There are 3 ways to cut the deficit – why has Labour chosen the wrong one?

scissorsThe budget deficit, which has been far more central to this election campaign than it should have been, can be dealt with in three separate ways. It can be reduced by cutting net expenditure either by taxing the poor or by taxing the rich, or it can be reduced by cutting unemployment (the ‘automatic stabilisers’ to sustain the jobless cost £9bn a year per million persons unemployed), growing the economy, raising wages and thus increasing government revenues to pay off the deficit faster. Continue reading

A slow-burning revolution is starting to overturn neo-classical economic orthodoxy

KeynesAs the world struggles to deal with threatening outbreaks of violence – most dangerously, in the Middle East and the Ukraine – another less dramatic and slower-burning revolution is getting under way. This revolution does not threaten violence – but it does promise change, and almost certainly change for the better.

The revolution that is gathering pace is a shift in understanding and increasingly in policy. What we are now beginning to see is the painfully slow and invariably reluctant abandonment – in the face of evidence that is now impossible to ignore – of an economic orthodoxy that has dominated the global economy for nearly four decades. Continue reading

Market socialism: oxymoron or just plain moronic?

KFCThese days the ‘99%‘ and ‘Another World is Possible‘ are slogans fluttering atop many a radical social movement. Yet on those occasions activists’ deliberations turn to what a post-capitalist future might look like, there will be a lot of talk about participatory democracy, community networks, the decentralisation of power and so on. The state might (might!) occasionally get a look in as something that can facilitate the building of the new society, but what definitely will not are markets and market-type mechanisms. And it’s entirely reasonable why they should not.

Ostensibly, the world economy has had 35 years worth of free market fundamentalism. The tearing down of tariffs and protectionism has been accompanied by an orgy of privatisation, speculation, and offshoring. Markets are the only political game in town. They have been introduced by hook and by crook into public services. In country after country, tax payers cash have been thrown at markets to lubricate them. Continue reading

Pain, no gain: the Austerity scam

15. Austerity 2To coincide with the Autumn Statement, PRIME Economics has published an excellent short pamphlet  Pain, No Gain: the Austerity Scam by John Weeks (Emeritus Professor of Economics, SOAS, University of London) which explains just why the deficit is not a problem – indeed is a necessary part of the solution – for the UK economy. In examining the history of the deficit and its causes, Prof Weeks not only explains the folly of austerity, but also the mistaken blame doled out to Labour for “causing the crisis”.

In fact, Gordon Brown had done much to bring Britain out of the crisis and, until the 2010 election campaign, was himself rejecting cuts in public budgets. On the other hand, apart from his Bloomberg speech, Brown’s protégé and the next would-be iron chancellor, Ed Balls, is now an enthusiastic advocate of austerity – whose differences from Osborne are described by Prf Weeks as “ones of emphasis not principle“. Indeed, in a week full of comment on how history might view Gordon Brown, we might well wonder whether future historians will conclude that Brown’s protégé exerted a negative influence on him – his best performance having been in the period when Ed Balls was assigned to non-economic duties. Continue reading

The economy, the state and my crisis of faith

11858987_sLast week I had a crisis of faith in Labour. Looking at the Scottish polling, it looks as if Labour’s journey back to government may be longer and harder than we thought. Yet that is not what caused my questions to synchronise into a cacophony of doubt.

My worries are for what happens if we do get into government in May 2015.

It’s not just about policy, it’s about attitude too. On Thursday I was watching Question Time with Tristram Hunt and Caroline Lucas. Hunt fudged all his answers, limited by the narrow set of opinions permitted by Labour’s current policy set. Lucas, free to say what she thinks, answered convincingly and honestly. Continue reading