How to beat Johnson’s government on economics

Might election campaigns have the foundations of attractive ideas, emotional appeal and a plausible previous record?

This government has/had strong emotional appeal, especially through its leader. Its ideas have the benefit of being based on the currently dominant economic theory of Neo-liberalism. It is supported, directly and indirectly by the mainstream media which, mostly, bolsters the performance of HM Government.

Opposition parties lack the theatrical style of Mr. Johnson. Therefore attack his language techniques. Ratios of jokes to facts? Ditto facts to inaccuracies. Ditto future tenses to past tenses. Which speech has the most metaphors etc.?

The oppositions propose variants of Neoliberalism. This weakens our nation and our oppositions. The purpose of neo-liberalism is the transfer of wealth to the very wealthy from the not so wealthy and to exploit/ruin our World. As the numbers of millionaires increase, so do food bank numbers. Climate crisis is evident.

Start speeches with the latest data on food banks etc.? Become more accurate and more used for reference than the Main Stream Media?

Opposition parties appear to be offering “Neo-liberalism Lite”. This is inherently weak as Conservative “do” neoliberalism whole heartedly. Therefore oppositions need to promote, adopt and apply different socio-economic theories or policies.

Alternatives include Classical Economics and Modern Monetary Theory.

Classical economics aimed/aims to “protect populations from having to pay prices that included a non-labor rent or financial “tax” to pay landlords, natural resource owners, monopolists and bond holders”. (M. Hudson) This minimises internal prices such as housing and finance. It will have to be adapted as we no longer have gold associated money but many of its facets would improve society and lower costs to the many.

Modern Monetary Theory uses the actuality of non gold-based money positively through being resource based rather than the (arbitrary) account book based. Societal efficiency is assessed against integral functions such as employment and inflation.

Neo-liberalism’s balance of payments is external to actual function. It explains not to whom debts are owed, nor when.

M. M. T presents a clear statement of the purposes/results of taxation enabling us to think and work for “Optimal Taxation” and not the harmful delusion of minimal taxation. Taxation benefits include:
✔ governmental power with force
✔ currency validation
✔ inflation management
✔ wealth distribution management
✔ behaviour management e.g. tobacco taxation
✔ popular interest in government and so democracy
✔ secure societal infrastructures

M. M. T shows that “balancing the books” is a myth and that a nation with its own currency can issue enough money for a fully employed, well fed, housed and educated citizenry, provided that there is full, properly paid employment and inflation is well managed through taxation and not under employment and in-work poverty.

Being “nice Conservatives” supports Conservatives by being part of an ineffectual and boring opposition.

Well informed and managed sovereign currency nations can always afford good infrastructures. The “financial deficits” we have been groomed to fear are not realities. Our starving children deficits are.

Please read “J is for Junk Economics” (M. Hudson) and “The Deficit Myth” (S. Kelton).

* Steve Trevathan is chairperson of Lyme Regis and Marshwood Vale Liberal Democrats.

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50 Comments

  • Wishful thinking IMO.

    The consequences of printing too much money do not change just because you have a new theory. The economy doesn’t care about your theory.

    Printing too much money has been tried lots of times with reliably bad consequences.

  • Peter Martin 12th Oct '21 - 2:00pm

    @ Joe Otten,

    “The economy doesn’t care about your theory.”

    I suppose we could say that gravity doesn’t care about either Newton’s or Einstein’s theory! But we know if we fall off a ladder…….

    On a point of information: all money is either printed or created in a computer these days. It’s a long time since the UK was on a gold standard either directly or indirectly via a link to the US dollar which was on a gold standard until President Nixon abolished it in 1971. No country in the world now fixes its currency against gold so why is the mainstream still carrying on as if it were, and with the old theories which were formulated when it was? Any new theory has to acknowledge the reality of the system. If you are going to attempt to fix your TV you do need a pretty good idea of it is supposed to work. So a workable theory can be quite useful.

    When tens of billions were asked for the NHS in direct funding, prior to the Covid crisis, we were told that wasn’t possible because there was no “magic money tree”. When the crisis hit, Rishi Sunak found a whole orchard of them! They produced a crop which a factor of ten larger than was asked for previously. ie Hundreds of billions to keep the economy going.

    It remains to be seen just what effect this will have on the longer term economy. There will likely be a short term inflation problem as a consequence. This is the downside of too much total spending relative to the level of production and taxation. Govt + Private Sector and not just by Govt.

    The danger is that Rishi Sunak and the BoE will hugely overdo the corrective action needed with a combination of over tight fiscal and monetary policies. ie A return to economic austerity.

    We shouldn’t be slaves to any particular ideology or theory. We need to keep an open mind. But a return to the type of economics which has never worked particularly well previously isn’t doing that.

  • Brad Barrows 12th Oct '21 - 7:19pm

    Just a comment re Classical Economic.
    Classical Economics is not an alternative to neo-liberalism – it was merely the first stage of the development of Economics in which the main focus was on the distribution of wealth and income. Both Adam Smith (whose name is taken by the neo-Liberal think tank, the Adam Smith Institute) as well as Karl Marx, co-author of the Communist Manifesto of 1848) were Classical Economists though they politics were poles apart.

  • Simon McGrath 12th Oct '21 - 9:05pm

    “M. M. T shows that “balancing the books” is a myth and that a nation with its own currency can issue enough money for a fully employed, well fed, housed and educated citizenry, provided that there is full, properly paid employment and inflation is well managed through taxation and not under employment and in-work poverty.”

