The Economist backs Cable, but it's no lurch to the left!

Cable looks to the heavens for inspiration

In a further sign that Cameron and Osborne are losing economic credibility even among their own side ahead of the 2013 Budget, The Economist's editorial has come out in favour of Vince Cable's proposals which he outlined in the New Statesman earlier this week.

Although more clearly articulated, Cable's proposals and modest critique of Osborne's strategy are actually more right wing than what the two Eds' Labour Party is calling for. Call it 'austerity-lite-lite'. Vince has since been feted by many, including now the journal "read by more of the world's political and business leaders than any other magazine".

The Economist backs the case for extra borrowing, made by Cable:

"All in all, the present evidence does indeed – with qualifications – point to some weakness of domestic demand and a low risk of expansionary policies spilling over into significant domestically generated inflation."

As the editorial points out, "between 2009-10 and 2011-12 public-sector net investment plunged from £48.5 billion to £28 billion" a large part of the reason for the appalling construction figures.

However, like Cable, The Economist also advocates that some "expansionary policies" i.e. public investment, should be funded by cuts to pensioner benefits and that perennial punchbag, welfare. The Economist also supports Cable's call to remove the ringfence around NHS funding.

This highlights how Cable is still very much on the Orange Book wing of the Liberal Democrats. Austerity is failing, the markets are unhappy, and what Cable and The Economist reflect is the capitalist class scrabbling around for an ideologically compatible solution to the enduring slump.

The fact that the right is divided, and Cameron and Osborne increasingly isolated, is reason for joy, but Labour and the trade union movement should not be taking sides in this internecine squabble.

Instead the struggle goes on to stop austerity in its tracks - not simply find another route for it to get to the same destination.

The left should take some encouragement however that its analysis is being proved right and that the right is having to adopt some of our proposals. In the case of The Economist both for more borrowing to invest, and - surprisingly - for a Land Value Tax:

"One reason why companies sit on development land is because they do not pay taxes until the offices and warehouses are built. It would be much better to tax the land value: that would make hoarding expensive and force owners to sell to someone who can use the site. Once in use, the site value and the tax would rise—creating a virtuous circle, as the revenues pay for better infrastructure, making land more valuable."

Permanent austerity?

In the New Statesman this week, former member of Blair's inner circle Alan Milburn comes over a bit Fukuyama-like and predicts:

"Austerity is the new normal. It is not a temporary phenomenon. It will become permanent. Fiscal conservatism is the order of the day."

See the way he emphasises his point using short sentences? It's classic Blair era communication training; used to signify authority, gravitas and confidence. The less generous among you might dismiss this Dalek-like grammar as pompous, hubristic and rhetorical. It is. There is a new consensus. Milburn is part of it. It is permanently wrong.

However it is powerful, and unites the Tories, the Orange Book Lib Dems and the New Labour factions. Under the not-quite-leadership of Ed Miliband, Labour has at times seemed to embrace this consensus, but at other times hinted at breaking away from it.

There is a macroeconomic context to it though. Milburn explains this is terms no less likely to make you want to smack him in the face:

"The truth is this: the era of big public spending is over ... The implications for public spending of a more constrained fiscal environment are threefold. First, governments will be forced to choose between spending programmes as well as within them. Second, they will have to think in a new way about how to get better value from existing programmes. And third, Europe's largely tentative efforts to reform welfare and public-service provision will have to move up a gear"

There is no alternative. But why? Milburn doesn't say. But the reason is the unspoken consensus: that rather than find a new economic structure we must slash wages in a race to the bottom to compete with the autocratic union-busting state capitalism of China.

So inequality is here to stay, even if Milburn laments it "How to address growing inequality?" briefly, before moving swiftly on to more important questions, like "How to create wealth and reward it?"

The question of how to create wealth is an interesting one. Banks do it by issuing credit (making loans) on which they charge interest. Now maybe if the state did that? For instance China's post-economic stimulus meant an expansion of public bank credit going to companies set up by local governments to help fund infrastructure investment. Combining economic controls with trade union rights, civil liberties and democracy is no contradiction - despite the fact both China and the UK fail to do it.

