Social justice in changing times

9th May, 2015 9:47 am

Yes it’s early. But the debate will be upon us very soon. Let’s be absolutely clear: the platform for change put before Britain over the last few years has been rejected. This basic truth has to be acknowledged very rapidly. Despite an incredible campaign full of energy, endeavour, and passion, there is little time to lick wounds. A leadership campaign is already upon us. This is not simply a choice of personality; it is a choice of programme. And if there is one thing we’ve learnt over the last 24 hours, it’s that the choices you make early on have a significant impact further down the line.

Change-22First, let’s address the Miliband legacy. There are two elements that should be retained. Miliband’s insight that a just future for the nation relies not simply on setting the framework but on rebalancing power within the economy remains important. It is a key component of a modern socially-just political economy. Pursuing economic efficiency is not enough; social justice is critical to. Ed Miliband was sometimes guilty of making the two things sound like they are one in the same. They are not but they are inextricably bound.Secondly, the process of politics matters. Miliband has conducted himself in accordance with the right set of personal and democratic values. That is to his credit. We have to internalise that if centre-left politics in all its plural forms is to become more attractive. This goes for the internal guild culture which Miliband wasn’t able to properly confront.

These elements of the Miliband legacy are critical but a long way from being sufficient in meeting the challenges of a modern society in the next decade. Labour needs a much bigger offer; a worldview. There are four major ways in which a Labour 2020 agenda could look very different to the manifesto put forward in 2015. The four main areas are a comprehensive vision of socially-just modern economy, a new participatory constitution, expression of complex and shared identities, and a state and society empowered by new technology. The means of achieving change will be open, creative and adaptive institutions.

Inequality has economic consequences but that is not an economic vision in and of itself. The question Labour has to address early on is what is its analysis of global economic change including the rise of China and Britain’s pathway to becoming a high value, high productivity economy within that context. It needs a growth as well as distribution analysis. On fiscal matters Labour has to accept that the plan it has just put before the British people has been rejected. It has to quickly rectify the evasion about Labour’s fiscal record in the middle of the last government without conceding that this led to financial crash because it just didn’t. It also has to realise that what it says on fiscal policy early on in the Parliament will remain attached to it at the end. The next election will be in 2020 not 2016 and this was one fundamental error in the last Parliament.

A more modern economy would distribute productive capital on a wider basis. This means more self-employment, access to share capital in your firm, greater support for essential skills development. There are dozens of models across Europe and the US; the centre-left would champion new forms of productive capital ownership to better embed people in economic activity – promoting productivity and well-being simultaneously.

Labour has allowed itself to be dragged into constitutional discussions kicking and screaming in reluctance rather than leading on them. Very quickly it will need to demonstrate that the current vision of power within the United Kingdom is just not right. Yes, this is about more powers to Scotland and, yes, it is about English democratic institutions. It is also about how power is dispersed to people to enable them to participate in the decisions that affect their lives. Enormous and rapid devolution is critical but so are new technology powered democratic tools to enable participation in important local decisions. And the Labour party has to urgently recognise that its only ally in securing social change is not the trade unions. The civic space is innovative, creative and interesting and an ally for social justice – if only the Labour Party could drop its superiority complex.

Identity matters. It is not ephemera. Instead of falling into easy caricature about nationalism, Labour should look for where it can be aligned with its values and be absolutely clear and critical where it is not. There is good and bad – some very  bad – in Scottish nationalism (as would be expected in a pluralistic movement). Unfortunately, the type of English nationalism that we are now seeing is of the more antagonistic variety. Labour, again as part of a broader movement, can become a voice for an open and civic English nationhood – including English local and national political institutions. These institutions must be pluralistic. It would be a disaster for Labour to veer towards becoming UKIP-lite. An open society albeit with managed borders is in the national interest. This spirit of openness must apply to the Labour party itself. Tribal loyalty is becoming increasingly difficult to defend to the outside world and out of touch.

Finally, new technology is now a fundamental driving social as well as economic force. It opens up new possibilities for changing the nature of the relationship between the citizen and the state as well as the worker or entrepreneur and the market. The more technology can be harnessed through the right adaptive institutions and new connected professional approaches to change the relationship between people and public services, the more efficient and effective they will become. This matters whether we are talking about access to learning, ensuring criminal justice works, or people with long-term health conditions and social and nursing needs are well catered for. The more efficiently and effectively this can be done, the more state resources can be freed up for investment in housing, infrastructure, education, health and so on. Labour must ally technology with frugality and adaptability.

I don’t know who is the right leader to take forward such a radically different approach for Labour. Like tens of thousands of others I’ll be listening closely over the next few days, weeks, and months. And I hope it is months- this is not 2010 where Labour is leaving office and has a record to defend. It remains in opposition so it can take time to have a proper debate about the future path of the party. Let it take that time and allow the right leader to emerge. There is no point going for the continuity candidate. Some elements of the legacy should be retained but there needs to be a bigger articulation of enormous challenges in a different and changing global society.

There is a deep sense of sadness that Ed Miliband is not Prime Minister today. But we can’t allow ourselves to tarry in looking towards the future – to 2020 and beyond. Labour’s first attempt at a post new Labour modernisation has sadly fallen short. But we’ve done this before and we can do it again. It won’t be the same as before; the challenges are somewhat different. But if Labour gets this right, we won’t feel the same in May 2020 as we feel in May 2015. This is a challenge but not a crisis. It can be done.

*For further details on the ideas above can I recommend some further reading? Firstly the concluding chapter of Left without a Future? provides some detailed thoughts. Secondly, this piece on tech and political change for Progress magazine might also prove useful. I look forward to engaging in thoughtful and civilised discussion. Let’s start as we mean to go on.

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  • Ian Robathan

    Your main point Anthony is spot on, we have to look to the future. That means ruling out anyone connected with Blair/Brown years, sorry Andy, sorry Tom, sorry Yvette but you are the past.

    Look at what the Tories did, after three failures they went for the younger intake in Cameron/Osborne, despite the advisory roles they played (and used against the two Ed’s of course) they were fresh.

    So my choice as leader, simple someone young, fresh, dynamic and is a winner. It is a choice between Stella Creasey and Dan Jarvis but ideally Stella as leader and Dan as second.

  • Paul Richardson

    I agree that Labour has always been reluctant on constitutional issues. The most important imho is the voting system. Ultimately, this is the only method in which the vast majority participate yet it disenfranchises large swathes of them due to “wasted votes”, small party squeezing and the necessity of tactical voting. The petition on change.org for PR was signed by 100k in 3 days! People are fed up of being under-represented and want their vote to count!

    The govt are going to bring in their boundary changes which to many sounds fair and Labour will be put on the wrong side of the argument by opposing it. Their motive will be to neutralise Labour’s eletoral advantge but will be presented as bringing fairness to the election. Well lets allow that but with an amendmeent for PR used in the 2020 election. If boundary changes are about fairness then so is PR!

  • Sunny Jim

    Boundary changes to equalise voting numbers is reasoable but it will cost Labour 20 seats (40 net) which will leave the gap at somewhere between 130-140 MP’s which is an enormous gap.

    PR was rejected resoundingly in the referendum and another too soon will just irritate voters and result in a huge rejection.

    • RegisteredHere

      Good grief. PR was not rejected (that was AV).

      • Maverick Ways

        Slitting hairs is always good policy for re-election, I’ve found.

        • RegisteredHere

          Presumably your experience of re-election wasn’t dependent on an understanding of electoral systems?

          • Maverick Ways

            No. Understanding voters.

  • Kenneth Watson

    It has to quickly rectify the evasion about Labour’s fiscal record in
    the middle of the last government without conceding that this led to
    financial crash because it just didn’t- and which of the new breed is able to bring off this little task when its now part of a universal myth .Labour has no chance of doing this or of winning anything meaningful except by taking on neoliberal lies rather than by ignoring them or adapting them or sanitising them which is all thats currently on offer.

    • RegisteredHere

      Yes, but I think Labour also has to have some ideas of its own rather than just trying to mitigate against the neo-liberal consensus. Thatcher and Blair (and Cameron) made rent seeking socially-acceptable again (albeit rebranded as ‘wealth creation’ and ‘trickle down’), and while we persist with the same financial system, things will not improve and the system itself will always be vulnerable to being returned to the C17 version that satisfies the arrogance of the trust-funded establishment.

      Rather than vainly trying to restrict the worst excesses of the system, it may be better embrace free markets (that we’ve never had) and drag the system itself into the C21 by (eg) removing the banks’ monopoly on money creation like Iceland.

  • AdamB

    A few thoughts on a strategy for success from a Conservative voter who is friends with some Labour supporters and suffers from a bipolar mix of irrational, tribal hostility to Labour and friendly interest in your very important movement…

    (1) An apology for the economic crash that everyone will believe.

    The crash was the result of a meltdown in financial markets – yes. And Balls and Miliband have apologised for lax regulation – yes. But the world economy is cyclical, always will be, and instead of getting the economy in the brace position, Gordon Brown pronounced the end of boom and bust and ploughed on. In doing so, he blew billions, bloated the public sector, and paid for all the excess with a massive tax hike that he sent it into the future to our children in a time machine called The National Debt.

    You will need to produce a detailed and objective analysis of the mistakes, show a clear understanding of the risks of high spending , and apologise sincerely.

    (2) A positive message – always.

    I once asked a (very) left leaning friend if attenuating wealth was more important than attenuating poverty. I admit that I presented it as a false, binary choice between the two. But he chose the former, as I thought he would. There’s something going on there that you all need to think about.

    I would start by looking at the language you use. Try “For the Many” or “For Everyone” instead of “For the Many, Not the Few”.

    Never mind that anything coming after “Not” is by definition negative language. But “Few” comes from the same part of the Labour lexicon as Predator, One Percenter, Millionaire, Mansion, Selfish, Scum, Vermin and Jackal (with thanks to George Galloway). All these words have to go, along with the accompanying lip-curling.

    It may even be an idea to take a break from using “Rich” or “Wealthy”. Try limiting yourselves to “successful people” – the longer sentences will make talking about this topic less useful in sound-bite terms – so there’ll be less of it, and make anything you do say sound more measured and thoughtful. Which may result in it actually being more measured and thoughtful!

