{"id":24419,"date":"2013-06-25T18:25:44","date_gmt":"2013-06-25T08:25:44","guid":{"rendered":"https:\/\/billmitchell.org\/blog\/?p=24419"},"modified":"2013-06-25T18:25:44","modified_gmt":"2013-06-25T08:25:44","slug":"british-labour-light-years-away-from-1945-on-another-planet","status":"publish","type":"post","link":"https:\/\/billmitchell.org\/blog\/?p=24419","title":{"rendered":"British Labour – light years away from 1945 on another planet"},"content":{"rendered":"

\t\t\t\tThe problem of living in Darwin some of the time is that the normal day to day travel that one engages in while pursuing professional life becomes very onerous. It is a four hour flight to any of the capital cities (whereas most were around 1 hour or so from Newcastle). Further, the flight schedules are crazy because Darwin Airport has no curfew (because there is no residential areas nearby) and so you catch planes to and from, say Melbourne at 1.45 in the morning, fly all night, then have to hit the ground running to meet work commitments. This part of Darwin life is very austere. Talking about austerity – in a much more significant way, however – I read that Mr Ed Miliband, thinks he is the 2013 version of Clement Atlee and he can do great and radical “Labour” things in Britain while pursuing a neo-liberal economic austerity program. My immediate reaction was who does he think he is kidding. Sadly, the British Opposition leader seems to think his party can defy basic accounting – that is, reinvent the rules of addition and subtraction – as he tries to present himself as a small target but one imbued with traditional British Labour Party values. The point of this blog is to explain why this neo-liberal bluster is so anti-1945 Labour, without dwelling too much on history. My personal austerity (flying overnight last night) has impinged on my time to wax lyrical today!
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\nThe economics are that a government can use fiscal policy to change the composition of spending within a given level of economic activity. So if the politics permit, a government could shift spending to promote equity for example while leaving the overall net public injection.<\/p>\n

This is not to say that the level<\/strong> and composition<\/strong> of public spending are independent of each other, which is an assumption that underlies the rhetoric of the current Opposition leader.<\/p>\n

The level of government net spending is a significant influence on aggregate demand and hence national income and employment generation. In times of high pressure (low unemployment), many policy initiatives can be effectively pursued more easily than if there is massive unemployment.<\/p>\n

It is much easier bringing in significant equity reforms when times are good. Distributional shifts are very hard to accomplish politically when there is crisis because there are too many losers.<\/p>\n

I will come back to this argument presently.<\/p>\n

But first, here is a little historical context. The following graph shows the British unemployment rate from 1881 to 2012 (annual data).<\/p>\n

The red segment of the graph (no particular colour meaning) is the period when Clement Atlee was the Prime Minister and clearly the current Opposition leader thinks is a reference point for his narratives.<\/p>\n

I used the Labour Trends Special Feature (January 1996) – Unemployment statistics from 1881 to the present day<\/a> – published by the British Government Statistical Service (Labour Market Statistics Group), which is now the Office of National Statistics for data between 1881-1970.<\/p>\n

The current ONS data was used from 1971 to 2012.<\/p>\n

Whatever else we might think about the period from 1945 to 1951 – including the nationalisations of coal, the central bank and transport (rail and road haulage), the utilities (electricity and gas) etc – the policy stance adopted by the British government maintained an unemployment rate that averaged 1.8 per cent.<\/p>\n

The other point is that the UK current account balance was typically in substantial surplus during this period – which regular readers will immediately know provides certain policy options that are not available to a nation that is running significant external deficits as Britain is today (more about which later).<\/p>\n

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On June 21, 2013, the UK Guardian published an interview with the British Opposition leader – Ed Miliband on the Saatchi-Lawson pictures: ‘our duty is to intervene’<\/a> – where Ed Miliband started channelling Clement Atlee, at least in the way spin merchants do who try to command respect from history but are, in fact, violating that historical connection.<\/p>\n

There was an accompanying article (June 21, 2013) – Labour can achieve radical change amid austerity, says Ed Miliband<\/a><\/p>\n

The second Guardian article notes that:<\/p>\n

\nMiliband has urged his party to remember that the post-war Labour government achieved radical social change while also managing to run budget surpluses in a time of austerity.<\/p>\n

The Labour leader urged party members concerned about his decision to accept coalition spending plans for 2015-16 to recognise that high day-to-day spending is not the only route to social justice and that Clement Attlee created the welfare state and NHS while also balancing the budget.\n<\/p><\/blockquote>\n

The first cited article quoted the Opposition leader as saying:<\/p>\n

\nIf you go into the roots and history of the Labour party and think about our most dramatic society-changing government, the 1945 government, we all remember the NHS, building homes, and the family allowance … <\/p>\n

What is less remembered is the other half – yes they created the NHS, but, believe it or not, they were running a budget surplus. There was wartime rationing. This is a government that banned the import of sardines because they were worried about the balance of payments. It shows a government can be remembered in difficult times for doing great things\n<\/p><\/blockquote>\n

What defines the Atlee period was the emergence of the Post-War commitment to full employment and strong government intervention into resource allocation.<\/p>\n

The Government members sang – The Red Flag<\/a> – on the first day of the Atlee Parliament.<\/p>\n

Just to get you in the mood, here is Billy Bragg singing The Red Flag.<\/p>\n