    This is nonsense. If it were true it would be in the power of Govts in desperately poor countries to magically make them wealthy

  • Peter Martin 12th Oct '21 - 10:26pm

    @ Simon,

    You’re right. Steve has got this bit quite right. If we consider a country that doesn’t have adequate means for survival, perhaps it is in a region where desertification has taken hold, it’s not lucky enough to have any exploitable mineral reserves underground, and, to make things even worse, the general level of education isn’t good, then even the best economics available isn’t going to be able to change anything fundamentally for the better.

    It doesn’t change the fact that for those countries who are relatively luckier and do have a climate where the rain does fall, the sun does occasionally, shine and where crops will grow, there is something worth digging for underground, there are fish in the surrounding seas, and the population does have a relatively good level of education then Steve is correct.

  • Sadly for Steve Trevethan, I am afraid he is following a series of Economic Snake Oil salesmen and Simon McGrath is absolutely right.

    I really do wonder how some of us can really believe this stuff when we are all so aware of the Climate Crisis. Rishi Sunak may believe he found the magic money tree in 2020, just enough to propel him to stardom in the Whacky World of Tory Fantasy, but he and his party hasn’t even found a way to get the food that is available to the shops, never mind start to replenish all the lost trees in UK, increase bio-diversity when humans want ever more land or start to put some of the Carbon back into safe storage.

    Life is tough, Steve. Please don’t pretend all it takes to solve everything is to print money (or its equivalent) by generating ever more clever financial instruments and wheezes – just like those that brought down Barings, Freddie Mac, Fannie May, and nearly so many others. Vince understood the real economy and finances, so did Roy Jenkins.

    The world and its resources are finite and pretending otherwise is sheer folly.

    Don’t fall for the siren calls of “Please I just need just one more quick fix!”

  • Peter Martin 13th Oct '21 - 12:24am

    @ David Evans,

    “The world and its resources are finite and pretending otherwise is sheer folly….”

    You’ve either not read what Steve has written or you haven’t understood it.

    Can I suggest you have another try and this time take your time?

  • William Francis 13th Oct '21 - 1:00am

    Perhaps not talking about neoliberalism would be a good start. Outside of Academia the term increasingly means little beyond a line of attack, often is used as a way to covertly discredit Liberalism (given the name) by blaming it for the actions of the Thatcher and Blair governments. Something we shouldn’t be doing as a Liberal Party. Far better to use Jo Grimond’s critique of Thatcherism (which can be applied to Blairism) as not actually being about free markets, a small state the spread of wealth and power, but as another variant of power concentrating corporatism.

    The central problem of MMT advocates is that they tend to forget economic policy doesn’t exist in a vacuum and they forget the importance of institutions and politics.

    Giving the cabinet free rein over the money supply will merely promote massive inflation. The people don’t like taxes? Just abolish them and use the money printer! Do people like world-class public services? Money printer! People don’t like the national debt level? Use the Money printer! The incentive to increase the money supply be enormous (what kind of politician doesn’t like lowering taxes and increasing expenditure on much-loved services), and at some point massively expanding the money supply will result in high inflation would occur (it need not be massively high, the inflation that broke the post-war consensus only maxed out at around 25%). Even the most ardent MMT proponent agree that the money supply can’t grow significantly faster than GDP indefinitely.

    The MMT crowd would naturally argue that taxation would be used to restrain inflation (flipping the role of fiscal policy to perform the role monetary used to do). However, using taxation in this way is laughable. The past few decades have shown voters are reluctant to desire higher taxes to pay for better public services and reducing poverty (even Corbyn said he wouldn’t raise taxes on 95% of the population), why should they be expected to accept financial sacrifices to keep CPI in line with government targets? Indeed, we saw what happened when the state did try to suppress living standards to control inflation back in the 1970s; a shoddy policy of wage restraint (affecting really affecting only public sector service workers given the limitations of the TUC) that lead to the winter of discontent, and ultimately Thatcherism. (Part 1)

  • William Francis 13th Oct '21 - 1:02am

    (part 2) Indeed, taxation’s legitimacy in the eyes of the public will doubtlessly collapse. Taxation performs the useful role of limiting demerit goods and curtailing economic rents, but that is justified primarily by raising money for the benefit of the community. Without that powerful justification support with whither. So would indeed complaints about government graft, corruption, and corporate welfare. After all, it’s not taxpayers’ money being wasted.
    In addition, economies are composed of people, who are not passive in the face of government policy or events. They react, sometimes with unintended consequences. Economic models are thus second-order chaos systems in that they respond to predictions. This is one of the reasons why the social sciences can’t produce fundamental laws of nature as physics can, though it has tried to do so (often in service to the very “neoliberalism” you decry). Using the money printer in the real economy (rather than in the financial one via QE, which has resulted in low treasury yields and booming asset markets). The fear of Weimarian, Venezuelan, or Zimbabwe-style inflation will still be present in a large chunk of the population (especially among the MMT skeptics who will no doubt include many of the UK’s richest people) and naturally, they will act in ways with the perception in mind; chiefly by panic buying (like we have seen during the pandemic) and capital flight (which can crash the currency as it did in Venezuela). The result may well be the kind of inflation that broke the post-war consensus in the 1970s.

  • William Francis 13th Oct '21 - 1:04am

    (part 3)

    But aside from the technical issues, MMT doesn’t really engage with Liberal aims, as it is just another step of a long line of corporatist ideas that centralize power at the expense of people and their communities.