    The problem with following my suggestion here is that it will make the Labour Party a less comfortable place for people who hold Labour sympathies because they are angry – they may leave.

    (3) Become the go-to party for people starting and running small businesses.

    You already have us all persuaded that you care about our employment rights – but this needs to be balanced with a tailwind for the people that provide that employment. Because running the average small business is a nightmare of obligations and liabilities. It is, Labour people, the ultimate zero hours contract.

    Try some radical ideas: how about the state providing all the rights, and the employer being left alone? If someone wants to throw a sickie, they have to engage with a government agency to get their sick pay – the company simply docks a day’s pay and moves on. No hassle for the employer, (effectively) no change in entitlement for the employee. But I bet it would change things. You could move on from this type of thinking to a broader, better something-for-something / personal responsibility message.

    And here’s another one: we have taxes on income, and taxes on investment (dividends and CGT). How about a new class of income tax, payable by small business owner/managers? Or an average-over-three years regime like the one Osborne brought in for farmers, to smooth out wild fluctuations in income? In other words, special treatment to reflect the essential nature of small enterprises.

    (4) Accept the consequences of (3).

    At the heart of this is a difficult one: accepting that wanting to do really well personally is not a condition. That maybe it’s a bad idea to set speed limits on success and impose penalty points if they are exceeded, because of the signal that sends to those getting started. The top rate of tax, anyone? And the “Mansion Tax”… oh dear, you may as well have called it the “Wealth Offenders Register”.

    (5) Something completely different.

    Here’s an idea for an eye-catching initiative that really will change the perception and reality of being in government: abolish defined benefits pensions for ministers, MPs and the civil service. Move to defined contributions.

    In this way, the retirement prospects of the people running the country and therefore the economy will depend on the degree to which they do their job well. No more moving into a gated community after wrecking everything (Gordon Brown I am looking at you). This idea could align public and private sector thinking about our economy; we really would all be in the same boat – and maybe we’d all start rowing in the same direction!

    We need a strong and effective Labour party – for all the good things it has done, and for all the good it can still do. Your roots in the ordinary folk make you the natural party of government – but you need to be pragmatic rather than ideological if you want to realise that potential.

    Good luck!

    • g978

      A detailed and thoughtful comment. Not many people are saying Labour did cause the world wide recession. But after 14 years of economic growth (1993-2007) a recession of some sort was expected. So we should have been running a surplus, not a 3% deficit (at the limit of what is considered acceptable). Running a deficit at that time was a major cause of us going upto a 10% deficit.

    • althejazz

      Had he not bailed out the reckless bankers, none of us would have had any money at all. There was no alternative to what Gordon Brown did. Had blair not kow-towed to his rich cronies and made them pay their fair share of tax, we would not be in the position we are in today. Thatcherism is still destroying the lives of ordinary people and looks like going on to do even more of the same.

      • AdamB

        I agree that GB dealt decisively with the emergency when it began. But many feel that the economy was badly configured to withstand such a shock.

        As g978 says, we were running a 3% deficit entering the crisis. Would 50% income tax, higher CGT, mansion tax etc have offset that? Surely not – these measures are only worth a few billion (less than 10?). But it’s simply a calculation: what do the numbers tell you?

        As for “cronies” etc, see my point (2) 🙂

        • RegisteredHere

          Why not question the debt? Some of it must be odious, and some must pre-date general suffrage.

          • AdamB

            I don’t think Labour will succeed in moving voter perception with a detailed defence of their pre-crisis financial management and its background. I am saying you need to apologise – even for stuff that wasn’t your fault. Or that was perfectly justified. Or that nobody else could see a problem with (2007 Conservative pledges to match Labour spending…). Total humility is required, I think.

          • RegisteredHere

            Yes, I don’t disagree with any of that, but I don’t think it’s enough to say ‘We were wrong‘, without having an alternative solution….and if Labour’s alternative solution is just a slightly-more socially inclusive version of the neo-liberal status quo then that is also something the electorate need to be made aware of.

          • Kit Ingoldby

            Welching on debt is a good way to destroy Britain’s international financial position in a matter of minutes.

          • RegisteredHere

            It’s not welching on debt if the debt is unjust, or if the people charged with repaying the debt have no real responsibility for it being incurred in the first place.

            That would be sound financial practice, and in a democracy governments should have a responsibility to make these things more widely understood.

          • Kit Ingoldby

            Governments arbitrarily declaring that some of the debt it took on is ‘unjust’ and should not be repaid would result in a simple and complete shut down Britain’s access to the international financial markets. Anyone who thinks that would be ‘sound financial practice’ has no understanding of the real world.

            I suggest you look at Argentina to see how your ideas work when actually applied……

          • RegisteredHere

            If you want to continue with socialised debt-repayment and defict-reduction then a public audit is hardly revolutionary stuff, and is pretty much what any company or venture capitalist would do when taking over a new company.

            If you want to promote Labour as a fiscally-competent body as AdamB is suggesting, then you’re going to have to educate the public on national debt, deficit, money creation, public sector borrowing…….after which it becomes a matter for democracy to decide who’s responsible for which debts, what’s ‘welching’, and what’s sound financial management in the national interest.

          • CrunchieTime

            Then you need to look at private household debt which rose from 37% of average wage in 1997 to >140% of the average wage by 2010.

            That was what paid for the Blair years via financial service tax receipts and the tax on debt fuelled spending. All shored up by Brown’s love of cheap borrowing.

            Unfortunately it’s made debt slaves of the working class who bought overpriced housing and the asset boom which resulted means the children of those debt slaves will be forever paying rent to the wealthier in society.

            Thank you Gordon Brown, Ed Balls and Ed Milliband. And good riddance. You couldn’t have made things any worse if you’d tried.

          • RegisteredHere

            Private household debt is scary, but I don’t think it’s all down to Labour when we see the London property bubble, Help To Buy and now Right To Buy on the Tory side.

          • CrunchieTime

            A drop in the ocean compared to what happened under Labour. But by all means address it, as it’s a vote buyer for the children of the upper middle class.

          • RegisteredHere

            The only way to get household debt under control is to take away the banks’ money creation powers, and neither Lab nor Con will do that…and with £12B benefits cuts in the offing this parliament I can only see household debt increasing.

          • CrunchieTime

            That’s not exactly true. Money is issued through debt via the fractional reserve banking model. When I bought my house in 1996 I could only borrow a maximum of 3x my gross income. I borrowed 2.5 times my manual workers wage to buy a 2 bedroom semi.

            Brown lost control of the issuing of money with his FSA bastard child’s lack of regulation. Thus not only did the money supply increase, so did household debt and inevitably the banks exposure to that leverage.

            If controls are reintroduced, then the existing debt will gradually be paid off and in the longer term become devalued by inflation. But it will take a generation or slightly less.

            Of course it would be a lot easier if we had never got into this situation. But that’s Gordon Brown’s true legacy.

          • RegisteredHere

            So no money is created when you take out a bank loan?

          • CrunchieTime

            Of course it is.

          • RegisteredHere

            Then presumably following Iceland’s example in removing the banks’ money-creation privileges would slow rising household debt and prevent it acting as a buffer against the cuts of the current government?

            Personally I’d prefer to see the gvornment end the banks’ monopoly and open currency creation and forex markets up to the free market, but the banks don’t want any kind of free market that affacts them, and the bankers’ party isn’t going to hurt the banks, but it’s still difficult to blame the last Labour government completely when the Tories supported Labour policies on deregulation and wanted even more.

          • Kit Ingoldby

            You seem to have difficulty comprehending a very simple point. If a government welches on its debt then it gets shut out of the international financial markets.

            You can blather about ‘auditing’ debt all you want. Companies and venture capitalists don’t get to ‘audit’ their debt, they either pay or go bankrupt. Nations don’t get to decide to ‘audit’ their debt, they either pay or get shut out of the international financial markets.

            Your mindset pretty much illustrates why the British electorate voted the way they did.

          • RegisteredHere

            I think that’s the point; the electorate believes what it’s told
            about international financial markets, ‘welching’ on debt, and no doubt wealth creators, the politics of envy and trickle-down too, but no one ever bothers telling us about how this debt gets created, what for, who’s owed, who benefits, and why we have a debt-based currency in the first place.

            However, the mantra that we must not welch on our
            debt is clearly as well-ingrained, in spite of the near (and
            still-possible) collapse of the whole system, the common experience of austerity-type policies across western economies, the rise of social and crypto-currencies, the fragmentation of the international financial markets, near bankruptcy in the EU periphery, and the emergence of BRICS banking; not to mention fair debt-payment offers (venture capitalism), debt-forgiveness, and constitutional change (the “UK” owes the debt?).

            I have no idea what we would do with any debt that was identified as odious or if some of the debt was proved to pre-date common suffrage, but if you want to combat the anti-austerity brigade then you’re going to have to make things a little less opaque and come clean about the details the legal implications.

            Ironically, I think your mindset illustrates why the British electorate voted the way they did way better than mine 🙂

          • Kit Ingoldby

            You just don’t get it. If the British government announces that it is not going to honour some of its debt, then the international financial markets just shut Britain out. That’s it. Whining that some of the debt is really old, or borrowed for things that you don’t like doesn’t change a single thing.

            Your indulgence in magical thinking just highlights why Labour had no way or regaining any trust or credibility on economics.

          • RegisteredHere

            I think you’ve said most of that already. What do you think of crypto-currencies?

          • Kit Ingoldby

            Yes, I have said it already and I will say it again. Welch on the debt and Britain gets shut out of the international financial markets. That’s reality. Cryptocurrencies have nothing to do with this in the slightest.

            Are you really living in such a fantasy world that you think the British government defaulting on debt would be a good move? Seriously?

          • RegisteredHere

            I live in a very real world in which people talk about debt and deficit, and austerity (and international markets!) with a religious fervour that elicits fear, derision and bewinderment, but rarely enlightenment. If the electorate is to be educated in these matters as AdamB suggests, then a public audit of the debt alongside a basic education in currency systems (and international markets if you like) would seem to be a good place to start, especially as alternative international banks are being established and international crypto-currencies are challenging government-backed fiat on the sidelines.

            Interesting that such a benign suggestion provokes such excitement 🙂

          • Kit Ingoldby

            If you really think the British government welching on its debts is a ‘benign suggestion’ then I suggest you head off back to your Militant Tendency reunion and enjoy a rousing rendition of the Red Flag before trying to work out why no one is taking you seriously.

          • RegisteredHere

            Haha! All I’ve done is suggest a public audit of the debt, which is not only absolutely justified given that the electorate is fingered for paying it off, but also relevant to AdamB’s point about education and honesty.

            To read your comments about Militant Tendency and the Red Flag, you’d think I’d suggested signing off the debt as odious in front of a crying hedge fund manager, Bullingdon style! 😉

          • David Battley

            Pretty much the only debt that will pre-date suffrage will be war bonds, and those were not inflation linked (and hence are pretty minute amounts, in today’s money).

            no one ever bothers telling us about how this debt gets created, what for, who’s owed, who benefits…

            That is what manifestos are for… As it happens, the electorate chose the party which promoted the lowest debt creation policies this time around. Does that not meet your intent?

          • RegisteredHere

            Not really, because voting for a party that wants to reduce the debt (alongside a bunch of rhetoric, fearmongering and other policies) assumes a general level of understanding and acceptance I don’t think exists….there are deniers on the left and accolytes on the right, but I suspect most people when questioned abut the national debt resort to shrugs and credit ratings (or international markets!), because no one really understands the points above (or indeed how much if any of the C18 and C19 debt was rolled over).

            I’m not suggesting that we don’t pay off the deficit and reduce the debt; I’m suggesting that an audit of the debt might be necessary to achieve AdamB’s aim of educating the public and coming clean about the financial crisis and Labour’s economic record, because it’s all related. CrunchieTime’s comment about household debt is also relevant if personal borrowing is being used to supplement low wages and high costs, which comes back to Iceland and the banks’ ability to create money…..

    • David Battley

      Very impressive commentary, and I am personally grateful for your temporary “crossing over” to share these ideas.

      Clearly the Labour party has been thrown into a difficult position. However, scratch beneath the surface and this has been bubbling under for a while: posters such as myself have been long derided on these boards for being proponents to a not dissimilar line to that which you recommend: that “free” markets can be harnessed, rather than trying to place them under a yoke, to achieve the best effect; and warning that the offered “solutions” under Ed Miliband were equal mixes of anodyne soundbite and dangerous economic irrationality that would not chime with the electorate. Others have a different view, that what was proposed was in the right direction, but not ambitious enough.

      For each, analysis of Thursday’s failure will lead to very different conclusions.

      While the paroxysms continue there will be a general vying for prominence from each side of the debate. While these internal debates continue, language will be thrown about like “Neo-Blairite”, “Tory-Lite” and the like (and, conversely “Loonie” and similar), but regardless of whether people agree with your ideas or not, specific positive ideas of the type that you have outlined represent exactly the right way of thinking – to providing a coherent vision that, whichever “version” of social-democracy wins out, can persuade the electorate that the Labour Party ready to be entrusted once again with power.

      • anthonypainter

        Very good points. Especially about the abusive use of language.

      • AdamB

        Glad that my thoughts chimed with you.

        I’ve been thinking how I would have handled some of EM’s objectives. If a gun were at my head and I had to deliver a labour policy!

        Take, for example, rent controls. I was incredulous at it. Well-intentioned madness. And yet, when I talked to my other half, she said she could see why he did it. That stopped me for a moment… I guess there are more than a few people in my social circle who face the “generation rent” challenge.

        So how would a centre-right thinker control rents (assuming the nausea could be controlled)? Here we go: operate 2 tax regimes for landlords. Standard tenancies have rental income taxed as normal after 10% deduction for wear and tear, as at the moment. But “enlightened” tenancies (longer tenure, CPI cap on rent rises) get a _substantial_ tax break – and a reasonable safety valve if the input costs spike unexpectedly (e.g. mortgage interest rates). Carrot not stick. You could apply this model to other problems your social engineering instincts are latching onto… Energy prices anyone?!

        Ironically, the tax treatment of rental income was in Labour’s policy mix: withdrawing wear and tear relief if you don’t meet minimum accommodation quality standards. Stick not carrot… Sigh….

    • Mandy Hall

      This is exactly what people in the Labour Party need to think about!

    • The last Labour Government:

      1) Failed to assume responsibility for monetary policy. It gave away too much responsibility and control to the BoE. This led to interest rates being to low.

      2) Enjoyed the benefits of low interest rates. These stimulated the economy and made the governments figures look artificially good. That helped it win elections in 2001 and 2005.

      3) Failed to recognise that this ‘winning strategy’ depended on the bubble inflating ever bigger.

      So, if they had directly controlled interest rates ie increased them to choke off the credit bubble, (as they should have) what else should they have done, to compensate ? What else should they have done to counter the slowing of the economy that would have caused?

      Should they have increased their fiscal deficit or reduced it?

      • AdamB

        From my (centre-right) standpoint, the problem began with Brown/Balls and an arrogant approach to the economy (we’re applying neo-endogenous growth theory here people, it can’t fail!). I would not have handed another large economic lever (interest rates) to such people.

        A Keynesian would (I believe) run a surplus in the good times, build up decent reserves, and use them fairly aggressively to smooth out the (inevitable) bad times. As it happens, so would I.

        • AdamB,

          You’ve still not answered my question. If interest rates had been raised (by either the BoE or the Government) to choke off the credit bubble, should the Government have run a larger or smaller deficit?

          The Keynesian idea of surpluses in the good times and deficits in the bad times is really a special case which applies to countries which have balanced trade. In Keynes’ time the imbalances in trade which we now see would not have been so easily possible. This was due to currencies formerly being on a gold standard or linked to other countries currencies which were.

          So to run a large deficit in trade, as Britain now does, would have required that deficit to be funded by gold. That’s not the case now. Britain can run any deficit providing the big exporters co-operate by purchasing Govt gilts. Which they usually do. There’s no gold required.

          So, in the UK there’s always money draining out of the economy to pay for net imports. Consequently, even in the good times the UK runs a budget deficit, using the proceeds from gilt sales, to replenish that lost money. It’s always going to be that way unless and until the current account is brought into balance. But no-one seems to care about that any more. Its been a long time since trade figures have rated a mention on TV new reports.

          • AdamB

            This is very interesting. You’re talking about a technical aspect of the economy I haven’t given much thought to. I remember buying a revolutionary paper from a RCP activist in Hammersmith about 25 years ago and he greeted me as a potential fellow traveller. I smiled and explained that I really wasn’t. “Ah”, he said, “so you’re a fascist?” I was genuinely surprised that he saw that as the obvious alternative, and explained my centre-right leanings, especially my favourable feelings about low tax etc. He came back at me with the trade deficit point and I remember not really understanding it, but I asked him how he expected to persuade anyone of anything if that argument was central to his pitch. “I don’t think we’re clever enough!” I said…
            Anyway, let me try to be a bit less thick this time. Say I’m an importer, and I need to settle a foreign currency invoice. My bank can do it because they have access to foreign currency via the BoE, via the deficit/gilt mechanism you’ve described. But what if my supplier accepts Sterling? (I have imported from one that did) What do they do with the Sterling balance they now have? Presumably it washes though the system and is for UK exports and gilt purchases… but the system would gum up if not for the gilt sales because there aren’t enough exports to balance the import flow… right?
            What do you see as the endgame given our current trajectory?

          • A buyer in country A can only pay in A’s currency. A seller in country B want B’s currency to pay his bills and the wages of his employees etc. Currency A’s currency is no good for that.

            Of course the buyer and seller can agree the terms of the sale in either A’s currency or B’s or even a third country’s currency C. It doesn’t matter. Both buyer and seller will calculate what that means in term of their own currency and make the exchange on the forex market.

            If both country A and B have balanced trade the forex market will be in balance too and each currency will be in natural equilibrium. But if A is a net importer it will need to sell bonds on the market to raise its currency above the equilibrium level.It sells bonds (gilts in the UK) to soak up the natural excess of its own currency on the market.

            If B is a net exporter, it needs to depress the value of its own currency by creating an excess and which the companles in country B use to pay their bills. At the same time the central bank in country B uses the excess of country A’s currency to buy up those bonds which it then stores and collects interest on.

            Country A has to deficit spend the proceeds of the sale of the bonds into its economy to keep the money circulating and prevent recession. Country B , on the other hand has to remove the extra money coming in from exports by taxing it away to prevent inflation.

            The other variable is the willingness of individuals in each country to net save. If there is net saving in both countries then govt taxation can be less, or govt spending can be more in both countries. Meaning a bigger govt deficit in A and a reduced govt surplus in B.

            So there’s no end game as such. That’s the way the system works.

          • AdamB

            Thank you for helping me to understand this better.

            Do you think my point (5) might drive coherent, long term thinking? Make our lords and masters care beyond the electoral cycle? By connecting their actions with their personal financial destiny?

          • There is a very small probability that something like your point 5 will ever happen. I’m not sure it’s a good idea anyway. What about those politicians who voted against policies which turned out to be successes/ failures? And there’s always going to be a big argument about which were the successes and the failures. Does the EU really created 3 million jobs for example? Would unemployment be be 5 million now without it? Of course it wouldn’t. So who do we reward and penalise the pro or anti EU politicians?

            I would say it’s much more important for there to be a generally better understanding of how the economy works. Then we can all better understand the possibilities from either a left or right perspective. I don’t believe that the relationship between the government’s deficit and the trade or current account deficit is that hard to understand. If I can follow the reasoning then I’m sure most people can too, including politicans.

            Yet many politicans seem blissfully unaware. They think getting the budget back into balance is just a matter of raising taxes and cutting spending. All that generally does is increase recession. Tax receipts fall and the deficit doesn’t shrink.

            I’m at a loss to explain just why official Treasury forecasts are claiming a return to surplus in just a few years time based on the Govts spending plans. That won’t happen because it can’t happen. It’s just impossible to turn the trade pattern around in such a short timescale. Do they really not know or are they deliberately lying? Either way it’s just beyond belief.

          • AdamB

            Testing my understanding of this point: has our high deficit since 2010 injected enough Sterling liquidity (500bn or so) into the system that we can ride through a finite period of surplus while running a trade deficit?

          • Neil Wilson runs an excellent blog and you might be interested in looking at some of his graphical data.

            Google {3spoken UK sectoral balances 2014)

            So the possibility you mention has occurred previously. It could re-occur theoretically, but it would be difficult for the Government to induce enough extra borrowing into the private sector unless they lowered interest rates. Which they can’t as they are at what Paul Krugman would call the zero bound.

            The money injected into the system is nearly all to cover import costs at present. The economy would be in balance otherwise.

          • AdamB

            Thankyou again for your patient and helpful replies.

    • Rob K. Mart

      I once asked a (very) left leaning friend if attenuating wealth was more important than attenuating poverty. I admit that I presented it as a false, binary choice between the two. But he chose the former, as I thought he would. There’s something going on there that you all need to think about.

      ———————————–
      You appear to have a limited understanding of the baleful effects of plutocratic oligarchy.

      • AdamB

        Guilty as charged. In fact, I have a limited understanding of what you just said! Enlighten me?

        • Rob K. Mart

          One small example. The dirty money of the post-Soviet oligarchs and mafia oil states pours into London and is used to sustain our economy because we cannot export enough. Note how our trade deficit was never mentioned during the campaign? Or that thing called ”inward investment”?

          Influence is purchased with these kleptocrats billions. In the UAE there is a slave economy with foreign workers living and working in hellish conditions on minimal wages. The great heroine Sturgeon spoke form the Emirates Arena. How wonderful for her and the people of Scotland. And Arsenal! What a sweet stadium.

          We are the mercenaries, money launderers, safe haven and harlots of a global criminal class of plutocratic oligarchs.

    • Hadrian

      adamB – you correctly remind everyone of GB’s economically illiterate goodbye to boom and bust statement. No one has ever managed that in the modern economic world and the country painfully remembers the effect of GBs spending spree which produced lots of debt but very little effect on the social contract. It is this basic fact which makes the country associate the events of 2007 with Labour. We didn’t cause the crash but we were leveraged to our eyeballs because GB assumed future growth would pay down the doubt. Of course the growth never materialised!! We have to accept the blame for GB and look forward to defining a new all encompassing social contract which covers a far larger part of the country.

      • AdamB

        “very little effect on the social contract”

        I don’t know. GB employed another million in the public sector and spent fortunes on the NHS and schools. I think Labour on his watch made big changes. For example, can someone here provide numbers for where we will be after the £12bn welfare cut – with respect to where we were in 1997? Spending more or less (in today’s money)?

        Haven’t got the data, but my gut feel is it will be more, maybe a lot more. And we were NOT a third world country in 1997. In which case GB has changed the expectations of many about a reasonable level of welfare spend, such that returning to a previous (reasonable) level is a nightmare that has many of you looking on in utter horror. Be good to get a fact check here, though 🙂

        If I can digress for a moment, my cousin is a management consultant working in the NHS. He’s not from the UK. He can’t really put together words to express how stuffed we all are by PFI. He was working at a hospital which cost £300m to build, for which we will pay £3bn. He talks of empty wards, and describes the whole thing as an “economic war crime”. This is another area where it seems GB did serious, intentional wrong – just to keep spending off-books – and hands should be held up.

  • AdamB

    A few thoughts on a strategy for success from a Conservative voter who is friends with some Labour supporters and suffers from a bipolar mix of irrational, tribal hostility to Labour and friendly interest in your very important movement…

    (1) An apology for the economic crash that everyone will believe.

    The crash was the result of a meltdown in financial markets – yes. And Balls and Miliband have apologised for lax regulation – yes. But the world economy is cyclical, always will be, and instead of getting the economy in the brace position, Gordon Brown pronounced the end of boom and bust and ploughed on. In doing so, he blew billions, bloated the public sector, and paid for all the excess with a massive tax hike that he sent it into the future to our children in a time machine called The National Debt.

    You will need to produce a detailed and objective analysis of the mistakes, show a clear understanding of the risks of high spending , and apologise sincerely.

    (2) A positive message – always.

    I once asked a (very) left leaning friend if attenuating wealth was more important than attenuating poverty. I admit that I presented it as a false, binary choice between the two. But he chose the former, as I thought he would. There’s something going on there that you all need to think about.

    I would start by looking at the language you use. Try “For the Many” or “For Everyone” instead of “For the Many, Not the Few”.

    Never mind that anything coming after “Not” is by definition negative language. But “Few” comes from the same part of the Labour lexicon as Predator, One Percenter, Millionaire, Mansion, Selfish, Scum, Vermin and Jackal (with thanks to George Galloway). All these words have to go, along with the accompanying lip-curling.

