This is the text of my letter to the Guardian published this morning.
Ha-Joon Chang (in the Guardian on 20 October) is right that “the country is in desperate need of a counter narrative” to the Tory story on the economy. I believe it should go like this.
First, Labour did not leave behind an economic mess; the bankers did. Labour was not profligate: the biggest Labour deficit in the pre-crash years was 3.3% of GDP; the Thatcher-Major governments racked up deficits bigger than that in 10 of their 18 years. So who was the profligate? It’s a no-brainer.
Second, the Tories have claimed that the reason for enforced austerity is to pay down the deficit. Yet, after six years of falling wages, private investment flat, productivity on the floor, and fast-rising trade deficits, the deficit is £100bn, when Osborne promised in 2010 it would now be next to zero. To cap it all, the deficit will almost certainly rise this year because income from taxes has sharply fallen as wages are increasingly squeezed. Austerity is now a busted policy that has turned toxic. It should be dropped.
Third, Osborne’s so-called recovery is bogus because it is too dependent on a housing asset bubble, too dependent on financial services rather than manufacturing, and has no demand to sustain it. It is already fading as growth slows.
Fourth, the only way now to get the deficit down is by public investment to kickstart sustainable growth via housebuilding, upgrading infrastructure, and greening the economy. Funding a £30bn package at interest rates of £150m a year would create 1.5m jobs within two/three years. Or it could be financed without any increase in public borrowing by printing money, or instructing the publicly owned banks to concentrate lending on British industry, or taxing the 0.1% ultra-rich whose wealth has doubled since the crash.
People need hope. The Tories are continuing with austerity because their real motive is to shrink the state and public services, not to cut the deficit. The alternative offers investment desperately needed, growth in the real economy, genuine jobs, rising wages – and really will pay down the deficit.