    On the economics front, as Liberals, we should be pushing empowered local and regional government, a universal basic income, tougher anti-trust laws, ownership for all, and industrial democracy (preferably via the principles of co-ownership). Though policy itself won’t beat Johnson. The central matters are themes, narrative, and public perception. Liberal economics should be about empowering people to live with agency and independence from distant bureaucracies (be they nationalized or privately owned). Poverty deeply undermines these liberal aspirations, as does being under what John Pardoe called the “dictatorship of the weekly wage”. The argument of markets vs states over the provision of goods and services should be based on what is most conductive to liberty (positive and negative), autonomy, and personal development, not merely efficiency. Any necessary increases in central government state power must be met by the empowerment of society to keep the state in check (as outlined in Acemoglu and Robinson’s The Narrow Corridor).

    Ultimately Liberalism is a humanistic creed, not a technocratic one.

  • Well said, William. You should be writing the articles here.

  • @ Joe Otten

    “The consequences of printing too much money do not change just because you have a new theory.”

    How do you determine how much money is too much without a theory? MMT proposes that inflation is an indicator that spending is higher than the capacity of the economy to absorb. In what way is this inaccurate and what alternative method would you suggest using?

  • @ David Evans

    “The world and its resources are finite and pretending otherwise is sheer folly.”

    That’s exactly where MMT differs from the mainstream view. The availability of real resources is seen as the limitation on government actions not the availability of financial resources. Isn’t that a more accurate explanation of reality? If not, why not?

  • Peter Martin 13th Oct '21 - 9:57am

    @ William Francis.

    You’re just being as diversionary as David Evans. Either you don’t understand the basic concepts of MMT or you are deliberately trying to misrepresent it. MMT is simply a attempt to modernise the understanding of the economic system. It’s a lens through which to view what actually happens.

    The decision to have a totally fiat currency wasn’t taken by MMT economists. The UK hasn’t been on the gold standard since pre war days. The USA not since 1971. MMT economists are saying that it doesn’t do anyone any good to pretend that nothing has changed.

    You obviously don’t like the idea that the £ should be printed. Actually its not even that these days. It’s created in a computer at the touch of a keystroke. Fair enough. So campaign for a return to the gold standard if that is what you prefer.

    Otherwise you’ll need to understand the economy as it actually is if you want to give your economic policies for devolution, a UBI etc some sort of a chance of actually working. Otherwise you’ll just be meddling what you have no clue of. You’d be like someone who doesn’t have the first idea of how to fly a plane claiming he can do a much better job than anyone previously. You’ll end up with a crashed plane or a crashed economy.

  • Peter Martin, Don’t be so condescending. I *have* read what he said and I do understand it.

    What he said was “M. M. T shows that “balancing the books” is a myth and that a nation with its own currency can issue enough money for a fully employed, well fed, housed and educated citizenry, provided that there is full, properly paid employment and inflation is well managed through taxation and not under employment and in-work poverty.”

    That is a fantasy and should immediately consign the whole theory to the rubbish bin (including sadly the good bits).

    The world can be a cruel place and well meaning optimism will be no answer to flooding, raw materials shortages and loss of biodiversity. Lib Dems know better than this.

  • Peter Martin 13th Oct '21 - 11:04am

    @ David,

    While I wouldn’t put it in quite the same terms as Steve, I would say that, usually, for a country like the the UK there is no need to ‘balance the books’ in the sense that taxation revenue has to equal government spending. It usually doesn’t anyway so I’m not advocating anything at all radical. The govt issues the currency by spending and gets some back in taxation. It can’t get back more than it issues in the first place and even getting back the same amount depends of the rest of us not wanting to squirrel some of it away somewhere. Add in that we run a trade deficit and money leaves the country to pay for that, which can’t be easily recovered in tax, and the difficulty is easy enough to see why the Govt is nearly always in deficit and builds up a debt.

    Trying to achieve the impossible with a combination of spending cuts and tax rises will simply send the economy into a tailspin.

    I disagree with Steve slightly on the ability of the Government to achieve actual full employment. It can get pretty close with the right policies, fiscal and monetary, but those last couple of percent will be super tough. So, rather than risk setting off high inflation in a vain attempt to do that, which is what we saw happen in the 60’s and 70’s we need a Jobs Guarantee for those workers who might be considered hard to place.

  • Thank you Peter. If you had said that the first time … But that’s all water under the bridge now. All the best.

  • Steve Trevethan 13th Oct '21 - 2:29pm

    Thanks to all who have contributed to this discussion
    For me, the main purpose of this discussion is to extend information and knowledge more than to win a point.
    A foundation of the article is that this government is not governing well enough.
    Information and comments on this premise are most welcome?
    The next step, for those who agree, is to find ways in which to weaken them and obtain their departure, some of which have been included.
    More please!
    It is then suggested that the current economic theory and associated practices are not fit for the purposes of running an equitably efficient country which creates decent conditions for all and their descendants.
    It is also suggested that finding/developing better economic approaches would make opposition to the current government more effective.
    It then introduces two alternatives plus a little information on them.
    Other alternatives are most welcome.
    In the brief sketch of M.M..T. there is a list of the benefits of an equitably efficient tax system. Are there any agreements, disagreements or suggestions here?
    The final input is based on the premise that economics must serve societies fairly and not the reverse.
    P.S.s
    1) Do also read “The Joy of Taxation” by Richard Murphy, whose site “Tax Research UK” is also well worth reading.
    2) Do the Lib-Dems have an economic theory?
    3 What is it called?

  • Peter Martin 13th Oct '21 - 2:59pm

    @ David,

    Thanks for that. Sorry if I was a bit ‘sarky’. I do tell myself to avoid that. Need to try harder!

    Cheers

  • Lorenzo Cherin 13th Oct '21 - 3:13pm

    Peter, David, neither , snarky, in any easily offended sense. Both of you fellows are capable of being caustic, but both valuable on here in representing genuine centre left ideas, whether we agree or not.

    But please, Dear Peter, stop seeing the few in this party who veer away from the centre left , as libertarian right! As someone firmly on the social liberal social democrat centre left, particularly on covid, even to me, the Ed davey type is not the Steve Baker one, please!

  • Thanks Steve, some interesting points to pick up on.

    Word usage: ‘Neoliberal’ did briefly have a sense of ‘New Liberal thinking’ in the early 1900s, but that usage soon faded. Today the ‘neo’ part should be read as ‘NOT’ (capitalised for emphasis because it’s the polar opposite). So, read ‘neoliberal’ as ‘NOT Liberal’ and a lot of things make more sense. There are enough distorted echoes of the original for the ‘neoliberal’ coinage to be very confusing.

    Economists like to think their discipline is the queen of the social sciences but it’s not at all like the physical sciences in two important ways. Firstly, theses can’t be tested under controlled and repeatable conditions leaving huge scope for ‘interpretation’. Secondly, its theories influence policy outcomes. That means that economic theories can justify policy choices that shift vast resources one way or another so creating a huge incentive for powerful people to buy the desired ‘research’ results – hence all the right wing ‘Think Tanks’.

    For their part, economists can get a permanent seat at the policy high table AND make a good living by supplying that demand. And the media barons naturally go along, making it difficult to find a coherent alternative perspective.

    So, every great political tradition has a corresponding economic theory. Parties that don’t are hollow things or personality-driven or some such.

    Current political neoliberalism has as its economic theory counterpart the ‘neoclassical’ school of economics. Translation: ‘NOT Classical’. The counterpart of Gladstone-era political Liberalism was ‘Classical economics’ while that of current Lib Dems is err, umm ? (And that, plus its linked organisational and leadership issues, is why the Party isn’t succeeding.)

  • A defining feature of Classical economics was opposition to ‘economic rents’, i.e. prices above the actual cost of goods and services provided (including fair profit). They arise through monopoly, land rents and other ways. Hence a defining battle of the 1820s & 30s was over the Corn Laws which put up the cost of the then key staple, wheat. Later governments used their ability to raise finance cheaply to keep utilities costs down. (Finance costs are typically large for infrastructure/utility. IIRC Hinckley Point power will cost 92.5p/MWh but only 11p of that is operating costs – the rest is financing!)

    Neoclassical economics sees the economy as a system that always moves to equilibrium – the interplay between supply & demand is mediated by price to reach equilibrium where they balance. Therefore, anything that interferes with this process is BAD so regulation (however well meant) is BAD. That is why the Tories are so opposed to regulations of any sort (especially EU-derived ones they don’t control > sovereignty.)

    As classical economists know, the balance point is determined by POWER, not price. Price is a factor – but not if one side has a monopoly. Now why would powerful people not want us to know that? Also, the supply curve is normally shown sloping upwards (getting more copper means using poorer deposits with higher costs). It can slope up but mostly slopes down over relevant ranges – aka economies of scale as businessmen know. So, as we see in real life, the big have an inbuilt advantage that drives to monopoly

    Hence, classical economics sees that without regulation (eg, anti-monopoly laws) ‘economic rents’ quickly metastasise through the economy increasing its cost base. That’s bad for the 99% because living costs go up and they get poorer. But what matters in the corridors of power is that those driving the ‘economic rent-ification’ of the economy are making out like bandits.

    This also explains why the UK is great at inventing but poor at commercialising – the latter takes a different mind-set and skill-set. Why do hard and risky stuff when you can more easily develop a profitable monopoly in some comfy niche? It also in large part explains our world-champion balance of trade deficit – our cost base is so high even the best firms struggle to compete in global markets.

  • MMT is, as far as it goes, a perfectly accurate description of the way government spends money into the economy and taxes it out. It illuminates some boundary conditions but, beyond that rather modest utility, I don’t see it as being particularly useful in making policy. It certainly can’t do the heavy lifting many on the left hope for.

    In an emergency like Covid it was clearly right to support people and firms with deficit spending. Even £100bn is a drop in the ocean of total national wealth of ~ £15 trillion – less than 1% in fact which is massively less than changes in the speed at which money circulates and statistical errors in the system.

    On the other hand, it’s large compared to UK annual imports of ~ £550bn so if the government prints money to pay for fuel imports we could soon see hyperinflation (and that’s just on the numbers, sentiment would add to that). That’s exactly what caused the Weimar inflation in Germany post WW1.

    Crucially, MMT has nothing to say about the real problems in the economy – for example about those with poor jobs or no jobs and so needing support to get by. In recent years housing support alone has been running at a little below £20bn/year. This is almost wholly ‘Failure demand’ – that is demand caused by the failure of industrial, housing, training, and other policies. No government will admit that, so they blame the victims of their failures.

