Category Archives: Labour Party

There’s nothing wrong with People’s Quantitative Easing

It’s fashionable among the economic scribes to deride Corbyn’s advocacy of what he calls People’s Quantitative Easing (PQE) as though it were somehow illiterate.   In fact it is an entirely sensible policy.   Conventional QE operates via the central bank buying bonds in the financial markets, thus transferring newly-created money to banks, hedge funds and other investors.    The effect is therefore to boost the prices of bonds, shares and other assets, making the rich richer.   The theory then is that this wealth effect should stimulate the economy as the investors who have been enriched by selling assets at high prices to the Bank of England spend some of their profits on the high streets or employing servants or investing in new businesses.   It is clearly a very indirect and extremely inefficient way of  stimulating an economy.   Both Tory and Labour governments have spent £375 bn in using this device with very little to show for it since we still have the slowest recovery for over a century.

A better alternative – though not the best – would be ‘helicopter money’.   Or slightly more realistically, send cheques of £20 a week to every man, woman and child as a sort of reverse poll tax.   Technically, if £375 bn were spent this way, these cheques could continue to be sent out every week for nearly 6 years since £375bn is roughly £6,000 per head when equally divided among the 64 million people of Britain.   That would indeed be a far, far quicker way of stimulating economic activity.   Since neither dropping money from helicopters or sending cheques every week to every household in Britain is very practical, a third alternative is to bypass the banks and, after full and detailed consultation with the CBI ansd TUC, invest directly in key industrial or manufacturing projects.

One of Jez’s first tasks must be to frame his project, and to de-frame Osborne’s

If there is one single reason why Labour lost the election, it’s that Osborne realised the critical importance of framing his project in a way that made it acceptable in the eyes of a majority of the electorate.   The fact that it was a string of lies didn’t matter as long as people believed it.   This was Osborne’s line: the Labour government left a terrible economic mess, we’ve cleared it up by the only means possible, it’s been painful but we’re all in it together, we’ve succeeded in our recovery and should stick with it.  Every statement there is false, but in the absence of Labour refuting all these lies, it was the only tale in town.   Labour lost because Ed Miliband, though he won a lot of support for his policies on energy freeze, living wage, house-building, etc., nevertheless neither exposed the Tory mantra for the utter falsehood it was, nor, even more crucially, produced a commanding narrative which framed his own project in a manner which grabbed the electorate’s attention.

Labour didn’t cause the economic breakdown, the bankers did.   The Tories didn’t clear up the collapse in the only way possible; they chose to impose austerity when they coul dhave continued with Alistair Darling’s policy of expanding the economy and generating growth and jobs to pay down the deficit quicker.   We were not all in it together when the top 1% have continued to increase their wealth while the squeezed middle and pummeled poorest have paid the price for the bankers’ recklessness and arrogance.   Osborne has not produced a proper and sustainable recovery , only a weak and irregular upturn trapped in prolonged austerity with no end in sight.

Why Labour didn’t say this loud and clear between 2010-15 must remain one of the unaccountable mysteries of modern politics.   But Labour didn’t, and it allowed Osborne, lies and all, to dominate the political landscape right through to the election.   Now he will try to do exactly the same again, and paint Corbynomics into a corner even before it’s got off the ground.   Labour must now urgently do two things.   It must tell the truth about Osborne’s total misrepresentation of the political record, even if it means apologising for letting down the country by not pronouncing the truth before.   But above all, Jeremy Corbyn should quickly begin to draft his own project.   It might run something like this.   The Tory bankers allowed their greed and incompetence to capsize the British economy.   The Tory government chose to deal with this by imposing austerity which hits the poorest hardest and lets the bankers off the hook.   It hasn’t worked because hard-working families are still worse off, companies are not investing and household borrowing is at dangerous levels.   We need a fundamental change, and growth and jobs is the answer to austerity.

Corbyn forces the Tories to take him seriously

After all the slurs about unelectability, the Tories have very quickly changed their tune and acknowledged that they are now facing a very real threat that they’ve not encountered for the last 30 years.   At a meeting of the political cabinet last Tuesday they decided to focus on the idea that they offer a better future through lower taxes, a higher minimum wage, more jobs, and better public services, while a left-wing agenda would deliver insecurity through higher spending, higher taxes and more borrowing.   If that is their plan, they have a real fight on their hands since almost all of their claims are downright wrong.

Taxes have been lowered for the top decile and for multi-national corporations, but the severe cutback in tax credits in this next Tuesday’s Finance bill will increase taxes for the bottom third of the population, even after the increase in the personal allowance is taken into account.   The £9 an hour minimum wage, which will not be reached till 2020, is actually unlikely to exceed by much, if at all, the uprating that the minimum will have reached by then.