    It may even be an idea to take a break from using “Rich” or “Wealthy”. Try limiting yourselves to “successful people” – the longer sentences will make talking about this topic less useful in sound-bite terms – so there’ll be less of it, and make anything you do say sound more measured and thoughtful. Which may result in it actually being more measured and thoughtful!

    The problem with following my suggestion here is that it will make the Labour Party a less comfortable place for people who hold Labour sympathies because they are angry – they may leave.

    (3) Become the go-to party for people starting and running small businesses.

    You already have us all persuaded that you care about our employment rights – but this needs to be balanced with a tailwind for the people that provide that employment. Because running the average small business is a nightmare of obligations and liabilities. It is, Labour people, the ultimate zero hours contract.

    Try some radical ideas: how about the state providing all the rights, and the employer being left alone? If someone wants to throw a sickie, they have to engage with a government agency to get their sick pay – the company simply docks a day’s pay and moves on. No hassle for the employer, (effectively) no change in entitlement for the employee. But I bet it would change things. You could move on from this type of thinking to a broader, better something-for-something / personal responsibility message.

    And here’s another one: we have taxes on income, and taxes on investment (dividends and CGT). How about a new class of income tax, payable by small business owner/managers? Or an average-over-three years regime like the one Osborne brought in for farmers, to smooth out wild fluctuations in income? In other words, special treatment to reflect the essential nature of small enterprises.

    (4) Accept the consequences of (3).

    At the heart of this is a difficult one: accepting that wanting to do really well personally is not a condition. That maybe it’s a bad idea to set speed limits on success and impose penalty points if they are exceeded, because of the signal that sends to those getting started. The top rate of tax, anyone? And the “Mansion Tax”… oh dear, you may as well have called it the “Wealth Offenders Register”.

    (5) Something completely different.

    Here’s an idea for an eye-catching initiative that really will change the perception and reality of being in government: abolish defined benefits pensions for ministers, MPs and the civil service. Move to defined contributions.

    In this way, the retirement prospects of the people running the country and therefore the economy will depend on the degree to which they do their job well. No more moving into a gated community after wrecking everything (Gordon Brown I am looking at you). This idea could align public and private sector thinking about our economy; we really would all be in the same boat – and maybe we’d all start rowing in the same direction!

    We need a strong and effective Labour party – for all the good things it has done, and for all the good it can still do. Your roots in the ordinary folk make you the natural party of government – but you need to be pragmatic rather than ideological if you want to realise that potential.

    Good luck!

  • RegisteredHere

    We have to internalise that if centre-left politics in all its plural forms is to become more attractive.

    Yes, people didn’t vote Labour because Labour failed to convince people that they were sufficiently unlike the Tories, which wasn’t helped when Labour spent as much time fighting with parties on the left as the right.

    Since there’s no chance that the Tories will ditch FPTP, perhaps Labour (as the de facto opposition) could do worse than establish a common cause that all progressive parties could sign up to before elections begin to avoid the otherwise inevitable questions of coalitions and C&S: fight against fellow left wingers for election if necessary, but stand with their elected representatives in parliament on a common core of progressive principles.

    I for one would be interested to see what Labour is willing to sign up to.

  • Many of us moved Greenwards because we didn’t think 2Eds Labour was on the right track – and also because climate change is still the single biggest issue any government must face.

    But I agree that rebuilding a substantial new left narrative is key. You are absolutely right about building a new modern economy, and that technology is key. This means disintermediating a lot of the financial sector through things like equity crowdfunding platforms. This can all be used to link stakeholders to the equity of the enterprises they work for, or shop with. Labour’s roots are in the union movement and the co-operative movement; it’s no betrayal of those roots to modernise them.

    A productive use of the opposition years will be to collaborate on constitutional reform especially devolution towards a federal UK. There is considerable support for this in the Tory party and a constructive attitude that also lances some political tribalism can’t be all bad. Pressure for voting reform won’t go away either and, given the SNP/UKIP seats/votes disparity, will come from all sides of the spectrum.

    I would add monetary reform to constitutional reform. This hasn’t been touched by the coalition, and the global economy is still in a precarious state. It will affect the bankers though. Blair-Brown Labour failed to tackle the City because it was heavily dependent on the financial bubble machine for tax receipts.

    QE has disguised deflation in the US, UK and Eurozone and negative real interest rates are likely to persist for some time (although let’s hope not as long as 2020..) . Puzzled me why, when even Gus O’Donnel was saying it, EdB didn’t shout, “when money’s so cheap, it’s dumb not to increase the debt”.

    Need not to be afraid about tax reform either.Basic rate tax rises are currently taboo but they shouldn’t be. To make threshold rises effectively progressive, the basic rate needs to rise by a fiscally-neutral compensating amount, so that tax is cut for those on below-median income and raised for those on above-median.

    (Excellent comments from AdamB, btw).

  • Rob K. Mart

    You missed out maintaining inflows of dirty billions from Post-Soviet oligarchs, mafia-oil state ruling classes and their kleptocratic pals in order that people like you do not need to talk about the trade deficit and how to export more because you don’t have a fracking clue.

    Issued from the Emirates Arena (not to be confused with the Emirates Stadium) just like Sturgeon who wants Scotland to suck and suck in dirty money from these slave states.

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