Corbyn's "economic illiteracy"

Recently Chuka Umunna made an appearance on Channel 4 news in which he revealed that he would refuse to serve in a Corbyn led shadow cabinet as a result of Corbyn's "economic illiteracy" when it comes to the deficit. Now before I go into why I don't think that Corbyn's plans are illiterate in any sense, I should first stress that I do agree with one of Umunna's much repeated statements, which is that there is "nothing progressive about paying out huge sums to the city in the form of debt interest repayments". Sadly however I suspect that this is as far as my accordance with his view on the matter extends.

Umunna of late has been keen to stress his distaste towards Osbourne's "austerity fetish" as he terms it, but on the other hand has also been in favour of Osbourne's rhetoric around "balancing the books" and "living within our means", even expressing sympathy towards Osbourne's entirely political policy of forcing the state to run a surplus in "ordinary times" - whatever this means. From this I take it that Umunnas's ideal deficit reduction plan lies somewhere in between Labour's plan before the recent election and Osbourne's projected one parliament surplus plan. Umunna certainly has a right to favour a certain pace of deficit reduction, however I think it's somewhat absurd to represent a slower reduction plan, even a dramatically slower plan as "economically illiterate", doing so without providing any proper analysis beyond platitudes is merely indulging in tabloid economics.

Umunna is keen to emphasise the desirability of surplus, however one of the main arguments behind the idea of a slower deficit reduction (which I will come onto) is that for a growing economy even a relatively large deficit can see debt as a percentage of GDP fall. All the talk of "living within our means" ignores the fact that with growth at 3% and debt at 80% of GDP, an annual deficit of under 2.4% would see the debt ratio fall. Conversely, a slightly larger deficit wouldn't see debt rising to a dangerous level. This is also why I disagree with Umunna about how it was irresponsible for Labour pre-2008 not to run a surplus, the consensus at the time was that the economy was in good health and that therefore a small deficit was sustainable. This turned out to be hideously wrong due to the financial crisis, however on the issue of regulation, which is ultimately what's required in order to prevent a similar recession in the future, all of the leadership candidates bar "economically illiterate" Corbyn are disappointingly quiet.

As previously alluded to, in my view there is much to be said for pursuing a slower pace of deficit reduction. Britain is not in the same boat as Greece, the current debt/GDP ratio of 80% is most likely too high to be sustainable, but there's also no indication that it poses any immediate danger to the economy, nor to the government's ability to borrow at reasonable interest rates. There has even been an IMF paper released suggesting that developed economies which possess independent central banks, such as the UK - aren't in any need to pursue further savings in any form. I disagree with this conclusion as I believe that a slow reduction in debt is desirable in the pursuit of long term sustainability, however I included this paper purely because it is far beyond what Corbyn's proposing, yet I rarely see the establishment calling the IMF "economically illiterate" for floating such ideas.

New Keynesians would in the short term go even further into the realms of "economic illiteracy" by arguing that because interest rates can't be lowered further than their current level, something that is desirable in order to offset some of the economic damage caused by cuts, the government's prime aim at this point in time should be to expand government spending - irrespective of the deficit in an effort to boost the economy. Thus, when the economy has reached a higher degree of stability savings can then be made, although at a much slower pace than what Osbourne follows. Crucially at this point interest rates could then be reduced to counteract the damaging economic effects of cuts, helping to avoid a lot of the hardship currently being inflicted upon ordinary people.

Nevertheless, this Leadership should really be seen as a debate about economic policy come 2020, sadly it looks as though Osbourne's economic masochism will make the debate in this last paragraph merely academic. The economy, despite suffering a lot of damage will probably limp upwards towards mediocre rates of growth, albeit at the expense of a lot of unfulfilled capacity that will never be reclaimed. Interest rates will also have risen, making large, short term debt sustained investment too expensive. The main debate about the deficit will be the pace at which it is gradually reduced, and how the debt/GDP ratio will be prioritised relative to other areas of economic policy. Certain IMF economists mightn't value debt reduction, however Corbyn and other economists have, sensibly in my view appreciated that debt should be gradually reduced, although at a slower rate and therefore with less hardship than what's being suggested by the Tories, and for that matter also what Labour proposed prior to the 2015 election.