As to more jobs, there are still 1.8 million people unemployed and the jobless figures are already starting to rise again.   Moreover, the quality of jobs created over the last 2 years has been poor: 40% self-employed on a pittance wage and most of the rest insecure, low-paid, and on zero hours contracts, and even then 11 out of 12 jobs created have been in London or the South-East.   As to better public services, are they serious?   The NHS is being outsourced and privatised strongly against the wishes of the public, education is being made to fit Tory ideology, and legal aid is being drastically pared back.

A left-wing agenda that produced growth and better-paid and more sustainable jobs could be generated at minimal higher spending while interest rates remain at 0.5% which will be for some long time yet.   But it would produce the opposite of what the Tories claim – higher income and greater security than the Tory option of prolonged austerity.   Again a left-wing agenda would certainly increase taxes on the very rich who are holding the country to ransom by their industrial scale tax avoidance, but it would lower taxes on the poorer half of the population.   As to more borrowing, the Tories have a cheek at throwing that at Labour when they themselves are forcing the 13 million households in poverty in the UK, half of them in work, to borrow more because of the £12bn welfare cuts about to be imposed.

 

 

251,417 votes. Wow!

With 4 contestants in the running, to achieve 60% of the leadership vote in the first round is an outright landslide.   Jeremy Corbyn has secured a higher percentage than Blair got in 1994.   Even more significant, Corbyn’s electorate at 554,272 was more than double Blair’s, and no less than 76% of them actually voted, a higher percentage turnout than Blair got.   And another pointer to the overwhelming inspiration that Corbynmania achieved – no less than 160,000 volunteers were recruited to the Corbyn campaign – far, far bigger than in any similar campaign in the past.   This is a seminal day in British politics, marking the coming together of the two great conditions needed for transformational change – radical new ideas and a burgeoning social movement on the scale required to push through major change.

Why did it happen?   The defining moment for today’s denouement was the catastrophic crash of 2008-9, from which 7 years on there is still no sustainable recovery in sight.   It represented the unambiguous bust of the free-wheeling unfettered capitalist business model which had prevailed in the Western economies over the last 3 decades since Thatcher and Reagan.   The essence of this dominant ideology was: leave it all to the markets and let government get out of the way.   It was supposed to be self-regulating and efficient; it was neither.    Worst of all, when it did crash, the Tories imposed all of the pain in remedying it on to the squeezed middle and the battered poorest while letting the bankers, the real perpetrators, off scot-free.   The roiling resentment of the public at this monumental injustice has finally burst out, and Jeremy Corbyn was the right man to articulate this at this moment.

The central demand is for an end to austerity.   Quite apart from the immiseration it has caused, it is the wrong policy for reducing the budget deficit and is being pursued for the wrong reasons (to shrink the State, as Osborne himself has told us).   The right way to cut the deficit is by expanding the economy, creating sustainable well-paid jobs and real sustainable growth, not by contracting the economy, and that steady expansion towards full employment is what Corbyn has made clear he stands for.   Alongside this major revival of British manufacturing industry, which is the only means to pay our way in the world and preserve our living standards, there needs to be tighter regulation of the banks to prevent another crash, a halt to privatisation of our public services, and an end to suppression of the trade unions.   All of those are very powerful reasons why an unprecedented number of people voted for Jeremy Corbyn – ane they were absolutely right!

The European future that faces is

It is fairly clear, even among Europhiles who want to stay in, what most people object to about the current state of the EU and what they would like to see changed.   The membership fee is uncomfortably large, some £11bn every year.   Free movement of labour works well between countries of similar living standards, but not between countries at very different levels of economic development.   The Common Agricultural Policy (CAP) and Common Fisheries Policy still take 40% of the entire EU budget, and cause considerable resentment in many countries, including the UK.   Most people, including most businesses, support free trade, but doubt whether the Single Market is worth the bureaucracy it generates.   It is widely felt that the EU is too regulatory and too protectionist.   Not many people in the UK want to see Britain becoming part of a federal United States of Europe, but that’s the direction favoured by many of Europe’s leaders.

Are these aspirations likely to be achieved in the current negotiations?   It seems very unlikely.   There may be a declaration that the UK is not fully tied into the EU goal of ‘ever closer union’.   The benefit entitlements of migrants from the EU to the UK will be restricted further.   There are proposals to strengthen the sovereignty of national parliaments and for the role of the City to be safeguarded against discriminatory EU financial regulation.   But none of this is likely to impact significantly on the concerns that most people have about EU membership, and particularly at a time when the EU is running into deeper difficulties.   The austerity policies to maintain the single currency leave EU living standards, as in the UK, still well below 2007 levels.   The way the Germans treated Greece has heavily undermined the perception of the EU as a force for tolerance and fairness.   Far right parties are on the march across much of the EU and will increasingly put at risk unpopular policies needed to keep the single currency from collapse.

This may explain why the latest polls suggest that 43% of people in the UK wish to leave and only 40% to stay in.   So how is a policy to remain within the EU, which most Labour Party members want, to be combined with renegotiation aims that meet the objections of the majority of British people?   Cameron and Osborne seem only interested in achieving the minimum changes that will persuade a majority of the electorate to vote to stay in.   Nor has the Labour party so far offered a vision much beyond this minimalist goal.   Once a new leader is elected, this must become a top priority.

It’s about the fundamentals, silly

The basic reason that the leadership election has been so disappointing, until Jeremy Corbyn came on the scene, was that it was stuck on issues (insofar as it was stuck on any issues at all) that, while certainly important, did not have the makings of a vision.   Even when Corbyn prompted the others to produce some actual policies, they were not the real thing.   Andy Burnham was right to praise land value tax and above all the need to integrate social care within the NHS, and Yvette Cooper was absolutely right to demand that Britain takes its proper share of Syrian refugees where the government response has been callously dehumanised.   Bully for her.   But these are not the fundamentals, and only Jeremy Corbyn seems to have grasped what this election is really all about.

it is about how the world (because it concerns far, far more than just Britain) should respond to the most momentous event since 1945.   That is the biggest financial/economic crash for nearly a century, the slowest recovery since the Great Depression, and the longest run of prolonged austerity (and far from over) since the 1870s.     The City, the corporate business elite and the Tories (and to a lesser degree the Blairites from Blair downwards) regarded this as a glitch from which business-as-usual should return as soon as possible.   They believed the underlying structure was sound, the ideology was right (i.e. de-regulation of finance, unfettered capitalism, glorification of the market, privatisation of all industries and services wherever possible, and suppression of any counter-force and in particular the trade unions), and removal of governments from the action was the best way to promote efficiency and growth.   But not only did they believe it then, they still believe it when the evidence against it is now overwhelming.

The ultra-liberal business model has manifestly failed.   It has led to an intensely fragile global economy, indeed to secular stagnation as Lawrence Summers has rightly termed it, and over six years of grinding austerity have produced neither sustainable growth nor much deficit reduction.  We need some new ideas about the fundamentals, and only Corbyn seems to be offering them.   He opposes further austerity on the grounds that continually contracting the economy is incompatible with lasting growth.   He wants to rebalance the economy by large-scale public investment in industry and services, with the serious goal of full employment, paid for either by mandating the publicly-owned banks to prioritise investment in British manufacturing or by a direct injection of QE funding into industrial investment rather than via the banks or by requiring a fair contribution of the costs from the extremely rich, none of which would require any increase in public borrowing.   Instead of pursuing privatisation and outsourcing which has turned out wildly expensive and wasteful, he would seek to create a new settlement between State and markets where private markets have clearly failed, particularly in sectors like energy, housing, rail, water, pensions and banking, in a manner that optimised the public interest rather than just maximised money-making.   And much more.

Umunna’s partial olive branch

In his speech yesterday Chuka Umunna appeared to be offering from the Blairite faction of the PLP an olive branch of reconciliation.   If this is the correct interpretation, it is a useful and welcome one, although he made it conditional on Jeremy Corbyn showing flexibility on EU, NATO, Trident renewal, and tax (unspecified).   I don’t remember Blair, when he won the leadership in 1994, offering flexibility on policy in order to gain support from potential front-bench members of the PLP, having won.  My memory is that, come 1997 in particular, we were all told to knuckle down and loyalty was the order of the day.   But let that pass.   The key point is that he emphasises solidarity and agrees, what is obviously true, that the vast majority of the hundreds of thousands who have joined Labour in recent weeks are not entryists, but have done so because they are animated by Labour values.

That is helpful, and if Corbyn wins, we should certainly respond in kind, though not by acceding to veiled threats of non-co-operation as though certain persons are  indispensable, though certainly not either with intimations of a purge – even if again that is exactly what Blair and Mandelson organised via consolidating control of parliamentary selections and making huge efforts behind the scenes to replace large numbers of centre and left MPs with preferred Blairite alternatives in the run-ups to general elections.

But Umunna still does not quite get it.   Defending New Labour, he argues that “It is not unreasonable to be ambitious for what your party in government can achieve in building greater equality, liberty, democracy and sustainability”.   He seems not to recognise that New Labour actually did the precise opposite.   It increased inequality, restricted civil liberties, centralised power, and prioritised wealth-creation over sustainability.   He doesn’t seem to grasp that it was for reasons such as these that the country does not want New Labour back.   And that’s quite apart from the Iraq war, paving the way for the almighty crash of 2008-9, the despised culture of spin and manipulation with which Blair poisoned political communciation, and Blair’s rancid love of money-making.

Umunna still can’t get it that this Blairite agenda is really not wanted.   It’s a failed and busted business model which, given Labour’s unprecedented majorities between 1997-2010, was a massive wasted opportunity.   If Corbyn wins and Umunna and his Blairite friends show reliable loyalty to the new leader, then the party can co-operate well.   But nobody is indispensable.

 

Blair is living in a state of deluded denial

There never was a truer example of ‘when you’re in a hole, stop digging’.   His article in the Observer today is a gift to his opponents, but it does even more damage to himself.   He reveals himself as increasingly deserted even his previous closest followers, an utterly broken man watching everything he stood for swept away before his eyes.   He has gone from opposition to delusion, from hysteria to denial.   But what is perhaps most disturbing of all is that he can’t, as he himself candidly admits, understand why the Corbyn earthquake is happening.   He just blankly refuses to acknowledge the passionate resentment which he and New Labour created by laying the foundations for the financial crash of 2008-9 and making the squeezed middle and brutally punished poor pay for it, by taking Britain without any constitutional approval into an illegal was with Iraq, by introducing into politics the hated regime of spin and manipulation , by indulging now his squalid lust for money-making, and by clearly having no more overriding desire than to strut the world with Bush.

He describes his opponents as trapped “in their own hermetically sealed bubble”, when that applies exactly to himself.   If what he says were really true, why has the Labour electorate swelled to over 600,000, 50% larger than he managed even at the height of his pomp when so many were glad to be rid of the Tories on 1st May 1997?   Why is he so unfeeling and unapologetic about aligning the New Labour alongside the Tories in pursuit of austerity from 2010 onwards, especially since Osborne’s policy (to shrink the State) has been so dramatically unsuccessful in reducing the deficit?   Why did he urge the Blairites to support the government’s welfare bill which opposed every tenet of the real Labour Party?   Why did he push for privatisation of the NHS and other public services?   Why did his acolyte Mandelson say “New Labour is “relaxed at people becoming filthy rich”, and proved it by letting inequality balloon to even highe heights than under Thatcher?

So after doing all those things, how does he expect Labour members and the country to treat him?   After a 20-year temp;orary iruption of hi-jacking the party down a route utterly alien to its founders, in order to ingratiate himself with corporate and financial leaders on their terms, how can he imagine that anyone wants him back?   He has a lot to learn, less egoism, more humility.

The deeper reasons for supporting Corbynomics go far beyond re-nationalisation

It is curious that the main charge thrown against Jeremy Corbyn – apart from all the bluster and hysteria – is that his policies lack ‘economic credibility’.   The assumption presumably is that the economic policies pursued by UK governments, both Labour and Tory, as well as by the EU, were sufficiently credible and rewarding as to justify or even necessitate their continuing to be followed.   Even a second’s thought shows that that is an absurd proposition.   The business model of free market de-regulated capitalism which has been ruthlessly taken to extremes over the last 3 decades is patently bust.   It led inexorably to the biggest global breakdown for nearly a century, followed by the longest recession and the slowest recovery since the 1870s – indeed a secular stagnation with still no recovery in sight.

We were told that the markets were self-regulating and that the role of government was to get out of the way.   It turned out that the opposite was true, and that the economic system was only kept going at all by the constant drip-feed of government-initiated QE.   We were told that the dynamics of capitalism would self-generate the levels of demand to keep the system constantly expanding.   It turned out that growth was only achieved, if at all, by stacking up debt to prodigious levels, opening the way to the next financial crisis when the debt bubble imploded.  We were told that giving a free hand to investors would ensure the maximum efficiency in the allocation of capital.   What actually happened is that capital flocked to emerging markets which offered the best return, then flowed out again equally fast as soon as Western financial conditions improved, leaving emerging markets badly weakened and exporting deflation to the West.

The cataclysm of 2007-9 was a lesson that international policy co-operation was needed to increase global demand.   It was a lesson that higher investment in infrastructure and skills was needed to increase productivity.   It was a lesson that an economic model based on widening inequality was undermining the essential requirements of a successful economic system.   It was a lesson that uncontrolled capital flows are both dangerous and counter-productive.   It is clear that none of these lessons were learnt.   Perhaps Jeremy Corbyn’s greatest contribution is that he is not accepting the status quo which is rotten: an over-sized financial sector, a neglected manufacturing industry, inadequate investment, flat productivity, huge and growing balance of payments deficits, ballooning inequality, and an economy mired in enormous permanent debt.   He deserves credit for arguing that the fundamentals have got to be changed; it’s a debate we desperately need.