Labour were too left-wing?

Yougov published some interesting polling results today which in a lot of ways seem contradictory. They asked people about Ed Miliband’s leadership of the Labour Party, and the direction Labour should take in the future. Here’s the results (click to enlarge):

Screenshot 2015-05-18 at 6.27.01 PM

Around a third of respondents think that Labour under Ed Miliband was too left wing and 40% thought the new leader should move Labour more to the centre. This should be a surprising result, as Labour’s manifesto was not remotely left-wing, promising to continue austerity and talking tough on immigration and social security. To me though it shows the power of framing, and how media presentation can feed through to public perceptions. Constant reinforcement of ‘Red Ed’ and labelling certain policies as ‘communist’ seems to have done the trick.

If we contrast this with some other results from the same poll, the picture becomes a bit less clear as Yougov’s Peter Kellner explains in this blogpost. If you ask people where they sit on the political spectrum, the most popular answer seems to be ‘right in the middle’. You get a rather nice bell shaped curve like this:

Screenshot 2015-05-18 at 6.40.00 PM

“The centre is where I am” seems to be the mantra. You hear politicians talk quite a lot about ‘reclaiming the centre ground’. For example the Lib Dem’s entire strategy seemed to be based around placing themselves slap bang in the middle between Labour and Conservative. They failed miserably of course, but not for that reason. Tony Blair was probably the master of claiming the centre ground, but the main point for politicians I guess is that to be successful you need to reframe the centre as “whatever platform we are running on”.

Words associated with left-wing and right-wing have a lot of negative baggage attached now so trying to attach a positive message to them is probably futile. They have kind of lost all meaning now. Everything to the left of whoever is in power is labelled as dangerous socialism, while the same is true to a lesser extent of the right wing.

So what does this mean for Labour? It seems clear that whoever wins the Labour leadership contest will want to present themselves as being in the centre. A moderate. A safe pair of hands. This is probably unavoidable, but being in the centre doesn’t mean your ideas need to bland and middle of the road. If you look at the public’s opinion on a range of issues, they are quite ‘leftish’ on a number of things (while still calling themselves centrist). Here is another finding from the Yougov poll linked to above:

Screenshot 2015-05-18 at 6.54.08 PM

Previous polls have also shown strong public support for nationalisation of certain industries like the railways and utilities. Unfortunately (to me) though, the British people also seem quite preoccupied with making sure those unlucky enough to not have a job are not too comfortable:

Screenshot 2015-05-18 at 6.58.19 PM

To me though, this presents an opportunity. If you can successfully frame yourself as being part of the centre, you can promote some quite radical policies while keeping a lot of voters on side. The public clearly want to see less people dependent on social security payments, so why not give them that by offering a guaranteed job to anyone willing and able to work?

It seems also that people can clearly see that capitalism is working incredibly well for those at the top, but less well for everyone else. There are some quite radical ideas that can tap into this while still being “pro-market”. I liked this recent comment from fellow blogger Neil Wilson:

It’s time to stop being ‘pro-business’ and start being ‘pro-market’.

– If you’re pro-market then you remove power and size differentials wherever they may be to ensure competition is allowed to work.

– If you’re pro-market then you ensure that everybody has an alternative job offer open to them via a Job Guarantee, ensuring there is always competition for labour resources.

– If you’re pro-market you address monopolies and rentier issues to ensure that resources are always fully utilised and available at the best prices.

‘pro-business’ people take the opposite view on these points.

Business needs to be treated as cattle not pets. They are looked after and farmed for what the output they provide, but if they stop doing that then they are culled to avoid wasting resources better used by others.

I think that’s dead right and is an attitude that should have support from across the political spectrum. The more interesting thinkers on the right like Douglas Carswell often talk of their disdain for ‘crony capitalism’, and would likely sign up to policies that were ‘pro-market’.

‘The radical centre’ is a phrase I’ve often heard (usually by people who are neither radical nor in the centre), but it does sort of capture an approach that could be successful. Convince voters you are in the centre and they’ll feel comfortable coming out to support you even if your policies offer a clear break with the status quo. It’s all about hitting the right notes by framing your ideas in the right way. It will be hard for any Labour leader to achieve this though, but hopefully one or more will at least try something new. The early signs are not great though.

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



Full employment, April fools and stupid Mr Gove

Here’s my weekly roundup of the best links from the last 7 days. The week started with George Osborne declaring his commitment to full employment. This is what some people thought of Osborne’s pledge, but full employment can be defined in different ways. Neil Wilson provides his definition here:

Full employment is when everybody has a job

Tuesday was April Fool’s Day, and Paul Bernal put out this post. It’s actually a pretty good satire that explains the issues a lot of lefties (me included) have with the Labour Party:

Why I’m rejoining the Labour Party

This week also marked the first anniversary of the Bedroom Tax. Here is Jules Birch’s ‘uncelebration’ of the day:

Many unhappy returns

There have been a couple of articles this week by people with a different (and more accurate) view on how the economy works, that have appeared in more ‘mainstream’ sources. First up, Peter Martin blogged on Labourlist about Ed Balls’ desire to run a budget surplus:

The economics of a budget surplus: Something to think about before making rash promises

And here’s one from Philip Pilkington writing in The Guardian about what he sees as the problem the left faces in trying to increase living standards at the same time as shrinking the importance of the financial sector:

The left needs a deft touch in tackling the financial sector’s dominance

Some more non-conventional perspectives now with another blog by Neil Wilson, countering the oft-heard question “How are you going to pay for it?”:

‘Taxation = Government Investment’ : Each Time, Every Time

And here’s another from Peter Martin on what gives our currency its value:

Want to make your business card worth something? Easy. Start a protection racket!

In this article by former financial regulator Bill Black, he explains how the knowledge to prevent the crisis was already available to us but was ignored:

Three Passages From Akerlof & Romer’s 1993 Article That Should Have Prevented The Crisis

Two more bits to finish. First up, a letter to David Cameron on why privatising the NHS is such a horrendous idea:

The best precis of why NHS (and other) privatisation is a Bad Thing

And finally, here’s a video that seems to be going down well with teachers – “Dear Mr Gove”


Welfare Cap, Labour are crap

Quite a lot of links this week, and first up, Scottish Independence. Much of the debate so far has been over what currency an independent Scotland should use. In this post Neil Wilson argues that it’s the real resources of Scotland we should be talking about and that a new Scottish currency would be the best option:

Scottish Independence – a Modern Money analysis

A nice blog from Tim Harford next how governments could start to address inequality, using Finland as an example:

Four steps to fixing inequality

And here Jules Birch discusses the welfare cap which passed through Parliament this week with help from Labour:

Does the welfare cap fit? 

Speaking of Labour, here’s two blogs expressing despair at Labour’s general uselessness:

Labour have stolen my Right to Vote

Oh, Labour

A wonkish this one, but I’ve included it, because it’s well argued. If you’ve know any economics, you’ll probably be OK:

Krugman Uses ISLM to Proclaim Looming Fiscal Crisis, Denounces Those Who Don’t Use ISLM

And finally, I found this blog on self-employment by Flipchart Rick interesting. Lots of nice charts as well:

Is the rise in self-employment really a Good Thing?


Banks, Balls and more Balls

Here’s another roundup to links from the last week. Two nice posts on banks first by Neil Wilson and Frances Coppola:

How banks work

Banks don’t lend out reserves. Nor deposits. And we aren’t “paying banks not to lend”

And on the Central Bank, Richard Murphy writes:

The pretense that we have an independent Bank of England should end

First installment of Balls now. For the last couple of months, there have been signs that the economy is starting to recover. Unemployment in particular has fallen much faster than expected. Despite this though, Ed Miliband has been putting David Cameron under pressure over what he calls the ‘cost of living crisis’. Under pressure from Miliband at PMQs on Wednesday, Cameron said that most people were better off now than in 2010. To back this up, on Thursday, the Treasury cobbled together some ‘evidence’ to support this. Duncan Weldon examines the evidence here:

What to make of the latest claims on living standards

Finally, some more Balls. This time, Ed Balls. He’s making a speech tomorrow about how Labour will reinstate the 50p tax, but he’ll also apparently be explaining his plans for ‘fiscal responsibility’. This is unfortunate as Neil Wilson and Richard Murphy explain:

Ed Balls promises to cause a UK recession by 2020

The incredible Ed Balls

Labour promised fireworks but delivered another damp squib

All week I’ve been reading that Labour were planning some big policy announcements soon. Ed Miliband gave his big speech today after pre-briefing the big announcement to the media which was [drum roll] to refer the banks to the competition authorities with an eye to creating some new banks… and that was pretty much it. Miliband strikes me as a nice guy and he’s not bad at political speeches. He made some approving noises about low pay, high cost of living, housing etc, but his party have no answers to any of these issues that are significantly different to what the government are doing. So while I despise the Conservative Party, all I feel about Labour is an ever growing sense of disappointment. As Miliband is fond of saying, “Britain deserves better than this”.

So his big idea today was on the banking sector. Would more competition be a good thing? Probably. Would it transform the industry? I don’t see how. Labour’s ideas about banking are already very much in line with what people like Vince Cable are already trying to do in government. There’s nothing radical or transformative about it. There are other options though. Here’s two that sound interesting to me.

The first may be known to some people, coming as it does from the Positive Money people. They favour removing the power from private banks to create money with a “full reserve system” which I think means that every £100 they lend out must be backed by £100 of deposits. I think they also propose a system where depositors (you and me) can decide if we just want the bank to store our money, or to lend it out and in return receive some interest payments.

Instead of the banks creating money then, they propose the government should just create enough money as is required to ensure the economy runs at full speed. And instead of politicians deciding how much money is created, Positive Money want it to be decided by an unelected committee (albeit one accountable to Parliament). Radical? Yes. Democratic? Maybe not. It’s an interesting idea, but I haven’t looked into it into enough detail yet. There’s a nice video here with more details for anyone interested.

The second proposal is outlined by Neil Wilson on his 3spoken blogTaking inspiration from Minsky and elsewhere, Neil proposes that the role of banks should be significantly narrowed to the extent that their main purpose should be to underwrite loans to businesses and individuals who are going to do productive things and develop the economy. Banks would be allowed to go bust, which would happen if they don’t underwrite the loans competently. Such a system would promote competition because operators could be licensed by the state, with that license affording the operator an interest free overdraft at the central bank. So the better the underwriting, the more successful the operator. The money being created by the loans would be government money, but banks would determine how much of it is created and who it is distributed to based on demand. This system appeals because of its flexibility. As Neil writes:

“So with complete disintermediation by the central bank you can have several models – from a fully nationalised state bank with employed underwriters, through the ‘Provi Model’ where you have self-employed lenders and collectors, to the normal bank with employed bank managers.

The amount of state money injected is limited by demand – as determined by a highly distributed set of underwriters locally on the ground varying interest rates to suit local conditions and their own profitability vs the competition from fully match funded lenders.”

Narrowing the scope of banking and focusing on high quality underwriting would probably reduce the amount of credit available from recent levels, but this could be compensated for with lower taxes or higher conventional government spending. Read the whole thing as Neil raises issues of the payments system.

So both of these proposals offer a radically different way of doing things. In my view they are both well argued and warranting of wider discussion. But both are so far outside the mainstream political debate as to be almost unheard of by the wider public. So it’s worth saying again, while Labour and the Tories argue furiously over tiny differences, there are a whole range of potential options open to consideration. Options which could have an enormous impact upon the economy and which do not simply seek to tinker at the edges while maintaining the status quo.


The Government’s Super Platinum Cashback Credit Card

This post will start with a bit of consumer advice, and then extend that idea to government spending.* So what’s the advice? Cashback. I love cashback. Like many people, I regularly buy stuff online. It’s often cheaper and more convenient than the highstreet. But an added attraction for me is cashback. Click through to a site where you want to buy something from a cashback site like topcashback or quidco, and you could save up to an extra 10% plus on whatever you buy. Most major online businesses have affiliates programmes with the cashback sites, so it’s well worth checking before you buy anything if you could get cashback as well.

There are many credit card companies that also give cashback each time you use one of their cards to make a purchase. If you’re someone like me who pays off their balance in full each month, this makes owning one of these cards an absolute no-brainer.

But what has this got to do with government spending? Well just like me, the government also has a cashback credit card; only theirs is super platinum. I only get a couple of % cashback when I spend, and then only on certain things, and I have a strict credit limit. The government by contrast, has no credit limit and gets cashback every time it spends in the form of tax revenue. And as every (or nearly every) transaction made in the economy is taxed, ultimately the cashback on all government spending is 100%. Some of the spending will leak into savings, so it won’t get it all back straight away, but at the end of the day, while the money the government has spent is circulating, it will be getting taxed and coming back to the government.

Once this point is understood, the common question “How are you going to pay for it?” whenever a political party suggests a spending policy, seems a bit silly. The spending will pay for itself. Instead, politicians should be concerned with important questions like are there enough jobs for everyone who wants one? are living standards rising for all, not just those at the top? To get positive answers to these questions, they need to ensure they spend enough money into the economy, creating it out of thin air like the banks if needs be.

The common retort to hearing this argument from the less imaginative will be “Great, a magic money tree, let’s just print £1m for everyone and we’ll all be rich!” This argument fails, because what is not being said here is that there are no constraints on what a government can spend. While the super platinum card has no credit limit, there are real constraints. Once an economy is running flat out, if the government keeps spending, prices will start to rise – inflation would be the result. So the super platinum card needs to be used wisely. As long as it is used wisely though, there is no need for us to put up with high unemployment, rising poverty and falling incomes. It is within the government’s power to do something about it if they just unleash the power of their super platinum cashback credit card.

* This is an idea I’ve nicked after reading a comment by Neil Wilson under this post. I’m running with it because it struck me as a great way to try to visualise government spending in a way that runs counter to the common narrative.

UPDATE: As Neil points out below, he expanded on his super platinum card idea a post on his blog a couple of years ago. It’s excellent. Read it: