Lessons for Corbyn in “Lerner’s Law”

I’ve seen a couple of references to “Lerner’s Law” on Twitter in the last couple of days and thought “What’s that?”. Before anwering this question, let’s wind back a bit.

Who is Lerner?

Abraham (Abba) Lerner was a Russian-born British economist, who, writing in the 40s and 50s developed a theory he called “functional finance“. JM Keynes was aware of some of this work, and there is evidence he agreed with much of it. Unfortunately Keynes died before really exploring Lerner’s ideas. If he had, maybe what we think we know about “Keynesian economics” would look a lot different today.

Lerner’s functional finance is a key plank of what is today called Modern Monetary Theory (MMT), and it was one of MMT’s key figures Warren Mosler who I first saw mention “Lerner’s Law”:

@RichardJMurphy I'm functionally a supportor. My concern is largely about violating 'Lerner's Law' and thereby losing the debate.

— Warren B. Mosler (@wbmosler) August 31, 2015

So what is Lerner’s Law?

I’m not sure it’s actually known widely as such, but what Mosler alluded to was a passage from Lerner’s 1951 work “Economics of Employment”. Bill Mitchell quotes this passage in his latest book “Eurozone Dystopia”. I found the relevant section here. Bill writes:

“Lerner’s work also contains a very clear message for progressive thinkers who are reluctant in the current debate to think outside of the confines that the neo-liberals have created. For example, Labour politicians in the United Kingdom confront the austerity debate with claims that they would ‘fix the budget’ over a longer time period to avoid the massive damage that immediate austerity brings. Of course, even debating the ‘health’ of the fiscal position in terms of some financial ratios is ceding ground to the conservatives, ground that is illegitimate. Lerner (1951:15) called progressives who argued in this way ‘proponents of organised prosperity’ and argued:

A kind of timidity makes them shrink from saying anything that might shock the respectable upholders of traditional doctrine and tempts them to disguise the new doctrine so that it might be easily mistaken for the old. This does not help much, for they are soon found out, and it hinders them because, in endeavoring to make the new doctrine appear harmless in the eyes of the upholders of tradition, they often damage their case. Thus instead of saying that the size of the national debt is of no great concern … [and] … that the budget may have to be unbalanced and that this is insignificant when compared with the attainment of prosperity, it is proposed to disguise an unbalanced budget (and therefore the size of the national debt) by having an elaborate system of annual, cyclical, capital, and other special budgets.

Progressives should first and foremost seek to educate the public about how the economy and money actually operate and what opportunities the government has to act on our behalf to advance our wellbeing. If we think in this way, then options that have been constructed by the neo-liberals to be ‘dangerous’, ‘radical’ or ‘taboo’ will start to appear reasonable and grounded in reality.”

So simply stated, Lerner’s Law would be something like “If you try to present your ideas cloaked in the language of you opponents, it will do your cause great damage”.

This offers a lesson to Corbyn and his supporters. Corbyn has manfully tried to present policy ideas that currently sit outside what is thought ‘possible’ within the current orthodoxy. He has done so though while trying to present himself as being enthusiastic about balancing the budget, or at least the ‘current’ budget. He has also talked about how he would ‘pay for’ his policies by raising taxes on the rich. Both of these are examples of disguising ‘new doctrine’ as old as Lerner wrote, and leave him open to attacks from those holding on tight to the old.

Mosler, in his Tweet embedded above invokes Lerner’s Law to criticise the idea of “People’s Quantitative Easing” as proposed by Richard Murphy and adopted by the the Corbyn campaign. It takes an idea that is actually quite revolutionary (Overt Monetary Financing), and cloaks it in the language of something that was on the unorthodox edge of current orthodoxy (Quantitative Easing). This has opened it up to all kinds of criticism (for example the recent FT letter signed by 55 economists).

When it’s suggested that ‘progressives’ should adopt different language to try and explain alternative policies, it’s sometimes replied that this is a hopeless cause as the current orthodoxy is so ingrained in the public’s minds. Lerner has an answer to this (quote also referenced from Bill’s book):

The scholars who understand it [the “new doctrine”] hesitate to speak out boldly for fear that the people will not understand. The people, who understand it quite easily, also fear to speak out while they wait for the scholars to speak out first. The difference between out present situation and that of the story [The Emporer’s New Clothes] is that it is not an emporer but the people who are periodically made to go naked and hungry and insecure and discontented – a ready prey to less timid organisers of discontent for the destruction of civilisation.

Let’s speak out!

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An accurate assessment of Chuka Umunna

Inexplicably (to me) the current favourite to be the next leader of the Labour Party is Chuka Umunna. I thought Bill Mitchell gave quite a good assessment of the problem with Umunna in a longer post about the problems Labour-type parties are having across the developed world. Umunna, and (let’s face it) most if not all of his rivals have eerily similar thoughts on where Labour have gone wrong. Here’s Bill’s assessment:

In the days following last week’s election, various candidates for the Labour Party leadership have emerged. An apparent front-runner, Chuka Umunna exemplifies why British Labour and Labour-type parties around the world are failing and have lost meaning.

He told the press on Sunday (May 10, 2015) – ‘No-one is too rich to be in Labour’: Chuka Umunna sets out leadership stall:

1. “Labour was wrong to run a deficit before the financial crisis”.

2. Condemned “Ed Miliband’s attacks on ‘wealth creators’”.

3. “Labour can regain power within five years if it is ‘pro-business’ and makes clear no one is ‘too rich to be part of our party’”

4. “you can’t be pro- the jobs we want to see unless you are backing the people that create them”.

5. “Labour must appeal to middle income voters in England who have ‘ambition, drive and aspiration to get on and do well’”

He is a lawyer by background.

He is being championed by the pompous and scandal-prone Mandelson, part of the New Labour movement in Britain which destroyed the nature of the Labour Party once and for all in that country and turned it into another pro-business party with tenuous claims to its past.

There is nothing I have heard since the election disaster last week that indicates that anyone who is likely to lead the British Labour Party understands they have no existence if they continue to think that capital is the wealth creator and workers get the benefits of that endeavour, that a political party has to be ‘pro business’, that mass consumption and indvidualism is to be prioritised over decent work and collective well-being.

I agree. Why would anyone vote for a red Tory, when they could have the real thing?

Cameron’s cognitive dissonance on jobs

The Tory campaign (well the lesser, positive slice of it) is focused on the economy. The phrases “We’ve created two million jobs” or “1000 jobs a day” form a part of every statement uttered by leading Conservatives, but this message is comically different from what we hear from the same people when in opposition. Bill Mitchell explained this rather well on his blog yesterday:

“I am always amused when conservative politicians make claims like they created so many thousands or millions of jobs while in government. Typically, in Opposition they will claim that governments do not create any jobs, which justifies them introducing pro-business policies and imposing austerity. That ‘free market’ position soon changes when they are trying to take credit for growth. With an election in the offing in the United Kingdom, the Prime Minister is demonstrating one of these shifts in causality. He told the BBC in an interview (March 30, 2015) –Election 2015: Cameron pledges ‘1,000 jobs a day’ if re-elected – that his government had “created a thousand jobs a day” and would continue to do so if re-elected. But there is clearly more to this claim that a 1000 net jobs per day.

David Cameron told the – BBC Breakfast program – that:

Over the last five years we’ve created a thousand jobs a day, and we commit to continuing that record because we’re going to continue supporting business and industry, continuing to make our country an attractive one to invest in and so we believe we can create those thousand jobs.

The data supports the conclusion that the UK economy has created in net terms around a 1000 jobs every day since the Conservative government was elected.

Of course, many thousands more jobs have been created and destroyed each day in Britain over the period in question. The 1000 jobs a day is just a net figure.

He clearly didn’t think the government was responsible for job creation while in Opposition.

On May 2, 2010, as part of the General Election campaign, the UK Conservative Party leader, now Prime Minister launched the – Contracts for Jobs – strategy.

In the Launch Speech, the British Prime Minister David Cameron said:

And nowhere is that more true than our economy because you all know as business people it“s not Governments that create jobs it is businesses that create jobs.

So government’s do not create jobs! So where have those 1000 net jobs a day come from!”

Watching the debate tonight, I rather wish there was someone up there like Bill. Watching all seven in turn talking about how “of course we need to balance the books” left me wishing for someone who had the first clue about how the macro economy actually works, rather than debate being between bashing the poor or bashing the rich. It’s probably a good thing there is only one of these debates.

What Cameron’s idea of “living within our means” actually means

Bill Mitchell’s blog post from today on David Cameron’s recent speech on the economy was a good one. Bill writes:

The Government then proposes the following nonsensical fiscal cut back over the next five years. Obviously, some genius in the Treasury (or OBR) has been told that they have to get a surplus by 2018-19 and then drew the spending cut line to meet that objective.

If that net public spending contraction was to happen given the state of the external sector and the already heavily indebted private domestic sector, then pigs would be flying or the economy would be pushed back into deep recession.

The problem is that if they really try to cut spending by that much and that quickly then the recession will come before the pigs take-off.

The House of Commons yesterday overwhelmingly voted to commit to achieve budget outcomes in this ballpark. Bill thinks pigs will fly before this is achieved! He goes on to take a look back at some OBR reports from 2011 (including this one) to have a look at what was being forecast for private debt at the same time as politicians were talking solemnly about the need to reduce debt as our responsibility to future generations. Bill says:

The following Table is taken from the OBRs Table 1 showed the forecasts for household assets and liabilities as a percentage of disposable income. The OBR says that “net worth is forecast to decline as a percentage of income as the household debt ratio is expected to rise and the household assets ratio is expected to fall”.

In other words, all the fuss about private and public debt levels and “dealing with our debts” in 2010 and 2011 was a smokescreen.

Its own growth strategy was always contingent on the private sector taking on a rising debt burden over the forecast period and becoming relatively poorer?

What the British government’s strategy amounted to was a deliberate plan to reduce public debt at the expense of more private debt.

Prudent fiscal management requires that exactly the opposite is the case when the economy is floundering – given current conventions about matching fiscal deficits with public debt issuance.

So which part of Britain is actually “living within its means”?

It’s a good question! In the event, household debt hasn’t (yet) gone up by as much as forecast because the government’s deficit hasn’t come down by anything like as much as was thought, but rising private debt is an absolute guarantee should politicians like George Osborne get their way. Here is the path the OBR are currently forecasting:

In other words, above the levels of the 2008 crisis. Bill ends on a rather depressing (but probably accurate) note:

It is clear what ground the British election will be fought on in the coming months. Economic myths, data denials and lots of well-crafted myths about money, debt and deficits.

The real problem is that the British Opposition will go along with it and claim it will conduct austerity better and more fairly and all the rest of the nonsense.

Budget deficits are neither good nor bad

This is going to be a re-blog of a re-blog, which is a bit lazy of me, but I’m repeating it again because I think it’s rather pertinent at the moment, what with the talk about long term economic plans to generate budget surpluses and spending cuts and tax hikes supposedly totalling £50bn on the way. It’s so far removed from the usual debate about austerity, I try and repeat it as often as possible. Anyway, this is from an old Bill Mitchell blog (my favourite economist) and he’s writing about whether budget deficits or surpluses are good or bad (Bill’s Australian by the way if you didn’t already know):

“The budget balance has no meaning as a standalone aggregate. What does a $A30 billion federal deficit mean? Nothing in itself. What does a deficit of 2 per cent of GDP mean? Only that the deficit is 2 per cent of current price GDP. Is a deficit that is 2 per cent of GDP better or worse than one that is 4 per cent of GDP? The answer it that it all depends.

The higher deficit figure might be the exemplar of fiscally responsible policy choices whereas the lower outcome might indicate fiscally irresponsible decisions. Or, the opposite might be the case, depending on the circumstances.

There is nothing intrinsically good or bad about any specific budget outcome.

In response to the 1982 attempt by conservative politicians to pass a Balanced Budget Act in the US Congress, the revered macroeconomist Gardner Ackley said:

My own position on deficits has always been, and remains, that deficits, per se, are neither good nor bad. There are times when they are not only appropriate but even highly desirable, and there are times when they are inappropriate and dangerous. During a recession or a period of “stagflation”, deficits are nearly unavoidable, and are likely to be constructive rather than harmful.

This blog – A voice from the past – budget deficits are neither good nor bad – has more discussion about Gardner Ackley.

To add meaning to the discussion we have to relate the budget outcome to the circumstances in the economy rather than be side-tracked by some pre-conceived notion that some balance is desirable and another is not.

It is not the government’s role to run deficits or surpluses. We want governments to make policy choices that will maximise the potential of the people to enjoy their lives and contribute the best they can, given their own circumstances to the well-being of society and the planet.

We might call this goal one of public purpose. An essential element of that goal, given current cultural morays in most nations, will be to ensure that everyone who wants to work has a job and for those that are unable to work, for whatever reason, have adequate income support so they are not alienated and socially-excluded.

That goal is constrained by the availability of real resources that the nation commands – labour, capital, land, etc – but not by the financial capacity of the currency-issuing government.

In most budgetary discussions, it is erroneously assumed that the national government has a financial constraint and has to budget like a household.

The analogy neo-liberals draw between household budgets and government budgets is false. Households use the currency and must finance their spending.

However, government issues the currency and must first spend (i.e. credit private bank accounts) before it can tax (i.e. debit bank accounts). The claim that governments must tax or borrow to ‘finance’ its spending is false under a fiat-currency system.

The Euro nations are an exception to this rule. They surrendered currency sovereignty, and thus have to borrow to cover deficits. This makes them dependent on bond markets (in lieu of European Central Bank support) and exposes them to solvency risk. The current Euro problem lies in the flawed design of its monetary system, which was a neo-liberal ploy to limit the capacity of these governments to borrow and spend.

The restrictions on government spending are the quantity of real goods and services available for sale in its own currency, including all the unemployed labour. Neo-liberal claims that bond markets limit government spending are false.

The fact is that the only constraint that a currency-issuing government, such as the Australian government faces, are how many real goods and services are available for sale in $A. When there is mass unemployment, for example, we can conclude that the government has no real constraint at that point in time and can bring those labour resources into productive use through higher spending.”

Wading through the fog of the Scottish referendum debate

I can’t claim to have a particularly strong view either way over Scottish independence. If I lived in Scotland, I’d probably vote yes, and then pray the SNP saw sense before independence actually became official. I feel for those in Scotland who remain undecided though. They are being bombarded with bullshit from all angles. It’s clear virtually all of the media and political class are desperate for a No vote, and are coming up with ever more apocalyptic arguments to try and persuade Scots of the consequences of a Yes vote. Recent polling suggests that if anything, their efforts have resulted in a slight tightening of the polls, so they may be as well to just shut up. As for the Yes side, it seems obvious, they are not actually prepared for what comes next if Scotland does vote Yes, and some of their stated positions particularly their desire to keep the pound in an independent Scotland would worry me if I lived north of the border. 

In this febrile atmosphere then, it’s very difficult to get objective information about the consequences of Scottish independence. On the No side we just hear blatant scaremongering, and from the Yes side quite vague promises about what an independent Scotland would look like. With that in mind, here are a few links I have found interesting in recent weeks mainly focusing on economic aspects of Scottish Independence. I post these mainly because I judge the sources to be objective in the sense that they don’t have any skin in the game, although they are obviously not value-free.

First, this post from the Southampton University politics blog written by someone familiar with independence referendums in Quebec, Canada:

What can the 1995 Quebec referendum tell us about the Scottish referendum?

This recent post by Australian economist Bill Mitchell explains why – given the SNP’s plan for the currency – he would vote No if he were a Scot:

I would be voting NO in Scotland but with a lot of anger

Another economist Paul Krugman gives his own view in a column in the New York Times earlier this week:

Scots, What the Heck?

And finally, Neil Wilson has written a series of posts on his 3Spoken blog trying to dispel some of the (what he calls) myths of the Scottish Independence debate:

How to buy imports?

The currency board

The national debt

 

 

“What motivates people and leads them to high endeavor is not fear but hope”

I really like this blog from today by Bill Mitchell about what he calls the ‘unemployment industry’ and what we would call welfare to work. Talking about Australia, he says this industry’s productivity is practically zero. This resonates here too because we have a Work Programme whose results are worse than doing nothing. Bill draws up some great quotes from and about Arthur Altmeyer, one of the fathers of social security in the US.

I think it’s worth repeating them in full here because it will demonstrate how far we have come from the initial aims of social security, aims that over here were expressed by Beveridge. At an event in 1968 to mark the 33rd anniversary of the signing of the Social Security Act, the US Secretary of Health, Education and Welfare, Wilbur J. Cohen said this of Altmeyer:

“To those who declared that if men were no longer afraid to lose their jobs America would become a nation of loafers, Arthur Altmeyer replied that there was a motivating force in the lives of men that was even stronger than fear–that force, he said, was hope. A democratic society, he said, must rely on hope and incentive rather than fear and compulsion to influence the conduct and aspirations of its citizens. And I think that is a worthy note for us to remember in the issues that face us today. Social security, he taught us, replaces fear with hope. As he put it, liberty means more than freedom to starve. It means a real opportunity to make the fullest use of one’s capacity. Far from destroying individual initiative and thrift, social security, by providing a degree of protection to families against the major vicissitudes that beset them in this modern and complicated and hazardous world, releases energies because it substitutes hope for fear as the mainspring of human endeavor.

 

In short, Arthur Altmeyer preached and practiced the idea that liberty and security are interrelated and that we cannot have one without the other. With this kind of faith that he demonstrated in man’s perfectability, with this kind of vision of democratic government.”

The bits in bold seem to be the exact opposite of what politicians like Iain Duncan Smith believe today. Far from bringing hope, IDS believes social security has fostered a ‘dependency culture’. Rather than replacing fear with hope, with his new sanctioning regime, he wants to replace hope with fear, believing he can scare people into jobs, or at the very least compel them to stop claiming social security. 

Bill goes on to quote Altmeyer from the same 1968 event as saying:

“Before I get off of the early days I want to say another thing–an important thing many people forget. Important as the Social Security Act was, it was only part of the New Deal. We recognized it as largely an income maintenance program. But we had all kinds of work and education programs going. For example, the National Youth Administration. It financed not only vocational schools, but made grants to the colleges, secondary schools, and primary schools. People have forgotten that that was a part of the picture. We had the work programs–PWA, WPA and CCC.

 

Today I run across people who went to those CCC camps. They are proud of what they did in those days. They go and visit–when they have their vacations– the places where they planted trees, or what not, to show their children, their grandchildren, what they did for their country.”

Now, instead of jobs programmes, we have unpaid work experience and ‘mandatory work activity’. When Duncan Smith talks about dependency he means social security payments are too high, but to Altmeyer, who was dubbed “Mr Social Security” (that would probably sound like an insult now):

“The most important cause of dependency is a lack of jobs at adequate wages. So we must work toward full employment. We must have a permanent, long-range, nationwide public works program.”

As Bill then goes on to write:

“All our modern politicians and policy makers and those who the policy makers have co-opted within the ‘unemployment industry’ they created should reflect on that and work out where they have gone wrong and why.”

Quite.

 

“The beauty of public employment schemes”

More great blogging from Bill Mitchell today over at Billy blog. Bill somehow manages to produce 2,000+ words of daily economic analysis, and I often reblog parts of his posts for those without the time to read the whole thing. Today’s blog discusses some long-term economic projections published by the OECD. He offers an alternative to the implied future of continued austerity suggested by the OECD. Hidden behind the innocuous title “MMT is not conservative”, here is Bill on public employment schemes, which is a good antidote to today’s politicians who think governments “don’t create jobs”:

“The beauty of public employment schemes is that they can be evaluated on totally different criteria than the decision by a private employer to take on an extra worker.

There will be a massive number of jobs in areas of environmental and personal care services over the next 50 years as the climate and land-use damage from capitalism takes its toll and the population ages. There is significant scope to offer well-paid and secure employment to those being rejected by the private sector as robots take over assembly line and other work.

The OECD conception of growth is one driven by profit. My conception of growth is unrelated to that. If the population increases, then economies need to grow to provide income earning opportunities for all. But growth via public service oriented employment leaves a totally different footprint than that driven by private market incentives.

