Several related strands have come together in the last week of work and thinking. Today…
There was an exchange in the British House of Commons a few weeks ago (sitting on April 19, 2017), which really summarised why the Tories will win the British election and why Jeremy Corbyn has led the Labour Party there into an abyss of neo-liberal mumbo jumbo where there is no way out but loss. It was during the Parliamentary time when the Prime Minister lists her engagements for the day (a cute aspect of Westminster systems). You can follow the exchange in the Hansard entry – Volume 624. It will make your skin crawl. I guess that is what one gets from reading Parliamentary records. The upshot is that the British labour lost in a neo-liberal haze and marching forthrightly towards its Waterloo. The aftermath will not be pretty.
The interchange went like this. A conservative MP asked the Prime Minister a Dorothy Dixer about how well the Government was handling the economy.
here are three things that a country needs: a strong economy, strong defence, and strong, stable leadership. That is what our plans for Brexit and our plans for a stronger Britain will deliver. That is what the Conservative party will be offering at this election, and we will be out there fighting for every vote. The right hon. Member for Islington North (Jeremy Corbyn) would bankrupt our economy and weaken our defences and is simply not fit to lead.
Jeremy Corbyn responded by attacking the record of the Government, in part, saying:
… The Prime Minister says that we have a stronger economy, yet she cannot explain why people’s wages are lower today than they were 10 years ago or why more households are in debt. Six million people are earning less than the living wage, child poverty is up, and pensioner poverty is up. Why are so many people getting poorer?
Which were good questions and points and could have opened the door to a full-blown attack on mindless fiscal policy.
Then followed this (edited exchange):
PM: … I will be taking out to the country in this campaign a proud record of a Conservative Government: a stronger economy, with the deficit nearly two thirds down, a tax cut for 30 million people, with 4 million people taken out of income tax altogether, record levels of employment, and £1,250 more a year for pensioners. That is a record we can proud of.
Corbyn: … They only eliminated the child poverty target, not child poverty. In 2010, they promised to eradicate the deficit by 2015. In 2015, they promised to eradicate the deficit by 2020. Austerity has failed, so does the Prime Minister know by which year the deficit will now be eradicated?
… Only this year the new Chancellor pledged to eradicate the deficit by 2022. I admire Tory consistency: it is always five years in the future. Another Tory broken promise.
The Prime Minister leads a Government who have increased national debt by £700 billion, more than every Labour Government in history put together. Debt has risen every year they have been in office. We know their economic plan was long term. Does she want to tell us how far into the long term it will be before we get the debt falling?
The Labour leader then talked about that there was “less funding for schools and hospitals”, “tax giveaways to the richest corporations while our children’s schools are starved of the resources they need to educate our children for the future”, “For the first time in its history, NHS funding per patient will fall this year” and the like.
The Prime Minister responded by outlining how there are now “record levels of funding going into schools and record levels of funding going into the NHS” and concluded by saying that if the Labour Party was elected theen “we know what we would get … Bankruptcy and chaos.”
Corbyn responded with what appears to be his election mantra:
… Is it not the truth that, over the last seven years, the Tories have broken every promise on living standards, the deficit, debt, the national health service and school funding? Why should anyone believe a word they say over the next seven weeks?
Which would leave a person following this debate on TV, radio or in the press with the clear view that the Tories believe in government spending to enhance the outcomes from public services and have not been willing to cut into fiscal policy in case it would jeopardise those spending areas.
Conversely, Jeremny Corbyn’s constant sniping that the deficit nor debt has come down only goes to reinforce it the public sphere that Labour thinks these things are important.
Indeed, he accused the Prime Minister (in that exchange) of providing “tax giveaways to the richest corporations” in the same sentence as accusing the Tories of cutting school funding as if the juxtaposition was in some way valid – in a causal sense.
In other words, if they corporations paid more taxes the government would have more funds to reallocate to schools.
Again, reinforcing the claim the British government has to raise funds in order to spend and by giving ‘money’ to one group it has to take ‘money’ from another, which is really only true if the economy is operating at full resource capacity.
Regular readers will be familiar with the following Table, which is taken from a paper that Dr Louisa Connors and myself wrote a few years ago and is to be published in the next edition of the Journal of Post Keynesian Economics.
This particular version of the Table is taken from Chapter 8 of our forthcoming Modern Monetary Theory (MMT) textbook (Mitchell, Wray and Watts), which will cover the first two years of a macroeconomics undergraduate sequence and be published by Macmillan later this year.
In our JPKE paper, we argued that the dominance of mainstream macroeconomics narrative in the public domain is achieved through a series of linked myths that are reinforced with strong metaphors.
The following Table (Table 8.1) shows some of the popular examples of metaphors used by mainstream economists and commentators to focus their attack on government spending, deficits, public debt and income support payments for the most disadvantaged workers.
Each of these metaphors is designed to reinforce the main core values that the mainstream (neo-liberal) paradigm seeks to promote, such as: self discipline; independence; ambition; wealth and sacrifice.
Except, of course, when applied to the top-end-of-town, who continually put their hands out for government assistance in the form of lucrative contracts, favourable legislation, bailouts when their greed gets ahead of them and more.
The point is that metaphorical claims obscure the truth and lead us to support policies that make us worse off even when there are alternatives that would make us all, in a collective sense, better off.
If you think about Jeremy Corbyn’s attacks on the Government in the House of Commons on April 19, 2017 noted above, you will find they fit easily into this sort of metaphorical space.
For our textbook, we have created an alternative MMT-flavoured Table, recognising that human cognition is heavily dependent on the use of metaphors and framing.
Comparison of Table 8.2 with Table 8.1 will make clear how different the two approaches are. We can make use of our understanding of linguistics to provide a framing consistent with the policy space available to sovereign nations that issue their own currency.
One would have thought that Jeremy Corbyn, a self-styled progressive leader would seek to situate his narrative and attacks on the Conservatives within this metaphorical space rather than play the game by the rules set by the neo-liberals and use the language they have crafted to advance their agenda.
As the fact-checking site, Fact Check notes Corbyn’s claims that the government didn’t meet their deficit targets set in 2010 nor in 2015 are valid.
It also notes the Prime Minister’s claims that the deficit has been cut by two-thirds are valid.
The point is that Jeremy Corbyn should have been making in this interchange is that the targets set in 2010 were irresponsible and could never be achieved under the circumstances of the time.
When railing against the Government and concluding that “austerity has failed” he should have pointed out that in the 2012 Fiscal statement (aka ‘the budget’), the Government reversed direction relative to its attempts in the first two years (after being elected in May 2010) to scorch the earth with its ideological austerity agenda.
British growth was on the way to recovery, supported by the Labour deficit, when Cameron was elected. The following graph shows the quarterly real GDP growth rate from the June-quarter 2008 to the March-quarter 2017.
After two years in office, Britain was heading back into recession, and George Osborne, changed fiscal strategies and increased government spending to provide a bulwark against the double-dip recession. He didn’t admit it openly but that is what happened.
Thereafter, Britain began to post positive growth rates and has done ever since.
The following graph shows the movements public expenditure and receipts from 2000-01 to 2015-16. The two were growing in line up to the crisis, which makes the claim that the Labour Party were running huge deficits look stupid.
The GFC had two consequences: (a) revenue fell as unemployment rose; (b) expenditure rose both because the automatic stabilisers were in operation (increased welfare payments) and because the government took the responsible decision to expand discretionary spending.
George Obsborne inherited an economy that was growing again, with recover in revenue underway on the back of the growth.
You can see what he did to spending. There was a brake put on nominal expenditure growth, which means that real expenditure fell in 2010-11.
Then in 2012-13, he reversed course rather dramatically (a 2.2 per cent rise in spending) and allowed the fiscal deficit to rise from £78 billion to £87.5 billion in 2011-12.
In 2011-12, he slashed the fiscal deficit from £100 billion to £77.6 billion, which is why the economy tanked again.
That is what Jeremy Corbyn should have been emphasising. Not why haven’t they succeeded in cutting the deficit but why did they reduce the deficit and given the state of the British economy now, why aren’t they introducing even large fiscal stimulus policies.
That would be the responsible message for a progressive Opposition leader to be pushing out. Not the neo-liberal mumbo jumbo that deficits are bad.
The confusion in the Labour narrative is in the quoted sections above. Jeremy Corbyn talks about cuts in public spending and the increasing burden of household debt but doesn’t seem to be able to make the connection with the shrinking of the deficit by two-thirds.
It is obvious that George Osborne set out to mask the damaging effects of his austerity push by relying on an export-led recovery (taking over from the fiscal stimulus supported recovery he inherited).
He obviously thought that with the exchange rate falling the current account would adjust and inject net spending. Remember all the nonsense about the ‘March of the Makers’?
Please read my blog – The March of the Makers – out! – for more discussion on this point.
It soon became obvious that the external sector was not going to provide the support and he then relied on increasing indebtedness of the private domestic sector to save his hide.
To some extent that has happened – as household debt has soared including non-mortgage debt. That is a disaster waiting to happen.
Why can’t Jeremy Corbyn make these links? Why can’t he see that if the Government had have kept their early promises about the deficit that the plight of the economy would be much worse than it is now, and, many more households would have lost their homes and entered bankruptcy.
Why can’t he see that if the government squeezes the non-government sector with fiscal deficit reduction and income growth is flat, then the household sector must increase debt to maintain consumption spending?
These are simple sectoral balance propositions, apparently lost on the message writers of British Labour. Sadly.
It would be of educational value to print the two Tables off (they are png format files) and put them on a flat surface next to each other and recite the neo-liberal claim and then immediately recite the MMT claim to help in deconditioning yourself (if you are still doubtful).
That is enough for today!
(c) Copyright 2017 William Mitchell. All Rights Reserved.