Pre-empting the release of today’s growth figures (which showed GDP is now above its 2008 peak*), Ed Balls penned and article for The Guardian in which he warned against complacency and made the case for Labour’s own ‘radical’ economic plans. Here’s economist Bill Mitchell’s response to Balls’ article. He’s not too impressed:
This is now deemed a radical economic plan in this age of neo-liberal Groupthink
After berating the Conservatives for failing to deliver rising living standards given that “working people are worse off with wages after inflation down by more than £1,600 a year since 2010″ and “business investment is lagging behind our competitors, apprenticeships for young people are falling, and our export growth since 2010 is sixth in the G7″, Balls rejects what he calls the ‘trickle down’ tax cuts for the rich Tory strategy.
Balls concluded that:
“While the Tories claim all we need is one more heave of the same old policies, Labour’s radical and credible economic plan is the only way to make Britain better off and fairer for the future.”
Radical and credible!
Which means in his own words:
“And we must also get the deficit down. Labour will balance the books and get the national debt falling as soon as possible in the next parliament … But we will do so in a fairer way …”
That’s what radical means in this day and age.
The moronic recital of the neo-liberal balanced budget mantra without any sign that he understands the problems he outlined earlier in the article (stagnant economy, fall real wages, lack of jobs growth etc) are all due to the fiscal deficit being too small.
What does he think will happen if he continues to cut the deficit? With no hope that the external sector will contribute to British growth, the only option then is for the private domestic sector to go even further into debt – the ‘back on the merry-go-round to crisis’ approach.
Further, so-called progressives are always on about fairness. Sure enough the composition of a particular fiscal position can be altered to benefit different income groups, which can deliver more net benefits to low income groups. Is that fair?
Well it all depends. If the level of the deficit is, however, inadequate to fill the spending gap left by the non-government sector then unemployment will remain high and growth in incomes will lag.
Who do you think is disproportionately represented in the unemployment queue? Not high income, well-educated cohorts, that is for sure.
The point is that changing the composition of government spending might be a desirable aim but the government has to initially ensure there is enough deficit spending overall.
* While GDP is now 0.2% above the previous peak of 2008, GDP per capita (or per person) remains significantly below its 2008 peak. See this chart from the ONS: