Duncan’s Economic Blog

Austerity & Labour

Posted in Uncategorized by duncanseconomicblog on June 17, 2009

In the spirit of Hopi, who used to hoist my comments from his comments section before I started this blog…

Last week Charlie made a really interesting point that I think more people should see.

Both political parties wish to avoid being fully open about the nature of the problems ahead, for fear that honesty will send the electorate screaming in fear into the arms of their opponents. So Cameron et al wish to continually infer that the problems are all about Labour profligacy, and the government, in so far as it has a discernible communications strategy on these matters, want to focus on the prospect of Tory cuts.

I have a very strong hunch that whoever is in government after the next election will both have to raise taxes and make cuts (or, just as important, not expand spending in reflection of the demographic time bomb represented by the aging population’s health and allied needs). Of course the balance of tax rises and spending cuts is a key question- but not one that is currently highlighted in any front line policy discussions.

It is the Tories who have raised the slogan of ‘Austerity’ – but I wonder if it can be turned to the left’s advantage? After all the last time the UK went through Austerity as government policy was to pay for the consequences of a war, and rebuild the country after the economic exhaustion of 1939-45. That rebuilding crucially involved stuff like founding the NHS. Many people have made the point that ’solving’ (if that is what has happened) the bank crisis has left us with a bill equivalent to fighting, and possibly losing, a small war. So there is a rheotric of rebuilding the economy and our ability to function in the global marketplace which should surely be available to the left. (This is surely what Duncan’s programme of industrial retooling is about) Sacrifice now for gain latter. But for it to work it has to take the majority of people with it- it may mean raising taxes and holding down real wages for a while but there must be some compensation in terms of measures of social solidarity, analogous to the founding of the NHS. Pensions seem to me to be a likely key issue here given the aging population….

But i don’t expect Labour to take this option. I think they’ll try to stick with the frankly ludicrous line of ‘Things Aren’t That Bad/Look They’re Getting Better/We Saved the World Economy You Know/The Tories Want to be Thatcherite Beasts and We Don’t.

21 Responses

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  1. donpaskini said, on June 17, 2009 at 9:36 am

    The thing is, all the evidence suggests that whoever announces large cuts and tax rises (in whatever proportion) will suffer for it. Whether we frame it as \’protecting the most vulnerable\’ (as per Polly Toynbee) or \’sacrifice now for gain later\’ (as per Charlie), this isn\’t a good time for us to make this argument.

    The Tories have a double digit lead in the opinion polls, massively favourable media coverage and a receptive public, and even so they don\’t want to set out their plans because they recognise that whatever they come up with and however they frame it will be rancidly unpopular.

    \’Sacrifice now, gain later\’ is a much better argument for Labour to start making in opposition in 2-3 years after the Tories have got in, made a mess of the economy and seen their popularity nosedive after making savage spending cuts. And it will be even stronger if we can avoid the temptation to go on the record before then spelling out in detail what tax rises and cuts we would have done had we been in power.

    Attacking Tory cuts and not setting out a detailed alternative is not a very brave approach, and it will really annoy people who follow politics closely, but it gives Labour the best chance over the medium term of forcing the Tories to spell out what they would do and winning the overall argument.

    • duncanseconomicblog said, on June 17, 2009 at 10:21 am

      Don,

      I agree that this agenda is not a popular vote winner. But I just think the old dividing line of \’Labour Investment versus Tory Cuts\’ stacks up anymore. Everytime we use they will whack us with the public figures. This isn\’t 2005 and times are different.

      More popular I imagine would be talk of active engagement to help the economy versus Tory cuts.

  2. Paul said, on June 17, 2009 at 10:28 am

    I\’m all for attacking the Tory promise/threat of cuts, Dan (I may cross post this comment over at your place too) as they are real enough and it\’s perfectly valid to pass judgement on the effect those cuts will have on working people/non-working people.

    But I do think we need to present some kind of alternative. You\’re right that this can\’t be \’we won\’t cut/we won\’t pay back the debt incurred through the bail out\’ because that\’s not too realistic an option. Nor do I feel pain now/gain later is a message that will hit home as well as it did after the second world war, much though our aspirations for common socialist/alutruistic values would want it to.

    The narrative I think we need to develop, and one which links at least in some way back to \’real economics\’ of the post Keynesian variety Duncan\’s always on about, is that the only remotely sustainable way forward for post-crash capitalism is to set about creating greater income equality both domestically and internationally, because this is the key way to stop the development of future asset bubbles and consequent crashes caused by major imbalances in supply/demand (over-investment). (You will detect easily enough here, Duncan, that I\’ve been reading the Graham Turner book you approved of.).

    This narrative of \’equality is what will save us\’ needs also to be linked to what Duncan refers to as the new industrial tools – the \’green economy\’, that kind of thing. Within that narrative, and a (hopefully popular) commitment to investment in the bits of the (social) economy that might work in the long term, we need also to talk about how a new economy needs a new (domestic and international) governance framework which is about capping the excesses of multinationals driving down wages, about respect for production and the people who produce, and about a return to, yes, strong unions. Economically there\’s a lot of Carlota Perez in this – the need to create sustained eco-growth by setting the institutional frameworks up in parallet with new economic/production paradigms, rather than always playing catch up. Here\’s of course the tag lines for electoral use are around that \’new politics\’ thing Compass is always on about, but which makes little sense to anybody if it\’s not rooted in \’new economics\’ of equality if income/less fat cats/less moral culpability on the part of MPs, and blah de blah.

    Mmmm. I feel a mosnter post at my place coming on.

    Duncan – this is a really good debate you and Charlie have set up, and with Dan now engaging from his angle, it\’s bwe good to see it taken at least to a wider blogo-audience, hopefully via the good offices of Hopi and other sites that people read more than ours (though I\’ve no idea what your readership figures are like).

  3. CharlieMcMenamin said, on June 17, 2009 at 10:41 am

    Don\’s right of course – in the short to medium term anyone actually explaining quite how bad the next few years might be is likely to get creamed in any electoral sense. But, hey, I can\’t help noticing that New Labour seems on course to get creamed anyway, so why not do the right thing?

    I also think that how this kind of programme is packaged matters an awful lot. \’Austerity\’ might invoke coal nationalisation and the foundation of the NHS to deep-dyed lefties, but i suspect it invokes rationing and the general drabness of the late 1940s to most people for whom it means anything at all. If we are to draw on that period of history for thematic parallels then, on refection, I wonder if we should be talking of a new initiative on Marshall Plan lines- with the government (and/or possibly EU) coming in to play the part of the US in stimulating the rebuilding Europe for a different tomorrow

    There is, of course, the kernel of such a programme kicking around: the Green New Deal promoted by the New Economics Foundation and Green Party. I\’m not technically qualified to judge whether its policy components meet all the current requirements of a transformational economic strategy. I think it is a bit light on downgrading the independence of the City for instance. But at least it\’s a starting point. .

  4. Paul said, on June 17, 2009 at 10:54 am

    Charlie

    Yes, v useful. I\’ll have a look at what nef/greens are suggesting. I\’d be interested to see how far it goes/if it goes at all in the direction of promoting income equality/the rebalancing of capital/labour as a sine quoa non for the green economy as (Duncan\’s) new tools.

    My suspicion, before I even read a word, is that it might be a bit light on this, given the difficulties the Greens have in general in coming to any kind of consensus view on what is essentially the \’question of class\’, and given the view of Stewart Wallis (director of nef\’) on the inherent loveliness of capitalism (though he may have changed his tune).

    But that\’s not very fair – I\’ll read up.

    • charliemarks said, on June 18, 2009 at 12:41 am

      Caroline Lucas recently came out in favour of a maximum wage and the Greens have been very active in supporting Living Wage campaigns. The class question might be unposed, but the answer is clear…

      • Paul said, on June 18, 2009 at 11:23 am

        Charlie

        Thanks for that – as I said, i’ll look at this stuff and am very happy to be provide wrong

  5. Paul said, on June 17, 2009 at 10:59 am

    and I agree totally – the \’packaging\’ (what I refer to as narrative is all important) but to continue the metaphor I am optimistic that if the contents are sensibly shaped, the packaging can be done.

    And packaging is important because Labour may get creamed, but the extent of the creaming is still important. I wouldn\’t want \’doing the right thing\’, just because it makes ua feel better at our time of loss (cf 1983) to bring about such a battering that Labour takes even longer to recover electorally, so even if Labour does lose, it must still try to lose by as little as possiible while at the same time starting to create an alternative vision of a social economy for five years hence.

    Oh, I\’m such an old loyalist…

  6. […] have a look at the threads and comments (including my offerings), starting with Duncan’s post here for further […]

  7. crossland said, on June 17, 2009 at 1:29 pm

    I’d draw a paralell with the Tories ” you didnt fix the roof when the sun was shining” meme.

    It was untrue,it was dishonest and it was unfair.
    But it worked.

    The current argument in public gives Lab an opportunity because it reverses the classic situation where the opposition is vague and the govt explicit.
    I quite agree with the debate you are having on your blogs (I read all of you) but think Don is correct in Lab not going public yet- its too soon.

    Afterall Lansleys gaff was a gaff for good reason – he put too much out too quick so the focus is now on the tories.

  8. crossland said, on June 17, 2009 at 1:33 pm

    Like in X factor – regardless of the quality ,whoever sings first is at a disadvantage.

  9. Rob Killick said, on June 17, 2009 at 4:24 pm

    In reply to Don, ‘Attacking Tory cuts and not setting out a detailed alternative is not a very brave approach’, is at least a recognition of the cowardice inherent in this approach. I find it strange that you assume that there is no part of the state that could do with being cut. Do you really think that? if you look at my blog you will see that people of all poltical stripes are coming up with some pretty persuasive ideas of what we can do without.
    http://postrecession.wordpress.com/2009/06/17/public-spending-we-could-do-without-your-thoughts/
    Of course, if you are mainly concerned with the narrow preoccupation of getting Labour elected then it is understandable why you would wish to abdicate yourself from this debate rather than take some responsibility.

    • donpaskini said, on June 17, 2009 at 7:33 pm

      Hi Rob,

      Don’t worry, I have many views about how public spending could be reduced🙂 I did have a look at your blog and the ideas that people have come up with – there are some interesting ideas but a lot of really terrible ones (cutting public sector pay, abolishing Sure Start and the Department for International Development, introduce fees for GP visits, end state pensions by 2020).

      I think you are on to something, though, that this subject would benefit from much wider public involvement. For example, more or less everyone can think of some way of working differently in their workplace which would save a bit of money – maybe the government could do more to listen to ideas from front line workers, and from service users, in the public sector.

      But I was making a rather different point (the one which crossland made more succinctly), which is that the way political debate works means that there are terrible penalties, and no advantages, in being the first political party to set out detailed ideas for multi-billion pound spending cuts. Particularly when we are talking about cuts for 2 years in the future and no one knows how much money needs to be cut.

  10. duncanseconomicblog said, on June 17, 2009 at 4:55 pm

    I’m enjoying this debate.

    Political Betting has some interesting, and relevant, polling:

    http://politicalbetting.com/index.php/archives/2009/06/17/is-labour-losing-the-tax-and-spend-argument/

  11. CharlieMcMenamin said, on June 17, 2009 at 6:17 pm

    Its not just packaging of course, it would mean a real change of policy direction. Frankly, those of on the left outside the lLabour Party might – much as we love you good hearted Labour Lefite types, and want to appear constructive and all that – harbour some doubts about the Labour Party in government being willing to contemplate this.

    For example- go read Richard Murphy’s latest post. he provides evidence that as much as £2.4bn might be saved if we simply brought out the PFI contracts on hospitals built since 1997. http://www.taxresearch.org.uk/Blog/2009/06/17/one-way-to-save-billions/. But this is not a one year saving and would require some initial upfront investment. Equally to the point – can anyone imagine Brown or any imaginable successor agreeing to this?

  12. newmania said, on June 18, 2009 at 8:45 am

    Why should Public Sector Pay not be cut , Private Sector pay has been and Public Sector rewards have increased at double their equivalents in the real world ? This sums up the attitude of the parasites and their media friends
    Surveys were showing a general distaste for the continued expansion of the state and its sinecure holders prior to the crunch and the reaction to IHT showed that the old trust for big government had been abused and destroyed by New Labour .These are to sort of attitudes that have created that new settlement, a contempt for the tax payer and the ordinary family’s efforts to improve their lives .

    One local problem is that the Labour Party is now under the foot of Unite in a formal and real sense , this puts the Labour Party in the position of exploiting the 80% un-unionised for the benefit of their client 20% usually in the Public Sector.
    PFIs were usually only there to keep borrowing on the books and preserve the Golden rule of 40% over a cycle . That cycle is presumably is ice age to ice age . This is the sort of glaring inconsistency that you cannot simply forget .

    The feeling after the war was that those who had defended the country were owed a duty of care . Not that idlers should continue to live from working people. Churchill was soon returned to undo the inevitable authoritarianism the left ‘forgot’ to dismantle .

    If there is going to be an appeal to the moral concept of the Nation perhaps it might have helped not to sell it to the EU and lie about the referendum . Labour have additionally operated an aggressive settlement policy of immigrants for ten years . Having doen so they have forfeited all right to call on National Loyalty by unceasingly conniving to abolish Nation and throw “ racism” at anyone who did not like this internationalist project.

    As I understand it Duncan`s idea is to direct resources away form profit and into the hands of bureaucrats who will then play with it according to whatever trendy nostrum is floated in economist circles . These circles we should remember have been conspicuously more wrong about the future than ordinary people and pretty much said what they were paid for notably by New Labour.I am glad to see Duncan is admitting that the Labour lies he was repeating only days ago are not sustainable. Why not commit yourself to telling the truth in future .

    • duncanseconomicblog said, on June 18, 2009 at 10:03 am

      Newmania,

      I have been consistent on this since I started. Structural change in the economy, big burdens to bear, taxes will rise for everybody, some spending (after the recession) will be cut, industrial policy needed, Labour should be up front about this. Even the Tories are discussing industrial now.

  13. newmania said, on June 18, 2009 at 10:38 am

    ‘The choice is clear – the politics of austerity or the economics of growth’

    Is this a choice in your own mind then ? It is quite obviously not one any political Party is offering ?

    Taxes will rise for everyone anyway , you mean taxes will rise ‘even more’ to finance additional spending whereby the state takes the place of the private sector in wealth creation which sounds lunatic to me . WE will move into a period when interest rates have to go up perhaps sharply ( the fact they do not now shows you we are still in recession)You want to say to households hanging on by their fingernail ,”I want you to hand over even more taxes so some elite economists have have a little play at picking winners on your behalf ?”. Good luck. Meanwhile Brown knows as well as anyone that taxes cannot be the answer and we are yet to see the true extent of cuts . No-one ever announces it Duncan , the money just isn`t there .

    I don`t you and your lefty friends have yet understood how much of the big state model is under threat I am far from convinced David Cameron has . Yet.

  14. Paul said, on June 18, 2009 at 11:22 am

    NM

    1) ‘I don`t you and your lefty friends have yet understood how much of the big state model is under threat I am far from convinced David Cameron has . Yet.’

    Some of Duncan’s ‘lefty friends’ are at least prepared to contest the right’s loaded use of the word state (not that the left don’t also load their use). See http://www.bickerstafferecord.org.uk/?p=678 and Chris Dillow’s linked post on how the left needs to argue for a smaller state. I wouldn’t know about David Cameron.

    2) ‘Why should Public Sector Pay not be cut , Private Sector pay has been and Public Sector rewards have increased at double their equivalents in the real world ?’

    Try turning the question round to: Why shouldn’t private sector employees be encouraged to unionise in order to start to reverse the decade long decline in average earnings brought, so that earnings are enough in the long term to ensure consumer demand can be increased sustainably without resource to the imbalance of credit growth in budget deficit countries/depressed consumer demand in high-export countries?

  15. newmania said, on June 18, 2009 at 1:59 pm

    Sweet

  16. The left and cuts | said, on June 30, 2009 at 5:31 pm

    […] feed for updates on this topic.Powered by WP Greet BoxThe Guardian picks up a point leftie bloggers have been making for a while – that New Labour and the left should think properly about public […]


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