Speaking on the BBC’s Marr show, Ed Balls expressed an ambition to run a budget surplus during the next Parliament. I didn’t see the programme and I’m relying on reports from other media, but by all accounts Andrew Marr didn’t ask the obvious question: why?
The question matters because Balls was sitting alongside George Osborne, who has already committed the Tories to bringing the budget into surplus in the next Parliament if the Tories win the election. And I’ve blogged my reservations about this before – that the pursuit of surplus is wholly self-defeating, a piece of symbolism that will cost us dearly in terms of jobs and living standards. Ultimately, the deficit narrative is ideological; borrowing has risen under Osborne and the UK is having no difficulty in finding finance, but the economy continues to grow slowly, with what is being hailed as recovery being little more than a dead-cat bounce. Real incomes continue to fall and the narrative that is developing around secular stagnation is demonstrating the desperation of the austerity narrative. Ironically in view of Balls’ latest statement, Labour is beginning to dictate the domestic political agenda with a clear position on the cost of living and the need for a living wages. Balls, according to the Guardian, is intent on finishing the job that the Tories are failing at – but at the same time the political story has moved on. Ed Balls is not a stupid man, and surely is entirely capable of understanding both the internal contradictions of his argument and how uneasily it sits with Labour’s wider policy aims.
So – why? It’s possible that Balls is saying something much more subtle and nuanced than appears on the surface. If one were clutching at partisan straws, one could I suppose try and spin a line that he wants to be in a position as Chancellor to be able to run a surplus as a buoyant economy bounces back. Or, more plausibly, the line is a sign of Labour’s continued lack of confidence on the economy; but that would be accepting by default the Tory claim the current crisis is all down to Labour’s profligacy – which is nonsense, and allows the Tories to set the agenda when austerity is palpably failing. Perhaps this is an attempt to look bullish and in control (it’s worth remembering that Gordon Brown’s Treasury, at least at the political adviser level, was a deeply macho institution). But however you spin it, however you unpack what Balls actually said, the fact is that it looks like bad economics as well as bad politics.
I’m inclined to feel that it is part of a more general malaise in the way economic policy is debated and presented. This morning’s Observer contained a piece by Will Hutton that talked about Osborne’s failures – but did not mention falling pay and long-term demand once. It approached issues solely from the supply side – a good piece as far as it went, but it simply didn’t deal with Osborne’s macroeconomic failures. And I think Balls’ comments reflect the same failure.
The point is that the issues on which Labour is winning the political and electoral argument are all macroeconomic (and this matters all the more if you agree – as I do – with Paul Krugman that the practice of economics rests on macro foundations) This offers a huge opportunity to change the tone of economic debate, to move it on to ground that is far more favourable and grounded. Ed Balls is still mired in supply side language; Labour wins the argument when it talks about macroeconomic issues like the living wage and employment.
I long to see Labour take the economic arguments by the scruff of the neck: and I wish Ed Balls could get out of his supply-side mindset and really attack the Tories where they’re weakest – on pay, equality, and the long-term decline in living standards.