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What was Corbynism?

Published by Anonymous (not verified) on Thu, 26/11/2020 - 2:47am in

Much has been written about the accidents of Jeremy Corbyn’s astonishing rise to the the Labour leadership in the summer of 2015 (Ed Miliband’s reforms to the party’s leadership election rules, the famous last-second nomination that got him onto the ballot), but perhaps less about the social forces that actively enabled it and explain it. Corbyn was announced as the winner of the leadership ballot in September of that year, taking nearly 60% of the vote, and seeing off three established Labour politicians in Andy Burnham, Yvette Cooper and Liz Kendall. More than five years on, and nearly a year since Labour’s disastrous election performance spelled the end of Corbyn’s leadership, it’s now possible (and arguably desirable) to speak of Corbynism in the past tense, notwithstanding the ongoing rows surrounding Corbyn’s own position vis a vis the Labour Party and the EHRC report on anti-semitism.

Fiscal genesis

Labour had lost the 2015 election somewhat unexpectedly, with most polls suggesting a hung parliament. The central dilemma that the party had found itself in over the previous five years was over its fiscal policy, with Neo-Keynesians led by Ed Balls arguing (correctly) in favour of additional stimulus to arrest what turned out to be one of the longest economic slumps on record, but Miliband and others sensing (also correctly) that this was a political trap laid for them by George Osborne, who relished every opportunity to present the economic crisis as the consequence of Labour’s earlier spending and borrowing. Labour were damned if they did, and damned if they didn’t, and in the end Osborne’s cynicism won the day, resulting in a Tory majority.

The most significant catalyst for Corbynism was the introduction in July 2015 of a welfare bill, that proposed limiting tax credits to just two children. The timing of this bill was opportunistic, seeking to exploit Labour’s already crushed morale, and unsettle its leadership contest. The interim Leader, Harriet Harman, announced that Labour would “show it was listening” by not voting against the bill. Accepting Osborne’s framing of the previous five years, she said that “We cannot simply say to the public you were wrong at the election”. Corbyn, crucially, was the only one of the four leadership contenders who broke the whip to vote against the bill, and within two months was Leader of the Opposition.

It had become traditional for Labour to welcome a figure from the hard left of the party on to its leadership ballots, to broaden the debate. Diane Abbott had stood in 2010. John McDonnell might have stood in 2015, but suggested Corbyn instead. In that sense, Corbyn might be viewed as just another representative of the Bennite wing of the Parliamentary Labour Party. But this is to obscure what was so distinctive about Corbyn as a figure, and to misunderstand both his timeliness and eventual failure as a leader. Corbyn was primarily an anti-War activist, whose central vocation was towards the moral denunciation of Western foreign policies, especially in the Middle East. What was distinctive about Corbynism as a phenomenon was how this political mission was wedded to a widespread sense of public fury with the social consequences of George Osborne’s fiscal policy. In sum, Corbynism was a temporary and surprisingly potent alliance between anti-imperialism and anti-austerity.

Punitive neoliberalism

There has been far, far too much psychological discussion and speculation regarding the moral character and prejudices of Jeremy Corbyn as a person. And yet on one particular matter, his supporters and foes seem to be agreed: he is energised by taking principled opposition to things, but shies away from inter-personal conflict. To put that another way, he is a devoted activist and moralist, but a poor political leader and strategist. He is quick to declare that policies and actions are ‘wrong’, but reluctant to impose his will upon others. It is scarcely surprising that someone of this character would feel more comfortable on the back benches and at protests than in high office.

Yet it is interesting to consider why such a figure was, in many ways, peculiarly well-suited to the conditions of 2015-19. First of all, there is the obvious sense in which an ‘anti-politician’, an outsider, held appeal at a time when professional, mainstream politicians appeared to have become riddled with cynicism. Labour’s inability to defend the interests of poor families in July 2015 looked like evidence of what happened when ‘politics’ trumped basic morality, and made the case for electing a moralist as a leader instead.

But there’s a more general sense in which the time was ripe for Corbyn, which relates back to what I’ve termed the ‘punitive spirit’ of neoliberalism that emerged following 2008. The aftermath of the financial crisis witnessed a resurgent politics of guilt, in which authority derived from its capacity to mete out punishment to those who had allegedly had it too good. As Lazzarato, drawing on Nietzsche’s Genealogy of Morals, argues very well in The Making of Indebted Man, debt occasions a brutal morality of unrelenting self-flagellation, that may be unrelated to any utilitarian calculus of efficiency or progress.

So it turned out with austerity. Devastating cuts to the welfare budget and to local government (which is responsible for so much of what holds society together, via social care and children’s services) were notionally justified on a nonsensical macroeconomic pretext that they would generate growth and balanced budgets, but morally and psychologically justified on the basis that someone needed to suffer. George Osborne lost credibility in the eyes of the economics profession, but gained it in the eyes of baby-boomer middle-England, who were happy to hear that allegedly work-shy families in the inner cities and the younger, softer generation, had had it too good. Meanwhile, with all responsibility for macroeconomic stimulus pushed towards the monetary authorities, those same baby-boomers saw their house prices and pensions continue to grow, thanks to an abundance of cheap credit pushing up asset prices ever further.

