John McDonnell, Labour’s Shadow Chancellor of the Exchequer, wrote an article for the Independent last weekend in which he pointed out the folly and failure of George Osborne’s austerity fetish, and told us about the new economic strategy that the Labour Party is currently devising as an alternative to the Tory government’s slash and burn of public services. The article was thick on claims of the positive effects of this new strategy but very thin on novelty.
Mr McDonnell tells us that the future health of our economy will be assured by diversification and innovation. How this can be represented as a “new” idea beats me. I’ve been listening to the same waffle in various guises for the last 30 years, most recently from the Scottish National Party in their attempts to convince the Scottish electorate that independence is economically viable.
I have no quarrel with the notion that a diverse economy is better than one that relies on a narrow range of activity, and I am an unequivocal fan of innovation. Both are inherently good things, but I have yet to see any evidence that political promotion of them leads to any significant increase in them. Neither is there any evidence of a causal link between them and a more effective, more stable, more sustainable economy. Mr McDonnell uses the example of Finland’s transformation into “one of the world’s leading hi-tech exporters” without apparently realising that Finland has been in the grip of recession for the last four years, or how this fact undermines his distinctly geriatric “new” strategy.
I sympathise with John McDonnell’s aims. He and his chums want to stimulate the economy so that more people have better-paying jobs and the government gets more tax that it can use to provide good public services. But their lack of understanding of the limitations of the system in which they are trying to meet these aims makes me want to scream. Do they never stop to look at the perpetual failure of the system, decade after decade, to meet our collective needs despite endless “new” strategies from hopeful governments? Do they never stop to think what’s behind their desire to “create” jobs and “generate” more tax revenue?
It’s all about money. More specifically, it’s all about the movement of money. The reason that we obsess about paid employment is because it’s the main method of circulating essential spending money through the economy. About half the population of the UK relies directly on wages and salaries to pay for their day-to-day living expenses. The other half get this essential spending money in the form of pensions, dividends and welfare, all of which are funded by profits or taxes from paid employment. Money moving in cycles. Money that’s earned gets spent directly, or is taxed and spent by government, and made available for earning all over again. But the circulatory system has three major flaws.
First is the reliance on jobs as the primary pump for moving money. This makes many of us do work that is unnecessary, unpleasant, and unsustainable. It prevents us from doing work that is necessary and desirable. And it discriminates against people who are unable or unwilling to do whatever work is commercially profitable.
Second is the reliance on taxes from paid employment to fund public services. This encourages activities that are unnecessary and unsustainable. It inhibits useful activities that aren’t commercially profitable. And it means that the amount of money available for public services decreases whenever demand increases: fewer jobs mean less tax revenue but more demand for welfare.
Thirdly, the system is in constant conflict with our habit of accumulating and hoarding money. This universal desire to “have” money means that the amount of money available for circulation is always diminishing. It means that new money has to be created in the form of loans, which means more money has to be used for loan repayments, which means less money is available for wages and salaries, which means fewer jobs, less tax revenue, and more money being accumulated and hoarded by the lenders, which must be replaced by the creation of even more new money as debt.
Money is a brilliant tool for making an economy work, but we are using it in just about the stupidest way possible and compounding our stupidity by taxing the very activities that we rely on for our collective security and comfort. No amount of tinkering with incentives for diversification and innovation will compensate for this fundamental stupidity.
If the Labour Party is serious about devising a new strategy that “will safeguard the health of the UK economy both now and in the future” it has to get beyond it’s obsession with jobs and start getting to grips with the underlying causes of our economic malaise.
Our dysfunctional financial and fiscal systems can never provide us with the stable, equitable, sustainable economy that we so desperately need. It’s high time that our politicians admitted this and started the process of reform. The Tory party is too in love with its own lie to take this on, but Labour has already started to question the status quo and might just be capable of spotting the opportunity to transform our lives for the better. If it doesn’t it might as well kiss goodbye to any hopes of winning the next general election. Mr. McDonnell’s “new” economic strategy isn’t going to convince anyone to vote Labour.
8 thoughts on “Labour’s “New” Economic Strategy Makes Me Want To Scream.”
I like your book “Our Money” has McDonell red it yet?
I don’t know. Jeremy Corbyn was given a copy of it recently but I haven’t heard if he’s read it or not.
If McDonnell (or Jeremy, for that matter) has read it, I would expect him/them to engage with you about its contents.
If they have not yet read it, somehow they need to be gently persuade to do so. How? Any ideas?
This is a matter of acquiring economic literacy in real-world economics so that we “won’t be deceived by economists” (paraphrasing Joan Robinson).
I suppose they are busy men with lots of people trying to get them to read stuff. All we can do is keep chipping away, developing ideas and ways to express them.
Sorry I just found your reply. Yes, they must be busy with all the big but symptomatic concerns.
The Publishers of Verso Books also sent copes of “Inventing The Future—Postcapitalism and A World Without Work” to every member of the Corbyn shadow cabinet.
Good to hear they are being assailed by radical ideas from a variety of angles.
Just bought three extra copies of “Our Money”. Even my wife can understand it :-)!
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