But what Milburn wants to debate is not whether we can control credit or our currency, or redistribute the wealth we all create. No, Milburn's article is about how to privatise the NHS as a solution.

There is an Alternative!

Ditch austerity and try another route

Two letters from The Guardian on 17/02/12:


As the Greek public order minister says his people "can't take any more", it's timely that Simon Jenkins (Austerity fails, yet we're too shy to think outside the box, 15 February) says the failure to take economic management beyond the diktats of austerity has become the great intellectual treason of today.

It is not just in Greece that austerity is failing but in the UK, too. George Osborne's emergency budget was supposed to bring Britain back from the brink but has, instead, pushed us closer to the precipice. Where he predicted growth of 2.3% last year, we got 0.3% – less than in the US, Germany, France, and even Italy where their leader's economic incompetence got him deposed.

This failure to generate growth – which Osborne pledged to create by cutting the public sector, which he said had been "crowding out" the private sector – means his government is borrowing billions more than planned, necessitating further cuts. Unemployment is the highest for a generation, with youth unemployment the highest ever on record.

The alternative required is the exact opposite of austerity; it is investing for growth, creating jobs to get people working again, and raising wages and benefits to create demand. We have distributed over 250,000 copies of our "There is an alternative" pamphlet, explaining how this would work. Even the modest stimulus in the US has meant falling unemployment and higher growth. Mr Osborne should at least aspire to that, rather than following Greece into a death spiral.

Mark Serwotka
General secretary, Public and Commercial Services Union


• Simon Jenkins rightly wails that "thousands of citizens across Europe are having their lives ruined ... because a financial elite, once burned, is too shy to think out of its box". Fair enough, but maybe part of the problem is that the Guardian, like most of the media elite, is itself too shy to publish outside the box. With the unemployment trajectory on course this week for 3 million by the end of the year, it is remarkable that the renowned policy analyst Peter Taylor-Gooby was not even mentioned when he recently published his research study linking the potential for civil disorder and riots to the legitimacy of the austerity measures taken by western governments over two decades and suggesting that without change further unrest will follow.

Similarly, when tackling the economic deficit Greg Philo offers a radical proposal of a wealth tax of 20% on the assets of the richest 10%, but his work never gets beyond the Guardian's website. There's a comforting staleness in reading the same old establishment faces in the Guardian and watching them on Question Time or the Politics Show. Exceptions apart, to have a Guardian journalist decry others for a lack of radical thinking when the paper has been a fervent advocate of the timidity of British politics is a bit rich.

John McDonnell MP
Hayes and Harlington

Teachi-n this Saturday. Birkbeck College London

Capitalism isn't sustainable. Spending cuts, climate change, unemployment and soaring prices. What's the alternative? Teach-in this Saturday, Birkbeck College, London.

Details http://tinyurl.com/6x8fk43

Tax justice becomes a movement

As we blogged on 30 November, tax justice has taken to the streets.


After years of painstaking research and lobbying by the Tax Justice Network, ably supported by PCS - whose members work, and are increasingly being cut from, HM Revenue and Customs - the campaign now has a movement to further raise its profile and popularise it: UK Uncut, which has branded the campaign 'Big Society Revenue & Customs'.

On Saturday 4 December there was, according to the BBC (though there's a better write-up in the Morning Star) actions in 21 towns and cities across the UK, including Birmingham, Brighton, Bristol, Cambridge, Edinburgh, Glasgow, Leeds, Leicester, Nottingham, Oxford, Portsmouth, Southampton, York

PCS General Secretary Mark Serwotka said:

"People are rightly angry that the government is targeting the most vulnerable in our society with massive cuts in spending and yet it appears to be very relaxed about rich and powerful tax dodgers.

"We have campaigned for two years for action to be taken to tackle the billions of pounds in tax lost to our economy every year because wealthy individuals and organisations avoid paying what they owe.

"The moral and economic case, particularly at a time when we are told action needs to be taken to bring down the budget deficit, is unarguable."

This video shows how unarguable these campaigners - shutting down Oxford Street Top Shop - know the case to be, and there's some great photos and reportage from harpymarx.



And you really know a campaign has caught the zeitgeist when even the Daily Mail begins highlighting further corporate tax avoiders to protest against!

Centre for Progressive Economics launch in Belfast

I was invited to speak at the launch of the Centre for Progressive Economics (CPE) at Queen's University in Belfast on Saturday, and I'll post links to some of the papers and my own contribution once they're online.

On the same day of course, south of the border, over 100,000 people marched through Dublin in a huge demonstration against the austerity measures there. If you want to see the impact Osborne's cuts will have there is no better crystal ball than Ireland.

CPE is an excellent initiative, bringing together academics, activists and trade unionists to put forward an alternative to the discredited neo-liberal economics that continues to dominate mainstream discourse. The CPE has similar aims, politics and organisation to LEAP, and I hope LEAP and the CPE will learn from each other and share information and research over the coming months and years.

This is the CPE's introductory statement:

For many, the coalition government’s emergency budget in July 2010 and the Comprehensive Spending Review in October were declarations of war on the welfare state. The cut on corporation tax on profits, whilst increasing VAT and attacking universal benefits are not fiscal decisions but ideological. The relentless propaganda about the budget deficit and the need for deep and quick cuts needs to be portrayed for what it is, a Conservative led attempt to use the economic crisis to break the welfare state and re-shape the economy in the interests of the few. This seminar begins a series motivated by asking the following simple question:

‘why when in politics we do not think it desirable to have ONE theory of how politics and society should be organised, should we accept that there is only ONE theory of economics?’

The Centre for Progressive Economics has been established following discussions between the labour movement and a number of academics in Northern Ireland and beyond. The discussions identified the need for a progressive economic and social analysis to counteract the disappearance of labour and left focused research in third level institutions and its replacement by a neo-liberal orthodoxy. In response an ad hoc labour and progressive think tank has emerged to comprising trade unionists and academics with a broad remit to identify relevant issues for labour and broad progressive politics. The Centre for Progressive Economics seeks to promote a genuine debate within our political, policy and public/media discourse about the ‘economy’ and ‘economics’. ‘Economics’ is not synonymous with the ‘free market’ or ‘neo-classical economic thinking’, and the ‘economy’ is not synonymous with ‘capitalism’. At this time of global economic crisis and the literal bankruptcy and socially negative impacts of ‘business as usual’ economics there is a pressing need for fresh thinking about our economic future. This is an alternative and the Centre for Progressive Economics will seek to provoke debate as to that future in the Northern Ireland regional economy and beyond.

Is the cuts consensus crumbling?

Since the story switched from 'bad banks' to 'bloated public sector', at some point in 2009, there has been a political consensus in the UK which included the three main political parties and the mainstream media. This consensus was that cuts on an unprecedented scale where necessary to avoid economic oblivion, caused primarily by lavish public spending.

The consensus was economic nonsense, but ideological cover for attacking the last vestiges of public ownership (e.g. Royal Mail, the NHS and education) and the welfare state.


Finally, this consensus seems to be crumbling. The TUC in September highlighted the unions' opposition to cuts, and the pamphlet published by the PCS union 'There is an Alternative' probably the most articulate destruction of the cuts consensus. Tens of thousands of copies have been distributed at the TUC and party conferences, to PCS activists, and to the wider movement. Tax justice campaigner Richard Murphy said of it "This is very good, from PCS. I know because people in the Treasury told me so."

Following on from the TUC, the Labour Party's new leader Ed Miliband used his first speech to chart a different course from the Darling-Brown axis (which was championed by the defeated David Miliband). The excerpts are below - it's not quite earned him an invite to LEAP, but it does represent a shift in direction:

Economics teaches us that at a time of recession governments run up deficits.

We were too exposed to financial services as an economy so the impact of the crash on the public finances was deeper on us than on others.

We should take responsibility for not building a more resilient economy.

But what we should not do as a country is make a bad situation worse by embarking on deficit reduction at a pace and in a way that endangers our recovery.

The starting point for a responsible plan is to halve the deficit over four years, but growth is our priority and we must remain vigilant against a downturn.

You see, it's obvious really, when you cancel thousands of new school buildings at a stroke, it isn't just bad for our kids, it's bad for construction companies at a time when their order books are empty.

It's not responsible, it's irresponsible.

When you deprive Sheffield Forgemasters of a loan, a loan from which government would be paid back, you deprive Britain of the ability to lead the world in new technology.

It's not responsible, it's irresponsible. And we should say so.

And when you reduce your economic policy simply to deficit reduction alone, you leave Britain without a plan for growth, which is what this government has done.

No plan for growth means no credible plan for deficit reduction.

Ed Balls, who to be fair was heading in this direction earlier, used his speech to Labour Party conference to say we had to "put growth and jobs first" and he reminded delegates that Ramsay MacDonald had said there was no alternative to cuts (he didn't add that much of the previous new Labour government said that too and many of them have joined: Hutton, Milburn; and Mandelson offered to).

This shift in Labour policy will also be bolstered by the Guardian/ICM poll published today, which shows that "43% now saying the cuts have gone too far compared with the 37% who think the balance is right. By contrast, in July 39% thought the balance right, and 38% said too far".

Given the cuts have yet to be outlined in full until 20 October, and many of those announced have yet to impact, this should be a worrying trend for the coalition government.

It's up to all of us to kill off this consensus, and build the opposition. Today, there are reasons for optimism.

Never forget the reason we're in this mess - and that there are alternatives to cuts

Last week the BBC's Robert Peston posted a blog on the BBC website 'The risks of forcing banks off welfare'. It's an interesting post and of itself is thought provoking - is it in bad taste when £11bn welfare cuts have just been announced? Would the 'impartial' BBC allow a blog opposing the withdrawal of welfare to human beings?

However, in his honest appraisal of the state of the banks, Peston does reveal some useful information:

"At the peak of the financial crisis in late 2008, public-sector support for the worlds' banks - in the form of loans, guarantees, insurance and investment - was equivalent to a quarter of everything the world produces, or more than $12trillion.
In the UK, support reached a maximum of around £1.3trillion, almost 100% of GDP.

"These weren't just a few handouts. This was the biggest co-ordinated financial rescue operation the world had ever seen."

While £1.3 trillion was paid out in bank welfare, the unsustainable UK human welfare bill is just £0.19 trillion per year. And here, according to Peston are the UK payback terms:

"In the UK, for example, UK banks face a deadline of the end of 2012 to repay £165bn of high-quality liquid assets supplied to them by the Bank of England under the Special Liquidity Scheme.

"And over the same timescale, British banks will have to find £120bn to pay back debt that has been guaranteed by the Treasury under the Credit Guarantee Scheme (there is an option to roll over a third of these government guarantees to 2014)."

Right, so we have a annual deficit of £159 billion, and within 18 months the banking sector should repay £165 billion ... let's also remember that if it was not for these extraordinary levels of support the banks got, it is quite possible that the entire UK banking sector would have collapsed. Yet despite saving an entire industry, despite the fact we paid more to save it than it was actually worth at the time, we own virtually none of it, and control very little.

The UK bank bailout was the largest redistribution of wealth in our history. From poor to rich. The Emergency Budget consolidated that. There is a class war being waged, not by militant trade union leaders but by the state and big business.

There are of course alternatives to the Government's approach and that of its predecessor. We need to be publicising those alternatives, publicising the real reasons for the crisis and not accepting the need for cuts.

PCS has produced an excellent flyer for its members 'Our alternative to spending cuts', which could be used by any activist seeking an alternative to the cuts.