Tony Blair was elected by offering new hope in 1997 after the ravages of Thatcherism. New Labour squandered that victory. Five million votes were lost between 1997 and 2010 by taking our core voters for granted. Since then working class voters have defected in droves to UKIP. And most recently, in Scotland, to “Yes” and the SNP.
Ed Balls seems determined that trend will continue. What with benefit caps, pay freezes and sticing to a Tory budget, Austerity lite was bad enough, but at least investment spending provided some wiggle room. As Mark Ferguson puts it at LabourList:
the only reason for stomaching the adoption of Tory spending plans was the understanding – or at least, the hope – that Balls would use borrowing in capital investment projects to boost growth. Building schools, homes, road and railways costs money, but it also has a significant growth multiplier that means every pound borrowed and spent repays itself many times over – an economic dividend that a Labour government and the British people could reap at a time of hardship.
Now, a commitment to no new spending funded by borrowing takes austerity to Tory levels. Investment for growth has been sacrificed to make up for Balls’s own complicity in the errors of New Labour. Marg Ferguson says it’s a vision without hope. It is a disastrous error.
Ed Balls is not stupid. He knows it is wrong. Four years ago, in his Bloomberg speech, he said how important it was for him “to stand up now and challenge the current consensus that – however painful – there is no alternative to the Coalition’s austerity and cuts.” That Balls was right. That Balls pointed out:
Whether our leaders make the right calls now on growth and jobs, the deficit, public spending and welfare reform will determine the future of our country for the next decade or more and shape the kind of society we want to be.
That Balls knew that “by ripping away the foundations of growth and jobs in Britain” people like this latest Balls are :
not only leaving us badly-exposed to the new economic storm that is coming, but are undermining the very goals of market stability and deficit reduction which their policies are designed to achieve”.
The Balls of the Bloomberg speech understood that:
on all the other occasions when major economic misjudgements were made, broad-based political, media, financial and popular opinion was in favour of the decision at the time, and the dissenting voices of economists were silenced or ignored.
That old, Keynesian Balls remembered what happened to the plan of Ramsay McDonald when he caved in to the prevailing consensus:
The promised private sector recovery failed to materialise. Unemployment soared. Debt rose. Britain faced years of low growth. The parallels with today’s situation are striking.
Sadly, in spite of apologising for New Labour errors like the light-touch regulation of banks for which he was himself partly responsible, the returning neoliberal Balls “far from learning from our history … is set to repeat the mistakes of history“. As he told Labour’s conference yesterday, “in our manifesto there will be no proposals for any new spending paid for by additional borrowing.” Not even to finance capital investment on transport infrastructure or the building of 200,000 houses a year by 2020.
Balls knows that the economics he is preaching is bad economics. He preaches what he knows is wrong because the public perception is that the Tories are more credible than Labour. He is so cowed and defensive as a result of that perception and because of his own culpability for the errors of the past, that he preaches policies that he knows would fail. How can he establish Labour’s credibility on that basis.
Leadership is about changing and leading public opinion rather than being driven by it.
That’s what the Bloomberg Balls said. He was right. And that’s why the Balls we have now is not fit to lead Labour on the economy.
We cannot win with a plan that offers no hope. We cannot win with a plan designed not on a foundation of sound economics but in reaction to polls and focus groups. We cannot win with a plan we know won’t work. As the Bloomberg Balls said:
We must make clear that vision of a better Britain is rooted in a robust and credible economic analysis and an alternative economic plan.
We must persuade people in their heads as well as their hearts to come back to Labour again.
And by comparison, we must expose the Coalition’s plans as heartless and wrong-headed.