Why Labour still finds it hard to offer a “coherent alternative” to the cuts


10:32 am - November 18th 2011

by Sunny Hundal    


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Labour is frequently accused by lefties of not having a “coherent alternative to Tory cuts” and not fighting hard against the cuts enough.

Yesterday’s youth unemployment figures reminded me of a conversation I had during the Labour party conference on this issue.

A friend said his company had done some private polling just before the election on the state of the economy.

The polling, which wasn’t made public, asked a simple question: should Labour prioritise reducing the national debt or reducing unemployment. I assumed it must have been roughly balanced. No. 70% wanted Labour to focus on the deficit/debt while around 30% focused on unemployment. It was a much higher figure than I expected.

I frequently argued, prior to the election, that if Labour fed the deficit debate then it would be on losing ground. It had to make the election about unemployment, not debt.

But behind the scenes, I’m told that senior Labour ministers had two worries:

First, their own private polling showed an increasing majority was worrying about the national debt. The press focused on it every day. Alistair Darling argued that Labour had to offer a plan to reduce the deficit or else it would look out of touch with public opinion.

Second, talk of the deficit and national debt fed into another narrative that Labour had always lost elections on – that it had spent too much public money and that had gone to waste. The problem is this: even if people see improvements in public services to their area, they rarely connect this with national spending.

Hence, a steady stream of tabloid crap (fed by the Taxpayers Alliance for e.g.) on public sector waste, pushed alongside the line that Labour had ‘spent too much money’ – put Labour ministers in a bad position. They felt they had to look like they were also going to curtail the over-spending in order to get serious about waste and about the deficit.

I’m not making excuses for the political cul-de-sac they had landed themselves in – this is simply how they say it (I’m told).

So the Labour party’s position on the deficit was nuanced: they would have to cut some spending (£80 bn less than the Tories over 4 years) – but it would be slower and different to how the Tories aimed their cuts. A bigger proportion of the deficit shortfall would be made up via higher taxes.

They didn’t want to focus entirely on raising taxes because it then fed into the old narrative that Labour taxed and spent other people’s money, a lot of which went to waste. This is how Margaret Thatcher kept them out of power for several elections.

This isn’t a simple narrative for the public nor for the left: hence the muddle. If you can square this circle with a simple narrative, then fair play to you, but I don’t see it. Especially when faced with a hostile press and a BBC that also bought the austerity narrative.

No doubt the polls have since changed. In one sense, Labour was the victim of its own success – if unemployment had short up much more and kept rising, unemployment would have been a bigger concern. But Brown managed to stabilise the economy, so the attention shifted to the national debt. And they found themselves in a hole they couldn’t dig out of.

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About the author
Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
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Reader comments


But this is the whole point. Labour failed to offer a coherent alternative to cuts, and therefore cuts became an entrenched consensus.

The poll about the deficit and unemployment was from before the election. Now mass unemployment is becoming very much a reality, do you think the results would be the same?

How do the results differ regionally?

3. Jonathan da Silva

“lefties”. Nice labelling. Ouch.

How about anyone of any political denomination who listens to Labour and knows in the rounding error differences in tax and spend combined with being out of power mean little? Indeed if past experience is anything to go by one would suspect considerably worse in power -> seriously who said we’ll add a trillion to the national debt making payments to banks via PFI* and Bailouts and significantly reduce your savings through QE* all for improvements that will go in a series of cuts to pay for it all!

* Even Stella Creasy said it was wasteful as it was built on an assumption full UK taxes would be paid.

Labour are reactionary, by Ed Miliband’s own words, and position slightly to the left. That is not a way to produce a coherent or even an alternative policy. Which is why at present each month brings a new Balls policy.

You quote a private poll we can only take your word for that it asked the question you claim in the way it is claimed. We can only guess at whether it was 10,100 or a 1000 polled and by whom.

At least you make frighteningly clear Labour follow appearances and stand for nothing.

“They felt they had to look like they were also going to curtail the over-spending in order to get serious about waste and about the deficit.”

4. Chaise Guevara

“The problem is this: even if people see improvements in public services to their area, they rarely connect this with national spending. ”

Is that really true? I’m painfully aware that there is a sizeable group of people who don’t do the maths when they simultaneously complain that tax is wrong and spending should be higher, but I doubt humanity as a whole is so stupid that connecting services with spending is “rare”.

Of course, there’s also a group of people who think spending should be increased within a five-mile radius of their front door, but cut everywhere else…

“it then fed into the old narrative that Labour taxed and spent other people’s money, a lot of which went to waste.”

How could people think such a thing?

The Labour Party have failed to accept that their proposition to the country at the General Election was soundly rejected and instead of learning from that and changing policies to reflect what people actually wanted they have become even more dogmatic and dishonest than usual.

And not just the PLP even the bloggers are just as bad.

It can’t be a coincidence that sites like Left Foot Forward with its frankly ridiculous articles on The Labour Party the government are tanking the way they are.

Until Labour realise people do not want what they are offering – especially where finances are concerned – they are doomed to opposition.

Lose Balls and Miliband or lose the next electioon…

It’s also the case that Labour is divided on this issue.

Some of the ‘moderates’ who want Labour to sign up to Osborne’s deficit reduction targets in order to ‘neutralise’ the issue.

The Purple Bookers whose policies involve taxing a bit more to spend on some flagship initiatives.

The Alastair Darling approach of halving the deficit.

The Brownite approach of investment vs Tory cuts, reducing spending once growth is restored and opposing increases in VAT.

The leftie approach of maintaining or increasing levels of public spending and raising taxes on higher earners.

*

Personally, I think that Labour would have won the last election if we’d stuck with Gordon Brown’s strategy and campaigned against savage cuts and the VAT increase.

8. Chaise Guevara

@ Anon E Mouse

“The Labour Party have failed to accept that their proposition to the country at the General Election was soundly rejected and instead of learning from that and changing policies to reflect what people actually wanted they have become even more dogmatic and dishonest than usual.”

Of course, you could cross out “Labour” and insert “Tory” and that sentence would still make sense. The Tories were rejected less soundly but are more dishonest and dogmatic (YMMV).

“Lose Balls and Miliband or lose the next electioon…”

Milliband’s a liability, and could probably only win a negative vote (i.e. getting in because everyone was so fed up of Cameron), but I see Balls as a potential vote-winner. I think Labour would be doing better now if he’d won the leadership.

Not easy for Labour in country dominated by a tory media. Just went up my paper shop and had a look along the front pages. Not too many leading with the £400 million loss the govt have negotiated with Virgin to sell off Northern rock.

Can imagine the headlines if a labour govt had chosen a time when asset prices are falling to flog off something to a notorious opportunist. Once again there is no austerity for the rich. Just bargins.

“The Brownite approach of investment”

Heh.

Handy summary of said investment (sic) here:

http://www.tullettprebon.com/Documents/strategyinsights/Tim_Morgan_Report_007.pdf

The problem is that ” We promise to be good later” is unlikely to be believed by anyone and politically impossible to achieve. Labour`s position is in fact a merely rhetorical trick so they can oppose every individual cut on the basis that this was the one they were not going to make
The cumulative impression is that they still think that spending is what a Labour administration is for so what they ‘say’ they are going to do is hardly the point .
I think , to be honest sensible people have already given up on Ed and believe that labour need at least one more defeat to get the message.

Ed Balls as Chancellor … come on , not going to happen .

It is a choice made by Labour. They should be pounding on unemployment, doing everything they can to make unemployment the issue. Labour is big enough, influential enough to move the narrative. Even if it doesn’t mean Labour wins, by changing the narrative it forces even the tories onto the back foot and having to do something about the issue.

We can see how the actions of @ukuncut made tax avoidance an issue such that the select committee interrogation of Hartnett was big news. The narrative can be changed Labour just needs to stop the excuses of not trying to.

Kevin

Can imagine the headlines if a labour govt had chosen a time when asset prices are falling to flog off something to a notorious opportunist.

“Babbling idiot sells country’s gold at the bottom of the market and is stupid enough to announce it before hand”……?

Not surprising there is confusion if even you are happy to go on conflating debt & deficit, instead of clarifying the distinction.

13 Idiot troll misses point by a mile.

Yes saddy I forgot its a conspiracy.

Labour need to study the psychology of media and politics in a little more depth. What people believe is less likely to depend on rational argument than on repeat exposure. Cameron’s Conservatives understand this, and have done a good job with the promotion of particular slogans, soundbites and themes. Labour will always struggle when they exist solely as a reactive entity, tagging along with a narrative led by others. What they need is to take the lead. The opportunity has not gone. The media are hungry for new ideas, properly pitched. But there is no room in politics for timidity and chronic self-doubt.

@17 Jennie Kermode.

Thanks heaps. Exactly what I was trying to say but better.

Kevin

“Can imagine the headlines if a labour govt had chosen a time when asset prices are falling to flog off something to a notorious opportunist.”

I’d imagine the headlines would be much the same as the headlines that greeted the decision of a conservative government to sell off a bank at a time when the sector was extremely weak.

It was revealed last week that half of all Washington politicians are millionaires. All Westminster politicians are higher rate tax payers before the raised rate of £150,000. But I bet many of them now pay the new rate.

Trouble with all politicians. They don’t earn the average wage or less.

Labour failed to offer a coherent alternative to cuts, and therefore cuts became an entrenched consensus.

Owen – first you seem to assume they could control the consensus, which they can’t. Not with an overwhelmingly opposed press, a bad communicator as leader, and other events around the world over-taking them.

And you’re not telling me how you would have played it.

Now mass unemployment is becoming very much a reality, do you think the results would be the same?

No, of course not.

How do the results differ regionally?

This, I don;t know.

At least you make frighteningly clear Labour follow appearances and stand for nothing.

If by that you mean they try and see where public opinion is at, and respond to it – then yes.

donpaskini: Personally, I think that Labour would have won the last election if we’d stuck with Gordon Brown’s strategy and campaigned against savage cuts and the VAT increase.

That’s what I argued at the time but I’m no longer sure that was a sustainable position.
You’re right the party was divided between different factions… but I think they had to find a way to neutralise the issue of deficits rather than pretending it wasn’t an issue.

Jennie: The opportunity has not gone. The media are hungry for new ideas, properly pitched. But there is no room in politics for timidity and chronic self-doubt.

Sure, but I think this is optimistic. The media is over-whelmingly negative. Plus they had Gordon Brown as leader at the time, who couldn’t sell heaters to eskimos.

If it were that easy to change the narrative (which many lefties believe to be self-evident) then why is the current govt finding it so hard to win the debate over fairness? Even the Tories can’t control the narrative, and they face a plaint press.

“Trouble with all politicians. They don’t earn the average wage or less”

No one would take such a job for average wage – for all my criticism of politics its a dam stress full time consuming job and needs high rewards.

23. Anon E Mouse

Chaise Guevara – Agreed…

” … (£80 bn less than the Tories over 4 years) … “.

The above cannot be right if the Coalition is only cutting £83 bn or thereabouts by 2014/15.

Re my last comment, I see Sunny talked about “Tory” cuts as opposed to “Coalition” cuts, so my comment was not correct, but I still cannot work out how Labour cuts would be £80 bn less…

I don’t think Jenny was saying that it was going to be easy. Just that without doing it the narrative will always be controlled by the Tories.

“No one would take such a job for average wage”

The amount of volunteers involved with parties suggests many would. Particularly when you consider the post politics career can be far more lucrative. 10 years as a backbencher on 30k still gives you enough experience and skills to secure at least three times that in the private sector. A ministerial career and you’ll be a millionnaire pretty soon after purely based on your contacts. Make the salary of an MP the median wage and you’ll still have a decent supply.

MPs who lose their seats usually don’t starve.

27 – The Labour Party struggled for decades to boost the salary of MPs, because they considered that without a properly high salary, Labour was disadvantaged vis-a-vis the Tories, who could supplement their income through second jobs in the City, at the Bar etc.

#21. Sunny Hundal
“Owen – first you seem to assume they could control the consensus, which they can’t. Not with an overwhelmingly opposed press”

The Labour Party had the opportunity to do something about the press in 1948. They did nothing then and haven’t raised the issue since, except as an excuse for their supine attitude on every other issue.
The obvious thing to do is to treat the press as the monopoly is and break it up.

Let’s not miss a glaringly obvious point here.

The consensus view is this: a substantial part of the deficit is structural, and would *not* automatically disappear over time even if the government succeeded in sustaining on-trend growth of 2.5% – 3% a year. The government can’t go on running a deficit indefinitely, since sooner or later that would mean the national debt reached dangerous levels. Therefore, in the medium term, some combination of spending cuts and/or tax rises is needed in order to close the gap between revenue and expenditure.

There’s plenty of room for disagreement among people who accept that consensus: e.g. over the timing of spending cuts and tax rises, the optimal ratio of spending cuts to tax rises, whether a slowdown in the economy is a reason to speed up or slow down, etc. But just rejecting the consensus view wholesale is not a serious option for a mainstream political party.

To consistently oppose all cuts, Labour would have to claim one of two things: 1 – there is no structural deficit, or 2 – 100% of the structural deficit can be closed through tax rises. And taking either of those positions would leave them way out on the fringes of the debate, with no prospect of drawing on the opinions of respected economists and institutions to strengthen their case.

…or leaving the political, tactical, how-do-we-spin-this questions out of it: the reason that Labour can’t oppose all cuts is that it does in fact appear that some cuts are going to be necessary in the medium term, for the very simple reason that the deficit is too large to be closed by growth and tax rises alone.

(I don’t say that with any relish; if there is a serious case to be made for the view that we don’t need to cut spending *at all* in the medium term, I’d be glad to hear it.)

“10 years as a backbencher on 30k still gives you enough experience and skills to secure at least three times that in the private sector”

Jesus christ…what planet are you on. This is not a game, its running the country, you don’t enter politics for “experience” you need bring your experience with you, ideally after proving your credibility in the working world, being an expert in your field.

Doing a degree or two then jumping into politics for the rest of your career, or starting as a volunteer to gain experience and secure your road to riches, what can come of this? Well, look around…

oh I’m not saying its a good system. Just explaining that recruitment isn’t a problem for politics.

“you need bring your experience with you, ideally after proving your credibility in the working world, being an expert in your field.”

I doubt even higher salaries are going to attract experienced experts to become MPs though. It isn’t a big factor in the decision making process somebody has on whether to be an MP. Plus there is no way the public is going to start accepting 100k salaries for backbenchers….

if you want MPs to be people experienced in careers outside politics before parliament there are other ways to achieve this; stop electing careerists being an obvious starting point.

“if you want MPs to be people experienced in careers outside politics before parliament there are other ways to achieve this; stop electing careerists being an obvious starting point”

Requiring specific experience before you can run for parliament would be another..just like any job?

31
Name me some MPs who are experts in their fields? And just because some private company pays you 30-40 thousand £s as a consultancy does not make you an expert. In fact it is more likely the the more youare taking back handers the less you know.

Most seats in the country are safe seats. Either tory or labour. If you get in you can stay there for 25 years. I know the problems of trying to compete with tories who have large private incomes, but at least many politicians on the left had some idea of what live was like for the people they represented.

No coincidence that as all the politicians have got richer , they have all bought into the free market clap trap.

35. Chaise Guevara

@ 33 Ross

“Requiring specific experience before you can run for parliament would be another..just like any job?”

Who gets to determine this requirement, and how much political benefit do you reckon they’ll squeeze out of it?

“Who gets to determine this requirement, and how much political benefit do you reckon they’ll squeeze out of it?”

Was educated first at Kirkcaldy West Primary School where he was selected for an experimental fast stream education programme, which took him two years early to Kirkcaldy High School for an academic hothouse education taught in separate classes.

Graduated from Edinburgh with First Class Honours MA in history in 1972, and stayed on to complete his PhD in history (which he gained ten years later in 1982)

Was employed as a lecturer in politics at Glasgow College of Technology – From 1980 he worked as a journalist – He also worked as a tutor for the Open University.

All I ask is would a person with the information above stated on a CV have any chance at getting a job as a CEO of an international corporation? A fund manager over seeing a few hundred million? If the answer is no one may wonder what he was doing as prime minister.

Im not attacking individuals, as I said earlier they deserve the money they get for the work load they have, I just think raising the standards and experience needed before you can find your self running a country would bring major benefits, I accept we will never leave the left VS right and the fight to shape public perception to your benefit.

“MA in history in 1972, and stayed on to complete his PhD in history (which he gained ten years later in 1982)”

hold on….did it really take GB 10 years to do a PhD?

38. Chaise Guevara

@ 36 Ross

With respect, you’ve expanded on your position without answering the question. Who gets to set these requirements?

@34 Sally: “Name me some MPs who are experts in their fields?”

It used to be the case that the Labour front bench in Parliament used to be crowded with academic economists: Hugh Dalton, Hugh Gaitskell, Douglas Jay, Harold Wilson, Tony Crosland . .

And other academics like Richard Crossman, Roy Jenkins . .

Sir Stafford Cripps and Sir Hartley Shawcross were eminent lawyers.

@ Ross:

The problem with your proposal — if, as I take it, you’re suggesting that some third party should vet parliamentary candidates to ensure they’ve got enough experience — is twofold. Firstly, surely it ought to be up to the voters to decide? If you think that MPs ought to have more experience outside of politics, I agree, but the way forward is to convince voters to elect people with experience, and parties to avoid parachuting in careerists who’ve spent their entire careers working for the party. Secondly, it seems quite open to manipulation. It would be easy to bias the selection against the Tories (“Yes, well, I know you’re a successful businessman, but you don’t have any experience of being a poor person struggling by on the dole or the minimum wage, so I don’t think you’ve got the right experience for helping the worst-off in our society…”) or the Labour Party (“Look, I appreciate that your time on the minimum wage has given you good insight into the lives of poor people, but you’ve never been in a wealth-creating job — like, say, running a business — so I’m afraid your experience isn’t really good enough when it comes to the economy…”).

Hence, a steady stream of tabloid crap (fed by the Taxpayers Alliance for e.g.) on public sector waste, pushed alongside the line that Labour had ‘spent too much money’

Public spending went up from 36% of GDP in 2000 to 48% of GDP in 2010. If the UK economy grew at an average rate of 2% over those years, that’s an increase of 63%. This is a vast sum of money, and if public services did improve by 63%, I certainly didn’t notice it.

For every problem, Labour’s solution was always to spend more taxpayers’ money.

42. Leon Wolfson

@24 – Simply because Tory policies have failed in spectacular fashion to deliver savings while harming millions doesn’t mean they didn’t think their policies for more savings would work. Of course, that they stick to them now is plain incompetence.

@37 – At one time it was quite common for PhD’s to take years. You have a maximum of 5 years in the UK these days, as I understand it, but those rules are of recent genesis (one co-worker just got his after 11)

43. Leon Wolfson

@41 – So your answer is this. A devastated economy, higher borrowing, deliberate hatred fermented against the poor and sick, who are punished repeatedly by the government for existing…

Yes, this is SO much better.

@41: “For every problem, Labour’s solution was always to spend more taxpayers’ money.”

Not so. Roy Jenkins was Labour chancellor in the run-up to the general election in June 1970. For solid economic reasons, in the budget before the election, he famously planned for a fiscal surplus and was roundly criticised for doing that by the Conservative shadow chancellor, Iain Macleod, who said the budget was too stringent.

Just to recap, prior to the financial crisis in 2007, general government expenditure as a percentage of national GDP was only a little higher than in Germany and lower than in Denmark, Sweden, Netherlands, France . . according to OECD stats.

#30. G.O.
“just rejecting the consensus view wholesale is not a serious option for a mainstream political party.”

But only because the definition of a ‘mainstream political party’ is that they don’t rock the boat.

“To consistently oppose all cuts, Labour would have to claim one of two things: 1 – there is no structural deficit, or 2 – 100% of the structural deficit can be closed through tax rises.”

True.

“And taking either of those positions would leave them way out on the fringes of the debate”

This ain’t necessarally so. If a major political party challenged the premises of the consensus then it would change the debate. (Of course this rests on the assumption that the Labour Party is a major political party)
Just imagine how things would play out on Newsnight or the Today Programme if leading Labour figures systematically rejected the calculation of the structural deficit and or argued for the Ricardo option (a capital levy) to pay off the entire national debt in, say, the next three months.
Of course the commentators would huff and puff but if the Labour Party held its ground (a questionable assumption, I agree) then the debate couldn’t carry on in the old way.
The impact of such a public challenge to the foundations of the ‘consensus’ would probably be dramatic. Let’s not forget that at the last count only 55 percent of people thought that the cuts were ‘necessary’. Despite the media blackout on anti-cuts thinking at least 27 percent thought cuts ‘unnecessary’.
“with no prospect of drawing on the opinions of respected economists and institutions to strengthen their case.”

Since 2007 “respected economists” has become pretty much an empty set. The only people who might qualify are those that called the recession. There are a few, e.g. Steve Keen, but they aren’t mainstream.

If the terms of the debate were changed then there are lots of heterodox economists who could come forward and argue a convincing anti-cuts case.

@ George Hallam

I think a large part of the problem I’m driving at is this: if you’re a party of government, or want to be seen as a credible party of government-in-waiting, and the non-partisan organs of government (the Bank of England, the OBR, civil servants in the Treasury, etc.) are all telling you that the structural deficit is £X or the likely rate of growth next year is Y%, aren’t you pretty much obliged to take them seriously? If Osborne were to come out and say “everyone else seems to think the rate of growth next year is going to be under 1%, but I’m going to base my policies on a projection of 5%”, he would rightly be ridiculed. So how can Labour say (something like) “everyone else thinks there’s a structural deficit, but we’re going to base our policies on a projection that the deficit is wholly cyclical and will be eliminated in five years without any tax rises or spending cuts”?

It seems to me that there’s a big difference between ‘rocking the boat’ in terms of taking a non-consensus view on how you respond to a situation (e.g. arguing for different cuts, fewer cuts, differently timed cuts, more tax rises, more emphasis on job creation, etc etc etc), and ‘rocking the boat’ in terms of taking a non-consensus view of what the situation actually is (e.g. arguing that there is no structural deficit).

47. Frances_coppola

@46 G.O.

We don’t know how big the structural deficit is, or even if there is one. And we won’t know until growth is restored and cyclical effects unwind. So cuts designed to eliminate a structural deficit are a) premature b) impossible to judge at present c) will delay economic recovery. Labour could put together a completely coherent argument that spending cuts and/or tax rises will be necessary if, once growth is restored, there remains a deficit that is evidently structural, but that until that time spending cuts and tax rises are counterproductive and government should instead be concentrating on measures to promote growth.

But Labour won’t produce any coherent alternative to the Government’s destructive economic policy while the various factions are producing contradictory ideas and squabbling among themselves. For goodness sake, get a grip and unite behind a single set of policies if you want to be taken seriously as a credible Opposition and future Government.

48. George Hallam

@46. G.O.With all due respect I think your approach is jejune.
Your are begging more questions than you can shake a stick at, if you’ll excuse the mixed metaphor.

“ if you’re a party of government, or want to be seen as a credible party of government-in-waiting”

Seen as a “credible party of government-in-waiting” by whom?

“, and the non-partisan organs of government (the Bank of England, the OBR, civil servants in the Treasury, etc.) are all telling you.”

You are contradicting yourself. Those august institutions were really “non-partisan” organs of government then it wouldn’t matter if one disagreed with them. However, in reality they are only impartial between parties that they regard as ‘credible’ or ‘reliable’. When it comes to towards parties and movements they don’t like they are extremely partisan.

If you want a current example look at the millions that have been spent on infiltrating and disrupting the ecology movement. Now ask yourself how much HM Revenue and Customs might have netted if a fraction of this had been spent on surveillance of just some of the tax dodging operations that are run in the City.
But of course you know this. In fact your argument depends on it. Your message is: don’t mess with these people.

[if ] ”the Bank of England, the OBR, civil servants in the Treasury, etc.) are all telling you that the structural deficit is £X or the likely rate of growth next year is Y%, aren’t you pretty much obliged to take them seriously?”

???? why on earth would you want to listen to them?
Both the structural deficit and predictions about next year’s rate growth depend on a shed load of assumptions. Change the assumptions and you change the prediction.
Economists are like accountants, both professions share the same jokes.
For example,
Q. How many economists does it take to change a light bulb?
A. Well, what kind of an answer were you looking for?

The idea that Treasury economists have measured the structural deficit at 4% of GDP with the same degree of objectivity and precision that physicists have measure the speed of light is risible. The calculation depends on a number of assumptions. Change those and you get 2% or 1%, or less. You choose.

“If Osborne were to come out and say “everyone else seems to think the rate of growth next year is going to be under 1%, but I’m going to base my policies on a projection of 5%”, he would rightly be ridiculed. “

???? What Osborne actually did was to build his policy around some wildly unrealistic assumptions. My sources in the Conservative Party tell me that at least some ministers said at the time that Osborne’s assumptions were unrealistic and that the economy would stall. Of course, they didn’t make a fuss about it. I have no doubt there were many in the Treasury who thought the same, but Treasury wallahs are notoriously tight-lipped about letting on about things like that.

