On the day of Ed Balls’ speech to the Labour Party conference – which included a ringing declaration of the need for fair deficit reduction – Chris Dillow raises some interesting points about fiscal credibility. He writes:
At the end of an interview with Ed Balls this morning, Sarah Monague (02h 22min) gave us a wonderful example of the ideological presumptions of supposedly neutral BBC reporting. She asked Nick Robinson: “It’s about economic credibility here, isn’t it?”
What’s going on here is a double ideological trick.
First, “credibility” is defined in terms of whether Labour’s plans are sufficiently fiscally tight*. This imparts an austerity bias to political discourse. There’s no necessary reason for this. We might instead define credibility in terms of whether the party is offering enough to working people, and decry the derisory rise in the minimum wage as lacking credibility from the point of view of the objective of improving the lot of the low-paid.
Which brings me to a second trick. Credible with whom? We might ask: are Balls’ policies credible with bond markets – the guys who lend governments money – or will they instead cause a significant rise in borrowing costs? Or we could ask: are they credible with working people? But neither she nor Nick presented any evidence about either group. The judges of what’s credible seem to be her and Nick themselves – who, not uncoincidentally, are wealthy, public school-educated people.
The first point is well made; the second is more complicated. Dillow argues that the bond vigilantes have gone home – in a world with a savings glut and a dearth of safe investment havens the old concerns about market credibility matter less. But that doesn’t mean that credibility doesn’t matter – Ed Balls is, after all, the Shadow Chancellor facing a general election in a matter of months. Credibility is absolutely crucial to his, and Labour’s, electoral prospects.
But that brings us back to the first point – why, and for whom, is the rhetoric about deficit reduction credible? At one point in the speech Balls said:
Working people have had to balance their own books. And they are clear that the government needs to balance its books too. So Labour will balance the books in the next parliament.
Now that’s not a statement that carries a lot of intellectual credibility – most of all coming from a left-of-centre party. Most serious economists of centre and left would vigorously contest it. And it is a direct reflection of coalition rhetoric about how Labour “crashed” the economy – that appalling, ignorant phrase about “maxing the nation’s credit card”. In this case, “credibility” appears to be about adopting the framing of an administration whose economic record is appalling, even on its own terms; Osborne promised to eliminate the deficit by 2015 and, wholly predictably, has failed to do so, causing chaos and misery along the way.
It raises questions of for whose benefit economic debate is carried on. Balls’ statements – about this, and about the cap on child benefit – are couched in terms of an economic credibility that Labour is claimed to lack, but they sit uneasily with the direct experience of the people whose votes he seeks, who have – by and large – seen their living standards fall as a result of policies predicated precisely on the intellectual error those sentences perpetuate.
The question for Ed Balls – and for the Labour Party as a whole – must surely be: are we more credible when we rely on this kind of framing about the deficit (and debt generally), knowing that it reflects the bias of the media and, to a considerable extent, of the political elite – in the hope that we will pick up some crumbs of support and acknowledgement? Or when we challenge it intellectually and argue for the more expansionary policies that most economists of the left and centre-left would advocate, and take the argument to press and people – especially since we know the media will attack us anyway? What does that question tell us about Westminster politicians’ view of people’s ability to handle serious argument, especially in the light of the response to the Scottish independence question?
It is a question that we are going to need to answer in the months before the election; and the answer we give will determine whether we are seen as a credible alternative by the people who matter – the people heading for the polling booth on 7th May next year.