Last night in Bristol saw the latest instalment of John McDonnell’s new economics tour, with prominent macroeconomists Ann Pettifor and Simon Wren-Lewis – both members of Labour’s economic advisory board – speaking to a packed audience. It was in many respects a remarkable occasion – not just for the content, but for the fact that it was happening at all.
John McDonnell started by outlining the nature of the project. Labour knew that it its defeat in 2015 owed much to its inability to set out a coherent economic vision; on his appointment as Shadow Chancellor, he had decided to create a team of advisors to develop a new policy, but also to engage the Party in the process. Hence this tour, an integral part of the enormous amount of work now being done to develop a new economic policy to challenge the disasters of austerity.
Ann Pettifor’s presentation focused on the Green New Deal – her slides can be found here – and how it was simply bad economics to say that we could not afford to do things because it meant taking people’s money away in the form of higher taxes. She proclaimed that that she was an absolutely unreconstructed Keynsian, and reminded us that Keynes had said that the first condition of an economic recovery was the onshoring of financial activity. She made much of the potential nightmare of deflation, in which huge levels of private debt for both businesses and individuals become a growing burden, and showed how delight at falling prices was wholly misplaced; one person’s cheaper shopping was another’s lost job. And she finished with a simple message from Keynes; that you will never get out of a recession by shrinking the economy.
Simon Wren-Lewis talked about what he called MediaMacro – the version of macroeconomics presented by the media, which was wholly inaccurate; the obsession with the deficit along with the belief that Labour trashed the economy by overspending, which he demonstrated was utterly bogus. Of course the deficit had increased in the recession; that was a well-known macroeconomic process known as the automatic stabiliser, and, as the title suggested, this was both natural and beneficial. In answer to the claim that Labour should have run a surplus in the “boom years” he showed that there was no pre-crash boom, and that growth and the deficit were more or less on-trend; even if his suggestion that we should take the bar-charts with us on the doorstep was problematic for those of us for whom memories of the 2015 doorstep campaign remain fresh. We still need, as one questioner said, a simple homely narrative with which to deal with the Tories’ trite and dishonest simplifications about household budgets and fixing the roof while the sun shone.
He also mentioned media coverage, and suggested that by focussing on the deficit, as Government wanted, the BBC in particular was deeply culpable, because it had simply failed to meet its charter remit to educate and inform. He characterised it not as anti-Labour bias but as bias against the facts. He pointed to the UK’s appalling record on investment. And finally he produced a table that showed on every main area of policy Labour’s ratings had improved between 2010 and 2015 – except on the economy. His conclusion was that it was MediaMacro that won the election for the Tories.
And in questions the debate turned again and again to the issue of why Labour did not attack the narrative that it had overspent in office (Ann Pettifor had mentioned Liam Byrne’s infamous note to the effect that there was no money left – and ridiculed it as a simple failure to understand the realities of where government money comes from). And it became clear that it was an explicit political decision. Simon Wren-Lewis suggested that the evasions of the Beckett report concealed the fact that a quite deliberate decision had been taken not to oppose it; he had been intensely frustrated that, having done the work to demonstrate that it was simply untrue that Labour in office had overspent, nobody from Labour sought his assistance in rebutting it.
Other discussion surrounded the difficulties of onshoring financial activity and of managing the world financial system. Ann Pettifor related how Franklin Roosevelt had insisted that there should be no bankers at Bretton Woods; it was for the world’s best economists to develop an answer, and that system had endured – without a single financial crisis – until Nixon unilaterally broke the system in 1971 (she described it as the biggest default in history, not that you would ever see it called that in the histories of the period).
The panel’s response to questions about the EU was particularly interesting – Ann Pettifor deeply sceptical about fiscal union but passionate about the possible fragmentation of Europe in politically traumatic times; Simon Wren-Lewis arguing that every reputable economic analysis showed that the UK would be economically damaged by leaving.
This is of necessity a highly truncated account of an absorbing evening; I took three main points from it.
First, the necessity for a simple narrative remains. Simon Wren Lewis’ suggestion of taking bar charts on to the doorstep illustrated the problem; it’s enormously difficult to get past the mythology (and the Labour leaders who failed to challenge it have a lot to answer for). There was a sense that we might be tantalisingly close; much of the discussion concerned low investment and low wages, and how to break out of that vicious circle of low investment and falling wages, which in turn made investment less attractive as the cost of labour fell (a point made powerfully by Paul Mason in Postcapitalism) could provide a starting point for a simpler argument.
Second, although it was not explicitly referenced, I could not help reflecting on Simon Wren-Lewis’ recent blog-post in which he suggested that the real post-2007 political divide could be three-fold – between neoliberals of various persuasions, tribal nationalists and leftists – and that a two-party system could never really reflect this. Of course the fault-line between leftism and “soft” neoliberalism, on this analysis, ran straight through the Labour Party; and that, however many Labour MPs yearned for the comfort-blanket of Blairism, this debate was redefining the Labour party as a genuine social-democratic, centre-left alternative to an ideological project that was all too clearly collapsing around us.
Finally, perhaps the most important thing was that this event – indeed this debate – was taking place at all. Until now, economic policy has remained firmly locked inside Westminster – no Shadow Chancellor has had the vision or perhaps the sheer self-confidence to take policy-making out to the public in this way. But the concepts underlying macroeconomic policy are not difficult and they are profoundly political; they are about achieving a just society as well as a functioning economy. And question and answer session was serious and informed (although Ann Pettifor did give pleasingly short shrift to a Postive Money enthusiast). The opening-up of economic policy making can only be a good thing.
I came away from this meeting feeling more enthused that I had for some time. This was the sort of debate that Labour desperately needed to be having, and after the evasions of the Balls years I had been longing to hear a Labour Shadow Chancellor crafting a policy that was evidenced, progressive, and achievable. This was Labour becoming what it could never be under a leadership that essentially allowed the Tories to frame the debate; the party of economic competence.