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You lost! Badly! Humility not hubris is needed in order for British Labour to regenerate

Summary:
When the Remain vote lost the June 2016 Referendum there was a sense of denial. They had lost but only because of the ingrates that voted the Leave. And sooner, rather than later, those dolts would soon have the so-called Bregrets and another vote would be held and the Remainers would win. That sense of denial persisted past the 2017 General Election, which should have consolidated Jeremy Corbyn’s leadership, but didn’t. The biting sense of privilege that the Remain camp seemed to construct for itself slowly but surely ate into the Labour Party leadership, regularly feeding news stories to the press and social media about the impending doom facing the British economy (Project Fear), and pushing the myth (supported by all sorts of interpretable public polls) that a ‘peoples’ vote’ (I am not

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When the Remain vote lost the June 2016 Referendum there was a sense of denial. They had lost but only because of the ingrates that voted the Leave. And sooner, rather than later, those dolts would soon have the so-called Bregrets and another vote would be held and the Remainers would win. That sense of denial persisted past the 2017 General Election, which should have consolidated Jeremy Corbyn’s leadership, but didn’t. The biting sense of privilege that the Remain camp seemed to construct for itself slowly but surely ate into the Labour Party leadership, regularly feeding news stories to the press and social media about the impending doom facing the British economy (Project Fear), and pushing the myth (supported by all sorts of interpretable public polls) that a ‘peoples’ vote’ (I am not sure what they thought the Referendum was) was inevitable and would reverse the 2016 choice and restore equanimity. And the Labour leadership crumbled in the face of this onslaught from within and abandoned their previous commitments to their constituencies, which the majority of their elected MPs represented, and went along with this ‘peoples’ vote’ nonsense. The Tories, meanwhile, realised that the underlying sentiment that drove the Brexit choice was consolidating and pushed through a General Election which categorically demonstrated that the Labour Party were nowhere near the mark. That was a disastrous loss in any one’s estimation for Labour. But, still in denial, the apparatchiks in the Party, the hangers on, the wannabees, whatever you choose to call them are out there on social media now claiming that, in fact, despite the humiliating devastation at the December 15 polls, that the Labour Party’s agenda has been accepted as the norm – ‘we won the argument’ – and that they as good as won the election. And meanwhile, the leading contender for the leadership is suggesting they will campaign to be readmitted to the European Union. It is hard to make this sort of stuff up. A lost generation for Labour coming up unless it gets real.

As an aside, the Remain camp is now claiming that as a result of Britain’s exit of the European Union, British people will be disadvantaged in access to any coronavirus vaccine both in terms of timing and cost.

Back then, it was that cancer rates would rise.

There is no humility for this lot.

Labour went into the December election knowing that 56 per cent of its constituencies vote to Leave and data analysis shows that 8 per cent were uncertain (remember the boundaries of the data for the Referendum are not the same as the constituencies). It is a fairly safe bet that only 36 per cent of the Labour-held seats voted to Remain.

In the December election, the House of Commons Library analysis – GEneral Election 2019: Brexit – shows that:

1. “58 seats switched to the Conservatives”.

2. “Of these constituencies, 55 voted Leave in the 2016 EU referendum”.

There were other reasons that influenced the voting patterns, but it is hard to dismiss the proposition that the Labour Party got their ‘peoples’ vote’ and the outcome was definitely not what the Remain camp had assumed, with some arrogance and disdain, I might add.

But denial runs deep.

The ‘we won the argument’ narrative emerged after the Tory Government introduced its new – 2020 Fiscal Statement on March 11, 2020.

It was an entirely predictable scenario, even before the coronavirus crisis emerged as a dominant theme.

Having taken so many seats of Labour and several that were in the so-called Labour ‘heartland’ (Bolsover, Rother Valley, Blyth Valley, Darlington and Redcar, etc), even though the voting trends in the Midlands and North had been turning against Labour for several elections (well before the Brexit to do), what would a sensible political machine undertake?

Answer: To shore up those shifting voters!

It is not rocket science.

The “levelling-up” plan announced by the British government, quite apart from the coronavirus initiatives, means that:

By the end of the parliament, public sector net investment will be triple the average over the last 40 years in real terms. In total, around £640 billion of gross capital investment will be provided for roads, railways, communications, schools, hospitals and power networks across the UK by 2024-25.

If we actually decompose what is on offer to what was on offer one can see that around £400 billion had already been announced.

Irrespective, the injection is significant.

Other initiatives include funding boosts to the NHS and schools, among other elements of public service delivery.

It also will increase the “National Living Wage (NLW) to reach two-thirds of median earnings and be extended to workers aged 21 and over by 2024”.

This is in addition to the increase that will begin in April 2020 that the government previously announced.

There were other initiatives – Affordable Homes, freezing fuel duty, etc

The extra £175 billion for public infrastructure over five years and £30 odd this year is apparently “the biggest fiscal boost in 30 years”.

Some have characterised this as a turn away from the dominance of Thatcherism in Tory thinking. Others are less clear on that.

But one cannot escape that this is a large fiscal intervention of a Tory government that is clear that it will actively spend to create better infrastructure and services, and target those changes to the seats its took of Labour in the last election.

Entirely predictable as I said.

Those commentators who say that it doesn’t arrest the impacts of the fiscal austerity are correct but bleating about that takes attention away from what is actually happening.

10 years of pernicious austerity does not get rolled back in one fiscal year. It may take a generation to roll back the extreme damage the neoliberals (both Tories and before them the Blairites) have inflicted on Britain.

But the 2020 fiscal intervention is clearly not an austerity action. It is expansion and will create higher incomes, more jobs and do political wonders (I suspect) for the Tories.

There are many things about the Tory’s fiscal strategy that I do not agree with but it is certainly expansionary and will improve the material standard of living of many British people.

And, it will help Britain overcome the Brexit dislocation, which is what I predicted all along. The fiscal capacity of the Government was always going to be sufficient, if used, to prevent catastrophe post-Brexit.

And already we see that Nissan has announced it will invest £400 million in the Sunderland car plant to build its next generation of models despite all the fears that EU tariffs will kill its export market (Source).

Hardly the mass exit that the economists in the Remain camp were predicting.

In fact, none of their doom-type predictions have come close to being realised.

But if you read some of the comments coming from the Labour camp in the period since the delivery of the Chancellor’s fiscal strategy you would be forgiven for thinking it that the fiscal expansion was all Labour’s doing.

The day after the Chancellor unveiled the strategy, Unite the Union leader said that the fiscal statement was “Jeremy Corbyn’s legacy” and that the Tory’s had “embraced his spending philosophy” (Source).

The responses were fun.

One Tweet response posted the election results, while another said “Ahh. Now I get it … This was the plan all along! Absolute genius!!”

A key Novara Media representative – one of those ‘peoples’ vote’ pressure voices in the lead up to the election – claimed on March 12, 2020 that the Tory intervention was the “Labour Party’s first budget in a decade” (Source). Except it wasn’t, was it?

If it was then one would expect all the Labour Party gang to be extolling its virtues on a daily basis. They aren’t.

It is useful to compare, in aggregate terms, what Labour took to the election with the 2020 Tory fiscal intervention.

The Labour party claimed in the document – Funding Real Change – that accompanied its – Manifesto – that its program would require spending of £82.9 billion through to 2023-24.

In the same document, it outlined the so-called “Additional revenue raising measures” equivalent to £82.9 billion, including all sorts of ‘tax the rich’ schemes.

In addition, there was a proposed £250bn green transformation fund.

The Labour Party claimed that:

As such it comprises an aim for current budget balance in 2023-24 in line with our Fiscal Credibility Rule: capital spending (including the National Transformation Fund) is therefore not included.

The Resolution Foundation estimated the total increase in Labour spending would be £175 billion over the next Parliament combined with the estimated tax revenue increase of £83 billion (Source).

The Labour approach was couched squarely in terms of its ridiculous Fiscal Credibility Rule, which didn’t seem to convince anyone.

First, in its initial form it was incompatible with the Manifesto and internally inconsistent and in the weeks leading up to the Election, they fundamentally changed it with little fanfare (I read one insider claiming it was just a small “tweak”, Not, it was a major change).

It was meant to convince the voters that the extensive spending plans in the Manifesto would be covered by tax revenue and the borrowing would be modest to cover capital spending.

The problem in framing the issue in this neoliberal manner is that it puts the all the irrational fears about governments running out of money and raising taxes to meet their out-of-control spending at the forefront of the whole exercise.

They are always having to construct every move in terms of the Rule, which means they never educate the public about the purpose of fiscal policy, which, clearly, is to improve well-being rather than meet some arbitrary and meaningless financial ratio restrictions.

Second, compare that to the Tory 2020 Fiscal Statement, which the Resolution Foundation commentator said:

… has increased public spending significantly while being very reluctant to raise taxes to pay for it. While the Conservative government even a few years ago aimed for a smaller state and zero borrowing, these plans mean a bigger state than under Tony Blair paid for by more borrowing than Gordon Brown.

The Government is proposing a deficit of 2.4 per cent of GDP in 2020-21 but events will overtake them and this will have to rise.

The Chancellor also said in relation to the existing Tory fiscal rules that he will review the entire framework and expects that the existing rules – requiring a balance in current spending with tax income by 2023 (akin to Labour’s Rule) – would not provide enough flexibility to meet the challenges ahead for the nation and that he wanted to be able to spend more in the years ahead.

No obsession with rules then.

No framing every move in terms of whether they met some arbitrary fiscal rule.

Third, in fact, far from being pushed by Labour into this new era of fiscal dominance, the Tories are just following the trends in world thinking that is pushing a paradigm shift away from a dominance of monetary policy.

I commented on that shift and its implications for British politics in these blog posts:

1. Is the British Labour Party aboard the fiscal dominance train – Part 1? (September 23, 2019).

2. Is the British Labour Party aboard the fiscal dominance train – Part 2? (September 24, 2019).

3. The ‘rats’ are deserting the mainstream ship – and everyone wants in (September 25, 2019).

Fourth, the Labour Fiscal Credibility Rule was neoliberal not only in the language and framing that was used in the documentation and presentation but also in the substance of the mechanics of the Rule.

I wrote extensively about the Rule and these last few blog posts summarise the arguments (and contain links to the earlier critiques):

1. Forget the official Rule, apparently, there is a secret Fiscal Credibility Rule (June 19, 2019).

2. The British Labour Fiscal Credibility rule – some further final comments (October 28, 2018).

The mechanics of the Rule allowed for a suspension in bad times but only if “the Monetary Policy Committee” (Bank of England) “decides that monetary policy cannot operate …” any longer in an effective manner.

The MPC is an unelected body and not directly accountable to the people.

Just the fact that the Chancellor would have had to wait for the MPC to tell him/her what to do is a sop to neoliberalism.

The subordination of fiscal policy (accountable and elected representatives) to monetary policy (unelected and unaccountable technocrats) is one of the classic ‘Monetarist’ coups over the last several decades.

It is consistent with what Thomas Fazi and I denoted depoliticisation in our recent book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017).

Further, I pointed out, drawing on extensive analysis of the MPC documents (minutes and statements) that at no time during the GFC and its aftermath did the MPC consider that monetary policy had become ineffective and so would have never suspended the Rule.

Fifth, the – British Election Study – an academic partnership between The University of Manchester and The University of Oxford, recently released their latest study – British Election Study 2019 Data Release – Internet Panel, Results File, and Expert Survey (March 6, 2020).

This is a panel data study that is now up to Wave 19.

The panel for 2019 comprised 32,177 persons, 69.3 per cent of whom carried over from Wave 18.

I am still working through the data but what appears to be forthcoming is the view that a consensus is emerging between voters in the Midlands and the North and voters elsewhere.

Austerity is not supported by an increasing majority of persons and this view does not divide between the new Tories and the old Tories.

Both groups are now increasingly voicing a view that fiscal deficits are not a key problem and that austerity should be abandoned in favour of nation-building.

Meanwhile, Labour still talks in Fiscal Credibility Rule terms and frames.

They have really missed the shift and will have to catch up fast.

Conclusion

Even before the coronavirus crisis – which dwarfs anything I have ever experienced or lived through – the tide was quickly turning away from the neoliberal austerity mentality towards fiscal dominance.

The British Tory Government knew that it would have to use fiscal interventions of significant proportions to defend the economy as it made its transition out of the European Union.

That has nothing at all to do with Labour’s Manifesto plans.

And the coronavirus has accentuated the capacity of the currency issuer to maintain economic stability in the wake of a massive demand and supply shock.

Labour supporters would be better off if they realised they lost – and lost badly – and it was because of all the hubris of their ‘intellectual’ urban lobbies, who proved to be ‘too smart by half’ in their assessments and judgements.

Humility is needed now.

The Tories are leaving them behind.

That is enough for today!

(c) Copyright 2020 William Mitchell. All Rights Reserved.

Bill Mitchell
Bill Mitchell is a Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the University of Newcastle, NSW, Australia. He is also a professional musician and plays guitar with the Melbourne Reggae-Dub band – Pressure Drop. The band was popular around the live music scene in Melbourne in the late 1970s and early 1980s. The band reformed in late 2010.

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