    At root of these problems is that ‘economic rent’ extraction (see above) and neglect (because the majority have no political clout) have raised the cost-base of the whole economy so it’s not competitive and, relatedly, has concentrated spending power in a few so most people are, like a fish out of water, left gasping for money and opportunity to participate fully in the economy.

    Totally critical to building a prosperous and equitable society is rediscovering how to spend public money wisely. If every government ‘project’, large or small had less snouts in the trough (see PPE contracts) and were properly evaluated (see HS2) it wouldn’t matter how much the government deficit spent because that would correspond £ for £ to an increase in national assets and their associated income/benefits.

    That gives huge scope for easy gains. The methodologies are well known but as they say, ‘a fish rots from the head’.

  • Gordon 13th Oct ’21 – 6:49pm:
    It also in large part explains our world-champion balance of trade deficit – our cost base is so high even the best firms struggle to compete in global markets.

    Over the last decade the UK has had a growing trade surplus with global markets outside the EU and a deficit with the EU…

    ‘Goods and services trade balance of the United Kingdom (UK) with the European Union and countries outside the European Union from 1999 to 2020’:
    https://www.statista.com/statistics/1116212/united-kingdom-uk-trade-balance-eu-and-non-eu/

  • Peter Martin 13th Oct '21 - 8:32pm

    @ Gordon,

    “Crucially, MMT has nothing to say about the real problems in the economy – for example about those with poor jobs or no jobs and so needing support to get by. ”

    Nonsense. MMT supports the Job Guarantee.
    http://bilbo.economicoutlook.net/blog/?p=46956

  • Gordon 13th Oct ’21 – 6:49pm:
    A defining feature of Classical economics was opposition to ‘economic rents’,… […] Hence a defining battle of the 1820s & 30s was over the Corn Laws which put up the cost of the then key staple, wheat.

    The Corn Laws (which imposed a tariff on cheaper imported grain) are an example of a regulation introduced at the behest of powerful landowners to protect rentierism.

    That is why the Tories are so opposed to regulations of any sort (especially EU-derived ones they don’t control > sovereignty.)

    One wonders why the Conservative government of the day campaigned to keep us in the EU if they were so opposed to such regulations.

    …classical economics sees that without regulation (eg, anti-monopoly laws) ‘economic rents’ quickly metastasise through the economy increasing its cost base. That’s bad for the 99% because living costs go up and they get poorer.

    Regulation often entrenches monopoly power and rentierism by imposing barriers and costs on new competitors. This is why established businesses with dominant market share often support more regulation and lobby governments to set the rules to their advantage. An example is Facebook…

    ‘The Week Facebook Became a Regulated Monopoly (and Achieved Its Greatest Victory in the Process)’ [April 2018]:
    https://techliberation.com/2018/04/10/the-week-facebook-became-a-regulated-monopoly-and-achieved-its-greatest-victory-in-the-process/

    As layers of new regulatory obligations are applied, barriers to new innovations will become formidable obstacles to the very competitors that the public so desperately needs right now to offer us better alternatives. Gradually, Facebook will recognize this and go along with the regulatory schemes. And then eventually they will become the biggest defender of all of it.

    ‘3 Reasons Why Facebook’s Zuckerberg Wants More Government Regulation’ [April 2019]:
    https://fee.org/articles/3-reasons-why-facebooks-zuckerberg-wants-more-government-regulation/

    Those who are familiar with the effects of government regulation will not be surprised to hear a billionaire CEO throw his support behind it. Large firms with dominant market share have long made peace with government regulation because it often helps these firms create and solidify monopoly power for themselves.

  • Peter Martin 14th Oct '21 - 7:38am

    Why is anyone complaining of Steve’s correct usage of an English language word?

    Neoliberalisim is the adoption or advocacy of policies of economic liberalisation, including privatisation, deregulation, globalisation, austerity and reductions in government spending in order to increase the role of the private sector in the economy and society.

    You might want to look it up in the dictionary It’s unlikely to say anything which is much different.

    Neoliberalism is so pervasive that we often miss it. We are constantly fed a junk diet in the mainstream media who are usually quoting the right wing think tanks. A current example is the IFS telling us that Rishi Sunak is “short of money” when we know he isn’t! Not in his role of chancellor in any case! He’s done OK privately too but that’s another matter.

    It may well be that he should raise taxes and cut spending to quell inflation but if that’s the case why doesn’t the IFS say so? In addition we have all the usual nonsense about how the budget will be in surplus in a few years time. It won’t be anywhere near in surplus as we all know. We’ve heard it all before.

    If the Government cuts its spending it also cuts its income, If the Govt raises taxes it slows the economy which also reduces its income and at the same time causes public pressure for a bigger Govt to better manage the economy. Neoliberalism fails even under its own terms.

    https://www.thisismoney.co.uk/money/markets/article-10083939/IFS-warns-Sunak-little-room-new-spending-increases.html

  • This article really sums up so many issues thst have developed on the left.

    Firstly “classical economics” was a stage of development of economic analysis. Smith and Marx were applying classical economic analysis, most would not associate them with a standard approach. This effectively became redundant in 1862.

    It is important not to confuse a method of analysis with the conclusions.

    More importantly the far left many years ago started playing word games to try and win the argument. Changing definitions and inventing new terms.

    For all the complaints of “neoliberalism” is there any political party who describes this as their policy? It is just name calling.

    For a party with thd word “liberal” in its name it would seem ridiculous to buy in to use the nonsense term “neoliberalism” as the strawman to bash.

    There are serious discussions to be had about economics and public policy, inventing terms noone claims to brand your opponent is childish (but sometimes works), picking terms that make you look bad is just bizarre.

  • Steve Trevethan 14th Oct '21 - 12:26pm

    Thanks again to all who have contributed to this conversation!
    Perhaps it is appropriate to consider names in detail and try to differentiate different types?
    Some are direct and clear such as the label “cat” for felines.
    Some are metaphorical such as the phrase “hot dog” which is a label for a cooked sausage in a sort of bun.
    Some have names which have names which tell you nothing, or nearly, so about what is labelled such as “Steve”.
    And so on.
    In other words, some labels are accurate, at least to some extent and some less so.
    Perhaps we might find different, more appropriate, more preferred and/or acceptable etc. labels for economic theories and/or policies, particularly for now.
    This might be especially so for Economics/Socio-Economics which uses names which distance the subject and its matters from regular people.
    Perhaps current H.M.G. policy could be labelled as “Current Conservative Economic Policy” , “Neo-Liberalism” of “Extractive Economics” or ?
    Mr Javid plans to spend a small proportion of the funds raised by taxing the not rich (N.I.) on G.P. services whilst restricting G.P.s from using their expertise in order to foster antipathy between patients and medical practitioners which then weakens the N.H.S. further and increases the uses of private medicine and further finances investors.
    (See today’s edition of “Tax Research UK by Richard Murphy”)
    P.S. Has anyone found a good label for Lib-Dem economic/socio-economic policies?
    Does one exist?

  • Peter Martin 14th Oct '21 - 12:55pm

    @ Martin,

    “Keynsism (sic), modern monetary theory and neoclassical liberal economics are all examples of neoliberalism.”

    My first thought was that you do come out some nonsense. But I see that you are trying to modify the English language to suit your POV. Good luck with that. Neoliberalism means what everyone assumes it to mean and there’s not a lot you’ll be able to do to change minds. Especially as English is an international language which isn’t under ‘English’ control.

    @ FS people,

    ‘“neoliberalism” is there any political party who describes this as their policy? It is just name calling.’

    No it actually isn’t. Hayek and Friedman are just two economists who accepted the description. I’ve spoken with Conservatives and one Lib Dem who are in agreement with both and accept their world view is neoliberal. However they are astute enough to not use the term publicly because of its negative connotations.

    The last Lib Dem manifesto was the most neoliberal of the major parties. But naturally Jo Swinson was also sufficiently politically astute to avoid the term herself.

  • @ Jeff – Almost every moderately complex manufactured item I’ve bought recently (or even seen but not bought) is made abroad, often in China. The news is full of how our ports and distribution networks are clogged with incoming stuff. It never mentions outgoing bottlenecks.

    To be sure services exports have balanced things up, but they tend to be concentrated in London & the SE. Levelling things up nationally requires a renaissance of manufacturing IMO despite its often-small statistical footprint. That’s partly because of automation and partly because many functions that used to be done in-house are now outsourced. But it remains vital to regional economies. Also, the future of service exports is somewhat clouded at present as several EU countries are set on grabbing a share post-Brexit. That’s as expected – we were told it’s a protection racket – but it does leave a rather large hole in our economy if they pull it off to any substantial extent.

    The sophisticated manufacturing that remains in largely foreign owned, though mainly run by British managers. So, it CAN be done here but something about being UK headquartered seems to be a problem. I earlier suggested high costs (for small but ambitious enterprises that should be the giants of tomorrow) as one issue but there are others, in particular financing and culture.

    Re regulation: yes, regulatory capture is a thing as is its cousin, state capture (which could also be called legislative capture). But the opposite of ‘bad’ is ‘good’, not ‘none’.

    There is strong public demand for regulation – see for instance the scandal around cladding for tower blocks post Grenfell or recent news items about the appalling quality of some new housing – because it really does matter.

    It IS difficult and hence will often be wrong (so mistakes should be corrected ASAP when discovered). Also, regulations tilt the playing field one way or another so a big part of the party-political struggle comes down to rival views of what should be regulated as with the Corn Laws.

    A favourite trick of deregulators is to write regulations in such a way as to render them entirely toothless. That gets past the difficult headlines but changes very little.

    So, who thinks big builders be allowed to get away with building shoddy houses that aren’t warm or safe?

  • @ Peter Martin – Yes, JG is a far, far better approach than UBI but I see it as distinct from MMT although they DO go well together. In practice, governments who don’t buy into MMT have always opted for deficit spending when the cause is close to their heart – think bailing out the banks or foolish military adventures. The unemployed simply aren’t a favoured cause.

    MMT provides a theoretical framework that explains why governments could do far more than they usually do. But I see it as a hard sell – difficult enough on LDV, never mind to the vast majority who are only marginally interested in politics.

    “Neoliberalisim is the adoption or advocacy of policies of economic liberalisation…”

    That’s a good working definition of neoliberalism as it’s currently used. But I fear some don’t get part the ‘liberal’ element of it and assume it’s something to do with the Lib Dems. They may be right of course but if that is the settled view of the majority then we need a new party.

  • Steve Trevethan 14th Oct '21 - 5:25pm

    Perhaps regulation, of itself, is neither good nor bad. What seems to matter are the consequences of regulation, it’s forms, its applications and its in forcements as well as its submerged intentions.
    Perhaps a compounding current problem is that language, notably regulation language, has more power than the the actuality/what has happened.
    Grenfell Tower burned, and so killed, because of deficient cladding,. Might we, therefore, consider all those involved to be collectively responsible and charge and punish them as the responsible group and then let them argue between between themselves?
    Might the inherent extractive nature and purposes of neo-liberal economics makes society supporting regulation less, if at all, likely?

  • David Evans 14th Oct '21 - 5:38pm

    Of course in spite of everything said here, the key question is “How to beat Johnson’s government on elections?”

  • Steve Trevethan 14th Oct '21 - 6:32pm

    So right, Mr Evans!
    Thank you!
    Any suggestions?
    Any suggestions from HQ?

  • Peter Martin 15th Oct '21 - 4:07am

    @ Martin,

    “Your use of ‘neoliberalism’ appears to be some sort of insult… ”

    Do you have a preferred alternative? Whatever it might be it wouldn’t change the type of wrong headed economic thinking I’ve been complaining about.

    The use of the word ‘socialist’ is often considered an insult in the USA. This is largely because socialists there often aren’t sufficiently self confident to accept the term. Whereas in much of the rest of the world it’s simply a descriptor of a political viewpoint.

    Those with a neoliberal POV often have a similar lack of confidence. This is perhaps more understandable because they are clearly wrong! But they can’t quite kick the habit of fretting about govt deficits as we are seeing now. They worry that the BoE, or the IMF, or the Martians, will somehow be able to demand that the government pay back all the money it has ‘borrowed’. They don’t see that it hasn’t really borrowed anything. It doesn’t have to when it owns a central bank.

    It’s not a problem for government. The problem is for the rest of us who might have to put up with some additional inflation for a year or so. It won’t help, though, if a neoliberally inclined govt handles the problem badly by overreacting as we saw with the coalition in the period 2010 to 2015.

  • There is a misconception among the general public (and many commentators here) that the government has in its gift to determine the rate of ecnomic growth of the UK economy at any point in time. It does not.
    The government can determine its own level of spending, redistribution, taxation and borrowing and that in turn is one factor (among many) that contributes to economic outcomes.
    Government fiscal and monetary policy is, however, almost entirely reactive. Policies like near zero bank rates and quantitative easing are reactions to economic recessions not planned policies. Likewise hikes in interest rates and/or tapering of QE will be reactions to higher inflation not planned in advance. Public spending commitments are based on the demands on the NHS, Schools, the benefits system etc and constrained by the ability to raise taxes and/or service greater levels of public borrowing, That ability is determined by economic growth, which is the principal determinant of government economic policy – any government.
    Any economic analysis that does not recognise that governments react to economic downturns and growth, rather than create them, is starting from flawed assumptions. Keynesian policies can support employment and mitigate the impact of recessions (stopping downturns from turning into depressions and reviving animal spirits) but it cannot prevent them from happening in the first place.
    Government policy should focus on the equity and efficiency of the tax system in achieving distributive goals with the minimum of deadweight costs and maintaining a constant and predictable rate of current spending and investment in the economy.

  • Peter Martin,

    “..those countries who are relatively luckier and do have a climate where the rain does fall, the sun does occasionally, shine and where crops will grow, there is something worth digging for underground, there are fish in the surrounding seas, and the population does have a relatively good level of education, then Steve is correct.” This is a good description of Venezuela. In 1950, Venezuela was the fourth richest economy in the world. In 1982, it was the richest nation in South America with one of the highest rates of literacy. Today it is in the midst of a humanitarian crisis caused by a mix of several different factors, such as the mismanagement of the Venezuelan oil industry, corruption, the Chavez government, and money printing on a massive scale.
    William Francis and Gordon have both explained the reality of the economic system in their comments above.
    In the UK we have a sophisticated array of economic institutions from the treasury to the BofE, world leading university economic departments, global banks, the OBR, independent research bodies like the IFS and resolution foundation, publishers like the Financial Times and the Economist. It is through these bodies that debate and analysis of economic fundamentals is thrashed out and ultimately makes its way to policy formulation.

  • Peter Martin 16th Oct '21 - 2:56pm

    @ Joe,

    “There is a misconception …. that the government has in its gift to determine the rate of ecnomic growth of the UK economy at any point in time.”

    It’s probably not entirely in the hands of the government. We could become embroiled in a major war which was not of the government’s choosing. Or we could be adversely affected by some natural or even man made disaster which could put a spanner in the works. I suppose the population could go strike and refuse to co-operate with govt but apart from that….

    Up until 2008 we grew steadily at a rate of 2-3% then it all lurched to a halt with stagnation and austerity. If governments had pursued the right policies there is no reason that couldn’t have continued.

    “those countries who are relatively luckier …..the crops will grow,….high level of education … then Steve is correct. This is good description of Venezuela ”

    First of all the economic policies do have to be correct. The taxation system has to work. Corruption needs to be minimised. It’s probably not a good idea to be quite so dependant on oil sales. The government, as in my previous comment, does have to have the right policies. It might have been a good description of early 1973 Chile too. Another right policy has to be not to get too far offside with the Americans!

    If they back the military to take over then all bets are off!

