Labour's economic answers

Tony Blair says of the Labour leadership: “These guys aren't providing answers, not on the economy, not on foreign policy.” I don’t want to discuss foreign policy – others might have opinions on Mr Blair’s ability to judge that – but in economic policy, this seems questionable.

Among our economic problems are: persistently weak capital spending; a fiscal policy which, at the ZLB, cannot cushion the economy from adverse shocks; stagnant productivity and real wages; and unaffordable housing.

And Labour does have some good answers to these. A National Investment Bank can step up investment in new technology and infrastructure; Labour’s fiscal rule increases the flexibility of policy; the pledge to increase housebuilding is self-evidently a good idea; and McDonnell’s claim that “there is a clear boost to the economy from worker ownership and management” is correct; worker democracy can raise productivity.

Granted, Labour’s ideas aren’t fully worked out yet, but this is only to be expected four years from an election. The fact that McDonnell is seeking advice from top quality economists augurs well. As Liam Young says, Labour is building a good economic case.

This is not to say that Labour can solve all our economic problems. There’s not much it can do about the long-term slowdown in world trade growth – which is an especial problem as the current account deficit might become a constraint on growth. It doesn’t seem yet to have a policy about banks and financial stability (hint: nationalization). And it might be under-estimating the power of the forces depressing investment such as low profits; the fear of future competition and the possibility that companies have wised up to the fact that innovation doesn’t pay much.

 However, I suspect that this is not what Blair has in mind; scepticism about the health of capitalism would be out of character for him. So what is he thinking?

One possibility is that he’s just out-of-touch. A globetrotting multimillionaire friend of dictators is not well attuned to the struggles of the low-paid, or to McDonnell’s attempts to solve them. Another is that he’s living in the world of post-truth politics, in which the test of policy is not whether it is a coherent answer to real problems, but simply whether it sells to a biased media and inattentive electorate. A third possibility is that he’s thinking of the economy in BBC mediamacro terms – as a synonym for “government borrowing.” None of these possibilities do him any credit.

Comments

[Dave Timoney]

I imagine what Blair really means is that the Labour leadership aren't asking the right questions, which shows that his intellectual straitjacket remains as tightly-buckled as ever.

One of Blair's defining characteristics is his narrow-mindedness. If after resigning he had decided to become a pig farmer or learn the bagpipes, rather than continue as a para-statesman, I think his views would command a lot more respect today.

[Steve]

Could well be all 3 apply.

[Blissex]

«economic problems are: persistently weak capital spending; a fiscal policy which, at the ZLB, cannot cushion the economy from adverse shocks; stagnant productivity and real wages; and unaffordable housing.»

And here we go again, as sometimes our blogger, is not cynical enough.

The above issues are not issues for most voters that matter:

* there is huge capital spending on property speculation;
* monetary and fiscal policy at the ZLB have not just cushioned but boosted the price of property;
* speculation on property returns 100% profits on cash, which is amazingly high productivity;
* property prices are always too low and affordable for the 60-70% of voters who are incumbent owners.

«the struggles of the low-paid, or to McDonnell’s attempts to solve them.»

The low-paid (or northern residents) don't return parliamentary majorities, so a politician aiming at electability can more or less ignore them.

«Another is that he’s living in the world of post-truth politics, in which the test of policy is not whether it is a coherent answer to real problems,»

While I guess that T Blair is a "post-truth" politician, those you describe are not «real problems» for the voters who can return parliamentary majorities.

For those voters the main issues seem to be:

* Property prices are not going up fast enough.
* Wages and employment for the low paid are not going down as much as they should.
* The low paid immigrants who are keeping low pay wages constant or falling dare to show themselves in public instead of being invisible in their ghettos.
* The EU is blocking immigration from outside the EU by much cheaper low pay workers than the poles and romanians.

Usual T Blair 1987 quote:

«Post-war Britain has seen two big changes. First, and partly as a result of reforming Labour governments, there are many more healthy, wealthy and well-educated people than before. In addition, employment has switched from traditional manufacturing industries to a more white-collar, service-based economy. The inevitable result has been that class identity has fragmented. Only about a third of the population now regard themselves as ‘working-class’. Of course it is possible still to analyse Britain in terms of a strict Marxist definition of class: but it is not very helpful to our understanding of how the country thinks and votes. In fact, of that third, many are likely not to be ‘working’ at all: these are the unemployed, pensioners, single parents – in other words, the poor. A party that restricts its appeal to the traditional working class will not win an election.»

[Keith]

The people elected to running Labour are interested in real problems affecting people and how to solve them. Unlike millionaire temporiser Blair.

[TickyW]

@Chris,

"a fiscal policy which, at the ZLB, cannot cushion the economy from adverse shocks;"

I suspect this statement contains a typo. Should it not read "a monetary policy..."?

[Churm Rincewind]

"One possibility is that he’s just out-of-touch. A globetrotting multimillionaire friend of dictators is not well attuned to the struggles of the low-paid, or to McDonnell’s attempts to solve them. Another is that he’s living in the world of post-truth politics, in which the test of policy is not whether it is a coherent answer to real problems, but simply whether it sells to a biased media and inattentive electorate. A third possibility is that he’s thinking of the economy in BBC mediamacro terms – as a synonym for “government borrowing.” None of these possibilities do him any credit."

Yeah, what a complete bastard. His sole achievement was to bring a broadly leftist perspective to the governance of the UK for a decade.

Luckily, Jeremy Corbyn and John MacDonnell have messages which resonate more fully with the electorate. As we saw in the recent Scottish elections.

Oh no, sorry, I've checked and that's wrong. Their ideas were decisively rejected.

No matter. That shouldn't stop us from trashing Tony Blair. Let's all keep the left out of power, yeah?

[cjcjc]

Is there any evidence that Labour's much heralded economic advisers are any good?
Blanchflower's forecasts for UK employment have been completely wrong, for example.
Labour seems to have made a mistake for which you would no doubt be (rightly) castigating the Tories, i.e. chosen advisers likely to give them only the advice they want to hear.