Joseph Stiglitz, Nobel Prizewinner in Economics and one of Jeremy Corbyn’s board of economic advisers, has claimed that the centre-left consensus of Tony Blair, Gordon Brown and Ed Miliband has now eroded. The claim was made in an interview with Labour List following his recent lecture as part of John McDonnell’s “New Economics” tour.
According to Labour List, he went on:
“I think for a very long time there was the hope… that relatively minor tweaks to the economic system would do: provide more education, maybe raise the minimum wage, little bit more progressive income tax – would solve the problem”, he said.
“That was the major thrust of New Labour and Clinton, both sides of the Atlantic… That was broadly the centre-left consensus. That consensus is now eroded. Almost no one supports that view anymore.”
This is important as Labour continues to get to grips with framing an alternative to austerity economics. The point is that both Blair and Clinton were able to rely on an expanding economy – which meant that tax revenues could rise, and modest redistribution undertaken, without the need to raise tax levels, while the UK government ran a modest deficit ensuring that the public sector filled the gaps left by the private sector’s failure to invest. Against that assumption, Blair’s record (or perhaps more accurately Gordon Brown’s) on inequality was actually rather good; hundreds of thousands of children were taken out of poverty, for example, even if at the same time the seeds of the crash in terms of excessive private borrowing were being laid.
Obviously the crash of 2007-8 changed the landscape completely. The economic questions now are about how to bring about equality and social justice in an economy that is stagnant and when real incomes – and tax takes – are falling for the majority, with massively increased inequality as the few continue to profit. Stiglitz has put his finger on precisely the reason why harking back to the halcyon days of Tony Blair and Gordon Brown is, at best, frivolous. The world just isn’t like that any more.
Stiglitz points out – wholly correctly – that austerity is a political choice. And that is why the Labour party leadership election was a watershed. Three out of four candidates remained trapped in an austerity mindset; and all the talk of “aspiration”, however far it pushed certain buttons on the centre-right, in practice meant embedding the austerity mindset even further; in an economy in which real wages are falling, and in which wages as a share of national income are falling, the kind of individual aspiration articulated by Liz Kendall’s supporters is actually a savage driver of inequality. Stiglitz points out that inequality is bad for the economy, bad for society, and bad for business – understanding that has to be at the heart of any serious response from the left to austerity economics.
The lesson from Stiglitz for the Labour Party is very clear – Labour simply cannot afford nostalgia for the Blair years. We should as a party acknowledge the achievements and move on; and that means those on the Labour right – not least those distinguished ex-Shadow Cabinet members who took their toys home after the Leadership Election – having the courage to get back inside the tent and to work towards a new economic consensus; helping to build the economic narrative that can take us beyond austerity.