The Guardian reported comments made by current Shadow Chancellor Chris Leslie today in an article headlined “Corbyn’s economic strategy would keep Tories in power, top Labour figure says”. To me it says much more about the Labour right than anything Corbyn has come up with. It’s the mode of thinking Leslie expresses that will really keep the Tories in power. If Corbyn does win, he needs to make a clean break from the sloppy thinking set out in the Guardian’s article.
The current view on the economy in the Labour Party is identical to to that expressed by the Conservatives (but completely at odds with what most sensible economists would advocate). That is to say they think is the government’s deficit gets too high, and the total stock of debt gets too high, ‘the markets’ will start to doubt the government will be able to repay their debts and interest rates will rise, which will mean the government actually can’t repay its debts and may have to default, leading to economic ‘chaos’. To mitigate this risk, the government needs to cut spending/raise taxes to try and reduce its deficit in order to get the public finances back on a sustainable track.
It’s not clear at all to me that the Conservatives actually believe this argument, but that’s the one they have been endlessly repeating and which Labour apparently agree with. The trouble is though, if you accept this argument as true, Labour’s calls for ‘fairer cuts’ looks incredibly weak and makes it easy to attack. I don’t see how Labour can win with this argument, but the media and the Westminster establishment seem to think it’s an absolute must. I got an email from the Liz Kendall team today giving me a long list of nice sounding ideas (with no detail) about her ‘vision’ for the country, but while maintaining this wrong model of how the economy works, she and others in the Labour Party can argue for nothing more than that they will be better managers that the Conservatives. If you buy the argument on deficits and nobody is disputing that version of reality, surely you would just vote Tory?
The current view however, is nonsense. The economy just doesn’t work like that. The government always has as much money as it needs. High deficits don’t lead to higher rates, and there is no chance the UK would ever default on its debts. What we need is someone who gets this and doesn’t let bad economics prevent them for arguing for what needs to be done. Can Corbyn be that person?