That is what I tell green-followers who demand no growth. There has be growth, the challenge for progressives is to channel it into green-consistent activities. The government sector has to lead the way in that regard and use its currency-issuing monopoly to mobilise productive resources that the private sector chooses to leave behind (lower skilled labour etc).

There is massive scope to redefine what we mean by productive work – artists, musicians etc – can become public servants on secure pay, which would transform the green-quotient of the real GDP growth rate.

Jazz and reggae concerts and art displays and circuses (without animals) are less environmentally damaging than smokestacks! But the dollars spent on them woud deliver the same growth rates as a dollar of coal exported.

Inequality can also be reversed if governments use their fiscal capacities to advantage and ensure that all workers have opportunities to earn decent incomes. Banning most of the financial speculation will also help.

This also ties in with infrastructure. The trend to privatisation and public-private partnerships has undermined the quality and scope of major infrastructure in the advanced world.

Governments should take back control of that development and use major infrastructure projects as vehicles for employment, wages growth, and altering the nature of urban centres. More public transport, better energy systems, better communication systems, etc can be spawned through public sector leadership.

One of the big claims that the privatisation lobby made was that private firms faced ‘unfair’ competition from public enterprises. I always found that ridiculous.

Using our real resources in the best way possible at the lowest cost is the aim of any economy. Waste is typically bad. So if a public firm can access funds cheaply relative to a risky private firm but produce something people want then that is to be applauded. Capitalists are always looking for subsidies as long as they only go to them! Leaving the market free to them is a form of public subsidy.”

Government debt is not a burden on future generations

The Guardian have an article today about an index that purports to measure intergenerational fairness:

“Young people face a steeper climb to achieve the lifestyle of today’s baby boomer generation, according to an index measuring intergenerational fairness which recorded a rise from last year.

 

The declining affordability of housing for the under-30s accounted for the increase alongside a rise in government debt, which future generations must pay.”

 

In response, economist Bill Mitchell has written a great blog questioning some of the indicators used to build the index, in particular the government debt measure, which Mitchell argues in no way places a burden on future generations. The blog is excellent but a little long, so I thought I’d just quote some choice sections here:

“…the inclusion of public debt and unfunded pension liabilities for government workers in the index are based on a misunderstanding of what actually will burden the future generation.

 

The fact is that the current government has as much ‘money’ now as it had yesterday and the same amount it will have tomorrow. That is, it has whatever it wants to spend. It always has that. It has no more or less capacity to spend today because there were surpluses in the past than it would have if there had have been deficits in the past.

 

The implication of the IF Index components is that fiscal surpluses provide more spending capacity in the future or lower tax rates. That is plain false.

 

Every generation chooses its own tax rates. That is, the mix of public and private sector involvement in the economy is a political choice. If the future generations want more private and less public they will choose lower tax rates etc.

 

Currency-issuing governments do not draw down on the savings provided by the previous government’s surpluses. It is a nonsensical notion thinking that a sovereign government would ‘save’ in its own currency.”

 

He goes on:

“The idea that borrowing ‘takes money from the pockets of future taxpayers’ is nonsensical. The funds to pay for the bonds originate in the government net spending in the first place.

 

Clearly, deficits now are in part helping the current generation with income transfers and the like. But they also facilitate public education, public health and other infrastructure which provide massive benefits into the future for the current generation and their children.

 

Once you understand that then the idea that there is a future burden will make you laugh.”

 

And on the idea that we’ll all have to be taxed more in the future to pay back today’s debts:

“There has never been an empirical relationship shown between tax level changes and debt level changes lagged however many years you like. The notion is ridiculous.

 

I have never been asked to pay back the public debt that was accumulated as non-government wealth by my parent’s generation. But I sure benefited from the public infrastructure that the continuous fiscal deficits allowed the government to provide.

 

If you want to provide for the future generation then the things that will matter are education, employment and public infrastructure. All three are investments in the future. On all three, the previous government failed dramatically.

 

The best thing this government can do to prevent entrenched disadvantaged among our youth is to ensure they have work now or are in education and training programs.”

 

So the next time you hear someone argue government debt is placing a burden on our children’s future, you’ll know they’re talking nonsense!

 

 

“This is now deemed a radical economic plan in this age of neo-liberal Groupthink”

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 …”

Phew!

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: