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Escaping “Stockholm syndrom – Stop fessing up to errors Labour didn’t make

Fire_escape_tube_-_NARA_-_285282Mr Osborne’s most striking political achievement, with the connivance of the economics profession and media, is to reframe the debate about the most severe crisis in living memory away from finance and towards the welfare state – identified as causal of the crisis.

In reframing the debate he has succeeded in ‘capturing’ some of his opponents and convincing them of his framing and narrative. He has done so by accusing Labour of reckless management of state finances.

Now Labour, egged on as it was under Gordon Brown by orthodox economists in both the Treasury and academia, does share responsibility for ‘light touch regulation’ of the City. But in no way can the Labour government be found guilty of “overspending”. The opposite is true.

Gordon Brown was a fiscal conservative. It must be remembered that it was he that (unwisely in my view) introduced the Fiscal Responsibility Act 2010.  As soon as assuming office George Osborne repealed the law, having previously called it “vacuous and irrelevant”. He was right to do so. Had he not repealed it, he would have been forced into deeper austerity in 2012 and 2013.

Then he persuaded both politicians, but also the media to effectively ignore or downplay the foibles of London-based financiers, who all played a big part in the global financial collapse. Both politicians and media obliged the Chancellor by largely removing from the political narrative and agenda any mention of the conduct and criminality of City bankers, or of the need for tougher management of the City. Instead deficit mania ruled.

As they watched this scene unfold, the City’s mandarins could not believe their luck. (They had initially been contrite, but this changed when Mr Osborne took charge of the Treasury – and even more so with the election of a Conservative government in May).

Then, as everyone knows, something extraordinary happened this summer. British politics changed. As the media focus on the speech of the new leader of the Labour Party today, I want to draw attention to some of the recent economic speeches and comments of leading figures inside the Labour Party.

Take for example the speeches of Andy Burnham, a man who has rightly commanded respect for his defence of the National Health Service. Yet he seemed to represent the views of many Labour MPs when he apologised for Labour overspending before the credit crunch of 2007-9:

Sorry. It was a mistake, we should not have allowed the deficit to get that high.”

And again:

Small though it was, we were still running a deficit at the peak of a booming economy…in government we should have done more to control spending in the middle of the last decade, so that we were better prepared when the crisis hit….

The question facing Britain in the future is how to clear the deficit and run a surplus…”

It strikes me that many in the Labour Party must be suffering the symptoms of Stockholm Syndrome.

Stockholm syndrome, or capture-bonding, is a psychological phenomenon in which hostages express empathy and sympathy and have positive feelings toward their captors, sometimes to the point of defending and identifying with the captors. (Wikipedia)

Mr Burnham’s Conservative opponents have repeatedly accused Labour of overspending and running deficits “while the sun shines”. Mr Burnham and others appear to show “empathy and sympathy” with this view, and even defend the accusations of his “captors”.

But PRIME’s Jeremy Smith has delved into the history since 1979, and made plain that there is no economic justification to empathise with the Conservative “captors”. For these are the facts:

The post 1997 Labour government on average spent a lower percentage of GDP than the preceding and following Conservative(-led) governments.

During the years from 1998/9 to 2000/01 the Labour government ran overall budgetsurpluses, even taking investment spending into account. This was actually not a good thing, as it led to a low and inadequate level of net capital investment in the country’s physical infrastructure.

By contrast, deficits have on average been considerably greater under Conservative governments. These governments presided over more years of economic weakness, leading naturally to high deficits.

Mrs Thatcher takes the prize for high government spending. Under her first government, public sector current expenditure rose from the 38% of GDP in 1979 to 42% in 1981 to 1983  –  and remained over 40% till 1986.

Under John Major’s Conservative government, current expenditure rose from 35% (1990/91) to 39% of GDP in 1993/4/5.

The incoming Labour government in 1997 inherited a debt level of 37% of GDP. As noted above, current expenditure remained at or below this level until the crisis began to hit in 2008/09. The current budget deficit in 2007/08 (which excludes investment) was only 0.5% of GDP.

The incoming Conservative-led Coalition government inherited in 2010 a current spending level of 42% of GDP. Despite the worst crisis since the Great Depression, this was still just under the Thatcher government’s peak spending level. Under the management of George Osborne, it has remained at over 40% of GDP until 2014/15. And it was only that high because tax receipts from a devastated private sector had collapsed.

Fortunately while some Labour MPs might be suffering from Stockholm Syndrome, their supporters in the country are not. They are fully alive as to who the real ‘captors’ of our economy are, and determined that their capture should be resisted.

This, I believe, goes some way to explaining the election of Jeremy Corbyn as leader.

This article first appeared at Debtonation

Image credit: Child in escape chute, US National Archives, 1924


  1. David Ellis says:

    Corbyn’s Labour needs to apologise for everything that New Labour did from the illegal Iraq war to the assault on single mothers to the endless examples of corruption to dodgy growth theory and `no more boom or bust’ and of course for putting an entire state, three nations and the British economy in hoc to the bankers and their super rich creditors. New Labour are an utterly toxic brand. They will never ever get anywhere near power again. They have no idea just how despised they are by the British public because they are above all else totally fucking deluded.

  2. martin hogan says:

    Even this argument does not go far enough. the deregulation of the 1980s and 1990s made a financial collapse inevitable. This deregulation was carried out by Thatcher and Reagan in the main, with some backing of the EU but with the two biggest financial markets writing their own rule book, the rest of the world was forced to tag along.
    Even when in power, the Labour Party had little say over financial regulation because the troubles were being buried and the US (Clinton) was happy further deregulating (modernizing) the ‘market’ which helped hide the glaring flaws in the system.
    By 2003 the UK was creating more ‘wealth’ in finance (mortgages and other real estate gambling) than in manufacturing and this was the tipping point, the point of no return when the UK economy was bound to hit a catastrophe and collapse.
    The error and criminal negligence of Blair and Brown et al is that they did not warn of this coming catastrophe but instead happily drove into it and squashed the voices of those warning of the collapse.
    What could Labour have done differently? They could not alter the global system but they could have warned against it and not jumped into bed with those creating the disaster.
    Their love of privatization, of NHS Trusts, PPI, education academies, social security sell offs etc were all very badly flawed and left they way open for the Conservatives to blame the poor for the abuses of the rich.
    The Labour Party should cry mea culpa but it should put it in the context of the pro capitalist and banking policies of the neo Conservatives that abused the Socialist Movement throughout the 1990s and 2000s

  3. Jim says:

    The author loses all credibility for his argument by the constant cherry picking of yearly ranges to reinforce his arguments. B&B inherited their surpluses from sticking to the financial policies of the Major government for two years

    Labour did some things wrong in office for which an apology will never be forthcoming, not least of which was Iraq. My big issues were the abuse and overuse of PFI, increasing NHS funding but blowing it all in wages and hiring a million new government employees (not needed and most of whom have since been laid off) instead of funding infrastructure projects.

    A clean sheet is needed and Corbyn will provide it, unfortunately, for every new and enthusiastic Corbynite who comes on board, we will lose a swing voter to the lies of the press. Without PR, the Labour Party is a dead duck

    1. Robert says:

      Sadly you only need to look at labour to see the mess it is in split down the middle with New labour and Progress, the battle is not with the Tories it is within labour.

  4. J.P. Craig-Weston says:

    Personally I’m sick to death of listening to people believe that endlessly dragging over ancient history can win them back the votes that people like Blair and even Burnham, (who far from defending the NHS was complicit in the privatization programs and was Health Secretary towards the end of the extended period when the culture at Mid Staffs, has been described as being one of, “appalling abuse,”and which prevailed there under labour.)

    As for the crash, there is an odd but informative little book written by a contemporary of Dickens; Charles Mackay’s Extraordinary Popular Delusions and The Madness of Crowds, which enumerates various examples of the kind of almost psychological dislocation, (the, “madness,” in the title,) that eventually afflicts almost everyone during the kind of financial bubble that preceded the crash and that was exemplified by a senior government figure and chancellor no less making completely bonkers assertions of the kind that Gordon Brown made when he announced the end of, “Boom Bust.”

    That was the point at which almost everyone else realized that he’d pretty much lost his marbles, but of course he wasn’t alone in that.

    It isn’t so much that the Tories have captured the debate as that we have generation who grew up during the boom who regard that as normal and our current national predicament as some kind of aberration that will sooner or later abate and the good time to roll again.

    But much of damage is being done by the American belief, (guaranteed by their constitution and now being gradually extended to rest of world through TTIP and similar quasi legal arrangements) in the, “divine,” and inalienable, “right,” to own property and of people who own property to treat the rest of us however they chose to and with as much disregard and contempt.

    We hear a lot about Neo Liberalism, but to my mind the only end of these policies wherever it’s been inflicted is always this, “Fourth of July weekend shootings left 10 people dead — including a 7-year-old boy — and at least 53 others injured from Thursday evening to early Monday.”

    “Seven-year-old Amari Brown was killed in a shooting that also left a 26-year-old woman wounded late Saturday in the Humboldt Park neighborhood.” and so on…

    Is this really what we want for the UK?

  5. Bazza says:

    Good points Ann!
    I only post on here and elsewhere to try to share ideas to try to help Labour and the Labour Movement.
    This is why for the last 4 years I posted all over the place (including on the BBC) siting evidence that the banks were the cause of the financial mess (US banks being fined billions for their role in sub prime lending) but timid Miliband and Balls et al just ignored the evidence and like in your comments here they failed to counter the Tories propaganda – tell a big lie often enough.
    But with Jeremy as Leader members should now have a voice and I urge Labour members and supporters to post IDEAS on here.
    We face a really tough challenge but ideas from the grassroots, from our reading, research, and from our life experience I believe offer our best hope!
    Yours in solidarity!

    1. J.P. Craig-Weston says:

      Frankly mate, “yawn,” but the reality of my own experiences so far of Labor, (under JC,) is that new ideas, (particularly when they come from people who aren’t part of the charmed PLP circle of lobbyists, journalists or academics,) are about as welcome as the new members; which to say we aren’t really welcome at all.

      If this doesn’t change radically and soon then the only sound you’ll be hearing shortly will not be whoops of joy at a Labor victory; but the dull thud of 160,000 new members shutting the door on our way out.

  6. Greer says:

    Do I dare to start using the word “socialist” again? Can I now stop pretending to be “Mondeo Woman”? Stockholm Syndrome is a very good term for the endless justification of self-hatred. I dare to hope better times are ahead, for the party and for the country. Thank you for a lovely and thought-provoking piece of writing

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