuinely seems to be no real difference between right wing “Labour” types and Tories – you and Luke Bozier could then unite and condemn those of us naughty enough to believe that the Labour party should not just be another version of the Tories

  • Anonymous

    The Con Dems are cutting too far and too fast, but there would be cuts off if Labour was still in power.  Labour was right to stimulate the economy after 2008 but the stimulus could only be temporary.  The borrowing did need to be paid back.

    Some people on the left seem to think that we can carry on borrowing 100 billion plus a year, while the right do not seem to understand that cutting public spending too fast is counterproductive if it results in higher benefit payments and less tax being received.  The deficit needs to be cut at a rate that allows the economy to grow, which is what Balls has been saying for the last 18 months. 

    I thought that his Fabian speech last Saturday was the best argument for Keynsianism by a politician that I have read.  He actually is an impressive intellectual but his views  might be too complex for some people to understand. 

    • Owen Green

      This is another case of a false equivalence between a monetarily sovereign government and a household / firm; the mechanics and consequences of ‘borrowing’ aren’t remotely similar in each case. What we call government ‘borrowing’ is bond sales.
       
      This is not a fund-raising exercise, but a *voluntary* undertaking by the government to match spending £-for-£ with the issuance of interest bearing bonds. So the government ends up with a liability (not the same as a debt for you or I) to pay interest on the bond until it expires. It is essentially a conversion of one sort of money (that doesn’t yield interest), to another (that does).

      The entire public ‘debt’ (outstanding bonds) is rarely, if ever retired, and nor does it matter particularly if it is: a sovereign government can always make the interest payments, unless it decides not to. Sovereign governments don’t have / not have money in the sense that households or firms have or don’t have money. Money is created when the government spends, and destroyed when it taxes.

      The utility of this ‘borrowing’ exercise is not in raising funds for the government to spend (which in any case, they’ve already spent into existence), but in meeting interest rate targets. If so desired, parliament could vote to stop issuing matching debt tomorrow, and interest rate targets could instead be met by paying interest on bank reserves.

      Also, the problem with wantonly slashing public spending is not so much to do with the effect on the deficit via the automatic stabilizers, but that it contracts the economy by depressing demand and creating unemployment, and destroying vital services in the meantime.  

      • Anonymous

        Sorry Owen.

        You are writing as If the UK Government exists in a vacuum. It of course does not.

        The UK Government depends on trust that debt will be repaid. No that it actually WILL be repaid but that the Government is capable of repaying it and willing to do so.

        If that trust is lost, no-one will lend to you. See Greece as a classic example of loss of trust.

        You are proposing going down that route.

        Government debt would immediately drop in price and interest rates on new debt soar. (If you could issue any). The last time we tried that, we ended up with the IMF.

        Abject and utter failure of a policy, ignroing the real world so not credible.

        • Anonymous

          I agree with most of your comments.   On the IMF, it turned out that the loan was not actually needed and it was easily repaid.  As you say, the important point was that lenders lost trust in that government, which needed to regain trust with some very difficult decisions.

          • Anonymous

            Robert.

            Yes the loan was not needed.. but the Treasury numbers were wrong  and as you say it was trust that was lost.

            The annual spend on interest by the Government is c £49b for 2012 (Budget). The Increase in Government Debt for 2012 is c £137b (but may be less).

            See..  http://www.ukpublicspending.co.uk/

            and 
            http://www.ukpublicspending.co.uk/breakdown_2012UKbt_11bc5n 

            So  the Government has to borrow  just to pay the interest!

            Which puts Owen’s arguments in context..

            (Let alone ignoring the need to borrow to refinance debt maturing which has to be repaid. Which Owen has conveniently ignored We need to repay around £500b of debt over the next three years – which can only be done by borrowing on new terms to replace it).

            See.. http://www.ft.com/cms/s/0/88fb41f6-27c7-11df-863d-00144feabdc0.html#axzz1jtXPJWz1

            and

            http://duncanseconomicblog.wordpress.com/2011/04/07/britain-is-not-portugal-the-importance-of-debt-maturity/

          • Owen Green

            Please don’t misrepresent my position, or I’ll begin to suspect you’re not discussing honestly.

            I didn’t ignore the issue of inerest payments. I explicitly refuted the need to borrow in the first place and stated that the govt spends money into existence. This happens with interest payments, which appear as new net financial assets in the non government sector.

            If you wish to dispute this, by all means, make your case.

          • Anonymous

            Ah yes .. print money.

            How long do you think that will last?  When the next debt repayment is due, how do you think the lenders are going to feel being paid in new money?

            Not very happy.

            A certain Mr Mugabe tried that — he had no choice as no-one would lend to him.

            Net result the Zimbabwe dollar collapsed and inflation rose to 1000%.

            And you seriously propose that?

            I am sorry if I misunderstand what you are saying.. but if that is what you are proposing, you should give up now.

          • Owen Green

            I’m still not sure you and I are on the same page concerning the nature of this ‘debt’ for monetarily sovereign governments, as you’re still talking in terms of repayment, as if it were the same thing as private debt. Government debt is bond holdings; these are, basically, savings of the non-government sector. A savings account at the the BoE if you like. ‘Repayment’ consists of the bonds being converted from one sort of money to another, as I said. The only way the UK governemnt could fail to do this is voluntarily.

            Also (for the third time) we don’t need the ‘lenders’ (bond buyers). It’s a form of corporate welfare. The whole operation could be ditched. If the govt desired a positive interest rate, it could pay one on bank reserves, otherwise the interest rate would drift towards zero.

            I’ve already commented generally about inflation in this thread here.

            On the subject of the dreaded hyperinflation of doom that seems to get wheeled out every time somone suggests the state actually use its fiscal capacities:

            Zimbabwe is another inappropriate comparison. The ‘debt’ we are talking about for the UK is almost entirely denominated in the UK’s currency. Zimbabwe’s problem was holding a great deal of debt in foreign currencies (which really *is* debt).

            Zimbabwe also suffered a massive supply shock in its food market (that and the foreign debt holdings aren’t unrelated). Again, doesn’t apply here. 

            Much more detail here

            At the present time, we should be much, much more worried about the possibility of deflation.

          • http://twitter.com/Newsbot9 Newsbot9

            He’s a Tory troll on here to prevent proper discussion, and you “suspect” he’s not “discussing honestly”?

            Well I never!

        • Owen Green

          Madasafish, I don’t follow, or if I do, I don’t agree.

          (1) You appear not to have read my post when you talk of borrowing and lending – this is not what is happening for a monetarily sovereign government. Not in the sense that you imply anyway, as I described.

          (2) The UK is monetarily sovereign. Greece is not. The comparison is not apt.

          (3) I am not proposing any route. I am describing current operational arrangements.

          (4) The willingness of buyers to pick up UK paper is indeed predicated to an extent on the their likliehood of getting paid. However, (a) the bond markets know that the UK is sovereign and that Greece is not, and that default in our case could *only* be voluntary  and (b) Unlike Greece, as explained above, the UK doesn’t need to sell bonds to spend and sets its own rates.

          (5) What happened in the 1970s was linked to supply shocks, and inept government responses.

          If you can see the first post I made in this thread, check out the link I included. It explains all this in much greater depth. 

          • http://pulse.yahoo.com/_ZPXYLRVP4XOIGGDJWAL6HUO7U4 David

            Devaluation of the pound should be seen as a last resort for net consumers like the UK, since the outcome is inflation.

            And I am not sure you are correct about willingness of lenders to buy gilts in any event because we control our currency: note what went wrong in Argentina in the early 2000′s.

      • Anonymous

        Thanks for the informative reply and I agree with most of it.   However, the idea that we can just carry on borrowing does make me nervous.  A lot of the deficit will go due to growth and inflation, but some difficult decisions will also be needed.

        • Owen Green

          Does the idea that we could simply stop ‘borrowing’ make you any happier? ;-)

          Again, I think it’s really important that we stop allowing ourselves to be fixated by the budget deficit, which is symptomatic, not causal (and not, in and of itself, indicative of anything much beyond the savings desires of the non-government sector). The deficit that is important is the employment deficit.

          You are right that there are difficult decisions to be made, but these are political decisions. Economically it is a simple matter to get people working; what is pressing is discussion about people do; how we share resources; what type of society we wish to live in, and so forth.

  • Anonymous

    Great spirit shown as ever Owen….

    Yes, there must be far more coming together of sympathetic elements
    and so much common ground; it’s too dispirate and fragmented.
    I’ve been saying for ages too, need for a pluralist approach
    and looking outwards- this could take many forms.

    I agree what Len M has done is draw a line in the sand,
    and defined something fundamental.

    But I don’t want the unions to leap to a polarized
    position, rather to seek a common consensus
    and widen the debate.

    The Tories and others will frame this as fringe/extreme
    elements, and hark back to the role of the unions in the 70′s
    etc, no doubt.

    But I think perception has changed,
    especially as reflected in the marches last year.

    In March, there was that huge rally which brought
    many people together who might not traditionally
    have done so; it was reported that some of the typical
    “middle Englanders” were arriving by coachloads to
    protest about major cuts to local services such as libraries
    and youth services; social care for the elderly- such as day centres;
    drop in centres for the homeless, refuges for victims of domestic
    violence; community mental health services- a big one.

    I spoke to a member of our local party by phone
    and she told me it was an extraordinary event.
    She saw a mix of professional people such as lawyers,
    business people, vicars, teachers, health professionals,
    care staff, off duty police- and union workers all
    walking side by side.

    It looked and sounded more like the “big society”
    rather than “militants” that might be associated
    via some of the right wing narratives?

    (Remember the terminology used about workers
    in the public sector and misleading stories about
    “gold plated pensions” being “bloated,”
    “drain on the tax payer” etc….)

    Not to mention those in receipt of welfare benefits
    for whatever reason.

    And yet so little mention of those responsible
    for the financial collapse, or grossly highly paid
    executives across the board sharing the load?

    I don’t think this should become or appear
    to be in any way on the margins Owen-
    but a mainstream movement-bringing
    together a wider consensus.

    It doesn’t have to be just within Labour;
    there are many who care deeply about issues
    of social justice and fairness and have ideas
    and experience to offer.   

    The unions are an excellent starting point-
    but this could go much further.

    As you say too, some excellent journalists
    who have managed to steer clear of the
    prevailing narrative.

    For me, it’s about values, principles
    and the practical realities of life;
    also questioning how do we want our society
    to become- what are the priorities?
    Dissemination of power etc.

    So yes, cohesion of all interested parties
    and individuals, linking people together
    with common aims; organization…

    You’ve started the ball rolling anyway Owen!

    Perhaps Labour needs reminding of its purpose
    and principles?

    Thanks again- always stirring stuff.

    Jo

  • http://twitter.com/Newsbot9 Newsbot9

    Why?

    Building on sand is building on sand. The left need their own party.

    That’s what we need to build.

  • Daniel Speight

    Let’s be honest, if Ed Miliband becomes prime minister in 2015 do any of us know what the economic position of both Britain and the rest of the world will be? At the moment we are in a death spiral as far as living standards go for all bar the extreme rich. Positioning party policy for a 2015 government reminds me of that joke about a yokel being asked directions. His answer is that he wouldn’t start from here.

    My complaint about the statements coming out of the leadership this last two weeks isn’t about what was said, but about them being said at all. Who knows, in 2015 there may have to be meetings between the government and the unions about priorities. Council workers may say drop wages or working hours to allow more people to stay employed. We just don’t know. (What I do know is that workers either through their unions, workers councils or other groupings should be involved in the decision making process.)

    So why did the two Eds decide to make these recent statements. To me it has the smell of spin doctors and marketing gurus. You know the sort of people I mean. Let’s put a name on them. Let’s call them Tom Baldwins after that fellow who advised the shadow cabinet not to link the BSkyB takeover to phone hacking.

    So why are the Tom Baldwins telling the two Eds to make noises comforting to the Tory press? My guess, which I suspect most would agree with, is that the Tom Baldwins want to argue against the Tory storyline the press are following. Now myself, not being a Tom Baldwin, would argue that we shouldn’t even play this Tory game. Our arguments as a party should be what policies we would bring in to change the face British politics. What policies we can introduce to halt and reverse the growing inequality. Basically what makes us different to the Tories.

    Still the Tom Baldwins will tell us that this focus group or this demographic needs the reassurance that conservative statements can give. We all have to decide what way we want to go. Again myself I would fire all the Tom Baldwins and go back to Wilson’s crusade. That is I would fire those that haven’t already jumped ship and joined the Tories.

    • Anonymous

      You have to love special advisers and spin doctors the life blood of being in opposition

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  • Anonymous

    “
    I think it’s wrong that people can make 5x more in a week than some make in a yer

    Well stop your false outrage, set an example and ask union leaders to take a 50% pay cut. (Most are on well over £100k a year).

    If not, then stop moralising hypocritically.

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