The point is that, several years before an unlikely figure from the Stop The War coalition became Leader of the Opposition, austerity had already been waged as a moralistic program based around a logic of innocence, guilt and punishment, overlayed on to a financialised economy divided (as Adkins, Cooper & Konings identify) according to a logic of assets and debt. The most egregious manifestations of this were sadistic in nature: benefit sanctions, the bedroom tax and the Work Capability Assessment drove people to despair and beyond. As symptoms of the ‘punitive logic’ of neoliberalism, many of these policies were later found to produce more health problems and costs than they alleviated, just as Osborne’s attempt to eradicate the deficit by cutting public spending frequently had the opposite effect. Public sector pay-freezes contributed to both macroeconomic and psychological depression.

Osborne seized and channeled the moralism of debt-led neoliberalism with gusto, and it won him and Cameron a Parliamentary majority (which they got to enjoy for all of 13 months), but it unleashed a kind of legitimacy crisis that ultimately engulfed them. Whether expressed via Brexit (for which austerity carries not insignificant responsibility) or via Corbynism, political reactions to the new moral economy of punishment were expressed in similarly moralistic and punitive terms. As ever with rage and resentment, the targets were not always the most appropriate ones: Brussels, welfare-claimants, immigrants, universities and Israel are all potential scapegoats under these conditions. Underlying all of this is a break-down of the basic liberal compact of society (accelerated by events such as the 2011 expenses scandal), that reward is vaguely related to effort, and punishment to crime.

There was evident relief for the Left and Labour members in having a leader who was, at the very least, willing to denounce the policies that had visited such pain upon people, purely due to accidents of birth, disability and class. In many ways, the senseless violence of austerity’s sharper edges called precisely for a spokesperson who had spent decades denouncing senseless violence abroad. Osborne encouraged the zero-sum (and ultimately, with Brexit, negative-sum) conditions of British politics over the last decade, in which all parties (with the possible exception of asset-rich Remainers) come to view society as a domain of acute unfairness. British capitalism’s crisis, post-2008, could be measured in terms of slumping productivity, wage and GDP growth; but it was also an acute moral crisis, in how reward was earned (or not) and how punishment was earned (or not). This produced an overwhelming desire for this to be voiced, including amongst the young, whose rent and student debt were escalating.


Whether he meant to or not, Corbyn stole the political limelight in 2015 at a time when society was already being forcefully split into the guilty and the innocent. Corbyn was no more morally divisive a force than the man who sought to divide society into “strivers” and “skivers”, accusing the latter of “sleeping off a life on benefits”. What Corbyn seemed to offer his followers was a chance to draw that line differently, such that the young, the distressed and the weak were no longer deemed responsible for their own fate, meaning that culpability lay elsewhere. We now know that some sought it via terrible conspiracy theories, and that Corbyn lacked the stomach to confront this adequately.

Being more moralist than politician, Corbyn and his most loyal fans have often seemed unable to distinguish between his personal virtues (“kind”, “decent”, “principled”) and the broader consequences of his leadership. An unhelpful aspect of all this is the Christ narrative that has attached to the man himself, in which the more the press and establishment insist on his guilt, the more a section of his fanbase asserts his perfect innocence, whilst any kind of realism between the two becomes impossible. Something about the cocktail of righteousness and weakness that characterised the Corbyn leadership makes it very difficult to draw a line under.

What deserves focusing on now is not an individual backbench MP but the conditions that were already firmly in place in 2015, and have deepened ever since. Had Harman whipped Labour to vote against the welfare bill in 2015, or had McDonnell stood instead of Corbyn, things would have worked out differently, but the background constraints would have been the same. Corbyn’s mild-mannered pacifism, activism and sense of ordinary decency were certainly an especially effective vessel for expressions of deep social injustice, but those sentiments (and their causes) would have existed regardless. Labour cut through effectively as an anti-austerity party in 2017 (the year of Theresa May’s excruciating “there is no magic money tree”), but equally effectively as an anti-imperialist party in 2019, for which read ‘soft on national security’. The unlikely achievement of a pacifist leading a major political party was remarkable (as I discussed here), but ultimately was what did for him, as this account from a Momentum activist attested.

In policy terms, Corbynism offered to abandon the instruments and the decisions that had heaped stress and punishment upon those who deserved neither: tuition fees, public sector pay-freezes and benefit freezes would all be scrapped. Other instruments that caused stress to public sector workers, such as OfSted, would be abolished. In that sense, Corbyn offered a kind of mass ‘pardoning’ of all those on the receiving end of ‘punitive neoliberalism’. But despite the impressive range of economic thinkers that assembled around McDonnell, and the flowering of heterodox economic thinking on the Left during this time, it remained unclear how – if at all – the broader structural problems of rentier capitalism, asset price inflation and private sector wage stagnation could begin to be reversed, other than via a more active public sector. Ed Miliband’s slightly ill-fated 2011 dichotomy of ‘predators vs producers’ remained (and remains) the problem, and – until the furlough scheme was unveiled this year – there is still no mainstream vision of a welfare and labour market policy that provides genuine security to people, without accompanying distress. Many of the policies put forward by economists of inequality, such as Thomas Piketty and Tony Atkinson, are far more radical in terms of weakening the power of inherited wealth and targeting rent-seeking, than anything that appeared in Corbyn’s two proudly socialist manifestos. There is no reason why 2017 should be viewed as the high water-mark for the Left.

Corbynism helped politicise the economy and mobilise people accordingly, raising public consciousness of intergenerational injustices and the extent of unhappiness with the status quo. What Keir Milburn refers to as ‘Generation Left’ outlives Corbynism and continues to expand with each passing year, and the problem of acute poverty will become exacerbated by Brexit and the pandemic. The shape of British capitalism is not morally acceptable. It shouldn’t be like this, and there are more people willing to stand up and say this in mainstream public life than there were five years ago. The Conservatives have grown fearful of appearing like George Osborne, if only as a reputational problem. The question is what, if anything, is to be done next.

The post What was Corbynism? appeared first on Political Economy Research Centre.

Scottish Labour’s contempt for Scotland

Published by Anonymous (not verified) on Wed, 18/11/2020 - 8:59pm in

I was invited to sit in on a meeting of the Young Fabians in Scotland last night, where they were discussing whether Scotland could afford to be independent, or not. I was aware that two people with whom I have crossed swords in the past, being Kevin Hague, who is amongst other things the director of the profoundly pro-Unionist think thank ‘These Islands’, and Jackie Baillie MSP, who is deputy leader of Labour in Scotland, had been invited so I expected some difference of opinion. But what I had not expected with the scale of economic illiteracy that was on view from all those who were asked to speak. Nor had I expected the sheer level of contempt for Scotland that was on display.

Two Fabian members gave opening economic presentations. The first was, supposedly, on the economics of deficits and debt. I genuinely suspect that the Institute for Economic Affairs would have been quite shocked at how right-wing fundamentalist it was. The household analogy was out in force. Money creation was always to be frowned upon. Government surpluses were equivalent to profits, apparently, and deficits to losses. Debt supposedly constrains the ability of a country to grow because of crowding out private sector activity, which will be news to the IMF, OECD and World Bank amongst many others right now. Ratings agencies determine the capacity of a country to borrow. Even Reinhardt and Rogoff made an uncorrected appearance, without getting a name check. Keynes never got the slightest look in. It was staggeringly inappropriate at this time, and I would hope always so for a Labour meeting, and, more important, was almost without exception quite simply wrong.

Then there was a presentation on the scale of Scottish deficits that assumed that the Government Expenditure and Revenue Scotland statement (GERS) is factual, and that Scotland runs the biggest deficit in Europe, and that this is utterly unsustainable. There was not a mention that GERS quite specifically says it provides no indication of how the economy of an independent Scotland might behave. Instead it was assumed that nothing would change if independence were to happen. How that constitutes a credible argument, even before the flaws in GERS are considered, is hard to conceive.

Jackie Baillie opened by acknowledging that she and I have differed on GERS. For those who want to know what I think wrong with it, this is a guide. She then acknowledged that she has no economics training. After that she proceeded to declare that GERS is unambiguously and categorically ‘correct’, which is absurd, because that is a quality no national accounting data has. Given the preface to the comments I can only assume that this was intended as provocation.

Much anti-SNP comment followed from her, which could safely be ignored.

But she spent much of her time lamenting that cuts would be required to close the supposed deficit that she thinks would exist if Scotland were to be independent, before then using this as and the inability of Scotland to suffer theses cuts as a reason why independence must not happen.

However, and most tellingly, when asked what she would do if she was a leader in a Labour government she simply admitted that she could not imagine that happening. You could, of course interpret that as an admission that Labour has no hope of winning. I am quite sure that was what was intended. But you could also note it as a failure on the part of Labour to think about the issues that leadership demands. I think that just as likely. By implication Labour's policy in Scotland was made clear. It is to party that Scotland stays in the UK, with a Tory government if need be, as that is the only option for maintaining what they see as the desirable status quo for Scotland given that they believe that  GERS  is right and Scotland cannot manage its own affairs. The contempt for Scotland, its people and their abilities on display in this comment was quite staggering.

And then there was Kevin Hague, who presented some charts (no surprise there) all of which were designed to show Scotland has the worst economy in Europe. Kevin more than happily convinced himself, and all else present it seemed.

By this point it was 7.50 and I had forsaken fifty minutes of my life to quite the worst and ill-informed civil society economics discussion I had ever partaken in, and knew I would never get that time back. I was also aware that the Bake Off was on at 8 and the meeting was meant to last until 8.20, so I did not hold back, having made clear that I have no Scottish party allegiance and am quite critical of SNP policy right now.

I did of course explain all the well-known problems with GERS, and was laughed at.

I explained that the economics I had heard was shockingly wrong and inappropriate for Labour at this time and for this moment, and briefly explained why. That did not go down well.

I explained that an independent Scotland would record a massively different economic performance to that of Scotland now. I explained that it would have its own finance centre. It would record its own rents and financial income, and the tax due on both would be paid. It would measure its imports and exports, and financial flows. It could also control and tax t’s own profits. But most importantly, it could invest in its own future and deliver sustainable growth. And so on. And I was openly laughed at. Jackie Baillie smirked in contempt throughout.

After that, I explained that it was impossible that Scotland alone accounts for the majority of the overall UK regional deficit. The only logical explanation has to be that the data is wrong, and of course it is. But that suggestion was met with incredulity. The data underpinning my claim is analysed here, and comes from GERS.

Kevin Hague replied and said I could not do arithmetic. His claim was that since the UK had no deficit in the period to which I referred it was arithmetically impossible for me to suggest that Scotland created the greatest part of it. As my data shows, his claim was wrong, but what was clear was that argument had disappeared and pedantry was on display. As a result I decided I had wasted enough time and made it clear to the meeting that the reason why Labour was now doing so badly in Scotland was apparent. It was the arrogance on display, plus the contempt for the capacity of Scotland and its people, as well as for their ability to manage themselves and their economy, plus the sheer scale of economic incompetence evidenced and its hardcore right-wing bias that explained that failure.

I then told them that since the quality of political and economic debate on The Bake Off was bound to be of a higher calibre than that in this meeting that was what I was going to watch, and left the meeting.

My conclusion is that I am wholly unsurprised that Jackie Baillie cannot imagine Labour forming the next Scottish government. Candidly, nor can I. And I would add that on this evidence, for the people of Scotland that is decidedly good news.

Labour’s Green New Deal is a good step in the right direction

Published by Anonymous (not verified) on Wed, 11/11/2020 - 6:28pm in


Economics, Labour

Labour has reaffirmed its commitment to a Green New Deal in a document released by Anneliese Dodds and Ed Miliband in their respective roles as Shadow Chancellor and Shadow Business Secretary. which roll covers the environment brief.

In summary, the plan is sound. I would like it to be more ambitious, and believe it could be. But it hits the right targets. That makes it a solid step in the right direction. The principles that it embodies are, I think, appropriate:

My submission, with Colin Hines, to Labour’s call for evidence was on funding. We proposed a national investment bank, of course. It is in Labour’s proposal. And we suggested that this bank should be allowed to issue bonds, permitting green QE if need be. In addition, we suggested that those bonds be incentivised for retail saving. Labour has said:

I am pleased Labour has taken note. The proverbial ‘how are you going to pay for it’ question has been addressed without, I admit, explicitly touching on MMT.

So I can back this plan.

That said, I am aware that some in Labour are angry about it. The suggestion is that Rebecca Long-Bailey’s version of the Green New Deal was planned to exclude private sector participation in the process, and so what is being proposed now is not sufficiently socialist. I admit that I think the criticism unfounded. That is firstly because the delivery of a Green New Deal without private sector participation would be nigh on impossible: of course private sector companies would always be involved in the supply process. And second, that is because I consider this an irrelevant argument. We live in a mixed economy and are going to do so. Redrawing the boundaries between sectors may well be important, most especially in many care environments and around education, justice and other issues. And I am not denying, of course, that direct local authority action may have a real role to play in delivering the Green New Deal. But to pretend that the environment is the secondary in concern in the Green New Deal is just wrong.

Labour has a serious policy now, and I welcome it.

The Biden game really was not good enough. Labour and the SNP need to take note.

Published by Anonymous (not verified) on Thu, 05/11/2020 - 7:58pm in

There is a lesson to be learned from the US presidential elections, and those for the Senate and House.

There are two ways to present that argument. One is long winded, and the other is short. I’m going for the short option.

Trump did well. Biden did marginally better. But if you want to know why Biden did not race home the explanations are easy to find.

He took minorities for granted.

He offered very little in the way of policy that might enthuse anyone.

And he did not offer hope as a result.

So the lessons are, don’t take anyone for granted; do offer real policy alternatives and don’t make them dogmatic but simply ensure that they offer what might best be called on the ground hope.

Bland is no longer good enough.

Presumption is not acceptable.

And the left can win. But it really is time it did so by out-thinking the right, and by explaining why it’s ideas are the right thing to do.

I hope Labour and the SNP are taking note. They need to, because right now both are playing the Biden game, and it’s really not good enough.

Labour is life expired. Its sole remaining core purpose should be to build the new political settlement that the country it seeks to represent needs

Published by Anonymous (not verified) on Fri, 30/10/2020 - 7:57pm in

It is depressing to know that the left-wing of UK politics continues to be in a complete mess.

To make clear that my comments are not party political, just look at what I noted about the SNP a few days ago, and read the comments below the line there. It is apparent that under its current leadership SNP is now a decidedly right of centre party.

The Liberal Democrats did, of course, disappear in the same direction a long time ago.

One nation Tories are now just a slogan.

And just when the country is in real need of an effective opposition Labour is descending Into further infighting that can only be of benefit to a profoundly populist government whose every instinct is to abuse the people of this country, about whose fates, and even their deaths, it would appear to be entirely indifferent.

In this discussion I am taking the EHRC Report on anti-Semitism in the Labour Party as read: they have had much better opportunity than anybody else to form an opinion on this issue. I am presuming they are right.

That said, from my brief experience of working with Jeremy Corbyn, and having met him and his family, I seriously doubt that he is personally anti-Semitic. I believe him when he says he is not.

At the same time, it took me very little time to appreciate that he was out of his depth as Labour leader. That’s not a criticism, as such. I do not think he ever planned to have the role, or expected to win it. His whole career was focused on a series of single issue campaigns that he tirelessly pursued, being opportunistic to advance his cause In ways that, at least in retrospect, suggest he was insufficiently cautious about those he worked with. But, within the framework in which he expected to pursue his career he could probably have got away with that.

What was impossible was for him to bring to that role the same naive belief that he had previously held that those who professed broadly common objectives could not also hold views that he probably did find repugnant. I think Corbyn found it almost impossible to believe that there were those on the left who could be both apparently anti-racist and anti-Semitic. And so the obvious fact that this is true was something he did not, and still cannot, comprehend.

This hardly stands to his credit. It most certainly made him unsuitable as leader of the Labour Party, for which task a considerably greater degree of worldliness is required. All leadership requires an acknowledgement of ugly truths, and it seems that what the EHRC is saying is that there was a serious failure to appreciate this at the highest echelons within Labour, which means the buck stops with Corbyn.

But was Starmer right to suspend him in that case? Was Corbyn saying that the issue has been overplayed by those who wished to oppose him so wrong when glaringly obviously this is true? I doubt it. This has all the feeling of being a trap waiting to be sprung, just as was that set for Rebecca Long-Bailey. She too was unsuited for leadership, in my opinion. Corbyn could have been more contrite. He could have been more accepting of responsibility. But the Starmer response was heavy-handed. And that is also worrying, because this is clearly an attempt to shift Labour very markedly to the right.

And the reality is that so far we know little of the Starmer agenda. But it fair to say that it is not that impressive on COVID. Even his call for lockdown was too late, especially if he gets high-level briefings, as I presume he does.

The position on the economy is timid, at best, as yet.

The demands for long-term economic reform to support those losing jobs are tepid. It was clear Corbyn’s team got the Green New Deal. It is not clear that Starmer’s do.

On Brexit, Scotland, Northern Ireland (a major failing), electoral reform, localisation, immigration, and so much else there is as yet little to really say about Labour’s current stance that offers much hope. Calling the Tories scum may be justified when it comes to school meals, but anger is not enough.

Worse, in a turbulent political environment Labour cannot presume it has four years to wait for office and naively believe it can produce a winning platform that will gain support in the last few weeks before an election. This government it is now facing across the Dispatch Box is chaotic, unstable and despite its majority quite capable of imploding next year. If Starmer can’t read that he is at least as naive as Corbyn.

But where does that leave those of us who wish to see social and economic justice advanced in this country but do not do so through party affiliation? There are, after all millions of us. In quiet despair might be the best description.

No one who really seeks to deliver anything but a centre ground neoliberal alternative to Johnson can take much delight in Labour’s positioning at present. With it standing only neck-and-neck with the Tories at present even that limited appeal can hardly be said to be working that well. And that delivers those with real aspiration for reform little hope at all.

In fact, I feel much like the person in the US who was interviewed by Lindsey Hilsum for Channel 4 News in the last week. When asked whether she thought the US political system had any solutions to offer to the issues that impacted on her life as a black woman she was almost mocking, and simultaneously despairing in her response. And, I am sure, rightly so.

The simple fact is that our political system is similarly constructed to ensure it cannot deliver solutions to the issues that we face. Labour’s dedication to maintaining the duality of politics to its desired exclusion of all others is, of course, a key part in that. On this there is no difference between Corbyn and Starmer. Both worked and are working their hardest to ensure that that views of as many people as possible are denied representation in the UK. Both have sought to make Labour representative of decidedly minority views. Each set out to alienate as a consequence, just as the SNP are doing right now, and as the LibDems once did when they had chance to do so.

I want to frame the current crisis for Labour in this context as a result. This is not just a crisis for Labour, although it will do its upmost to make it that. This is an existential crisis for British politics where, as we have already seen with the Conservatives, capture of one of our two mainstream parties by a faction is a threat to us all. This is now also being replicated in Scotland. And let's not pretend otherwise; Starmer is a faction leader just like anyone else.

In other countries this is overcome with a comprehensive system of proportional representation and by having politicians who appreciate the need for compromise to create effective government. Of course, it does not always work: no system ever does. But, it is most certainly more effective than the system that we now have, and that the USA has. In this context Labour's problem is much bigger than that which many will represent. Its problem is that it is standing out against real democracy.

The question, then, is how can this be resolved? Clearly the endpoint has to be a new constitutional settlement fit for the 21st-century, able to supply us with government that is capable of allowing a variety of views to be represented but working, necessarily, in pursuit of common goals. That's the easy bit to define.

Getting there is harder, but Scotland indicates the way. The SNP would have a singular ultimate goal of independence, although I know some doubt whether the existing leadership share that. But presume it does. Then the goal is to use the existing system to achieve that aim and then write a new constitutional settlement that does not let the SN  keep the power it now has, and which actively encourages wider political participation and representation. In other words, the existing structure has to be used wisely to achieve something better. I can live in hope.

And so too do I in the rest of the UK. Labour has to recognise it has a duty to end this in-fighting. It has to recognise that it cannp0t keep the system as it is. It has to work with others to propose that new constitutional settlement that is required. It has to accept that this might then see it split. And by then, almost certainly rightly so. It is life expired. But so too is the system it is in.

Then and only then might we have hope for democracy in this country. But right now Starmer is as much an opponent of that as Johnson is. It is to neither's credit but I could hope more of one of them. Is that a reasonable thing to have? I wish I knew, because if this does not happen we are in even deeper trouble than I thought, and the last day's troubles are clear sign of that in very many ways.

What Labour should be saying when challenged on the cost of a lockdown

Published by Anonymous (not verified) on Wed, 14/10/2020 - 6:36pm in

I have noted that Labour politicians are being asked the question, time after time, ‘Have you costed the circuit breaker?’

The question does, of course, refer to Keir Starmer’s advocacy of a two to three-week lockdown to break coronavirus transmission rates. This is seen as an inevitability now, but the government has ducked it, so far. Labour has taken the opportunity to show a first real sign of leadership by Keir Starmer. And then that question comes in.

So let me answer the question in the only way that I could, if it was asked with me. My response would be that of course I have not, because it would be impossible to do so. The complexities are beyond anyone. But the judgement about whether this policy remains relevant, and whether the cost that it will result in is worthwhile, is one that can still be made. That is possible because the alternative can also be appraised. And, in this case, it is very clear that the alternative is to lay, followed by many more deaths, followed by NHS chaos, followed by what, in all likelihood, would be a much longer lockdown, resulting in increased cost. As a consequence, if cost is the issue, although it cannot be precisely appraised, it is possible to work out that a lockdown now is the best possible option.

I do wish that a Labour politician would say this, patiently, and clearly, looking straight into a camera. The claim that lack of precision in costing invalidates a decision has to be rebutted.

There is, though, more to this than that. what has to also be said is that sometimes there are things that have to be done, irrespective of cost. We as a society have to maintain the safety of those we live with, and that means protecting the NHS. That may well be overwhelming. That it is under-resourced is an issue to discuss, but maybe on another day. What matters now is that people are cared for, including those people who work for the NHS, who are also vulnerable, which far too many people forget.

And a wise politician would then also point out that this question does also make no sense when, so far this year, taxpayers have not been asked to make any additional contribution to the cost the government has incurred to tackle coronavirus. Nor, come to that, will they ever be asked for that contribution with regard to this year. And that is because, so far this year, the entire cost of the coronavirus crisis has been covered by quantitative easing (QE). In other words, newly created money has been used to pay for the cost of the coronavirus crisis. This money creation will never be reversed. The net consequence of it is that our banks and building societies are significantly more solvent than they might otherwise be, and that is a good thing in the face of a potential financial crisis. And, importantly, if this money had not been created by the government in this, or another way (and there are other ways, which may be better) then we would have faced a substantial shortfall in the cash circulating in the economy because people and companies have, quite reasonably, been saving during the course of the crisis, and that would have meant that there was a much worse economic crisis to come then there might otherwise be.

What is more, given that this situation will continue, it’s quite reasonable to think that more QE will be undertaken and as a consequence whatever the cost of this lockdown might be it is very likely that it too will be covered by new money creation in due course and the cost is, then, covered by the government itself.

Do I expect to hear that explanation? I am afraid not. But I wish I did.

Asking Keir Starmer about Brexit

Published by Anonymous (not verified) on Mon, 12/10/2020 - 7:38pm in

I asked a question of Keir Starmer on LBC this morning. It was, near enough, this:

Thanks for taking my call.

What I know from my discussions with business people is that almost all of them want a delay to the Brexit process. They are already struggling with Covid. And they know that the extra stress from Brexit could kill their businesses.

So my question is will you now demand a delay in the Brexit transition process, come what may, to just let business, our economy and our food supply chains have a chance?

And if not, why not, because surely this is now as important as Covid in ensuring that our country keeps functioning?

I regret to say that Keir Starmer ducked the question. He said that Brexit was decided upon, he hoped for a deal, and there was nothing he could do about it now. What is more, he said that business just want a deal - which is emphatically not true, as I know.

I got a brief follow up to make clear that he had not addressed my issues. But I did not get the chance to make clear that he could demand action to help business at a PMQ session. And that was a shame.

Was I impressed by the answer? No, to be candid. It was exactly what a government minister might have given. And that is not what I expect of a Leader of the Opposition. No wonder Labour is struggling to get ahead in the polls.

A Financial View of Labour Markets

Published by Anonymous (not verified) on Sat, 03/10/2020 - 7:19am in

We are used to thinking of workers as free agents who sell their labour in a market place. They bid a price, companies offer a lower price and the market clearing rate is somewhere between the two. Free market economics, pure and simple. 

But actually that's not quite right. The financial motivations of workers and companies are entirely different. To a worker, the financial benefit from getting a job is an income stream, which can be ended by either side at any time. But to a company, a worker is a capital asset. 

This is not entirely obvious in a free labour market. But in another sort of labour market it is much more obvious. I'm talking about slavery. 

Yes, I know slavery raises all sorts of emotional and political hackles. But bear with me. I am only going to look at this financially. From a financial point of view, there are more similarities than differences between the slave/slaver relationship and the worker/company relationship - and the differences are not necessarily in the free worker's favour. 

So, let's look at our slave labour economy. The purchase of a slave is a capital purchase in exactly the same way as the purchase of plant. The carry cost of that asset is the upfront purchase amount depreciated on some reasonable basis, plus the present value of the expected cost of maintaining that asset over its lifetime (food, shelter, medical costs), plus the present value of exit costs (funeral expenses). The exit cost can be avoided by selling the slave before death if there is a secondary market in nearly-dead slaves. The slave can "go wrong" (become ill and therefore unproductive) and need fixing, which may be a greater cost than the value of the slave - an eventuality for which the company might wish to take out insurance. But unlike a free worker, the slave can't voluntarily leave and can't be sacked without incurring a capital loss. Once purchased, the only way of eliminating the carry cost of the asset is to sell the slave, and that may be for considerably less than the purchase price.

Therefore the company will only buy the slave if the present value of the anticipated future income stream from the slave's productive labour exceeds the cost of carry. As with all capital purchases, estimating future income streams is informed guesswork, and much depends on the company's confidence about the future. If the company is confident that the slave can be productively used far into the future, they are likely to buy. But if the economic outlook is bleak, and perhaps the future of slavery is uncertain, they are not likely to buy slaves. They will use free workers instead.

You see, the main difference between buying a slave and employing a free worker is the up-front capital expenditure. A free worker is still a capital asset but it is, if you like, leased rather than owned. The carry cost is recruitment costs (if any), plus the present value of remuneration over the anticipated period of employment including benefits and taxes and the present value of anticipated exit costs (redundancy, pension payments). We would expect that the remuneration package for a free worker would be more than the cost of maintenance for a slave, and exit costs may also be quite a bit more - but in a difficult labour market this isn't necessarily the case, as I shall explain.

The important point, from a company’s perspective, is that up-front capital expenditure is far less. So when companies wish to hoard capital, and are worried about the future, free workers are a much better option than slaves. Free workers can be recruited at little cost and, often, dismissed at little cost - particularly if they were recruited on a casual, temporary or self-employed basis. And their remuneration stream can be limited to payment for the work they actually do, because the responsibility for ensuring that they have food and shelter doesn't rest with the company (since it doesn't own them).

In a difficult economy where there is considerable competition for jobs, free workers can end up being paid less than the maintenance cost of a slave. This has actually happened at various times in history - Steinbeck's depiction of the plight of migrants from the American mid-West in the Great Depression immediately springs to mind, but there are numerous other examples of worker remuneration falling well below the cost of living, resulting in starvation. When jobs are scarce, companies are likely to be less benign to free workers than they would be to slaves - after all, buying a slave is an investment, whereas a free worker on a temporary contract is only as useful as his current production and is not a long-term commitment. We would do well to remember this. 

Of course, there might be a very deep and liquid market in slaves, in which case companies could buy and sell slaves as required to meet operational needs. There would still be up-front capital cost, but for short-term use this might be netted out with forward sale contracts, and there would then be little difference between free workers and slaves - in fact slaves would be preferable because they can't resign and the company has complete control over their deployment. Or there might be agencies that provide slaves for particular purposes on a just-in-time basis - perhaps to cover peaks and troughs in production demand, or to cover skills shortages. There might be slaves with specialist skills that earn fees for their owners through being sent out to provide expertise to client companies. And companies could outsource some functions to slave farms, perhaps in a different country. Please tell me how any of this differs materially from the free labour market? 

Now, of course, we don't have a slave economy. We have a free labour market. Or - do we? Read all of the above again, substituting "robot" for "slave". And then tell me why it is that the wages of free workers are falling and there is huge growth in temporary, casual, self-employed and zero-hours contracts. 

When companies are hoarding capital and worried about the future, it is not in their interests to invest in plant , which is what robots are. Companies' outlook is essentially reactive and short-term, so they want a reactive, short-term workforce. They don't want to undertake the capital expenditure required to automate. They don't want to invest in workers long-term either, because training and development is also a capital expense. And they don't want to wait for full productivity: they want to buy in workers who can "hit the ground running", hence the impossible requirement for young people entering the workforce to have "experience". However you look at this, there are structural problems in the labour market caused by companies' short-term outlook and lack of confidence about the future. And the UK's highly flexible labour market encourages this, at the expense of economic stability and people's well-being.  

For at least the last decade, and probably for much longer, the major problem with the UK economy has been failure of corporate investment. The reasons for this are unclear: there may be a lack of profitable investment opportunities, and since the financial crisis there has undoubtedly been a lack of business confidence and a shortage of demand for goods and services. But if we erode employment protection and encourage growth of unstable, short-term and poorly-paid jobs, we actually make matters worse.

Despite the fears of modern-day Luddites, investment in robots doesn't seem to have significantly displaced investment in people. The truth is that companies have been investing in neither people nor robots. Instead, they have churned an increasingly insecure and impoverished - though nominally "free" - workforce. And we are the poorer for it.

This piece was originally published on Pieria in May 2013 under the title "The Financialisation of Labour". We have not moved on signifcantly since. There is still a dearth of corporate investment in either robots or people. The unstable, short-term and poorly-paid service jobs created by the thousand after the financial crisis are now disappearing by the thousand as the pandemic destroys the "gig economy". But as unemployment heads for the moon, governments are reaching once again for the ideology of highly flexible labour markets. Secure, well-paid jobs are not what they want to create, and they don't seem too keen on investing in training and skills development, either. When will policymakers realise that tight labour markets drive corporate investment?

Image: Slave Labour Mural, Banksy

Related reading:

The Grapes of Wrath - Steinbeck

Risk pricing in labour markets - Coppola Comment

Bifurcation in the labour market - Coppola Comment

Perverse incentives and productivity - Coppola Comment

Farmers Pitching New TV Show ‘Farmer Wants A Serf’ To Help Solve Fruit Picker Shortage

Published by Anonymous (not verified) on Fri, 02/10/2020 - 8:22am in

Australia’s farmers facing a pandemic led shortage of fruit pickers have approached the TV networks to pitch the show, ‘Farmer Wants A Serf’ with hopes that it will lead to an influx of fruit pickers.

”Desperate times mate, you know with no backpackers to exploit we need to look at other ways to get our fruit picked,” said Yabbie Creek farmer Trevor Gumboot. ”Bloody Aussie kids are too precious to be paid bugger all to pick fruit in the hot sun.”

”The PM didn’t rule out forcing the unemployed to go picking, but he did say he needs to do some polling to see if it was popular.”

When asked why the Farmers didn’t just try paying a decent wage and providing good conditions, Trevor Gumboot said: ”Yeah good one, could you imagine us trying to stand up to Coles and Woolworths and pitch more expensive fruit so people can be paid a livable wage?”

”Worked out great for the dairy farmers didn’t it.”

Prime Minister Scott Morrison was reached for comment but as it was the Friday before a long weekend he was not available.

Mark Williamson


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Keir Starmer is right: this is absolutely the wrong time to be talking about tax rises

Published by Anonymous (not verified) on Thu, 03/09/2020 - 4:27pm in

There is much comment all over the media about the need for tax rises at present.

There is also much left-wing fury that, according to Left Foot Foward:

Keir Starmer’s spokesman has rejected mooted Tory plans for a rise in fuel duty, corporation tax and capital gains tax in the budget.

The Labour leader’s spokesman told lobby journalists this afternoon that it is “absolutely the wrong time to be talking about tax rises”.

So, let me be clear: in a world where there is but one chance at a sound bite Keir Starmer is right. We do not need to be talking about tax rises at present. He is right to say so. I entirely agree that this may be the time to talk about tax reforms, but I reiterate, that in a world where there is but one chance at a soundbite, he has chosen the right line.

I argued his case in my submission on Tax After Coronavirus  to the Treasury Select Committee, saying:

The greatest misunderstanding around tax at present, arising as a direct consequence of the coronavirus crisis, is that there will at some time  be an obligation on government to somehow raise tax to cover the deficit of £300 billion or that will arise in 2020/21 and the £100 billion plus deficits that will arise in each of the following three years, as currently forecast. This is not true. There are a number of reasons for this:

  • To seek to do this at a time when demand is already suppressed due to the impact of the coronavirus on both household and business confidence, which means that demand (and so GDP) is likely to be severely impaired for some time, would have the net effect of further reducing the funds available to fuel that demand, and so would exacerbate the scale of the recession (or even depression) that we are now facing. As such there is likely to be no scope for increases in overall tax revenue for some years to come if the government wishes to see the economy recover to anything like its former level of activity;
  • As a matter of fact, there is no reason to raise funds for this purpose. As already noted, QE will cover most of the 2020/21 deficit, and will probably do likewise in each of the following years. There is no reason at all to reverse these QE arrangements and absolutely no pressure on the government to do so. Nor is there any obvious risk of inflation that suggests that QE might need be reversed. Indeed for more than a decade now inflationary pressure has almost disappeared from the world economy and there is no sign of it returning, anywhere. The chance that this happens to coincide with the period when QE has been in use is likely to not be coincidental at all.
  • There is ample demand for government saving accounts and bonds at present and since the government now has effective near total control of short term interest rates (as a consequence of the size of central bank reserve balances) and long term interest rates (through QE) the government has every opportunity to continue to engineer this valuable position that means that the net cost of interest on national savings deposits and gilts will remain exceptionally small in historic terms for some considerable time to come.
  • Any threat from money markets to destabilise this situation can always be neutered using either short or long term QE: the government can now always out-gun the markets, which was a fact not appreciated before 2009.

It follows that the rational objective for the tax take within fiscal policy is, in this environment, to keep that yield as low as possible in order to stimulate demand, and so encourage economic recovery, leaving QE, the Bank of England and the government savings markets to fulfil the task of balancing the government’s funding equation.

I am well aware that I then spent a great deal of time arguing that there were reasons to now think reform possible, and to suggest what they were, but everyone of those was a microeconomic footnote to the overall macroeconomic comment I have just reproduced here.

Keir Starmer has this right. Give the man a break.