If left-wing is anti poverty, how is Corbyn left-wing?

Most left-wingers I meet think of left-wing politics as being about reducing poverty. If that’s left-wing, then I regard myself as a left-winger.

They usually only believe in a bigger state, because they think the state is the best way to help the weakest in our society.

That can be true, but it depends how far you take it.

In my previous article “Is evidence-based policy losing out to populism?”, I argued that two supposedly left-wing policies, which Jeremy Corbyn has proposed, could actually increase poverty. Raising the national minimum wage beyond the recommendations of the Low Pay Commission will probably increase unemployment, particularly for the unskilled who will increasingly have difficulty finding work. And printing money to fund capital projects will risk a return of the curse of high inflation.

Not all Corbyn’s policies are bad, but I think the worst is his central theme, an end to austerity.

We are currently running an £89.2 billion deficit, a lot lower than the £153.5 billion of five years ago, but still high. Even if we adjust for the economic cycle and remove capital spending, it’s still £43.7 billion per year.

On top of that, we have a public sector debt of over 80% of our GDP, which is already worryingly high. If we don’t reduce the deficit, the debt will continue increasing, and so will the interest future generations pay on that debt.

Many left-wingers argue that austerity is not necessary because Keynes shows we can get out of a deficit by spending more, stimulating demand, and the increased size of the economy will generate taxes that will reduce the deficit.

That seems to me a complete misrepresentation of Keynes. He argued that deficit spending made sense during an economic downturn, but it should then be matched by budget surpluses after. As we are now in the expansion phase of the economic cycle, it’s very disappointing to hear supposed followers of Keynes advocating the opposite of Keynes.

Of course, Keynes’ belief in surpluses during the expansion phase is only his opinion. In a paper just released for debate, some IMF economists have suggested that countries like the UK could have the option of running a balanced budget, and then allow our high levels of debt to decline as the economy grows. This suggests that George Osborne may be being too savage with his cuts, which I think many Liberal Democrats would agree with. However, it would still require continued austerity, as we are a long way from a balanced budget.

Whichever of these two views is correct, running a deficit in a recession clearly makes sense. But now we are in the expansion phase, failing to reduce the deficit means borrowing more money from the future to pay for better public services today.

However, it’s even worse than that.

There are currently four people of working age supporting each pensioner in Britain. By 2035 this number is expected to fall to 2.5, and by 2050 to just two. Pensioners bring many benefits to society, but, with a greater need for health care and welfare support, they significantly increase costs to the welfare state.

That means that by 2035 our welfare system will be under much greater strain than it is today. And, in that sense, the future will be poorer than the present.

If, rather than running a surplus or a balanced budget during the expansion years of the economic cycle, we run a large deficit, that means we’ll be forcing the taxpayers of 2035 to subsidise our public services today. And that means we’ll be taking from the poorer future, to pay for our richer today.

How is that left-wing?

(This article raises many questions which I don’t have space to answer. If LDV are willing, I will continue in a future article which will suggest what policies would truly reduce poverty)

* George Kendall is chair of the Social Democrat Group, which is being formed to celebrate and develop our social democrat heritage, and to reach out to social democrats beyond the party. He writes in a personal capacity.

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47 Comments

  • I believe it is best to accept first that Jeremy Corbyn is genuinely left-wing. Nor do I believe there is any mileage in suggesting that Jeremy Corbyn would not prefer to see poverty reduced.

    I believe the argument must be over how effective is the Corbyn plan for reducing poverty. It is often claimed that every Labour government has left unemployment higher than it found it. We know that the [evil austerity inducing] coalition government reduced unemployment by 700,000 from the position they inherited from Labour in 2010.It seems to me that a critical difference between the Labour approach to poverty and the position the Liberal Democrats fought for over the last five years is essentially a difference between viewing poverty as a static problem and viewing poverty as a dynamic problem.

    I think the Labour viewpoint is that poverty is a static problem and its solution is to give more money to those people who are poorest now – even if this means screwing the economy so more people are poorer later on. Back in 1979 Peter Townsend’s study Poverty in the United Kingdom brought home to me for the first time that poverty is not a static problem at all – far more people experience poverty over the course of their lifetime than are poor at point in time. I think this point was grasped by the Liberal Democrats in government and they tried hard to introduce a series of solutions that [if they are not thrown away by Cameron’s government] will have a dynamic impact on poverty.

    I believe two of those reforms will do far more good than any of the reopening of former deep coal mines in South Wales proposed by Jeremy Corbyn.

    The first is Steve Webb’s reform of the pension system so that everyone who makes good use of [possibly temporary] good fortune to save for their old age will always be better off for doing so and will not get caught up in Gordon Brown’s pension credit trap.

    The second is Nick Clegg’s pupil premium which tips the educational playing field in favour of the least well off and thus improves the chances that people will be able to break out of the harsh circumstances that have griped their parents.

  • Matthew Huntbach 11th Sep '15 - 3:12pm

    George Kendall

    Most left-wingers I meet think of left-wing politics as being about reducing poverty. If that’s left-wing, then I regard myself as a left-winger.

    Yes, but the standard line of economic right-wingers is “If we cut taxes on the rich at the expense of public services to the less rich, they are such good and productive people that they will work harder and better because of it, the economy will grow and all will benefit and poverty will be ended”. While you’re not actually talking about cutting taxes on the rich, your argument is becoming a bit close to that, and you don’t actually talk about raising them as a way of cutting the deficit. Why is it that “austerity” only applies to some of the population?

    Corbyn’s line is much the same as the economic right-wingers in some way. Both say “Our economic ideas will work so well, that the economy will grow, so don’t worry about the details”. Corbyn is genuinely convinced that the borrowing he propose will be of long-term help to the economy in this way, and he has had support from some serious economists on this line.

    My feeling is that a lot of what you call “austerity” amounts to budget cuts being made at the top, and passed lower down to those who must actually implement them (e.g. all of local government) with the line “You work out the details”. Well, what actually happens then is that cuts are made which have long-term expensive cost impacts. But, if you are told you MUST implement them, that’s what you do – do something which might cost you more in a few years’ time, or where the long-term cost impact falls on someone’s else’s patch, and you’ve done what you were asked to do.
    I think the problem in the UK is that we have had a LOT of this over several decades now, and that’s why “austerity” isn’t working. Right-wingers then say “Waah, state spending as proportion of GDP isn’t going down, so we are just silly old socialists and must make more cuts to be true to what we believe”, and it’s a vicious circle.

  • ………………………… I argued that two supposedly left-wing policies, which Jeremy Corbyn has proposed, could actually increase poverty. Raising the national minimum wage beyond the recommendations of the Low Pay Commission will probably increase unemployment, particularly for the unskilled who will increasingly have difficulty finding work. And printing money to fund capital projects will risk a return of the curse of high inflation……………..

    Yes! I remember how we were told the introduction of the ‘minimum wage’ would have dire consequences on employment….As for printing money? We seem to have no problem with QE and ‘giving’ money to banks to ‘lend-on’ after taking their cut of course…

    And some say Corbyn is out of touch…

  • “Not all Corbyn’s policies are bad, but I think the worst is his central theme, an end to austerity.”

    I think you’re making an assumption here that Corbyn (and all ‘left wingers’) want to run perpetual budget deficits, getting further and further into debt. What Corbyn’s proposing is and end to austerity – cuts to public expenditure. A bigger government can always be funded by higher taxation – and moving the burden of taxation onto the richest – look over the water to Scandinavia for examples of that..

    “Raising the national minimum wage beyond the recommendations of the Low Pay Commission will probably increase unemployment, particularly for the unskilled who will increasingly have difficulty finding work.”

    That is the traditional economic theory view for sure, but we’ve been here before when original minimum wage was introduced. The self serving prophecies of doom from economists and business leaders failed to materialise. Companies will find a way. There may be some inflation.. which brings me to

    “And printing money to fund capital projects will risk a return of the curse of high inflation.”

    Again the traditional view for sure, but right now the global threat is deflation, not inflation. Some inflationary pressure would be no bad thing, especially if you were using that money to invest in infrastructure which in theory should increase the long term growth capability of the country.

    Look, I’m not saying I agree with everything Corbyn says (leaving NATO in particular is crackers). But last time I looked Liberals were meant to be challenging the policy status quo and dogma – we should keep an open mind on these ideas.

  • I’m no longer going to comment on the Lib Dem Voice until it gets out of this rut. Here’s what I think. I think the Right of the Lib Dems took the party down to 8 seats and can’t accept they got it wrong and so think spooking the few remaining lib Dems, and I am one, with scary pointy horned Corbysatanl stories will somehow persuade me , a lib dem voter, into voting lib Dem. When it all actually does is annoy me with it’s tiresome nostalgia for the coalition and it’s lack of vision.

  • Matthew Huntbach 11th Sep '15 - 4:06pm

    George Kendall

    By 2035 this number is expected to fall to 2.5, and by 2050 to just two. Pensioners bring many benefits to society, but, with a greater need for health care and welfare support, they significantly increase costs to the welfare state.

    Yes, we have loads and loads, and will have more so, of old people sitting in misery but refusing to contemplate the sort of taxes on property and inheritance that might fund the services that would help them on the grounds “Waah, my children and grandchildren need the money from my house when they inherit it, that’s the only way they can afford to buy a house of their own”. And why is that? Because house prices are pushed up, as due to the lack of property tax it’s the most money-raising investment, and as house prices reflect what money people have to pay for them, having inheritance money to pay for them means you have more to pay for them. It’s another vicious circle.

    Making it less profitable to hang on to property ends this, and encourages people to invest in other things, maybe building up businesses.

  • Matthew Huntbach 11th Sep '15 - 4:09pm

    Simon Shaw

    Really? Who told you that? More likely your memory is at fault.

    Oh, come on, it was a line always put by the Tories and the right-wing press in the days when there was no minimum wage whenever someone suggested introducing one.

  • Why is Simon Shaw constantly repeating himself? He sounds like he has an echo!

  • I get upset when I read liberals worrying about the size of the National Debt. I wonder why they don’t know that it terms of GDP it is not at an all-time high. I wonder why they don’t know that the economic growth of the 1950’s, 60’s and 70’s reduced it from 237% of GDP in 1947 to 42% in 1979. I know I shouldn’t expect them to know that the National Debt was over 100% of GDP from 1756 to 1860. I expect them not to sign-up to the Conservative narrative.

    When discussing the need to have a budget surplus again they take the Conservative position. In the good times, which I define as when unemployment is less than 3% as defined by Beveridge, it is still not necessary to have a budget surplus, it is important that the deficit as a percentage is less than the rate of growth. What is often forgotten by those who follow this Conservative narrative is that as the economy grows and more people are employed the tax take goes up and assuming that the government isn’t subsiding wages as it is now, government spending is reduced and these factors during periods of economic growth and declining unemployment automatically bring the deficit down without the need for any cuts or austerity. Another benefit of full employment is that it increases wages!

    As the number of people in work compared to those in retirement decreases it is important to look at ways of taxing companies more to pay for those not earning, so they can continue to consume.

    What would be a good idea I think would be for us to fund our 300,000 new house a year with quantitative easing. Wouldn’t lots of the inflationary pressure be reduced by the reduction in house prices and rents?

  • Simon.Shaw 11th Sep ’15 – 3:49pm………[email protected]! I remember how we were told the introduction of the ‘minimum wage’ would have dire consequences on employment…”Really? Who told you that? More likely your memory is at fault……………

    I was tempted not respond to such nonsense but; Lets try the Conservative party, David Cameron and the CBI…………………..”The policy was opposed by the Conservative party at the time of implementation, who argued that it would create extra costs for businesses and would cause unemployment. In 1996, The Conservative party’s current leader, David Cameron, standing as a prospective member of parliament for Stafford, had said that the minimum wage “would send unemployment straight back up”. However, in 2005 Cameron stated that “I think the minimum wage has been a success, yes. It turned out much better than many people expected, including the CBI.” It is now Conservative Party policy to support the minimum wage…….

  • George Kendall 11th Sep '15 - 6:32pm

    @Richard
    If left-wing means a bigger state, then I agree Corbyn is left-wing. I’m sure he wants to reduce poverty. But, as you’ll have gathered, I think his policies will be counter-productive.

    I think the pupil premium was probably our best policy throughout the coalition years. It’ll take time to see the benefits, but I understand early evidence is encouraging. Steve Webb’s reform of the pension system to make it pay to save for a pension, is also excellent.
    This will probably annoy some people, but I also think the integration of benefits under Ian Duncan Smith is a good policy – but any good they are doing is more than undone by the heavy cuts that the Tories are making to benefits.

  • George Kendall 11th Sep '15 - 6:34pm

    @Matthew Huntbach
    “While you’re not actually talking about cutting taxes on the rich, your argument is becoming a bit close to that”
    If that’s how it’s coming over, I’ve communicated poorly. My apologies. That’s not what I mean at all.

    For the record, I’d like to see a slight rise in taxes for people in the 40k to 150k range, higher property taxes on high value property, which is low-taxed by international standards. I would have rejected the cuts in tax for the wealthy in Osborne’s budget. And I’d want to reduce the cuts to welfare, and increase support for training and help in getting young people into work. I hope to expand on this in a future article.

    “Corbyn is genuinely convinced that the borrowing he propose will be of long-term help to the economy in this way, and he has had support from some serious economists on this line.”

    Perhaps, but I wonder. I was struck when going through the names of those 40 economists from around the world who wrote to the Guardian that, apart from David Blanchflower, I’d never heard of any of them. And it was very interesting how many leading left-wing economists did *not* put their name to the letter.
    They claimed in the letter than Corbyn’s policies were backed by the conservative IMF which is clearly untrue.
    The main thrust of the letter seemed to be to say, we aren’t necessarily Corbyn supporters, but the real extremist is Osborne. (I have to say, a number of their criticisms of Osborne I’d complete agree with) But I wonder if all the signatories really understood the details of the Corbyn programme that they were lending credibility to.

  • George Kendall 11th Sep '15 - 6:44pm

    @expats
    Thanks for your comment. I think I answered your point on the minumum wage in my response to Jack, in the other thread. If you want to respond there, I’d be happy to continue the discussion.

    As to your second point, I think Robert Peston, linked to in the article of the other thread, probably responded to that better than I. If you want to discuss what Robert Peston said, again I’d be happy to continue the discussion in the other thread.

    See http://www.libdemvoice.org/is-evidencebased-policy-losing-out-to-populism-47408.html

  • George Kendall 11th Sep '15 - 7:06pm

    @Gareth Wilson
    Thanks Gareth. You raise an issue I’d love to have put in my articles – but just not enough space.

    It’s true that Corbyn has claimed he can raise substantial sums from further increases in taxes on the rich and the closing tax loopholes.

    Regarding further increased taxes on the very rich, I fear, if we’re not careful, that could be counterproductive. The IFS have written a papers on how raising income tax too high could result in getting less income for a number of factors. Strangely, they missed out the obvious factor – rich people going abroad where the taxes were lower. I’m no fan of the mega-rich, but I’d really prefer we could use the tax revenues from them to keep funding our welfare state. I’m also concerned that if some of them leave, they may take their businesses with them, and so reduce employment, and reduce tax revenue further.

    What I think we need to do is look objectively at where we can increase taxes on the rich, without those being counter-productive. Have a look at my response to Matthew Hunbach, above, for a couple of thoughts on that.

    Regarding tax loopholes, this is a perennial claim of politicians in every party. While Corbyn is worse than most, all parties have done it. In practice closing these loopholes is a lot harder in practice than it might appear in a campaign speech – otherwise it would probably have happened anyway.

    On the minimum wage, I’m going to continue responding to folks on that in the other, thread. But I won’t here.

    “but right now the global threat is deflation”

    Possibly. We have no idea how the potential crisis in China will play out. But in the UK, thankfully, that’s not an immediate problem. We are well into the recovery phase of the economic cycle. I’d like us to use of that phase to follow Keynes advice, and get our finances in order. If a global recession does hit in a few years, we may need to do a lot of borrowing then – let’s not reduce our ability to respond to a recession by needlessly increasing debt now.

    “last time I looked Liberals were meant to be challenging the policy status quo and dogma”

    I’m all for challenging had dogma. But, where I believe the conventional economic consensus is correct, I don’t want to disagree for the sake of it.

    @Matthew Huntbach
    Again, on house-prices I suspect we’re in agreement. I agree taxes may help a little, but I think the big challenge is simply to build more houses.

  • Actually I denounce my forma policy on not commentating on Corbyn articles.
    The thing that worries me most is that Corbyn will spend the tax payers money on the development of special Marxist Leninist un-refrigerators that keep tinned beans at exactly room temperature and will nationalise everything including breathing, which would be much more efficient and better run by the private sector like rain water and streams, I also here that Corbyn is going to swan around in ruby encrusted Trotskyite bike clips.

  • @ Michael BG “I get upset when I read liberals worrying about the size of the National Debt… I wonder why they don’t know that the economic growth of the 1950’s, 60’s and 70’s reduced it from 237% of GDP in 1947 to 42% in 1979”. Apart from the growth in the economy might not the surpluses governments ran in most years between 1945 and 1975 have had something to do with the fall in debt relative to GDP?

    After conference debates housing at the end of September I think you will find that many liberals believe that now is a good time for the public sector to borrow to fund a substantial social housing programme but not by pretending that this is a policy without costs as it can all be magicked away using the smoke and mirrors of QE.

  • George Kendall 11th Sep '15 - 8:02pm

    @Michael BG
    “GDP it is not at an all-time high”
    True. I read an interesting piece a while ago on this from the IFS http://www.ifs.org.uk/bns/bn26.pdf
    There are a few differences, though. Our high debt is not as a result of a war of national survival. Instead, it’s due to the highest peace-time deficit in our history.

    But I don’t understand why you’re upset about us worrying about debt. Surely Keynes did. Surely historically Liberals have always been concerned with government finances.

    “it is important that the deficit as a percentage is less than the rate of growth”

    The trouble with this approach is, while it may stabilise the debt percentage of GDP in the short term, each time we hit a recession, the debt percentage will increase again.

    And as that debt percentage increases, each year the government will have to spend more money servicing that debt.

    At the moment, even with low interest rates, we’re paying £43bn per year. That’s 8% of government tax revenue. If that get’s too high, when coupled with an ageing population, if we try to tax companies more to pay for the welfare state, won’t those jobs just go overseas?

  • @ Richard

    “Apart from the growth in the economy might not the surpluses governments ran in most years between 1945 and 1975 have had something to do with the fall in debt relative to GDP?
    “After conference debates housing at the end of September I think you will find that many liberals believe that now is a good time for the public sector to borrow to fund a substantial social housing programme but not by pretending that this is a policy without costs as it can all be magicked away using the smoke and mirrors of QE.”

    There are about 30 years between 1945 and 1975 but only in 5 years was there a surplus: 1948, 1949, 1957, 1969 and 1970. So in most years there was a deficit!

    Quantitative Easing is not magic, it is a way to increase the money supply, by buying financial assets such as government bonds from financial institutions in the hope that these financial institution will lend the money to grow the economy. Therefore it would make sense to buy the government bonds straight from the government, missing out the middle man, so the government can invest the money to grow the economy and in my example finance the building of 300,000 houses a year.

  • George Kendall 11th Sep '15 - 8:07pm

    @Richard
    “I think you will find that many liberals believe that now is a good time for the public sector to borrow to fund a substantial social housing programme but not by pretending that this is a policy without costs”
    I won’t be at conference, but this is a debate I’ll be interested in following. There’s no quick fix on housing, too few have been built over so many years that it’d probably take a decade of serious effect to make a significant difference.

    I’d like to see more public provision of housing. But I’d also like to see us thinking about how to get the private sector to build more.

  • @ George Kendall

    It appears that 80% of GDP is your concern. Please let me know what war we fighting in 1720 when it went up to 82.82%? Please let me know what war we fighting in 1750 when it went up to 107.44%? Please let me know what war we fighting in 1821 when it went up to 260.34%?

    If we look at the increases in National Debt between 2000 and 2016 the biggest increase was in 2009 of 13.04% of GDP. In 1720 the increase was 18.81%.

    Another advantage of full employment along with increases to wages is inflation. Increased wages increase the tax take and inflation reduced the value of the National Debt.

  • George Kendall 11th Sep '15 - 11:18pm

    @Glenn
    I’m sorry you don’t want to engage in the debates we’re having in this thread. For all my disagreements with Jeremy Corbyn, he is very right when he says that politics should be about discussing policies.

    I’ve tried to outline in some detail why I think his policies are counter-productive. He is likely to be the next leader of the Labour party, so this is a very topical subject.

    I don’t think I’ve made superficial attacks, but tell me if I have. Where I can, I’ve given links so you can check up my references.

    And the article isn’t just about Jeremy Corbyn, but about the wider ongoing issue that our government is still spending a lot more than it’s bringing in in revenue. This is still one of the most important political issues facing the country.

    It’d be great to hear your views. Why not join in?

  • Eddie Sammon 12th Sep '15 - 12:08am

    It’s good to raise the impact of high regulation on small businesses and unemployment. I have conceded a bit of economic ground to Corbyn and have been focusing on foreign policy, mainly, where I think he is weaker.

    The thing is any economic debate with Corbyn will quickly get brought onto benefits and public sector workers, which his activists feel very passionate about. But I reckon if we point out the foreign policy flaws more we can pick off a lot of activists.

    However good to mention the flaws of his economic policy. The Tories sound like they have a simple and effective campaign lined up if Corbyn wins: a threat to Britain’s security at home and abroad. Economic and foreign.

  • George Kendall 12th Sep '15 - 12:40am

    @Eddie Sammon

    Thanks for your comment.

    Part of my motivation in writing this is that I feel too much of the criticism of Jeremy Corbyn has been that he can’t beat the Tories. That might give the impression that, while he is unelectable, he might be right on the economy. Of course I think that’s totally false.

    I’ve wanted to write a critique over two articles, which covers in reasonable detail some of the problems with his economic policies, and particularly that they may be counterproductive in reducing poverty.

    I also hope, if any moderate Labour supporters have had a look, that they’ll see we have a lot in common, in wanting to reduce poverty, but to make sure our policies will genuinely do what we intend.

    I know some people will think that I’ve been overly negative, but I hope, in a future article for LDV, that I’ll be able to outline a more positive list of anti-poverty policies, and start a debate where people can add their own.

    As for foreign affairs, I think that’ll be done to death elsewhere, and I don’t want to repeat what others have already said.

  • Eddie Sammon 12th Sep '15 - 3:12am

    Thanks George. Yes I agee. It is important not to give away the moral high ground to Corbyn, but likewise important not to give up questioning ourselves. Personally I think if a moderate Labour MP just said “no more public sector cuts” they might have won. I think that is really what drives the Corbynistas. Maybe.

  • George Kendall,
    There are no Corbyn policies. His one repeatedly stated aim is to consult with the labour party before setting any policies. His real biggest problem will be higher expectations than he can deliver. He’s a Socialist, but he’s one in co-operative influenced “we need negotiate and get an agreement sense”. He’s not an El Presidente. Also, at the time of writing he isn’t actually the Labour leader either! So most of these articles are speculation about the effects of policies that aren’t policie, but merely some thoughts by someone who isn’t leading a party yet and if he does become leader won’t lead it in the way these articles are arguing he will. So personally I find it all a bit like idle gossip.
    On a more pertinent level, I argued endlessly that the attacks on Miliband and the SNP here on the Lib Dem voice were counter productive because it turns people off. Negative campaigning works for the Conservatives because they have a lager fixed voter base and a press that comes pretty close to being a propaganda wing. As a Liberal I find this kind of thing distasteful and off putting.
    Here’s my thoughts made very simple. I think those in charge of the electoral campaign got almost everything wrong and accidentally campaigned for a Conservative Government by adopting elements of project fear. I think the results are pretty clear evidence that I am fairly close to being right and would suggest that the same mistakes are being repeated here. The Lib Dems gain nothing from echoing a mostly Conservative press because it just adds to a back ground drip feed of “change is dangerous, vote Conservative” which in turn bolsters the argument that all you can do is join a rightwards drift. I would like to see of less passive acceptance of the current order of things.

  • Eddie

    I think the best potentially vote-winning policy we came up with in the election campaign (although virtually unnoticed) was the end to public sector pay freezes.

    Public sector workers who are vital to this country really have borne the brunt of the “we are all in it together” austerity programme, with many losing their jobs and the rest losing 15% or so of their income since 2008. Far greater than the tax cuts from raising the allowance… Private sector workers suffered too, but not any more…

  • George Kendall 12th Sep '15 - 11:46am

    @Glenn

    In a literal sense, you are right. In his campaign document, Corbyn talks about options, he doesn’t make cast-iron policy commitments.

    But in politics it’s not the fine print that matters most, it’s the impression you give with your message. As you say, it’s the expectations you create.

    And Corbyn’s message has been, we don’t need cuts to close the deficit, and we can do it in the following ways…

    And, we can make people better off in the following ways…

    What I’ve been trying to do is examine in some detail three of those policies. There’s many other policies I could have covered, but even confining myself to three areas, I’ve had to be more superficial than I’d like.

    In how it will work out, I’m not sure you are right.

    Corbyn has led and built a movement, of socialist people and socialist unions, which may be in the process of taking over the Labour party. That movement may not have a set of policies which it has made a cast-iron commitment to deliver. But, in my opinion, the three policies I have outlined are central to what they would deliver if they ever came to power.

    I think it is valid, and indeed essential, that these policies are thoroughly critiqued. This is what I’ve tried to do in this article.

    Where I agree with you is your implied criticism that I have not been critiquing the Tories as thoroughly. That’s something I hope to remedy in the near future.

  • Simon Shaw 11th Sep ’15 – 10:15pm …………[email protected]…….I see you ignore the real point, so here is is again:…

    Yet another of your ignoring the substance referring to the minimum wage…You write “”Really? Who told you that? More likely your memory is at fault” but, when proved wrong, you refuse to admit any error and create a strawman…. I won’t bother responding to you again….

  • I am afraid that this article is all over the place:
    1) We are not in an expansionary phase when the labour market is still quite weak and interest rates are at incredible lows. Non-housing inflation is not high. Long-term growth predictions are bad. Indeed, it was only by curtailing austerity a little (and allowing a build-up in housing debt), that the Tories’ juiced the economy in time for the election.
    2) What evidence is there that the size of public sector debt is problematic? None that anyone can see. Bond markets are quiet, historically it doesn’t look high.
    3) Infrastructure spending might very well increase long-term growth rates in the short- and long-term. Considering the size of QE (and the complete failure of it to see Weimar-style inflation), warnings about inflation seem to be rather empty. Besides, a little inflation would help reduce the size of the debt in real-terms.
    4) When there is a lack of demand in the economy, why would we aim for a balanced budget??? This is craziness. Look at a sectoral balances approach here for a better analysis. Besides, it says that governments shouldn’t run a surplus, because it would be costly, not that the budget should be balanced. This also contradicts your (misinterpretation) of Keynes earlier.
    5) Where is the mention of household and corporate debt? Where is the mention of inadequate demand? Where is the mention of the productivity problem?

  • Oh, the minimum wage point is bizarre too. Considering the lack of demand in the economy and considering the empirical economics of minimum wage rises, I think a living wage is a very liberal principle. Perhaps we should match this with a commitment to close the skills gap?

  • George Kendall 12th Sep '15 - 11:19pm

    @Stevo, thanks for your comments.

    I’m curious. Do you disagree with independentreport’s interpretation of Keynes views, when they say:
    “Though Keynes argued for budget deficits to stimulate demand, he also advocated for subsequent budget surpluses to eradicate debt. That part of the equation seems to have been forgotten by many.”
    See http://independentreport.blogspot.co.uk/2012/03/john-maynard-keynes-was-right-and-not.html

    (1) “We are not in an expansionary phase”
    People use these terms in so many ways, we’re probably both right.
    For example in this article about the USA economy:
    http://useconomy.about.com/od/glossary/g/business_cycle.htm
    “In the Expansion phase, GDP growth turns positive again, and should be in the healthy 2-3% range. If the economy is managed well, it can stay in the Expansion phase for years. The current expansion phase started in the third quarter 2009, when GDP rose 1.3%.”
    As the UK economy has had growth of over 2% for seven quarters, I’d say we were comfortably in the expansionary phase, by that definition.

    (2) “What evidence is there that the size of public sector debt is problematic?”
    Others seem to think so.
    The Maastricht Debt-to-GDP ratio criteria set a ceiling of 60%, because they regarded higher debt as a problem.
    See http://www.cityam.com/article/1399490719/closing-deficit-isnt-enough-uk-debt-risk-financial-stability
    But frankly, 80% isn’t a big problem if it’s temporary. What is a problem is if the markets believe there is no credible deficit reduction programme. Thankfully, we have had such a programme since 2010, hence the low interest rates the markets are willing to accept on our debt.

  • George Kendall 12th Sep '15 - 11:19pm

    (3) Regarding inflation, obviously, the Bank of England disagree with you. One of the committee even voted to raise interest rates.
    That said, I’m not opposed to more infrastructure spending, indeed, I’d welcome it. I just think People’s Quantitative Easing is dangerous, especially now we’re well out of the recession.

    (4) “When there is a lack of demand in the economy, why would we aim for a balanced budget”
    Ask the Labour party pre-Corbyn, Alistair Darling 2010, just to name two.

    (5) “Where is the mention of household and corporate debt”
    I agree that is very important, as is the productivity problem, but this article already covers far more ground that is usual. I tried to keep the focus narrowed as much as possible.

    On the minimum wage, do you disagree with the OBR, that it says that Osborne’s increase could cost around 60,000 jobs? (Obviously, Corbyn’s proposal is higher, so the cost of jobs would be higher)

  • George Kendall 12th Sep '15 - 11:52pm

    @George Turner

    Sorry for the delayed response. I was trying to look up some relevant info I’d read before. Stupid of me, I should have remembered it was the slides from the IFS presentation…

    You said: “I really wish people could understand the difference between debt, deficit, public spending and austerity.”

    I think I understand the differences. However, if I have used those terms in inconsistent ways, please do point it out. I know I’ve had typos in the past, so it’s entirely possible the wrong word could be used in the future.

    You said: “The tories have been handing out corporate subsidies and tax breaks like it is Christmas. That is why we have austerity, not because we spend too much on public services (public spending).”

    Paul Johnson, Director of the IFS, described the tax changes as: “£14 billion of tax increases were partially offset by £8 billion of tax cuts”
    http://www.ifs.org.uk/tools_and_resources/budget/505

    There’s a load of giveaways to the rich that make my stomach turn. However, there are other tax cuts which aren’t of that nature. Still, even if you reversed all the tax cuts, that would still only make a small dent in a £89.2 billion hole.

  • (1) Keynes was saying that when demand is too strong, government should take some heat out of the economy. Would you say that the economy is too hot???? It is perhaps easier to think of it in terms of sectoral balances: when households and companies have too much debt on their balance sheet, government needs to run a deficit so that they can run a surplus. That’s a simple accounting relationship. So, to ask your question another way, do households and companies have too much debt? Or too little? Bear in mind the historical trends here:
    http://i.dailymail.co.uk/i/pix/2014/08/14/article-2724894-2086E2B500000578-939_634x380.jpg

    (2) Many, many others seem to think it’s not. And why fixate on public debt and not private debt? Martin Wolf and many others have said that UK public debt is historically not that high. Besides, the government can’t deleverage at the same time as households and businesses. The Maastricht criteria were part of governing arrangements of the euro that have proved to be widely ignored and rather useless.

    (3) Raise interest rates by a very small amount. And plenty of BoE economists disagree with you. The point is about how the monetary mechanism works (or doesn’t work). Lots of academic economists think it is broken, which is why QE has done little to help. A higher fiscal transfer directly into bank accounts and infrastructure spending could indeed we coupled with higher interest rates, but the additional spending would both encourage jobs and personal balance sheet deleveraging.

    (4) That’s not an answer to the question. In fact it is a complete non-sequitur.

    (5) You can’t really consider these points independently.

    No, I do not agree with the OBR. The empirical record of minimum wage rises tends to run completely counter to a comparative statics modeling approach. See Blinder’s book on this.

  • George Kendall 13th Sep '15 - 9:03pm

    @Stevo
    re: (1) Another interesting quote from the independentreport report is:
    “Deficits, he believed, were to be begrudgingly accepted as a necessary evil only in some circumstances.”
    If he were only begrudgingly accepting deficits in some places, it seems to me unlikely he would not want to bring down a £89.2 billion deficit when we have been growing at over 2% for 7 quarters.
    I’m not for a moment suggesting that no modern day Keynesians are arguing for us to pause deficit reduction. I’m talking about the man himself.
    Do you think that quote from independentreport is inaccurate? Do you disagree that Keynes only accepted deficits begrudgingly in some circumstances.

    “(4) That’s not an answer to the question. In fact it is a complete non-sequitur.”
    Perhaps we are talking at cross-purposes here.

    The reason I answered as I did was, well, mostly I was tired, and I’d spent too long on the internet as it was. But also, Chris Leslie, Ed Balls and Alistair Darling take a different view from Corbyn.

    I had assumed that you were defending the expectations that Jeremy Corbyn raising, and the policies he may implement to meet them. (His document is full of maybes, so I think the theme of anti-austerity is more important than the policies)

    But perhaps you were under the mistaken impression I am defending Osborne’s policy, and was criticising me on that basis.

    If so, we’ve been talking at cross purposes. Do you disagree with the economic positions Labour took in 2010 and 2015? Do you disagree with Chris Leslie’s view now?

    If you don’t, maybe we agree more than we realise?

  • (1) Yes, I do. I think I probably agree more with Keynes’ biographer, Lord Skidelsky, on what Keynes would have wanted. Also, let’s un-pack that 2% number. Growth comes from two things (mostly linked to each other): increased consumer spending coming from increased wages thanks to increased productivity. When real wages are flat, productivity is flatlining etc, could it be that this growth isn’t sustainable growth but because of unsustainable rises in asset prices? Again, look at the sectoral balances. And try again to answer the question: is debt too high or too low?
    (4) perhaps we are talking at cross-purposes, so let me re-state the original question: why balance the budget when there is a lack of demand?

    Do I take it that you agree with me on the other points that I raised?

  • George Kendall 14th Sep '15 - 2:01am

    @Stevo

    Genuine question: Has Lord Skidelsky explicitly said disagreed that Keynes was were only to be begrudgingly accepted? If I were to meet Lord Skidelsky, it’s that question I would want to ask, and about Keynes attitude to debt.

    I’ve usually disagreed with Lord Skidelsky on the occasions I’ve heard him, but I would be interested to hear his opinion. Nonetheless. I’m also pleased to see that Lord Skidelsky did not sign that letter to the Guardian, offering credibility to Corbyn’s economic policies.

    My suspicion is, if pressed, he’d say that the world situation has changed so much, it’s harder than you might think to answer that question. I recall hearing another expert on Keynes say pretty much exactly that.

    (1) I’m with Vince Cable. I think debt is far too high.

    Sadly, at present, too much of our economic growth has been based on debt, domestic, but much more worryingly, international debt. If we were a hermetically sealed economy, private and public debt wouldn’t be such a problem. As some modern Keynesians argue, in a hermetically sealed economy, debt and credit would balance out, and the government could move debt around from private to public, without too much worry.

    Regarding whether some of our growth isn’t sustainable, I agree. I particularly disliked Osborne’s policy of subsidising house-buying. I think some of that 2% will be because Osborne timed his economic strategy to boost growth around the 2015 election (not that that’s a hanging offense, every politician in history has done it).

    However, I don’t think over 2% for seven quarters can all be explained away by that.

  • George Kendall 14th Sep '15 - 2:15am

    Stevo “Do I take it that you agree with me on the other points that I raised?”

    I think you know the answer to that one. My post was already long enough, and I then went off to do something else.

    So let’s pick up on a few of them…

    (2) “Martin Wolf and many others have said that UK public debt is historically not that high”

    Martin Wolf is one of the few economic commentators I have respect for. Not because I agree with him, but because he is honest about how much disagreement there is in his profression on these issues. He writes clear and interesting prose, without resorting to hyperbole, or slipping into propaganda for his side of the debate. If I bought the FT, it’d, in part, be to read him.

    It’s true that debt has been far higher. In the 20th century, that’s been because of two wars of survival. But, anyway, I reiterate, 80% isn’t a problem, if there’s a plan to deal with the deficit.

    Another consideration is how our debt and deficit compare internationally.

    Have a look at the charts on page 9 of this briefing from the OBR.

    http://budgetresponsibility.org.uk/pubs/Brief-guide-to-the-public-finances-July-2015.pdf

    We’re about a third of the way from the top, in terms of total debt. Not great, but too to get too alarmed about. When it comes to the deficit, though, we’re third from the bottom.

  • George Kendall 14th Sep '15 - 2:27am

    Sorry, going to have to stop, but one more:

    (3) “A higher fiscal transfer directly into bank accounts and infrastructure spending could indeed we coupled with higher interest rates”

    I’ve heard that idea discussed by more mainstream economists than Richard Murphy, but that was in the middle of a recession, when we were desperate to look at any options out of a terrible hole.

    We haven’t done QE since 2012, because we are no longer in a terrible hole.

    My fears about People’s QE are twofold.

    Firstly, I know the pressure on politicians to find easy short-term solutions to problems, which will store up far worse problems in the future. If the precedent of using People’s QE were set, I think it would be inevitable that it would be abused.

    Secondly, I think the Bank of England Independence has been a success, in large part because it’s increased the confidence of the international markets that the UK’s economic policy is being driven by long-term considerations, not populism. In my view, People’s QE would destroy that confidence, and that would result in a higher interest to be paid on new debt, and that loss of confidence would linger for at least a decade, even after the policy was stopped.

    Higher interest rates on debt would mean more taxpayers money going to service that debt, which would mean that as demographic pressures put increased strain on public services, it may become impossible to maintain the welfare state as we have it now.

  • George, thank you for your continuing dialogue.
    * If it doesn’t come from productivity growth, where can the 2% come from?? Again, if it doesn’t come from real wage growth linked to productivity, then it must come from debt. That’s the opposite of what we want!! Again, the major driver of all economic disasters of the last 50 years has been an excess of private debt. I’ll ask again:
    “So, to ask your question another way, do households and companies have too much debt? Or too little? Bear in mind the historical trends here:
    http://i.dailymail.co.uk/i/pix/2014/08/14/article-2724894-2086E2B500000578-939_634x380.jpg
    * Governments can issue their own currency. Families and companies can’t. If you want to have households and companies deleverage- YOU WANT THAT, RIGHT??- then government HAS to run a deficit. Or the country as a whole has to massively export more than it imports. Lowering the deficit means less deleveraging. As you say, historically we’ve had more debt (the size of the Great Recession makes your comparison unsurprising). Indeed, according to the OBR document you cited, we had debt of that size in the late 60s, a rather good time economically.
    * As to hermetically-sealed, this was a strange comment. Wynne Godley’s sectoral balances- which I have referenced several times- says that there must be a balance between deficit and surplus between international, household, corporate and government. You want household and corporate debt (which is much more worryingly high, and different in nature, to government debt) to come down. So that means there needs to be a trade surplus and a government deficit to allow for surpluses in the other two sectors. You don’t need a plan to deal with the deficit when you still need to socialize debt from the private sector. You need a plan for the deficit AFTER the deleveraging has taken place. See my link again…. This is a long time off!
    * As for Keynes’ heritage, you have two options: Krugman’s neoclassical Keynesianism and post-Keynesian traditions. Both of them disagree with your interpretation that the economy is overheating and should be cooled off with interest rates rises and cuts in spending! There was a good recent article on this here: http://www.socialliberal.net/shouldn_t_we_listen_to_those_who_predicted_the_crash_part_three

  • * Traditional QE wasn’t working, so it is unsurprising that it ceased. See again the problem with the monetary transfer mechanism. I find it surprising that you think the economy is so strong. Most people, I think, consider the UK economy exceedingly weak and storing up more problems for the future.
    I have no idea why People’s QE would trigger a lack of confidence, and I see no evidence for thr effect you subscribe to BoE independence. But then, of course, markets can be thoroughly irrational anyway.
    * You think interest rates will stay low forever otherwise? Why do you not worry about the continuing high levels of private and corporate debt considering the prospect of an interest rate rise?

  • George Kendall 14th Sep '15 - 12:25pm

    @Stevo
    I’ve enjoyed this discussion. I find discussing in an open forum is good if it draws in others to the debate, but, in my experience, three days after the article is published, there usually aren’t new commenters.

    You used the word “we” in another thread. If so, presumably you are a party member. In which case, maybe we could continue this discussion in the members forum, where there almost certainly would be new commenters on any discussion.
    Or if you’d prefer, by private one-to-one message in the members forum – which has it’s advantages, as sometimes discussion without an audience allows for a more frank and open debate.

    Let me know if this would work for you.

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