Bearing this in mind, although Iain Dale may have accused Corbyn of wanting a permanent deficit in the LBC debate, this shouldn't be seen as anything more than lazy, evidence free journalism. So now that we've cleared up why not talking about "pragmatism" doesn't necessarily make you economically illiterate we can properly talk about the fact that there's also a government income side to this equation. The current overall budget deficit including government investment is roughly £90 billion, Corbyn has rightly pointed out that estimates of the UK's lost income through tax avoidance/evasion range between £30-£120 billion per year. Even an eternal optimist wouldn't expect for all of this to be recovered, however currently there isn't really a concerted effort within government to crack down on this lost income, a proper effort to do so could do a lot to shift the burden of any deficit reductions from the most vulnerable to those who really should be paying these large sums of money anyway. Although - as a side note the effects of Osbourne's strategy have by no means been limited to the poor, there's good reason to believe that the amount wiped off of GDP is equivalent to between £1500 and £4000 per person per year, this information might be useful to those saying that it's impossible to convince the middle classes from "the left". Corbyn is also right to talk about the prospect of tax rises, it's clear that taxes in the minds of many across all parties have gained the status of electoral kryptonite. However with inequality rising and many of the most vulnerable suffering I think that there couldn't be a better time to make a proper coherent case for a more progressive tax regime that is fully capable of funding necessary public services whilst building a more cohesive society, particularly if made clear that in reality this would only affect a minority of earners and businesses, notably large businesses with high degrees of market power.

Finally, as we're talking about economic incompetence, we shouldn't really be talking about the issue of deficits without mentioning the UK's worryingly high current account deficit. Even Peter Mandelson, hardly a standardbearer of the left's economic arguments views this as a problem that needs to be addressed through a proper industrial strategy, one which requires a degree of indicative planning. Yet despite the attention that this issue blatantly deserves, Corbyn once again seems to be the only leadership candidate prepared to address it. So much for economic incompetence.

Appealing to the Stone

Appealing to the stone is a logical fallacy named after the reported actions of pre-eminent literary critic Samuel Johnson. Johnson - who now lies within Westminster Abbey, may not be with us to act out the definition of this term, the polemic tactic of dismissing an argument as absurd without providing supporting evidence. However, luckily for him, there are still many within Westminster and beyond who are happy to do this for him.

First of all, as a proviso against accusations that I’m going to single out a single group of party supporters in the election debate, I emphasise that all hyperbole is unhelpful, and to the small minority of those on the left of the party calling Kendall or anyone else for that matter a Tory, please stop. Her political arguments are fair game, however, the left struggles as it is to be treated without disdain by the media - and sadly, by some figures within the party. So focussing ad-hominem attacks on her are damaging to the left’s cause as well as being unfair, although, notably this behaviour has by no means been exclusive to Corbyn supporters. Likewise if a fellow supporter feels that they belong within the Labour party, this shouldn't be open to question. Semantic arguments about whether others are proper socialists or not simply because they don't back the "right" candidate are also pointless, it may or may not be an objectively valid argument when compared to a single specific definition of what is in reality a very loose term, but when trying to convince sceptics of your own views any attempts to second guess their deep seated beliefs are counterproductive and rather presumptuous, particularly when many party members have given hundreds if not thousands of hours to help the party, all in the name of their self-identified beliefs. I don’t want to overemphasise this behaviour though, as in general I believe that the Corbyn campaign in particular has been very successful in achieving its originally stated goal of running a programme based upon policy, not personality. This trait in my view is probably one of the main reasons why his campaign has exceeded expectations amongst ordinary members.

The failings of a small minority of individuals who happen to hold political views similar to those of my own wasn't however what spurred me into writing this post, it was rather what I see as the false dichotomy that is arising around the idea of the Labour party adopting "Left-wing" policies. Many after the election felt that the Party fell foul of being viewed by much of the electorate as "nice but incompetent", compared to the Tories who were "ruthless but capable". As the leadership debate has heated up many of those towards the right of the party have started to panic that Corbyn could win, and in due course I've noticed a similar "socialist but incompetent" versus "centrist but realistic" dichotomy opening up in how the party should proceed. Several party figures have made their opinions clear that supporting Corbyn is irrational, and that doing so is simply a way of whinging and moaning about the fact that the public aren't as left wing as you are. This argument disappoints me, as it chooses to abandon rational debate in favour of making oversimplifications and generalisations. Sadly I suspect that this often occurs as part of a crude attempt to attract members away from Corbyn's policy agenda - as it's easier to make lots of noise about Corbyn's electability in a very tabloid-esque manner than it is to convince the Labour membership, who are often to the left of the PLP that his fundamental approach is undesirable.

Of course, in an internal election these accusations of childishness or unfeasibility might well have little impact. Labour members are highly politicised, and could react unkindly to being patronised in such a way. Nevertheless I think it's important that the Corbyn campaign does everything in its power to show that it can be the rational choice, not just the sentimental choice. Corbyn is unashamed to be a democratic socialist, however in the face of being boxed into the "socialist but incompetent" image I feel that it's important to demonstrate the merits behind Corbyn's strategy. 

In response to the idea of meeting the public where they're at, I think it would be only fair to acknowledge that many individuals of all parties support ideas such as rail/energy nationalisation and a 75% top rate of income tax, a rate far above Corbyn’s aims. Many in the party’s mainstream would view these policies as politically toxic. Of course, these ideas shouldn’t be viewed entirely in isolation, but as woven into a wider context of how the party is perceived. It is all well and good for people to support these policies on their own, however it strikes me as very clear that the reason behind our recent election defeat was that we were viewed by much of the public as economically incompetent. We weren't trusted with the country’s finances, with counterproductively fast deficit reduction being perceived by much of the public as necessary, this was often spurred on by our own rhetoric regarding the matter. This made it difficult to convince the public that these popular policies could be implemented without breaking the bank. No matter how popular our railways policy was we wouldn't have overcome these issues. We had a lot of available evidence to argue that the Tories cost all sections of society large chunks of money (at least £1500 per person per year), with many economists in agreement with the Labour party that such deep cuts took un-necessarily large amounts off of GDP and therefore tax revenues too.

We should have performed far better with the hand that we had going into the election. I - like many other party members believe that some fairly large changes to the economic system are morally ideal, as such I feel that reacting to the last election by accepting large swathes of the Tories' economic agenda is simply taking the line of least resistance as opposed to the strategy that best works towards these changes. The last parliament could only been seen as a failure, particularly for its first four years, treating the poor economic perception that resulted from this failure as an electoral certainty or a concrete example of how Britons despise "left-wing" policies - no matter how nasty and determined the media were to undermine us, is just underwhelming, not pragmatic. In this instance capitulating to the established order after defeat achieves nothing except to flatter the scale of our own failure. Many I suspect disagree with me on the need for a path leading to a different economic strategy. However if this is the case then I believe it’s important for individuals at the forefront of the party who disagree to frame any policy arguments as such, rather than through condescending members that their beliefs aren’t realistic.

In response to another commonly made argument about whether or not to oppose the welfare bill – I certainly don't view the party holding different opinions to those of the political or media mainstream as belittling to the public, but what I do view as belittling is betraying your own views in favour of basing policy upon what's ostensibly palatable for the public, as this is almost akin to claiming that the public aren't capable of rational thought to the same extent that you are personally. If you have an opinion supported by enough evidence that it’s convinced you to go into politics then you should also have confidence that it’s persuasive enough to sway the public in the same way.

In terms of our 2020 strategy I'm often taken aback at how Scotland is ignored when arguing for a rightward shift. No matter how much easier it may or may not be to win votes back from the Tories than from the SNP (although as previously stated most voters of all parties view politics in terms of issues, not in terms of left and right, as such not all "left wing" policies are toxic), we simply won't be a credible party of government unless we make an active effort to win back SNP voters. The threat of a similar implosion in our other heartlands also shouldn't be ignored, even if the ingredients for such an uprising don't seem to be in place currently, therefore targeting the more well off might not be worth the potential damage to our already diminishing working class support, even if it could help us in England overall. Something which I feel is a dubious oversimplification as it is, particularly bearing in mind that our middle class support in 2015 reclaimed roughly half of the ground lost between 2005 and 2010, whereas our support amongst poorer voters continued to plummit.

As for moving rightward simply in an effort to change the party’s perception at face value, sadly it does seem to be a feature of politics that you'll struggle to win an election when the choice is framed as helping the poor versus helping yourself and your family. Although seeing as we only lost the election by 6% this clearly isn't to say that the whole population are arch-individualists. The public aren't evil, and if we can convincingly show them that things such as changes to top end taxation, corporate taxation, a crackdown on evasion/avoidance, industrial QE while the economy is below full capacity, reducing high inequality which damages a majority of the population, increasing council house building, cutting tuition fees, giving workers more creative input and creating a strong welfare system are desirable things for everyone and not just a small few, then there's no reason why we shouldn't target election victories.

For clarity however, I don't doubt that through accepting many establishment ideas new Labour made election easier (athough importantly for me victory was still achievable by not doing so), however as far as I'm concerned it isn't sustainable as a permanent strategy, the "nowhere else to go" electoral model doesn't stand up now as it once did. What more the "we betray our support by not being in power" argument doesn't seem to have fared particularly well against the test of time in relation to the Blair era. We may have done a lot of good work in relation to tax credits and the minimum wage, however now it seems easier than ever for the Tories to undo Labour's legacy without much public opposition. In the long term the result of sacrificing principles in favour of electability can be summarised most aptly by Corbyn being asked on Channel four news whether he was "to the left of Karl Marx" for possibly wanting to raise the top rate of income tax back up to its level under Thatcher.

Perhaps this post has been a little unfair on Corbyn's opponents. After all I do understand the argument that Corbyn isn't "leadership material", as a non-identikit politician electing him would certainly be a step into the unknown. Personally I think there's something to be said for the argument that the public may find it refreshing to have a leader who openly speaks their mind. Tony Benn once said that if the public can tell that you believe in what you're saying then they're more likely to take a risk with you, and I think this is embodied quite well in politicians from Thatcher right through to Farage, politicians who managed to attract a lot of support despite favouring policies that haven’t been universally popular. However it's not for me to say that I know whether or not the party would do better or worse electorally with a Corbyn figure or with a better polished politician. However for me what sways the decision comes down to the fact that Corbyn embodies a lot of ideas that I wholeheartedly believe can be sold to the public if done so in the right way. Strategies are easily and coldly compared when in abstract form, but politics is personal, not abstract - over a million people are using food banks whilst many of Britain's most vulnerable are demonised as if they are nothing more than drains on society. I'm not willing to see the party ignore these issues out of a fear that doing otherwise would be electorally risky, after all as I previously mentioned the public aren’t spiteful, and in my view can be persuaded to Corbyn’s way of thinking on a lot of issues. I may appear to some as the epitome of the “naïve” post 2010 member who’s unwilling to do what’s necessary to win election, however I - like many others believe that those in politics have a responsibility to be honest about their views, and that doing otherwise ultimately serves to damage their cause in the long run, therefore for me Corbyn is definitely the sensible choice when it comes to the Labour leadership election.