Lens on Labour: Economics Supplies and Demands
Winning the next general election will revolve around winning the argument on the economy, the cause of the current crisis and a now related argument on democracy, nationalism and the EU. Critically, the first shots in the debate on policy on these issues have just been fired by the ‘in the black’ report, which argues that we should embrace an end to the deficit (in the black, you see) to re-establish Labour’s economic credibility. This would mean a significant shift to the right. Financial credibility is the issue stressed in the report. The authors suggest swallowing some Tory medicine. Ed Balls hit back with a defence of his current argument and it is substantial. Even the New Statesman is calling for an alternative economic policy from Labour.
Len Arthur brings us up to speed
Credibility is a political state of mind – consciousness, if you like, of the electorate. It is not a fixed feature but can be influenced by campaigning, experience and argument. Currently we, a very broad ‘we’, are not winning the argument. Polls suggest that while the Tories are not popular, Labour is still believed to be more at fault for the economic crisis than the bankers. Osborne is more trusted to deliver an answer than Ed Balls.
The Tory media also hammers away with its propaganda and it often comes up in discussion.
First, there is the Mr Micawber view of the economy: ‘Annual income £20, expenditure £19.6d = happiness; Annual income £19.6d expenditure £20 = misery’ – I paraphrase. Thatcher, with her purse, made much of it.
The argument is nonsense when applied to a state, which can spend to create more income and, if needed, print money, currently known as quantitative easing. Second, moving away from Mr Micawber, we tend to defend the weak Keynesian ‘borrow and spend’ approach – but not too much and not too explicit over the investment targets. We are left weak on the issue of the deficit.
Then there is the ‘alternative economic policy’, bringing back vibes of the 1983 general election where Labour was massively defeated on a not very radical manifesto, since labelled ‘the longest suicide note in history’. Yet the 1945 Labour manifesto was far more radical – for some it would seem revolutionary today – resulting in a landslide victory with the largest proportion of the vote ever.
Before we allow these shibboleths to frighten us into the Tory narrative, a coherent alternative economic policy, grounded in a realistic analysis of what has caused the crisis, would provide a sound basis to argue and campaign for what is credible on our own terms.
Producing … arguments
The bankers’ crisis is fuelled by a shift in wealth creating economic activity from production to satisfy needs. to wealth based upon financial speculation and sustained by unrealistic and inflated valuations. Financialisation, as it is called, has come to dominate all economic activity and has been aided and abetted by nearly all governments through de-regulation over the last 40 years.
Technically there is more, of course, but make no mistake, we are experiencing a bankers’ crisis. And, as states have helped to create it, they are having a problem solving it. So much so, that we are now experiencing a crisis of democracy across Europe, which may see sovereign states lose control of their economies without a commensurate extension of democracy. We experienced a civil war in Britain just over such an issue.
Pop has gone the financial bubble. Globally, we have been left with a black hole of possibly $11 trillion dollars of real demand that has been taken out of the international economy: more than the entire value of production in the EU over one year. States have tried to fill this hole with printed money and borrowing but it is just too big. So look out suckers – you and me – they are coming for us as hard and as fast as they can to make cuts to cover what states have tried to pour into the hole and they will wind up democracy to ensure it happens. Just look at Greece and Italy. And, come to think of it, I don’t think we voted for the policies of our own current government.
So what can we do as an alternative?
There are loads of suggestions around.
First let’s deal with the lies. The last Labour Government actually reduced the national debt (total amount borrowed) and the deficit (difference between state income and expenditure in a year) until the bankers’ crisis and their black hole hit us: reference
The deficit can be reduced by investing and not cutting: reference from False Economy
And our national debt is not so large historically, so we could allow the deficit to increase, as long as we ensured the money was invested in goods and services that people need: Paul Krugman, New York Times
Further, let us increase the supply of goods and services through investment using the money that is available rather than printing or borrowing it: Tax Research UK, There’s Plenty of Money and Michael Roberts, US Investment Strike and Eoin Clarke, The Green Benches
Investing in Ourselves
And, instead of cutting social services, wages and pensions let us increase demand by employing people through investment, particularly green investment, putting printed money into the hands of people to spend, not banks to stuff their coffers. In addition, force the money that is available to work; re-introduce a progressive and re-distributive tax system. I can’t cram all the real possibilities into a single sentence but we have a plethora of plan Bs available to us: like this, this, and this
It is crunch time in the UK and Europe. If we are bold enough and confident in campaigning and arguing the case, we have enough available to us to turn the Tory tide and win both now and at the next general election. We need to urgently take up the debate and fight for the future. An alternative manifesto will mean regulation of the economy, working closely with the trade unions, direction of capital, extension of cooperatives and nationalisation. The time for these arguments to mean something credible is now with us.
We should link these with a socialist case for the EU to counterpoise Tory nationalism and their challenge to democracy: a living wage for all; a commitment to full employment; defence and extension of the social chapter, pensions for all and an end to the Maastricht treaty, which is the embodiment of Thatcherism that Merkel is now trying to enforce. Now that would be something to have a real referendum on, one that unites the working class across the EU.
I know this may sound like seasonal wishes but if we are to have hope we can create it politically. Let us be clear about it: the Tories will be bold for the rich and their class of the 1%. We can be bold for the 99% and the working class.
Let me end with a xmas treat from across the Atlantic. It is a regular weekly hour-long wireless broadcast by a US economist Professor Richard Wolff on what is happening in the global economy and why. On 26 November he actually ended with a discussion about how a transition to socialism might take place, even in the US. It is riveting stuff – here, then move the bar to 50 minutes in.
Len Arthur is a Labour Party Member, Political Education Officer for his Constituency Party, and a former Trade Union Activist and Lecturer.