  • Peter Martin,

    it is not just probably, it is absolutely not in the hands of the government.
    Why did the UK have among the strongest growth among the G7 from 2013 -2016 and why did it take a dive after the Brexit referendum? (Clue – it had nothing to do with George Osborne’s economic policy, a major war or natural disaster). Why did the UK unemployment rate fall to 3.8% by 2019 from around 5% before the financial crisis?
    Why was annual economic growth in the USA virtually identical in the last three years of the Obama administration and first three years of the Trump administration despite radically different economic policies?
    Why has Japan been unable to restore steady economic growth for three decades despite unprecedented levels of government spending and public borrowing?
    Why did Ireland have the strongest growth in the EU after 2013 despite a major banking crisis, deep cuts in public spending and across the board tax hikes? If austerity is defined as a fiscal consolidation that causes unemployment to rise in a recession, then Ireland’s higher economic growth came with an initial cost of higher unemployment in the years prior to 2013 while the UK’s more modest austerity and growth avoided increased unemployment levels.
    The answers to these questions lie in the interdependence of global economies irrespective of the domestic policies of government.

  • Peter Martin 16th Oct '21 - 6:05pm

    @ Joe,

    Try Googling {GDP UK}

    You should see a very jagged line for UK growth after 2008. You’ll see a similar one for France but also a much healthier looking one for India.

    Now Google {GDP USA}

    Everything looks much better with just a slight glitch around 2008 and another dip in 2020 for Covid which is perfectly excusable.

    We also see graphs for China who are doing well and for Japan who were doing well up to 1995 but went off the rails about 1995. So did the Japanese people suddenly decide they were going to take it easy after 1995? The productive capacity was just the same from 1996 onwards and was there to be utilised. But that could only happen in the Japanese govt knew how to do that and were prepared to do that.

    You can’t say it was the Japanese people, or some natural disaster, or the fault of other countries. That just leaves the Japanese govt who had the responsibility.

  • Peter Martin 17th Oct '21 - 3:54am

    PS

    @ Joe,

    “………..it is absolutely not in the hands of the government.”

    Except when it’s the Venezuelan govt ?

  • Peter Martin

    So using the Stanford dictionary of philosophy. It is noted there is effectively two positions. One this is a meaningless term:

    “For many years, the term “neoliberalism” has been in search of a referent”

    But those who want to pin it down belive they have done by compiling views of Friedman, Hayek and Bucannan. Notably almost all the references are after the deaths of all three (always safer when they can’t answer back). Notable you reference that Friedman used the term, yet overlook the era of use – one in which Friedman was criticising wage and price controls, while pointing out those apologists for Stalin were misrepresenting the economic performance of the Soviet Union (and hiding attrosities). Hayek’s writing is very clearly written in opposition to authoritarianism of 30s Germany and the Soviet Union.

    Given what has to be the comparison of an honest actor, is this really a philosophy? For example would these LibDem and Tory MPs actually oppose modern competition policy (significantly expanded by the modern Tory party) based upon Friedmans opposition to the US system dating from the early 1900’s?

    Tribes love lables, but the lables need to mean something. What appears to be the case with “neoliberalism” is you have a meaning held by modern opponents, one by historical users and one by modern supporters (who appear not to say what they mean in public).

    That doesn’t help make a coherent political message. Where there are policy issues state them, jargon particularly that which is unclear really doesn’t help.

  • Steve Trevethan

    I know it is a novel concept in political circles, but could addressing the policies not be a better approach than inventing jargon lables for a massive collection of policies (particularly when they are only used by those opposing them)?

    Is universal credit wrong in principal? Or is it the level and/or implementation? A voter can see that someone wants an alternative, or a higher rate or a slower marginal reduction etc. You can say the cost is this but the benefit is that.

    Similarly if you are wanting more of regulation X or less of regulation Y. Or oppose importing Z products.

    Perhaps, increase/decrease tax A but implement tax B, or charge C.

    Far clearer that “my opponents are evil neo-spartan warmongers who want to kill babies and steal all your money and build Scruge McDuck swimming pools of money in secret hideaways.”

    One sounds like a plan for government, one sounds like they need to get off twitter, and get out more.

  • Peter Martin 19th Oct '21 - 10:02am

    @ FS People,

    I get that you don’t like the term “neoliberal”, and partly because it could adversely affect the fortunes of the UK Lib Dems. However it’s used internationally and the origin wasn’t an attempt to discredit either the social liberals of the USA or here. The European ‘liberals’ that inhabit such parties as the German FDP -maybe!

    The economists of the left have their labels such as Keynesian, MMT, Marxist or whatever which don’t usually cause too many complaints. What would be your choice of a term to replace ‘neoliberal’?

  • Peter Hirst 20th Oct '21 - 4:45pm

    Labels imprison us or at least our thinking. Better to be a pragmatic economist knowing the value as well as the cost of things. Thrift is investing wisely for the future and balancing the need to incentivise profit and sharing the reward of it sufficiently to provide a harmonious society.

  • Peter Martin 21st Oct '21 - 11:38am

    @ FS People,

    You may want to check for yourself but my understanding of quotation marks ( “”) is that they are to define the start and end points of , er, quotes or quotations.

    Can I ask who you were quoting in the penultimate paragraph of your last comment?

  • Peter Martin

    “What would be your choice of a term to replace ‘neoliberal’?”

    You have skipped a question. The first question that needs to be asked is:
    “What is the context of the communication”
    The different context will decide what should be used.

    If this is a wonk-y conversation the correct specific terms that relate to the area under discussion. There will actually be a great many different terms you would use for each.

    If communicating with voters, then no term. Don’t throw jargon in. Be clear, be specific and be honest. There may have been a time when jargon actually was impressive to voters, I just have never seen it. I can see how voters who really hate one government allow the alternative to use jargon because they don’t care (new Labour) but that is only trying to avoid a negative by obscuring the lack of clarity, not creating an actual positive.

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