“So how can Labour say (something like) “everyone else thinks there’s a structural deficit, but we’re going to base our policies on a projection that the deficit is wholly cyclical and will be eliminated in five years without any tax rises or spending cuts”?”

The point is that it isn’t “everyone else”. I have a hard job explaining to people the difference between the debt and the deficit. Getting them to understand the difference between the cyclical and structural components of the deficit takes even more effort. For practical political purposes the structural deficit just isn’t an issue. Which is a pity, because if it really was a matter of public debate the Government’s case would be a lot weaker.

“It seems to me that there’s a big difference between ‘rocking the boat’ in terms of taking a non-consensus view on how you respond to a situation (e.g. arguing for different cuts, fewer cuts, differently timed cuts, more tax rises, more emphasis on job creation, etc etc etc), and ‘rocking the boat’ in terms of taking a non-consensus view of what the situation actually is (e.g. arguing that there is no structural deficit).”

No, intellectually there is no difference between making a judgement about the likely effect of a particular policy and a judgement about the nature of a situation: they are both judgements about the world. Whether a particular view is at any one time a consensus view or not has nothing to do with its truth value: it’s the evidence and the arguments that count.
The difference you are referring to relate to politics.

49. George Hallam

With all due respect I think your approach is jejune.
Your are begging more questions than you can shake a stick at, if you’ll excuse the mixed metaphor.
“ if you’re a party of government, or want to be seen as a credible party of government-in-waiting”

Seen as a “credible party of government-in-waiting” by whom?
“, and the non-partisan organs of government (the Bank of England, the OBR, civil servants in the Treasury, etc.) are all telling you.”

You are contradicting yourself. Those august institutions were really “non-partisan” organs of government then it wouldn’t matter if one disagreed with them. However, in reality they are only impartial between parties that they regard as ‘credible’ or ‘reliable’. When it comes to towards parties and movements they don’t like they are extremely partisan.
If you want a current example look at the millions that have been spent on infiltrating and disrupting the ecology movement. Now ask yourself how much HM Revenue and Customs might have netted if a fraction of this had been spent on surveillance of just some of the tax dodging operations that are run in the City.
But of course you know this. In fact your argument depends on it. Your message is: don’t mess with these people.
[if ] ”the Bank of England, the OBR, civil servants in the Treasury, etc.) are all telling you that the structural deficit is £X or the likely rate of growth next year is Y%, aren’t you pretty much obliged to take them seriously?”

???? why on earth would you want to listen to them?
Both the structural deficit and predictions about next year’s rate growth depend on a shed load of assumptions. Change the assumptions and you change the prediction.
Economists are like accountants, both professions share the same jokes. For example,
Q. How many economists does it take to change a light bulb?
A. Well, what kind of an answer were you looking for?
The idea that Treasury economists have measured the structural deficit at 4% of GDP with the same degree of objectivity and precision that physicists have measure the speed of light is risible. The calculation depends on a number of assumptions. Change those and you get 2% or 1%, or less. You choose.

50. gastro george

@41

Not that it’s worth wasting my breathe. Comparisons of total government expenditure as a % of GDP are somewhat dependent on the level of GDP as well as the expenditure – and if you choose 2010 which is well after the crash then GDP is well down and expenditure on unemployment, etc. is well up because of that crash.

More reasonably, in the sense of a level playing field, expenditure went up from 40% in 2001 to 43% in 2007 (before the crash) – somewhat less and only a restoration of more normal expenditure after years of under-spending.

51. George Hallam

Your are begging more questions than you can shake a stick at, if you’ll excuse the mixed metaphor.
“ if you’re a party of government, or want to be seen as a credible party of government-in-waiting”

Seen as a “credible party of government-in-waiting” by whom?
“, and the non-partisan organs of government (the Bank of England, the OBR, civil servants in the Treasury, etc.) are all telling you.”

You are contradicting yourself. Those august institutions were really “non-partisan” organs of government then it wouldn’t matter if one disagreed with them. However, in reality they are only impartial between parties that they regard as ‘credible’ or ‘reliable’. When it comes to towards parties and movements they don’t like they are extremely partisan.
If you want a current example look at the millions that have been spent on infiltrating and disrupting the ecology movement. Now ask yourself how much HM Revenue and Customs might have netted if a fraction of this had been spent on surveillance of just some of the tax dodging operations that are run in the City.
But of course you know this. In fact your argument depends on it. Your message is: don’t mess with these people.
[if ] ”the Bank of England, the OBR, civil servants in the Treasury, etc.) are all telling you that the structural deficit is £X or the likely rate of growth next year is Y%, aren’t you pretty much obliged to take them seriously?”

???? why on earth would you want to listen to them?
Both the structural deficit and predictions about next year’s rate growth depend on a shed load of assumptions. Change the assumptions and you change the prediction.
Economists are like accountants, both professions share the same jokes. For example,
Q. How many economists does it take to change a light bulb?
A. Well, what kind of an answer were you looking for?
The idea that Treasury economists have measured the structural deficit at 4% of GDP with the same degree of objectivity and precision that physicists have measure the speed of light is risible. The calculation depends on a number of assumptions. Change those and you get 2% or 1%, or less. You choose.
“If Osborne were to come out and say “everyone else seems to think the rate of growth next year is going to be under 1%, but I’m going to base my policies on a projection of 5%”, he would rightly be ridiculed. “

???? What Osborne actually did was to build his policy around some wildly unrealistic assumptions. My sources in the Conservative Party tell me that at least some ministers said at the time that Osborne’s assumptions were unrealistic and that the economy would stall. Of course, they didn’t make a fuss about it. I have no doubt there were many in the Treasury who thought the same, but Treasury wallahs are notoriously tight-lipped about letting on about things like that.
“So how can Labour say (something like) “everyone else thinks there’s a structural deficit, but we’re going to base our policies on a projection that the deficit is wholly cyclical and will be eliminated in five years without any tax rises or spending cuts”?”

The point is that it isn’t “everyone else”. I have a hard job explaining to people the difference between the debt and the deficit. Getting them to understand the difference between the cyclical and structural components of the deficit takes even more effort. For practical political purposes the structural deficit just isn’t an issue. Which is a pity, because if it really was a matter of public debate the Government’s case would be a lot weaker.
“It seems to me that there’s a big difference between ‘rocking the boat’ in terms of taking a non-consensus view on how you respond to a situation (e.g. arguing for different cuts, fewer cuts, differently timed cuts, more tax rises, more emphasis on job creation, etc etc etc), and ‘rocking the boat’ in terms of taking a non-consensus view of what the situation actually is (e.g. arguing that there is no structural deficit).”

No, intellectually there is no difference between making a judgement about the likely effect of a particular policy and a judgement about the nature of a situation: they are both judgements about the world. Whether a particular view is at any one time a consensus view or not has nothing to do with its truth value: it’s the evidence and the arguments that count.
The difference you are referring to relate to politics.

What G.O. is getting at is that in politics there is a penalty for being far from the consensus. That is why things tend to coalesce towards the centre. We have a default assumption that at any given time the majority opinion is the most likely to be the correct opinion. The political penalty is because those who stray too far from the consensus will be seen as extreme and out of touch. Given that the general public find most things economic baffling and boring, they form an opinion based on what everyone else appears to believe. Therefore, a political party who argue something radically different to everyone else will just be assumed to be wrong. That can’t possibly be true otherwise everyone would believe it will be the attitude.

The thing about the structural deficit is absolutely no one knows how much it is. Moreover, it changes all the time even though we do not know how much of the deficit is cyclical and how much is structural. The key issue is the level of real GDP growth that the UK economy is capable of after the recession. Has our RGDP growth permanently fallen and the current excess capacity is not coming back. If it has fallen we have a bigger structural deficit than it would be if the excess capacity is brought back into use when demand picks up. We do not know that, so can’t know for definite the size of the structural deficit. The economy may be permanently damaged and we can’t get back to our RGDP growth long-term trend. In that case, cuts would have to be deeper to eliminate the structural deficit otherwise debt just keeps growing in absolute and as a ratio of GDP terms. The absolute issue is not very important but the ratio does matter. It would not be credible for a serious political party to argue that the structural deficit does not matter.

It is not strictly true that the structural deficit will not go away with growth. The government could put in place policies that encourage the economy to at least achieve the long-term trend and that in theory would reduce the amount of cuts needed to balance the budget. Radical policies that raised the growth potential of the UK economy above the long-term trend could also potentially completely eliminate the structural deficit. The government just spending more to juice demand will not achieve these things. To raise the UK RGDP growth potential means the private sector must expand. Radical could mean abolishing employers NI and slashing corporation taxes to raise private sector growth. In the short run the fiscal deficit would rise, but in the longer term the trend rate of RGDP would be raised. The government could look to recoup revenue in less growth destroying ways.

Even if we believe that there has been little permanent damage to the UK economy and we will eventually get back to the trend line, that is inconsistent with we do not need any cuts. Only if you believe we can exceed the trend would be consistent with saying we do not need any cuts. On the other hand, I suppose some people would argue that tax could eliminate the deficit without cuts.

53. Leon Wolfson

“Radical could mean abolishing employers NI and slashing corporation taxes to raise private sector growth.”

Yes, well, it’d need to WORK. Not turn us into Ireland Disaster Mk2.

“The government could look to recoup revenue in less growth destroying ways. ”

Yea, see, THAT’S sensible. And what programs (there are some) could be put on hold for a few years. What true boondoggles could be cancelled (like the one which has doubled NHS admin costs…).

But what’s really critical is restoring consumer confidence. That means jobs. It means stopping the language of attacking worker’s rights. It means stopping punishing the poor for existing.

54. Chaise Guevara

@ Ross

XXX @40 explains what I’m getting at here. We’d all like politicians to be wise, educated, thoughtful and honest people, but any attempt to actually enforce by law that would be a) anti-democratic and b) open to massive exploitation.

Mr Leon,

I am not advocating specific policies. In the context of the so-called structural deficit, the examples that I cited are radical things that people would argue to raise the RGDP growth potential of the UK economy. Raise the growth potential and the structural deficit is less of an issue.

56. Leon Wolfson

@55 – Ah, fair enough. And yes, I agree then.

@54 – It WAS that the Peers did that. Now, however, given most peers are also party-political appointees…

@43: So your answer is this. A devastated economy, higher borrowing, deliberate hatred fermented against the poor and sick, who are punished repeatedly by the government for existing…

Not at all. I despise and hate the Tories more than I despise Labour. At least some Labour people have their hearts in the right place.

Anyway, you asked me for my answer, so I’ll spell it out:

My solution would be to slowly decrease spending or keep it stable in real terms; over time, as GDP rises this would mean it would decrease as a proportion of GDP. The present savage Tory cuts are making a bad situation worse.

I wouldn’t cut benefits as the Tories are doing; instead I’d keep them at the same level but reduce tapers and marginal rates so no-one pays a higher marginal tax rate (including withdrawal of benefits) than someone with more income than them. In particular, people on benefits would be allowed to earn up to £50 a week with no loss of benefits. One way thisd could be implemented would be by introducing a citizens income to replace the present benefits system.

I’d also build lots of houses and introduce a policy of affordable housing for all. This would not, incidentally, cost a penny of public money.

I’d abolish crap like the Digital Economy Act and encourage internet startups. If the USA passes SOPA/PROTECT-IP, then I’d encourage US internet companies to relocate to the UK together with all their staff.

And last but not least, I’d get money out of politics and introduce proportional representation for all elections.

@44 Bob B: Roy Jenkins was Labour chancellor in the run-up to the general election in June 1970. For solid economic reasons, in the budget before the election, he famously planned for a fiscal surplus and was roundly criticised for doing that by the Conservative shadow chancellor, Iain Macleod, who said the budget was too stringent.

Sorry, I should have made myself clearer: I was referring to the 1997-2010 Labour administration, not earlier ones.

Leon @ 53:

“Yes, well, it’d need to WORK. Not turn us into Ireland Disaster Mk2.”

Or into Sweden…

60. Leon Wolfson

@57 – Okay. And…I don’t agree with everything there, but neither is it making me twitchy like major party politics does.

(I’m not a labourite myself, I’m a mutualist, but I’m quite happy with gradualist solutions)

“If the USA passes SOPA/PROTECT-IP…”

The problem is that the US doesn’t recognise national boundaries when it comes to the internet. I’m a creator myself, and I view corporate abuses and the long-term erosion of the public’s respect for copyright in general as the “great threat”.

@50 Gastro George: Not that it’s worth wasting my breathe. Comparisons of total government expenditure as a % of GDP are somewhat dependent on the level of GDP as well as the expenditure – and if you choose 2010 which is well after the crash then GDP is well down and expenditure on unemployment, etc. is well up because of that crash.

This is true. However, GDP was still higher in 2010 than it was on 2000.

More reasonably, in the sense of a level playing field, expenditure went up from 40% in 2001 to 43% in 2007 (before the crash) – somewhat less and only a restoration of more normal expenditure after years of under-spending.

If you look at this graph, public spending as a proportion of GDP went up by more than that.

In absolute terms, from 2001 to 2007, it went up from £403bn to £514bn (both 2005 pounds), an increase of 24% in real terms. If instead that £111bn had been spent on modest increases in benefits and major reductions in marginal tax rates for the poor, it would have helped them (and society) a lot more than wasteful spending.

The problem with this country is that the Labour Party, as I’ve said, thinks spending more money is the solution to every problem, the Tories hate and despise everyone except the top 1%, the Lib Dems just suck up whatever their Tory masters tell them to, and the Tories and Labour together perpetuate the squalid gerrymander that is FPTP, which denies democracy to the British people.

@52 Richard W: What G.O. is getting at is that in politics there is a penalty for being far from the consensus.

Yes, because under FPTP, elections are decided by floating voters in marginal constituencies. Whose fault is that? Put it another way: which party, elected in 1997, broke its promise to have a referendum on PR?

It’s because we don’t have PR that voters don’t get a valid choice in politics. If we had PR, voters would be presented with a real choice with a large number of parties being able to get elected.

@60 Leon Wolfson: The problem is that the US doesn’t recognise national boundaries when it comes to the internet.

… while at the same time it hypocritically lectures to others about openness on the internet.

The internet is the future social and intellectual environment of our species, it is quickly becoming the forum through which all our interactions are mediated. It can be the greatest force for good ever, enabling privacy and free speech, or the greatest force for evil, creating a total surveillance society worse than anything Himmler or Beria ever dreamt of.

Sadly, the US is sleepwalking towards the second option. In 2030, there will be three big powers: China, America and Europe. China is a brutal dictatorship. America is following trhe wrong path. Europe is therefore humanity’s best hope for the bright future that is technologically possible, but which risks being blotted out by the forces of evil, whether they call themseves the Recording Industry Association of America or the Chinese Communist Party.

@ George Hallam

“Seen as a “credible party of government-in-waiting” by whom?”

Voters, political commentators, civil servants, party activists, members, donors and affiliates, colleagues in parliament, etc.

“You are contradicting yourself. Those august institutions were really “non-partisan” organs of government then it wouldn’t matter if one disagreed with them.”

I don’t see this. If the OBR (say) forecasts growth of 1% next year, or a team of Treasury civil servants calculates that such-and-such a tax rise will raise £1 billion a year, or the Bank of England tells you that pursuing such-and-such a policy would mean inflation hit 6%, isn’t the government of the day pretty much obliged to take their word for it? A chancellor couldn’t stand up to deliver a budget and say “Here’s what the wonks at the Treasury, OBR and BoE tell me, but my Party takes a different view and so I’m assuming growth of 3%, a £5 billion windfall from this tax rise, and inflation to fall to 3%”.

“What Osborne actually did was to build his policy around some wildly unrealistic assumptions. My sources in the Conservative Party tell me that at least some ministers said at the time that Osborne’s assumptions were unrealistic and that the economy would stall. Of course, they didn’t make a fuss about it. I have no doubt there were many in the Treasury who thought the same, but Treasury wallahs are notoriously tight-lipped about letting on about things like that.”

…and if it turns out that Osborne was ignoring the advice of Treasury economists, leaning on the OBR to accept his own wildly unrealistic assumptions, etc., he would lose any credibility he now has and be exposed as a right-wing ideologue who was wilfully deaf to the advice of anyone who took a more moderate, non-partisan, evidence-based, consensus view. This is kind of the point I’m making.

“So how can Labour say (something like) “everyone else thinks there’s a structural deficit, but we’re going to base our policies on a projection that the deficit is wholly cyclical and will be eliminated in five years without any tax rises or spending cuts”?”

“For practical political purposes the structural deficit just isn’t an issue.”

It’s an issue in that Labour need to say roughly how and when they expect the deficit to be eliminated, and *their own official government figures* (from the period before the election) showed it wouldn’t be eliminated at all without tax rises and spending cuts. Now of course those figures were based on assumptions made by Treasury economists etc., but how could they now, with any credibility, just throw out those figures and say “actually we now think the deficit is wholly cyclical after all?” Based on what? If there was fresh evidence to suggest that growth over the next few years is likely to be substantially higher than Treasury economists were assuming in 2009 then fair enough – when the facts change, you change your mind. But there isn’t.

“Whether a particular view is at any one time a consensus view or not has nothing to do with its truth value: it’s the evidence and the arguments that count.
The difference you are referring to relate to politics.”

Yes, of course.

Public spending went up from 36% of GDP in 2000 to 48% of GDP in 2010. If the UK economy grew at an average rate of 2% over those years, that’s an increase of 63%. This is a vast sum of money, and if public services did improve by 63%, I certainly didn’t notice it.

Well – that is how many marginal voters and even people within Labour’s own constituency saw it.

I’m not going to defend all the money Labour spent, but then its easier to accuse a govt of waste than figure out how to effectively reduce waste.

PS – the comparison all the way up to 48% is fatuous. That includes the bailout of banks and bringing them under state ownership. Before that, expenditure rose incrementally.

66. George Hallam

63. G.O.
“I don’t see this. If the OBR (say) forecasts growth of 1% next year, or a team of Treasury civil servants calculates that such-and-such a tax rise will raise £1 billion a year, or the Bank of England tells you that pursuing such-and-such a policy would mean inflation hit 6%, isn’t the government of the day pretty much obliged to take their word for it?

No they would not be so obliged.

Economics is not like physics. There is no generally accepted body of theory in economics. Instead there are number of rival ‘schools’. Some economists are firmly committed to a particular school, but these days most are not: they, they equivocate, chop and change and generally hedge their bets. Even the partisans have to choose their assumptions. Taken together this means that no forecast is unassailable.

A chancellor couldn’t stand up to deliver a budget and say “Here’s what the wonks at the Treasury, OBR and BoE tell me, but my Party takes a different view and so I’m assuming growth of 3%, a £5 billion windfall from this tax rise, and inflation to fall to 3%”

If it reached the stage where the treasury forecasts were completely at odds with his policy then he could well say:
“Here’s what the wonks at the Treasury, OBR and BoE tell me, but these wonks have been consistently wrong on all the major issues over the last n years. They failed advised previous governments to free up financial markets, they didn’t see the recession coming in 2008 even AFTER the seizure of financial markets in 2007. All their recent forecasts have been wrong and have had to be constantly revised downwards. These people are worse than useless: they are a public danger. The House will be pleased to hear that I am, therefore, ignoring their advice.”

However it is far more likely that would not come to this. Long before, the Chancellor, on being presented with an ‘unhelpful’ forecast, would have said something like:
“Very interesting. Now what I would like you to do is go away and look at the assumptions behind this. Then I want you to change the assumptions in various ways and see what you come up with. I would like to see the range of forecasts you come up with. Now run along, there’s a good chap.”

Alternatively, he would know his department well enough to know exactly the bright and ambitious young economists to give the job to.

67. gastro george

In fact, it’s astonishing how much credence is given to mainstream economists, given the inaccuracy of their predictions – something that would never be tolerated in other sciences – although describing mainstream economics as a science is tenuous at best given the amount of empirical failure.

Wasn’t an analysis done a few years ago, comparing the predictions of all of the major institutions and banks. The results were all worse than predicting that the following year would be the same as the current year, i.e. useless.

Yet our public policy is completely beholden to what is, at best, a slightly mad religion.

XXX explains what I’m getting at here. We’d all like politicians to be wise, educated, thoughtful and honest people, but any attempt to actually enforce by law that would be a) anti-democratic and b) open to massive exploitation.”

————————————————————-

I agree that there are huge complications – We have standards in every industry, when I want to be an engineer there are certain skills I need to make it through the day, to actually function in the job, these standards aren’t dreamed up by a board of bureaucrats, there real skills, if I do not have them and the required experience I cant work the machinery, guaranteeing my employer colleagues and corporation a finished product and safe working environment.

I am all for the democratic process and the way it works its self is even more reason to implement something like this. We vote and the winners are set free to do as they please, you cant fire a politician whose making critical mistakes in a timely manner, as voters we should know who ever we vote for has a standard of competency required to do the job, we still get to vote its just the group of candidates placed before us to vote for are of a minimum standard for the position they seek.

We chart the skills qualifications and experience needed for private sector jobs quite well, what’s needed on a resume for a senior position at a fortune 500 company? A PHD in history? Social sciences? An arts degree….you get my point.

@67: “Yet our public policy is completely beholden to what is, at best, a slightly mad religion.”

That’s pompous stuff from someone who plainly knows little about “mainstream economics”. Admittedly, economists, as a profession, are no more prone to agree than politicians, lawyers, journalists, medics, scientists, estate agents etc but I’d much prefer to read or listen to their professional analysis before putting any weight on what the others have to say about economics issues. For a second time recently, neutrinos have been found travelling faster than the speed of light yet that breaks with a fundamental assumption in the standard model of theoretical physics.

The analysis is what matters, not infantile slurs of a profession by the ignorant. And the analysis should be the object of dissection and scrutiny. In the light of the muddled economic policies of the 1980s leading to the ERM debacle, who would prefer that interest rate decisions should go back to being made by the Chancellor instead of by the Monetary Policy Committee at the Bank of England?

In fact, years before the onset of the financial crisis, several economists were warning about inflating asset-price bubbles and the opacity of derivatives in financial markets – I’ve often posted links in earlier threads. The efficient market hypothesis has long been discredited – by an economist who showed that movements in share prices were too volatile to reflect the fundamentals they were reputed to.

What I find alarming is how keynesian analysis has been discarded in favour of a cocktail of austerity nostrums and Micawberish sentiments. A classic case is the German position on saving the Euro when the prospective failings of European monetary union were well anticipated by a string of economists back in the 1990s – and which were brushed aside by those intent on European integration regardless.

@ 67. gastro george

I think that is a bit of an unfair sweeping generalisation, Gastro George. It is only in the last decade that the MSM expect economists to be clairvoyants. Explaining things should be different to predicting the future with certainty. The modern media want the latter. Moreover, you have to look at how the MSM media report forecasts that come with caveats, assigned with a range of outcomes with bayesian probabilities. The media are not interested in the caveats and only report a definite number. Plausibility of an economic forecast is based on the given state of knowledge at the time of the forecast, which is then updated in the light of new, relevant data. The MSM media are incapable of reporting that nuance. When the central proposition is changed it is because of new data. The alternative favoured by political activists and journalists is to just make stuff up and when new data appears to make more stuff up.

It is possible to forecast a range of propositions for growth in the UK next year. However, if the EZ implodes they all go out the window because there has been a huge data change. That would not mean necessarily that the forecast was wildly wrong, it would just mean that the forecast was based on the EZ not imploding. Assign a probability to the EZ imploding and a new forecast taking account of that scenario could be advanced. Essentially probabilities for propositions is what hedging is all about and how banks use forecasts. The MSM media do not report on probabilities.

I do so love these increasingly frequent resounding calls for swift, decisive action to resolve the mounting crisis in the Eurozone.

The proverbial fly in the ointment is that Angela Merkel and her government remain determined to prevent measures such as the ECB acting as lender of last resort, the standard function of central banks – as advocated by Prof De Grauwe, an acknowledged leader on the economics of monetary unions – and insist on unrelenting austerity measures in deficit countries to restore failing competitiveness along with ever more Europe.

That last means that governments issuing bonds with sharply rising yields will need to check out their proposed national budgets with the Bundestag before putting those budgets to their own national Parliaments – I joke not:

“Revelations that draft proposals for the Irish December budget had been circulated in a German parliamentary committee were met with horror in Ireland. …”
http://www.guardian.co.uk/commentisfree/2011/nov/18/ireland-budget-germany-leak

Will the mainstream parties in Britain, if elected to government, now commit to checking their budgets with Berlin prior to putting those budgets before the House of Commons?

@ George Hallam

“However it is far more likely that would not come to this. Long before, the Chancellor, on being presented with an ‘unhelpful’ forecast, would have said something like:
“Very interesting. Now what I would like you to do is go away and look at the assumptions behind this. Then I want you to change the assumptions in various ways and see what you come up with. I would like to see the range of forecasts you come up with. Now run along, there’s a good chap.”

Alternatively, he would know his department well enough to know exactly the bright and ambitious young economists to give the job to.”

I’m sure that’s right, and it puts a party which is in government in a position to nudge the consensus in their direction and get some ‘official’ figures produced that reflect their own prejudices/assumptions. Two points, though: 1 – an opposition party is not in that position, and 2 – there are limits to the power of politicians to get civil servants, independent advisers etc to toe a party line. There’s always a possibility they’ll come back with dissenting views or inconvenient truths (as when the OBR revise their growth forecasts downwards and their borrowing forecasts upwards).

73. gastro george

Firstly – apologies for imprecision and over-stating my case, but it’s borne of a great sense of frustration. True, some economists had been pointing out the hazard of recent (pre-2007) policy, and I didn’t intend to malign the whole profession.

But how can any serious economist promote Ricardian Equivalence or, on a more tangible level, the idea of austerity as the solution to the “debt crisis”? Yet this is the consensus position.

74. Leon Wolfson

@73 – “Yet this is the consensus position.”

Of the /markets/. They’re out of control.

@71 – I see no reason for them not to be public documents, or at least circulated around all the EU governments.

Leon @ 74:

“I see no reason for them not to be public documents, or at least circulated around all the EU governments.”

What, before they’re revealed to the citizens of Ireland?

@65 Sunny: I’m not going to defend all the money Labour spent, but then its easier to accuse a govt of waste than figure out how to effectively reduce waste.

It’s also a lot easier not to increase spending than to decrease it later.

PS – the comparison all the way up to 48% is fatuous. That includes the bailout of banks and bringing them under state ownership. Before that, expenditure rose incrementally.

I wonder whether it was necessary to bail out the banks to such an extent. £1162 billion (£19,000 for each of us) really is a vast sum of money and I think it would have made more sense, at least in some cases, to let the banks go bust and compensate the depositors.

Future governments need to put structures in place that ensure that banks are not featherbedded and subsidised to such an extent. Obviously the Tories won’t do this, since half their donations come from the banks.

77. Leon Wolfson

@75 – The problem is governments being secretive about their work in the first place.

Well, in line with all polls recently Labour has extended its lead with Comres tonight to 4 points with the Tories falling back.

The reality of the damage the Tories are doing to the economy and people’s lives is starting to bite the Tories on the arse and no amount of whining about it all being Labour’s fault is going to save them.

Their plans are shot through, with borrowing over the life of the parliament set to exceed Labour’s 2010 plans. This was expected by anyone with half a brain observing Osborne’s reckless cutting in a crisis so called “plan”.

The Tories are getting fisked true and proper. And for the country at lareg it isn’t as pleasant sight or experience. because real people are getting hurt by useless rightwing dogma. Again.

79. Roger Mexico

But if you look at some other parts of the ComRes poll:

http://www.comres.co.uk/polls/SMirror_IoS_Political_Pol_20_Nov_2011.pdf

You’ll see that voters are still disagreeing with It is better to let Government borrowing go on rising than to allow more youth unemployment by 48% to 22%.

It’s true that there are some signs of resistance to the deficit narrative. Only 29% agree that The loss of hundreds of thousands of public sector jobs is a price worth paying to reduce the deficit as against 51%. There is even some sympathy for strikes. But it is clear that the deficit is still seen as the most important economic issue. YouGov has been running an interesting series of issue trackers on the cuts:

http://cdn.yougov.com/cumulus_uploads/document/yf81klddg4/YG-Archives-Trackers-Economy-171111.pdf

(page 14 and following)

and, while it is clear that most people agree they are too fast, too deep, unfair and even bad for the economy, a solid 55-58% agree that they are necessary. Of course you could argue that that is Labour’s position too, but it doesn’t help them much. To follow the same policy you need to convince people that you would be better at implementing it.

To go back to tonight’s ComRes poll, Labour are simply not convincing the electorate – even on traditionally strong policy areas such as jobs and the NHS. Only 27% (v 43%) agree A Labour government under Ed Miliband would be better at protecting people’s jobs only 39% (v 33%) agree The NHS would be safer under Labour than the Conservatives.

This is not a vote of confidence in the government, there are a lot of Don’t Knows and those disagreeing will include some people who think that Labour and the Coalition would be equally good. Or bad. Or powerless. But it shows how far Labour have to go.

@73: “But how can any serious economist promote Ricardian Equivalence or, on a more tangible level, the idea of austerity as the solution to the ‘debt crisis’? Yet this is the consensus position.”

I completely reject the claims made that Ricardian Equivalence with more austerity are the consensus position of economists. This report in Friday’s FT about Martin Weale, a member of the BoE’s Monetary Policy Committee, previously Director of the NIESR, is probably much closer to the elusive consensus among economists:

“There is a ‘very strong case’ for extending the Bank of England’s money-printing operations next year unless the outlook improves, says Martin Weale, an external member of the monetary policy committee.”
http://www.ft.com/cms/s/0/bd9f556e-1136-11e1-9d04-00144feabdc0.html#axzz1eBmaYP92

He warns about creating more national debt to fund additional public spending to stimulate the economy because that will tend to drag down the economy in future.

I’ve repeatedly posted in threads that aggregate demand for goods and services will fall and the economy flag unless net exports, business investment and spending by heavily indebted consumers rise to compensate for the cuts that the government is making in public spending. In Friday’s FT, Sam Brittan writes: “Between the peak of the last cycle in the first quarter of 2008 and the bottom of the recession in the second quarter of 2009 national output fell by a cumulative 7 per cent. Since then there has been a very modest and fitful ‘recovery’ that has failed to take us back to the previous peak.”

Friday’s FT is a bumper issue with conflicting analyses on the Eurozone from Guido Westerwell, the German foreign minister, and from Martin Jacomb on: Now is the time to go back to square one, about why the Eurozone as presently constituted has an in-built recessionary mechanism, a position argued by many economists, including myself in an earlier thread here.

We have in Britain a monetary union and a fiscal union where London and the South East regions make net fiscal contributions to the national exchequer while identifiable public spending in other regions exceeds the tax revenues contributed to the national exchequer. That is the sort of fiscal mechanism needed in the Eurozone to sustain a stable monetary union but which is opposed by the German government.

81. Leon Wolfson

@79 – Because they don’t mention the inconvenient fact that borrowing under Tories is HIGHER.

@80 – Ah yes, austerity-via-inflation, as opposed to austerity-by-cuts, when in practice it’s nearly as bad. Project merlin isn’t fooling anyone anymore.

@81: “Ah yes, austerity-via-inflation, as opposed to austerity-by-cuts”

No – as we’ve noticed elsewhere with your explicit unrestrained enthusiasm for “free market capitalism” you are plainly very confused about economics. Posting silly slogans is no substitute for analysis.

With a flat economy running below the previous peak in output, more Quantitative Easing is hardly likely to promote rampant demand inflation as the result of “too much money chasing too few goods”.

The policy risk is that the additional monetary stimulus will get hoarded in the financial system until the economy picks up and then deployed to finally support additional business lending to SMEs. But there are also policy risks from issuing even more government bonds to finance more public spending to stimulate the economy when borrowing is already rising faster than Osborne intended.

The BoE is predicting that with Britain’s flat economy, the depressed export markets in the Eurozone and subdued earnings growth as the result of rising unemployment, the CPI inflation rate in Britain will likely be at or below the BoE’s target of 2pc by the end of next year.

83. Leon Wolfson

@82 – You’re lying your ass off yet AGAIN, as usual for the hard right.

I am a free-market ANTI-CAPITALIST.

“more Quantitative Easing is hardly likely to promote rampant demand inflation”
“Posting silly slogans is no substitute for analysis.”

Follow your own advice. Over 5% inflation shows that you are starting with a radically flawed premise. That the BoE are predicting something, as they have for YEARS, doesn’t mean that THIS time they’ll magically be correct.

The inflationary target is 2%, and the GROSS NEGLIGENCE of not hitting that target is something you’re whitewashing. But no, keep defending the fact they’re not hitting the target, and that instead of borrowing to create jobs, the Tories are borrowing to stand still (And punishing people even more for the crime of being poor).

Go back to ConHome.

Leon:

You really are hopelessly muddled and confused.

I find it reassuringly comforting when I read the FT to discover that the analysis of its lead economics writers converges with my own thinking on the Eurozone and what to do about Britain’s flagging economy. Try Sam Brittan in Friday’s FT on: Five simple steps to curing Britain’s new depression:
http://www.ft.com/cms/s/0/74e5b240-1114-11e1-ad22-00144feabdc0.html#axzz1eCL4eoVZ

Since what FT writers are saying is persistently critical of government policy, I’m hardly likely to find ConHome with Andrew Lilico, its resident economics guru, congenial company, especially since I, unlike yourself, have been posting for years that the notion of “free-market capitalism” is nonsense for reasons well developed in an economics literature going back to the beginning of the last century.

85. Leon Wolfson

@84 – Your faith in the same economists who have repeatedly failed is touching.

“I find it reassuringly comforting when I read the FT to discover that the analysis of its lead economics writers converges with my own thinking”

Ah yes, groupthink and confirmation bias, those old chestnuts.

“especially since I, unlike yourself, have been posting for years that the notion of “free-market capitalism” is nonsense ”

Except I have been. It’s not-very-free-market Corporatism. Also, unlike you, I don’t pay for paywalled information unless it has actual value.

Your solutions have either been nonsense (the “Scottish Menace”, frex) or removing the free-market elements, rather than removing the Capitalism. That you have tactical disagreements with the ConHom economics editor doesn’t mean you have strategic ones.

Leon

That latest missive is even more confused than I previously supposed.

I don’t pretend to be “socialist” but then neither does the Labour Party nowadays (-: As I learned, ConHome doesn’t believe in free and open debate about policy issues – it censored posts of mine critical of John Redwood’s nonsense.

Why not try the challenging job of focusing on the analysis of real current policy issues as does the FT?

Btw remember that Ed Balls, the present shadow chancellor, used to work for the FT, as a leader writer, before he went off to work for GB years before that election in 1997 which brought New Labour to power. So much for your criticism of “Group Think”.

You really do need to buff up on your economics – try Parta Dasgupta: Economics – A Very Short Introduction (OUP 2007)
http://www.amazon.co.uk/Economics-Very-Short-Introduction-Introductions/dp/0192853457/ref=sr_1_1?ie=UTF8&qid=1321748122&sr=8-1

As I learned, ConHome doesn’t believe in free and open debate about policy issues –it censored posts of mine critical of John Redwood’s nonsense.

Which is why we should delete trolls on here. Tory brownshirts will not tolerate dissent on their sites. We should repay them with their own medicine.

Sally: “Which is why we should delete trolls on here. Tory brownshirts will not tolerate dissent on their sites. We should repay them with their own medicine.”

In our pluralist community, with all its diversity, one person’s troll can be another’s guru.

As JS Mill put it in his essay On Liberty: “If mankind minus one were of one opinion, then mankind is no more justified in silencing the one than the one – if he had the power – would be justified in silencing mankind.”

At one time, Keynes was the odd one out by going against the grain of received conventional wisdom. Ramsay Macdonald’s Labour government of 1929-31 rejected keynesian prescriptions for dealing with unemployment – as did HM Treasury, which persisted in claiming that even with widespread unemployment, additional government spending on public works projects would “crowd out” equivalent private spending. One of Keynes’s suggestions, if there were objections to funding public works spending by borrowing because of crowding out, was to bury Pound notes down a disused mine and auction off the mining rights. Nowadays, we call something like that Quantitative Easing.

In tonight’s news: “Firms are reviewing investment plans after a ‘sharp fall’ in confidence among senior business leaders, according to research by the CBI.”
http://www.bbc.co.uk/news/business-15808916

But not to worry, the communities secretary, Eric Pickles, has come up with an innovative policy to tackle these daunting problems. He is to make a UK curry college that would teach British workers the secret of perfect pakoras a showpiece of the government’s integration strategy.

89. Leon Wolfson

@87 – Geez Sally, you tried on ConHome? Heh, no offence but… (hm, “virtual balls” comes to mind)

@88 – “In our pluralist community, with all its diversity, one person’s troll can be another’s guru. ”

Really, the right ain’t usually big on pluralism.

Regardless, you might have a point in your case, although bluntly your tendency to come up with nonsense like the Scottish menace hardly works in your favour. But care to defend the troll which is SMFS? HIGHLY destructive of debate.

“Regardless, you might have a point in your case, although bluntly your tendency to come up with nonsense like the Scottish menace hardly works in your favour.”

I go by the historic facts. Why did the Roman emperor Hadrian order the construction of a 70 mile wall across the north of Britannia, from coast to coast, to create the most fortified border in the Roman empire?

I didn’t imagine the ill-fated Darien Scheme, which caused the Scottish state to go so totally bust that it had to be rescued by the Act of Union with England.

The capture of Derby by a maurading band of itinerant Scottish Jacobites in 1745 really happened.

As that Rothschild banker remarked concerning the Caledonian canal, “There are three ways to ruin: gambling, women and engineers. If the first two are the more agreeable, the last is the most certain.”

The failing Royal Bank of Scotland and HBOS weren’t malign fantasies on my part, unfortunately. We are having to fork out billions for the necessity of bailing out those banks to prevent a systemic collapse of Britain’s banking system.

91. George Hallam

At one time, Keynes was the odd one out by going against the grain of received conventional wisdom. Ramsay Macdonald’s Labour government of 1929-31 rejected keynesian for dealing with unemployment – as did HM Treasury, which persisted in claiming that even with widespread unemployment, additional government spending on public works projects would “crowd out” equivalent private spending.

This is a bit garbled.

Strictly speaking Keynesian prescriptions are based the idea that macro-economic policies should not be based on micro economics. Keynes didn’t full develop this view until after 1931.

His experience of working on the Macmillan Committee (1929 to 1931) was an important stimulus to him formulating this innovation. This was set up to investigate the effect that the British banking and financial system was having on trade and industry.

In response to the depression Keynes argued for a public works programme to ameliorate unemployment. As you say, the objection to this was the ‘’Treasury view, that public works projects would have no net effect because they would only “crowd out” private investment. Keynes clashed with Montagu Norman, the Governor of the Bank of England, on this issue.

The interesting fact is that Keynes was NOT the odd one. For example, Keynes co-signed two letters to the Times with Pigou, D. H. Macgregor, J. M., W. Layton, A. Salter, and J. Stamp, all prominent economists.

Pigou and plenty of other economists argued for public works. Of course, like Keynes, they did so from within the neo-classical paradigm. This constricted them. Keynes then went on to challenge the foundations of the conventional view.

The significance of this little bit of history is that it shows that:
Firstly, economics is highly flexible, if you want it to be,

Secondly, and contrary to Keynes, the ideas of economists, both when they are right and when they are wrong, are far less more powerful than is commonly understood. Practical men, who believe themselves to be quite exempt from any influence, are usually the slaves of vested interests, Indeed the world is ruled by little else.

@91: “The interesting fact is that Keynes was NOT the odd one”

Agreed but the more pertinent observation is that Tinbergen, in the Netherlands, and Kalecki, in Poland, deserve equal credit with Keynes for realising that the economy is driven by aggregate demand.

Together, they fundamentally changed mainstream economics. The Keynesian notion of the liquidity trap was also significant – namely that there is a floor to the rate of interest in financial markets which can be above the interest rate at which planned saving at full employment is equal to planned investment at full employment. In other words, control over prevailing interest rates may not be sufficient to prevent sustained high unemployment.

Keynes became the standard bearer for a macroeconomics which recognised that self-regulation of markets in capitalist economies wouldn’t necessarily prevent sustained high unemployment. He wasn’t particularly interested in reconciling his macroeconomics with neo-classical microeconomics. He tended to endorse conflicting interpretations of his theory providing the interpretations could explain persisting high unemployment equilibria.

Debates continue as to exactly what Keynes meant as well as to which parts of his theory are crucial for his conclusions. Without Keynes we have to invoke periodic aversions to bicycling to explain why unemployment rises and why that tends to be internationally contagious.

“Pigou and plenty of other economists argued for public works. Of course, like Keynes, they did so from within the neo-classical paradigm. This constricted them.”

It certainly does. The support for public works by neo-classical economists implictly accepts that there is the possibility of a business cycle in market economies which won’t necessarily support socially acceptable levels of employment.

“Secondly, and contrary to Keynes, the ideas of economists, both when they are right and when they are wrong, are far less more powerful than is commonly understood.”

That’s true given the explicit rejection of Keynesian theory by many conservatives on both sides of the Atlantic as well as by the Christian Democrats in Germany.


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