Labour leadership: Get Radical, Or Get Lost
The Labour candidate I’ll support in the current leadership contest is the one who is best able to think beyond the current economic paradigm of deficit fixation, and convince me that s/he is committed to helping develop a whole new ‘economic narrative’ for and with the Labour party.
It’s as simple as that.
I’m interested enough in what candidates have to offer in terms of internal party democracy and a new PLP humility. I’ll critically examine their views on everything from immigration to education policy, to the current position in the Democratic Republic of Congo.
But these matters in isolation will only have a marginal impact upon the way I decide to cast my vote.
I’m looking for a leader who, in opposition (I don’t care much if they go on to be the next Prime Minister) can argue the public case for a post-neoliberal world, and start to put some flesh on the bones about how that can be organized.
And if that’s a big ask, so be it.
These people are supposed to towering political giants, and I expect more of them than to seek to avoid economics in their hustings appearances, preferring simply to offer trite attacks on the coalition for its current plans for a double dip recession, while offering nothing but Tory-lite cuts, next year instead of this, as an alternative.
I want a leader who will, with her/his coterie advisers (amongst whom I expect to be counted), question all the economic assumptions that New Labour never questioned.
I want a leader who will go back to basics, and question what money is, who controls its supply, and who should control it.
I want a leader who can get to grips with the fundamental difference between commodity-based currency and fiat currency. I want a leader who understands that legal tender only commands authority because it comes from the state, and that neoliberal states across the world have allowed the creation of new money to become the sole prerogative of the finance industry, whilst happily accepting that the state (and its people) are the final backers of that currency when the banks get it all wrong.
I want a leader who can understand that the privatization of the money supply is not a simple matter of history, but a political choice made at the behest of the capitalist class.
I want a leader who understands that, as a matter of simple, stark reality, deficit spending is required in order to raise tax, because the money to pay tax can’t come from anywhere other than the state.
I want a leader who can counter the falsehood that a good government can only be the one which raises more in revenues than it spends. I want a leader who can argue convincingly that such assumptions are based on fundamental flaws in logic – flaws which have become the dominant explanation of how money works because it suits the rich for that explanation to hold sway, and because the left has been to lazy and/or incompetent to challenge them.
I want a leader who, like John McFall, but unlike any other Labour politician I have ever heard speak, actually understands that to compare government spending to household spending is to peddle a lie about economic reality.
I want a leader who can get to grips with a new economic narrative, which relegates the notion of fiscal deficit as a bad thing to the correct place in the list of intergovernmental concerns – as a an inflationary agent which it is perfectly possible to regulate by way of tax adjustment – and then promotes the use of deficit spending as the key to ensuring the maximization of resource use in the economy, primarily through government spending on a living wage for all those who can and want to work.
I want a Labour leader who can understand all of this, and has both the intellectual acumen and rhetorical skill to start to promote, amongst socialists both in Britain and abroad, the idea that a radically alternative model of economic management is both logical and possible.
I want a leader who will make the UK equivalent of this commitment by US Senate candidate Warren B Mosler, and be able to persuade the electorate that s/he and her/his Labour party are not mad; they’re just visionaries for a post neoliberal 21st century.
If none of the leadership candidates can offer me this, then I’m not that interested in who wins.
Note:
Further essential reading (in priority order) for Labour leadership candidates seeking my support:
1) Warren B Mosler (2010) Seven Deadly Frauds of Economic Policy (pdf file)
2) Warren B Mosler’s US Senate election site with links to other works
3) Mary Mellor (2010) The Future of Money: From Financial Crisis to Public Resource (Pluto Press) and related Red Pepper article
4) Paul Cotterill (2008) Thatcher’s Handbag, the discursive articulation of financial common sense, and the meta-alienation of the masses
5) Paul Cotterill (2010) Is being in debt good or bad?
Very sensible Paul. Also, John McFall = good.
This is not sensible. Has anyone else noticed that beyond saying “inflation could happen” he doesn’t set out any way of evaluating when the inflation constraint would kick in?
From what I understand it is normally stated that the government faces a solvency constraint because it is acknowledged that just printing money to finance spending is a very bad idea.
“I want a leader who understands that, as a matter of simple, stark reality, deficit spending is required in order to raise tax, because the money to pay tax can’t come from anywhere other than the state.”
What?
Barney
Mosler doesn’t say inflation cant happen. He says it can and that taxation policy can be used to keep it in check while still maintaining full resource use.
I fully acknowledge your current definition of solvency constraint, and that currently there’s a general acceptance that printing money is a bad idea. What I’m also saying is that we need to make a paradigm leap beyond that, on the basis of what money actually is in a fiat system (ans how its creation has been privatised under financial capitalism, while the risks in that creation are still held by the state.
The quote you take from my piece is the core of Mosler’s argument – that we need to conceive of tax (and tax policy) as the means to drive, and slow the economy, as need be. Actually, I do think Mosler needs to refine his argument around this matter to take on board the de facto creation of money through credit, but the core logic is – as far as my little brain can currently take me – sound, and fits with the historical development of fiat money systems.
I’m not saying changing the system is easy, which is why I set it out as a challenge to people cleverer than me (using the leadership debate as a cheap discursive device) but I am saying that our UK/world leaders on the left do need to think about mould-breaking around the way finance works globally, and stop accepting common assumptions provided to it by the current global system of finance, which makes private good, public bad, when in fact the private cannot operate without the tacit and (in 2008/09) backing of the public/people.
As I said: he gives no analysis of when inflation would kick in. In other words he doesn’t show that you wouldn’t need to take more out of the economy by tax than you are putting in by printing cash.
Historical experience of trying to print money to get out of trouble does not seem to be particularly encouraging. The onus is on Mosler and those who subscribe to such theories to show how those examples (Weimar Germany etc) are good indicators of what would happen.
I also challenge your assertion, explicit with respect to the theory of money and implicit with regards to mainstream economic thought generally, that current theories are triumphant because of the capitalist interests and left laziness. Without showing why current economic theory is incorrect this amounts to little more than name calling. I could just as well accuse you of only subscribing to the print cash solution because it fits your political prejudices. It also does significant disservice to Krugman, DeLong, Stiglitz et al who are in that respect mainstream but are by no means lapdogs to capitalism.
In response to the third paragraph of your comment at #4 Barney, as has been pointed out on this blog before – and by many eminent political scholars before – the transition between dominant modes of economic thought was not something that happened merely inside the academy before being rolled out to business and society.
At the end of the war opposition to the emphasis on the state of Stalinist and Keynesian economics basically defined the opposition, whether grouped around the Mont Pelerin Society or cultural centres and journals funded by the CIA or around direct business interests. This opposition did not merely wage a struggle within the academy – it used every means at its disposal to attack the power of organised labour and the other ideas and institutions identified as threatening the ‘classical liberalism’ some of the theorists of this movement espoused. What gave this theory real legs was its correlation to the struggle between labour and capital, or, if you like, its solution to staflations without requiring significant modifications to our system of private property and wealth creation and distribution that would not have been so favourable to the wealthy.
The triumph was not merely because the ideas were ‘objectively correct’ in their stated socio-political ramifications, which could talk about the same rather vacuous social justice that other traditions invoke, it triumphed as a direct result of intense political struggle of those who agreed with it for the above stated reasons with those who did not. This struggle was waged through elections and industrial strife, and in no few cases through the backing of military coups that were likely to favour US business interests. Victory in these struggles created the conditions necessary for the new collection of ideas to flourish. Victory for organised labour in these struggles would have seen a different outcome.
I don’t see anything even vaguely controversial about this, even from the point of view of a neoliberal, a neocon, a classical liberal, or whatever other labels we can use to designate the collection of economic theories that triumphed to one degree or another across the world between the 1970s and 1991. As countless academics can attest, a lot of economic theory remains exactly that – theory – unless there is somewhere and someone to put it into practice. And that requires politics.
I agree with you that it would a disservice to Krugman, DeLong and Stiglitz to call them ‘capitalist lapdogs’, in the sense that they don’t violate intellectual honesty. They believe what they are saying – but there’s no reason to assume that their theories would not benefit ‘capitalism’, especially if one operates on the assumption – as does Stiglitz – that a balance must be struck between equity, growth, stabilisation, the market and strong, transparent international institutions etc in order to continue ‘capitalism’. That, I suppose, if it’s populist hour at Speaker’s Corner, justifies the term ‘lapdog’.
Yes but the context of the article was a reformulation of monetary and fiscal policy. Not recasting soceity by abolishing private property, killing rich people etc.
Moreover the point still stands. Krugman et al support capitalism because they have an honest belief it is better for the poor than the alternatives. Reducing it all to interests tells us nothing about who is right or wrong in that debate.
Barney @4:
1) Tbh, Barney, I’m not clear why you should be so insistent on the need for Mosler to develop a predictive economic model, telling us all at what point inflation (over and above a socially acceptable rate) might be sparked. It’s not as though monetary management models currently used (interest rates) do this with any great effect – they largely just adjust the rate to suit where the economy’s at and with some historical review of what’s happened before, and (cf Mosler’s homage to Galbraith in his book title) that’s not very effective anyway. As for the issue of whether taxation might outweigh additional government expenditure, I can’t see that happening if (as with interest rates) taxation policy reacts to supply/demand change (= inflation/deflation)rather than pre-empts it. However, I also accept that I may still be missing your point somewhere.
2) I’m no denying that Weimar or Zimbabwe happened, but the essestial difference is that money printing was a desperate ploy to retain power/keep social unrest at bay. A willingness to throw away the old fiscal discipline textbook was not accompained, as it is in Mosler’s case, with proposals for the retention of full productive capacity in the economy through the provision of a living ‘public works’ governmental wage at times when it is needed (and note Mosler’s insistence to the pinning of this wage below private sector rates).
3) I have no interest in defending Krugman or Stiglitz, who are firmly in the tradition of Keynes as adjustors of capitalism to suit the continuity of capitalism. I see Mosler in a very different tradition (though he comes to his work totally independent of it until fairly recently) – perhaps more of Galbraith and before him Polyani etc.
That’s not disrespectful of Krugman/Stiglitz, who offer useful insights into how capitalism might be better managed by states.
As for whether current economic theory is incorrect or not, and as for my own ‘prejudices’ – well one person’s prejudice is another’s political principle. Current economic theory is, from the standpoint, incorrect because it breeds inequality and, in large parts of the world, starvation and premature death. What other proof do we need?
Barney (again): I realise the above makes me look like I’m becoming a Mosler apostle. I’m not, as I think the wider dimension of power is missing from his analysis (hence my reference in my OP to more ‘standard’ leftwing economic analysis as set out by Mellor, amongst others). But I do think Mosler offers some pretty interesting insights from quite a new ‘technical’/back to basics viewpoint.
1) They do produce economic models. Lots of them, with lots of quantifiable predictions.
2) Fair enough, although again I see no evidence this would make a difference or indeed be practicable. There is a big historical presumption that it doesn’t work and one would need to work very hard to rebut it.
3) Is meterology incorrect because it predicts global warming? All economics does is describe how a system works. The policies that one chooses to take out of it are up for grabs. Or one could change the system and render economics irrelevant – but it would still be correct (insofar as it is) in its description of the (now defunct) system.