Why does Labour still buy these incompetent neoliberal myths?

In the first of a two-part series, MICHAEL HANRATTY considers what the left’s reaction to the budget says about the state of Labour thinking.

Budget Day being an ordinary working day, I don’t normally get to digest the nuts and bolts of policy until it’s all become more widely discussed and less opaque. But this year I caught some local news coverage from the BBC interviewing employees and employers at a Tyneside firm making submersibles about their expectations.

Perhaps the most lamentable aspect of Westminster politics is the assertion that economics is something deeply specialised, mystified and prohibitive to pursuing political imperatives. Specifically socially democratic ones, which involve public investment. Our politicians take the view that the only way the general public can understand economics is through simple allegory. Roll on the myth that the Economy is a household like our own, living beyond its means. If not this gross simplification, we get another: assessing individuals’ current living standards – important to people of course, but fairly short-termist in the bigger picture.

Despite this, the BBC went from employee to employee asking about how much it cost to fill up their car, how much disposable income they were left with at the end of the month, how much childcare was, presumably following a pre-arranged plan to focus on living standards. That is, until they invited a Director of the company to speak. Clearly, he hadn’t read the BBC lines, as he complained quite plainly about the private sector having plenty of money on it’s balance sheets to invest but declining to do so due to the fact they’re worried about the prevailing worries over demand.

I’m going to assume this man was a capitalist, greatly concerned with how many submersibles he’s able to sell and not unduly worried about who’s buying them – as long as they’re sold. But not once did he mention public debt, the state, the difference between his workers as strivers and the unemployed as skivers nor how much they charged him on the forecourt that morning.
He raised the fundamental point that is continuing our Economic Malthusianism – if the private sector doesn’t invest because it’s pessimistic about our economy, his employees won’t spend because they’re paying down their mortgages because they’re pessimistic about our economy and the Government won’t spend because of contested reasons, who is exactly is spending? Where is the demand for his submersibles going to come from?

The response should be fairly standard. Even the staunchest of Conservatives among us concede that John Maynard Keynes set the narrative for macroeconomics in the 1930s by advocating government stimulus to boost aggregate demand, and that government has a range of fiscal and monetary measures to do this – so why do so many key figures in the Labour movement cling to the tired neoliberalism that should’ve died with the New Labour project in 2010?

Rachel Reeves tweeted about how Tories jeered as shadow Treasury minister Catherine McKinnell proposed a National Insurance holiday on small firms taking on new employees.

Does the employers rate of National Insurance really keeps small firms’ owners up at night? Or are they more bothered about who will be there to buy their product/service in the morning? Given Reeve’s and McKinnell’s respective constituencies are Leeds and Newcastle respectively, both major Northern cities dependant on central government jobs, particularly the DWP, surely they realise that it would be more prudent economically and politically to attack Osborne for keeping those worried about their state-sector jobs away from the small businesses, and obsessively paying down household debt?

A pretty pertinent point, since the crux of Osborne’s economic genius (sic) follows the Thatcherite idea of every single person taking on more personal debt to fund their consumerist wishes.

Read part two of Michael’s budget series here