Sunday, June 28, 2015

Responding to Hostile Questioning on Austerity, Jobs and the Deficit

When Diane Abbott appeared on Sunday Politics on 21 June – the day after the massive End Austerity Now demonstration took place in London – there was room for improvement in how she responded to Andrew Neil's tough line of questioning... 


What could she have said that would have made her responses more convincing?

DISCLAIMER: Though the facts are factual, the opinions contained in these responses are my own, and do not necessarily reflect the policy positions of Diane Abbott, Jeremy Corbyn or the Labour Party.


Diane Abbott, let’s look at alternatives to deficit reduction and to cuts in public spending, which is what the (#EndAusterityNow) demonstration wanted yesterday. Does the deficit matter?

It matters a lot less than people are being led to believe by politicians and the media. Unfortunately some leading Labour politicians are also buying into the rhetoric that our biggest economic priority right now is to drive the deficit down and that we need to be looking at spending cuts in order to do that.

It’s a very narrow view of the economic situation. The UK dipped into deflation last month (May), interest rates remain at record lows. What really matters is that we achieve growth, and do so in a way that is sustainable.


Growth may be coming right now, because average real wages are rising by almost 3%...

That is true (Guardian), but it’s important to consider this growth rate - like that of the economy - in historical and economic context. 

The UK’s recovery from the recession caused by the financial crisis of 2007-08 was slowed considerably by the imposition of austerity policies following the election of the Tory/Lib Dem coalition in 2010 (Simon Wren-Lewis). Only a year ago, 2014, average real wages were down at 2004 levels (Guardian). From such a weak base, the growth seen this year is far less impressive than it might initially sound. 

At this point, it would make sense to mention that Osborne changed tack in 2012 and increased spending but. because of the questions asked later on, that will come later...

Also, it’s important to bear in mind what the data actually mean: “average real wages” are average wages adjusted for inflation. As I mentioned earlier, UK consumer price inflation actually went negative in May 2015. In July 2014, it was +1.9% (data). Therefore, the low inflation rate is actually masking weak wage growth.


So should we be borrowing billions more and running a bigger deficit? 

There seems to have become engrained in the public psyche a perception that somehow running a deficit is something that only profligate governments do. But actually when you look back at the records, the IMF’s figures, the Tories ran a structural deficit every year between 1979 and 1997 (Huffington Post) - that’s 18 straight years.

[The government] shouldn’t be taking money out of the economy by imposing austerity policies, but instead listening to what pretty much every eminent economist is saying (Paul Krugman; Ha-Joon Chang et al [Guardian]) and stimulating the real economy. Promoting economic growth and increasing tax revenues, thereby boosting GDP, are often the best ways to get the debt-to-GDP ratio down, and indeed that is the case in the UK (Touchstone Blog; EconomicsHelp) Austerity has been tried and the results are in: it doesn’t work (Krugman (link above; for still more detailed analysis, Mark Blyth’s “Austerity: The History of a Dangerous Idea”).

At this point, Neil would probably have asked his question about Greece, but as the interview actually went he left it til the end - so feel free to jump ahead to that point then come back here!


[Savings from eliminating Trident] don’t save you anything in the next couple of years, and you don’t get much from raising taxes on the rich. Let me be clear, you wouldn’t borrow more?

Trident

Firstly, I support scrapping Trident because it’s the right thing to do, a step in the right direction towards a nuclear-free world (Jeremy Corbyn). Also, I think what a lot of people don’t appreciate about Trident is that it’s not an independent deterrent but is actually largely American-owned (Another Angry Voice). 

We acknowledge the economic impact on Argyll and Bute (where the Faslane base is a major employer) that will result from the discontinuation of Trident (Ian Jack, Guardian) and some of the savings should be re-invested in the region. 

Taxes 

We first of all need to tackle this defeatist attitude that it’s not possible to increase our tax income from the wealthiest individuals and corporations. Unless we get a grip of this, the inequality that has got out of control, and accelerated massively since the financial crisis (Guardian) will just keep on getting worse and worse. Already, the five richest families in the UK own more than the poorest 20% of the population (Guardian). 

There are policies that we could bring in that would go towards addressing this inequality; we need to look at the mechanisms that are being exploited by wealthy individuals and companies to avoid tax and how we can close loopholes. We need to change our relationships with firms that facilitate tax avoidance (SpinWatch). We need to make sure that multinationals that profit from sales to British consumers pay their fair share (Pearson). Where international co-operation is needed to address these issues, we should take a leading role in driving that co-operation.


I’m trying to explore the alternatives; how you would get out of this [deficit]. Given that raising taxes on the rich doesn’t get you that much, in fact it may even be negative, would you raise taxes on Middle England as Jeremy Corbyn suggested in his Newsnight interview? Going into the 40% bracket, should they be paying more than 40%? 

Yes. What I think people sometimes forget is that the higher rates of tax - be they 40%, 50% or whatever - apply only to income above the higher rate threshold. Everyone, even your CEOs and your Premiership footballers, pays basic rate tax on the first tier of their income; no-one actually pays 40% tax on all their income. The 40% really isn’t a high rate by UK historical standards - in the 1950s and 60s it was 90% (Wikipedia)! 


Where does the money [to invest in housing, education etc to create growth] come from? It doesn’t grow on trees, so are you going to borrow more or tax more to get this extra money? 

In the short-term we will borrow more. Despite what the Tories have been telling everyone for the past five years, that’s really not a problem. Our borrowing costs are lower than they’ve ever been (FT), interest rates are near-zero and so is inflation. There’s absolutely no reason aside from right-wing ideology why we shouldn’t borrow more and grow our way out of this slowdown. In the medium-to-long term, as we begin to achieve sustainable growth at the same time as tackling the tax avoidance I talked about earlier, the debt-to-GDP ratio will come down.


How much are tax cuts for the wealthy cost us? How much does the cut in the top rate of tax from 50% to 45% cost the Treasury? 

That all depends on how much the wealthiest individuals (who will have earned the most income over and above the top-rate threshold) managed to avoid! I believe we’re looking at a cost to the Treasury of £3–4 billion per year (Guardian).

More broadly, there is an idea that has been popularised – particularly in America – that tax cuts for the rich can boost revenue rather than costing the Treasury. When economists have actually looked at the data following tax cuts by Republicans in the U.S., they’ve found that it’s untrue (US News). One has to wonder whose interests the people spreading this myth are serving... 


What would happen if we hit the next recession and we still had a massive budget deficit? 

First off, we really don’t have a “massive” budget deficit. We have a modest deficit by historical standards (Data). 

We do need to be prepared for the next recession, and we do that by building our economy on strong foundations for growth, rather than being excessively dependent on the financial industry and on rising house prices (particularly in London; Guardian). Tory policies are leading us down the wrong road, and putting us at risk of a worse downturn in the future.


[If you cannot come out of a recession by making cuts alone], why have we now come out of recession? Why have we now got the fastest-growing economy in the G7?

I think what you’re doing here is taking statistics out of context to make a point that's actually misleading. Yes, we had 2.8% growth in 2014-15, but it’s been 7 years since the crash and onset of the recession and we’re only now just about getting back to where we were beforehand. 

We’ve wasted nearly five years (Simon Wren-Lewis), and that’s been because of the austerity policies of the coalition government. Up to the end of 2012, our recovery was the weakest of all of the G7 countries apart from Italy (Full Fact). Especially considering we’re not tied to the Eurozone with all of its currency’s structural problems, that’s really weak.

What has actually happened - and the Tories have been really sneaky about this - is that it obviously became apparent that austerity wasn’t working. And so, while the government didn’t change their rhetoric, they actually changed their spending policies to reduce the rate at which they were making spending cuts in 2012. The growth that was achieved in 2013 and 2014 follows on from that (Simon Wren-Lewis).

Unfortunately, it looks as though the Tories, now they’re in with a majority, are going to revert to the austerity policies of the coalition’s first two years in office, and we will likely see a downturn as a result. 


If these jobs are so low-wage and so insecure, why are we now in the middle of the longest spell of sustained retail spending since records began? 

I’m not too sure where you’ve got your figures from… The ONS reported that May 2015 represented the 26th consecutive month of growth (ONS). That’s consistent with the GDP data showing that we began to grow in 2013 after the government eased off on their spending cuts (see above) and after three years of weak to non-existent growth since the crash.

Of course, average sales volume data doesn’t tell you all you need to know about retail, and people have seen for themselves the impact of the recession and our slow recovery on their high streets, especially in more deprived regions where the renewed house price boom has had less effect on our towns (Guardian). 
We need to invest in the regions, do what we can to support small businesses and independent retailers and pubs and cafes and restaurants, and make sure that a rising tide lifts all boats and not just the biggest ships. When we put money into the pockets of people with the lowest incomes, and reduce inequality, we’ll start to see real social as well as economic recovery (IMF, via Guardian).


Unsecured credit is now lower than it was as the start of the recession [implying that the increase in retail spending isn't explained by people making more purchases on credit]...

This is misleading, because we’re not comparing the same timeframes. Yes, it’s lower than at the height of the boom (Trading Economics), but it’s growing fast once again. UK consumer credit grew by 6.6% in the year to February 2015 (Bank of England, PDF), so it is likely that a significant proportion of the increase in retail sales volume that we’ve started to see in the past couple of years.


There are 700,000 unfilled vacancies – there are jobs around, and three quarters of the jobs that are being created are full-time jobs...

When we look at the statistics on job vacancies, we see between 2001-08 there were somewhere between 550,000 and 700,000 vacancies in every three-month period until the crash. These numbers therefore represent a typical rate of turnover in the labour market (data from ONS, PDF).

That then dropped to 430,000 in early 2009. Not until the second half of 2013 did the number rise back above 500,000 (data source as above) – once again we’re looking at the impact of the misguided austerity policies imposed in the first couple of years of the coalition government. 


Where are the statistics from the ONS to show that these are all or nearly all low-paid jobs?

They’re not all low-paid jobs but many of them are. The median wage (that of the middle employee if they were all lined up from lowest-paid to highest) makes sense to look at when we're talking about low pay, because it’s less distorted by the extremes at the top end of the scale than the mean wage data are. In 2014 the full-time employee earning the median wage was actually earning less in real terms than they were in 2010 (Full Fact; Full Fact). The median wage is getting closer to the minimum wage (UK Parliamentary Business) – that shows that low pay became more prevalent under the coalition.


If running big deficits and racking up huge debts was the answer, why isn’t the Greek economy booming?

There are so many reasons why that’s not a reasonable comparison to make. First of all, most obviously, Greece is a member of the single currency, the Euro, and it really shouldn’t ever have been admitted. They fudged the figures (Independent). They have structural problems owing to years of corruption (Economist) and massive tax evasion on a scale unheard of in the UK (Guardian), and the austerity is only making the situation worse (Paul Krugman; Paul Krugman [chart below]).



Unlike Greece, the UK controls its own currency, and therefore have fiscal options aside from austerity. That doesn’t mean we think it's a good idea to go out and devalue the pound in lieu of responsible budget management, but rather that the flexibility that we have is reflected in our borrowing costs which are far lower than those of Greece (Benjamin Studebaker). 

Once again, the sensible thing for the UK to do, in the short-term, is to borrow more in these favourable economic conditions of low borrowing costs, interest rates and inflation and invest in infrastructure, housing and a sustainable future for this country. With the boost that the investment will give to the real economy, we’ll start to see our debt-to-GDP ratio go down and equality and social welfare go up.

Saturday, June 20, 2015

Saturday Sound: Robb Johnson

Up to 250,000 people are estimated to have taken part in today's anti-austerity demonstration in Central London, myself among them.

It's been 12 years since I've participated in such a well-attended protest. This music post looks back to 2003, with Robb Johnson.

What Politicians and the Media Aren't Telling You About Austerity

If you're over the age of about 25, you probably remember a time before our politics became pre-occupied with budget deficits and debt-to-GDP ratios. Before "austerity". Aside from a few fringe conservatives, mostly in the U.S., no-one really cared about these things.

You've probably guessed that this sudden shift in the terms of our political debate has something to do with the financial crisis of 2007-08... and you'd be right. The crisis in the banking system that led to the need for huge bailouts paid for from national budgets, was largely contained in the U.S. - but not in Europe.

As shown in the graph, the ratio of outstanding domestic credit to GDP continued to rise in Europe (but not the U.S.) well into the 2010s. The assets of European banks represent multiples of nations' GDPs (the U.K. is one of those nations). By comparison, U.S. banks' assets represent around 120% of GDP - and the U.S. has the advantage of being able to print the world's reserve currency.

So, why do we have austerity? Why has our politics - here in the U.K. and in the Eurozone - become obsessed with budget deficits? It's all about 1) saving the banks and 2) saving the Euro. The lower the debt-to-GDP ratio of a nation - particularly one with no currency flexibility such as those in the Eurozone - the more scope it has for taking bad bank assets onto its books. 

The only trouble is, austerity doesn't work. The economic slowdown that results from austerity policies means that the GDP growth required to get the debt-to-GDP ratio down cannot be achieved. The banks remain at risk of collapse. And austerity itself is socially harmful, hitting the poorest and the disabled hardest.

There has to be another way, because this one is a dismal failure.


Read more about the ideas discussed in this post: Prof. Mark Blyth (Austerity: The History of a Dangerous Idea)


Monday, June 15, 2015

An Astounding Achievement

I'm in shock. It's been a whirlwind week-and-a-half, and I'm still getting used to the fact that the seemingly impossible has become reality.



On this momentous Monday morning, Jeremy Corbyn received nominations from more than a dozen MPs. In doing so, he overcame the formidable hurdle put in front of him by party rules and became the fourth candidate on the ballot paper upon which the next leader of the Labour party will be elected. Jeremy will participate in public hustings and televised debates over the summer, and will surely make the most of the inestimable opportunity that has come his way to make the crucial case against austerity.

Ben Sellers rightly describes this as an astounding achievement. Jeremy's candicacy came about because activists, dissatisfied with the lack of effective opposition to Tory rhetoric about public spending and austerity among leadership candidates, demanded the opportunity to vote for a genuine alternative. When, in response, Jeremy announced that he would run, his chances of chances of getting onto the ballot were seen as remote.

Thousands upon thousands of tweets, poll votes, petition signatures, letters and emails to MPs later, and here we are, in a position to effect real change. Everyone who has participated in this extraordinary grassroots effort has helped to demonstrate that Labour in 2015 has the potential to be a movement again. Now, the real campaigning starts...

Saturday, June 13, 2015

Escape from Bizarro World

Eminent economists have lined up to slam George Osborne's plans for a 'balanced budget' law, saying that it ignores "basic economics" and warning that the imposition of such restrictions on a modern economy risks triggering a liquidity crisis.

Signatories of the letter published in yesterday's Guardian include Ha-Joon Chang, Thomas Piketty, David Blanchflower and Jared Bernstein, as well as professors of economics at Oxford University, the London School of Economics, the University of London and Warwick University among others.

Meanwhile, Nobel Prize-winning economist Paul Krugman, writing in the New York Times yesterday, attacked the British government's austerity policies and shameful rhetoric in no uncertain terms.
The ultimate example of a seriously bad idea is the determination, in the teeth of all the evidence, to declare government spending that helps the less fortunate a crucial cause of our economic problems.
Astonishingly, some in the Labour party believe that the best way forward for the party is to join the Tories in economic Bizarro World – capitulating to the dominant narrative that Krugman calls out for its absurdity. Writing on the ironically-named blog Labour Uncut, Samuel Dale argues that Labour should support Osborne's economically illiterate 'balanced budget' proposal.

Dale's argument is that the economics don't matter: the politics demand that Labour admit defeat on their economic record and move on. It's not an irrational argument, and based on the pronouncements made by all three of the front-runners for this summer's leadership election it's one that the party is somewhat taken by. It's also dead wrong.

Krugman:
Mr. Osborne sounds very serious [about his 'balanced budget' proposal], and, if history is any guide, the Labour Party won’t make any effective counterarguments.
If we are to escape from the Bizarro World of Osbornomics – one that is completely at odds with economic reality as viewed by most serious economists – Labour have to confront the myths and must not capitulate to that dominant narrative. It is extraordinary that the only leadership candidate who has given any indication of being prepared to do so is Jeremy Corbyn.

Regardless of anything else, this is why Corbyn must be on the ballot paper when nominations close on Monday.

Saturday Sound: Robb Johnson & The Irregulars

On Question Time last week, broadcast from Plymouth, an elderly local man speaking from the audience contrasted the austerity policies of the current government with those of Attlee's Labour, elected shortly after the end of World War II in Europe in July 1945:
After [the War] this country was broke. That was austerity. What happened?
Labour gave us the National Health. They gave us houses. They gave us full employment. They gave us that.
Now the Tories are taking it away!
Robb Johnson is one of the finest radical singer-songwriters currently performing. Here he is with his band the Irregulars, celebrating the post-War spirit that man in Plymouth referred to.


Tuesday, June 9, 2015

Jeremy Corbyn: Labour mustn't let this opportunity slip away

Since my last post about the leadership race on Saturday, the surge of enthusiasm among Labour members and supporters for Jeremy Corbyn's candidacy has continued unabated. He now has 15 MP backers and needs 20 more to reach the leadership ballot.

That the Parliamentary Labour Party do what's necessary for Corbyn to participate in the debates is of tremendous importance for the party's future. It has the potential to really energise Labour activism, and bring to life what will otherwise be a thoroughly uninspiring election process.

As well as the now 15,000 people who have expressed their support on Facebook, all of the below activist groups and supporter organisations have communicated their support for Jeremy Corbyn since his announcement (updated 10 June):

Additionally, influential individuals (other than Labour MPs) who support Jeremy's inclusion on the ballot include:

Finally, and admittedly it's only an online straw poll, but 52% of respondents in the Daily Mirror selected Jeremy Corbyn as their preference for leader


The time in which the PLP can make the right decision is short! Nominations close on the 15th.

Labour mustn't let this huge opportunity slip through their hands. Please, MPs, nominate Jeremy Corbyn for the leadership ballot.

Saturday, June 6, 2015

Saturday Sound: Attila the Stockbroker

I've talked a lot this past couple of weeks about the economic fallacies peddled by the Tories (and their coalition partners up until last month, the Lib Dems) and about the failure of Labour in opposition to combat these myths.

A large helping of blame, however, has to be assigned to our mainstream media. Among the worst culprits are the outlets owned by Rupert Murdoch...

Which brings me on to my spoken-word selection for this week's Saturday Sound, by Attila the Stockbroker. Attila also happens to be the organiser of the Glastonwick festival, whose 20th iteration I attended last weekend.



The crumbling case for austerity

I truly believe that people in years to come will look back at the economic policies of the UK government since 2010 and shake their heads in disbelief. Moreover, they will struggle to understand how on earth the supposedly left-of-centre opposition could fail so completely to expose these ideology-driven and destructive policies.

In Business For Scotland today, Gordon MacIntyre-Kemp argues that the myths underlying austerity policies are set to crumble. Such is the unreconcilable conflict between the political narrative and the economic reality, something eventually has to give. 66% of 33 macroeconomics experts surveyed earlier this year stated that coalition policies had not had a "positive effect" on the UK economy. Even the IMF, who are hardly known for their radicalism, are now advising that there is no reason for the UK to rush to cut back debt and, rather, that paying down debt too quickly could take an unnecessary toll on investment and growth.

However, in spite of all this, the opposition continues to derelict its duty to fight this economic nonsense. If you listen to Labour leadership candidates discussing the economy you'd be forgiven for thinking that they are completely unaware of any of the vast and growing body of evidence that austerity policies are actually damaging our economy.

As of last Wednesday, however there's hope for change. Jeremy Corbyn announced that he is standing for the Labour leadership on a clear anti-austerity platform.






Andy Burnham has indicated that he would support further welfare cuts, including a benefits cap, and has failed to use his platform to combat pro-austerity myths, along with...

...Yvette Cooper, who like Burnham served in the shadow cabinet throughout the coalition's 2010-15 term in office. This opposition failed miserably to oppose the economic narrative of the Tories and the right-wing media. She also supports welfare caps that government figures show will result in more children living in poverty through no fault of their own.

Liz Kendall is a complete disaster. It's not an exaggeration to say that her election as leader would mean the end of the Labour party as an effective opposition. She actively assists the Tories in promulgating the myth that Labour spent too much before the financial crisis, and  Phil BC over at All That Is Solid sums her candidacy up as follows: "Your candidature condenses all the faulty analyses and mistaken policy conclusions that are not only most egregious, but potentially most ruinous for our party over the tumultuous five years ahead".

Mary Creagh is currently lagging behind Corbyn in nominations (with 6, to Corbyn's 11) despite having announced her candidacy much earlier. That may be because she has proven unable to articulate any kind of vision for the future of the party at all beyond empty sloganeering.

In summary: In selecting a leader, Labour must look ahead to the next election, which will surely take place after the disintegration of the current flawed economic dogma. The consequence of failure to see beyond 2015 will be irrelevance.


H/T for bringing the Business For Scotland article to my attention: Linuspoint (Twitter)

Friday, June 5, 2015

Jeremy Corbyn: An open letter to potential nominators

Dear _________,

I am writing in the hope that you might consider lending your support to Jeremy Corbyn for inclusion in the Labour leadership ballot.

Since Jeremy announced his candidacy, there has been an enormous surge in interest in the leadership campaign. The debate around the future of the Labour party has been reinvigorated thanks to the renewed potential for members and supporters to vote for a candidate who offers real change.

Only Jeremy Corbyn has the potential to boost Labour's appeal to young people, and to those who are currently disengaged with party politics because they feel it has little to offer and see few reasons to favour one party over another. Social media is but one measure of appeal, but it is an indication of the excitement around the possibility of real change that Jeremy offers that just 48 hours after his announcement over 10,000 people had engaged with the Jeremy Corbyn for Labour Leader Facebook page, more than double the number who have 'liked' any other candidate's page.

Only Jeremy Corbyn offers a clear anti-austerity message. Unlike any of the other four candidates, Corbyn represents real change from the conservative consensus that there is no alternative to cuts to public services and the widening and deepening of divisions in society between the haves and have-nots and between the well and the unwell.

Jeremy Corbyn has demonstrated throughout his political career that he is unimpeachably principled and utterly genuine. He is the credible candidate – the one who can restore the British people's greatly damaged faith in politics.

For these reasons and more, it is imperative that the members and supporters of the Labour party be given the opportunity to vote for Jeremy Corbyn. Please, in your capacity as Labour MP, do what you can to make sure they have that opportunity.

Yours,
__________

Supporting the Jeremy Corbyn campaign

I'm not, and never have been, a member of the Labour Party, but such is the need for an alternative to the current "one rule for the rich and another for the poor" austerity/austerity-lite consensus that I'm giving my support to the campaign for Jeremy Corbyn as Labour leader.


The below text is adapted from a post I made to the Jeremy Corbyn for Labour Leader Facebook group...

It's so important that Jeremy gains enough nominations to enable him to participate in the leadership debates as the only anti-austerity and anti-war candidate.

Very encouraging news is that 10 MPs have already signed up to support Jeremy, but time is short to gather the additional 25 needed. However, there is cause for optimism as nearly 100 Labour MPs are still to declare their support for any candidate.

I have put together a Google Sheet (online spreadsheet) to, hopefully, aid campaigners. It lists all the Labour MPs, their constituencies, and who they have or haven't declared their support for. I invite fellow supporters to use it as best they can to support the campaign to get Jeremy onto the ballot and into those debates, where he'll provide a genuine left-wing voice that's noticeable by its absence among the other four candidates.


Monday, June 1, 2015

Saturday Sound: Grace Petrie

Posted a little late this week, because I've been away at Glastonwick music & beer festival. In addition to 85 eclectic and delicious real ales, the music line-up included many of the most stirring protest singers and bands in the UK today (and one from the US). 

One of the newer names on that list is Grace Petrie, from Leicester - this is her song written about the welfare policies of the coalition government, but unfortunately no less apt today...