Beware Labour’s deficit hawks

The party’s Hooverites are encircling Ed Miliband.

In my column this week ("Let Miliband be Miliband"), I argue that the new Labour leader has to stand up to pressure from the Tories, the media and the Blairites inside his own party, who want him to tack to the right and conform to conventional wisdom.

With the departure of his elder brother, David ("Labour's lost leader", wails the headline in the Murdoch-owned, Tory-supporting Times), the pressure on Ed to "moderate" some of his positions has intensified. "He has to move right on the deficit," a Mili-D supporter told me in Manchester, as if deficit reduction is a right/left issue. It isn't: it is a right/wrong issue.

But Labour's deficit hawks are getting more and more vocal. The outgoing shadow chancellor, Alistair Darling, warned against the party retreating from his four-year-halve-the-deficit plan at the conference in Manchester, and said Labour had to be "realistic and credible". The former City minister Kitty Ussher, now head of the think tank Demos, used a column in yesterday's Financial Times to urge Miliband to "toughen up on cuts":

The changed environment must now spur him to harden, not soften, [the Darling] position.

"Changed environment"? What could she be referring to? The rather convenient IMF report, published on Tuesday, which praised the coalition's austerity measures — despite the Fund having warned a fortnight ago that "[m]ost advanced countries should not tighten fiscal policies before 2011: tightening sooner could undermine recovery"? Perhaps she missed the economist Adam Posen's remarks this week. From the FT:

The UK faces a long period of sluggish growth, with high unemployment and falling prices, unless the authorities act quickly to stimulate the economy, an influential adviser to the Bank of England has warned.

Sounding the alarm over the possibility of years of stagnation, Adam Posen, an external member of the Monetary Policy Committee, rejected the upbeat arguments issued on Monday by the International Monetary Fund about the economy's nascent recovery.

With the prospect of a repeat of 1930s stagnation rather than 1970s inflation, Mr Posen urged the Bank to restart the money printing presses to inject more life into the economy.

Posen, rather ominously, added:

Let us not forget that it was sustained high unemployment and austerity, the sense that governments were unresponsive to average people's dire economic conditions, which led to the rise of extremist intolerant parties in pre-war Europe.

The current debate over deficit reduction is being conducted on the basis of politics, not economics. The Blairite deficit hawks, fans of triangulation, want to meet Cameron and Osborne somewhere in the "middle", regardless of the fragility of the economic recovery, the lessons of economic history or the principles of Keynesian demand management.

Their central, short-term goal is to prevent Ed Balls from securing the shadow chancellor's brief, even though Balls is the party's best economist and an unrivalled attacker of the Tories (see Gove, Michael). His Bloomberg speech, outlining a progressive and Keynesian alternative to the coalition's cuts agenda, has been hailed by commentators and economists from across the spectrum.

In fact, despite whispers about him lacking "credibility" on the deficit, Balls's position is backed by the Nobel Prize-winning economists Paul Krugman and Joseph Stiglitz, the Financial Times duo Martin Wolf and Samuel Brittan, and the governor of the US Federal Reserve (and scholar of the Great Depression), Ben Bernanke. Are they not "credible" enough for the British commentariat or the Labour right? Personally, I think the words "credible" and "credibility" should be banned from all discussions of the deficit.

(On a side note, on the subject of language, before Labour members or supporters get upset with me for using the derogatory phrase "Hooverites" in the standfirst — above — I should point out that I'm quoting Joe Stiglitz here. He told me, in an interview back in February, that deferring to the credit ratings agencies and "scaremongering" about the debt marked a victory for the "Hooverites" over the "Keynesians".)

I was delighted, however, to see Ed M tell Channel 4 News last night that he would want to tax more than the Darling plan allows for, and it is important that the debate over deficit reduction revolves not just around the timing for cutting, halving or eliminating the state's overdraft, but also the preferred ratio of spending-cuts-to-tax-rises. Ed Balls was the first Labour leadership candidate to argue that Labour's plan should be based on a 50:50 ratio between the two and to point out that Norman Lamont and Kenneth Clarke used a similar ratio when the Tories were cutting the deficit in the 1990s.

I happen to believe that Balls is the best candidate for the job of shadow chancellor (and I made my case for him in my column last week). Others have suggested Yvette Cooper, who is also a strong candidate with an impressive CV. But, outside of this particular married couple, who are the other candidates for the job? Are there any? And will they help Labour stand up to the economic illiteracy of the coalition's fiscal sadists?

Ed M — over to you.

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

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Labour's establishment suspects a Momentum conspiracy - they're right

Bernie Sanders-style organisers are determined to rewire the party's machine.  

If you wanted to understand the basic dynamics of this year’s Labour leadership contest, Brighton and Hove District Labour Party is a good microcosm. On Saturday 9 July, a day before Angela Eagle was to announce her leadership bid, hundreds of members flooded into its AGM. Despite the room having a capacity of over 250, the meeting had to be held in three batches, with members forming an orderly queue. The result of the massive turnout was clear in political terms – pro-Corbyn candidates won every position on the local executive committee. 

Many in the room hailed the turnout and the result. But others claimed that some in the crowd had engaged in abuse and harassment.The national party decided that, rather than first investigate individuals, it would suspend Brighton and Hove. Add this to the national ban on local meetings and events during the leadership election, and it is easy to see why Labour seems to have an uneasy relationship with mass politics. To put it a less neutral way, the party machine is in a state of open warfare against Corbyn and his supporters.

Brighton and Hove illustrates how local activists have continued to organise – in an even more innovative and effective way than before. On Thursday 21 July, the week following the CLP’s suspension, the local Momentum group organised a mass meeting. More than 200 people showed up, with the mood defiant and pumped up.  Rather than listen to speeches, the room then became a road test for a new "campaign meetup", a more modestly titled version of the "barnstorms" used by the Bernie Sanders campaign. Activists broke up into small groups to discuss the strategy of the campaign and then even smaller groups to organise action on a very local level. By the end of the night, 20 phonebanking sessions had been planned at a branch level over the following week. 

In the past, organising inside the Labour Party was seen as a slightly cloak and dagger affair. When the Labour Party bureaucracy expelled leftwing activists in past decades, many on went further underground, organising in semi-secrecy. Now, Momentum is doing the exact opposite. 

The emphasis of the Corbyn campaign is on making its strategy, volunteer hubs and events listings as open and accessible as possible. Interactive maps will allow local activists to advertise hundreds of events, and then contact people in their area. When they gather to phonebank in they will be using a custom-built web app which will enable tens of thousands of callers to ring hundreds of thousands of numbers, from wherever they are.

As Momentum has learned to its cost, there is a trade-off between a campaign’s openness and its ability to stage manage events. But in the new politics of the Labour party, in which both the numbers of interested people and the capacity to connect with them directly are increasing exponentially, there is simply no contest. In order to win the next general election, Labour will have to master these tactics on a much bigger scale. The leadership election is the road test. 

Even many moderates seem to accept that the days of simply triangulating towards the centre and getting cozy with the Murdoch press are over. Labour needs to reach people and communities directly with an ambitious digital strategy and an army of self-organising activists. It is this kind of mass politics that delivered a "no" vote in Greece’s referendum on the terms of the Eurozone bailout last summer – defying pretty much the whole of the media, business and political establishment. 

The problem for Corbyn's challenger, Owen Smith, is that many of his backers have an open problem with this type of mass politics. Rather than investigate allegations of abuse, they have supported the suspension of CLPs. Rather than seeing the heightened emotions that come with mass mobilisations as side-effects which needs to be controlled, they have sought to joins unconnected acts of harassment, in order to smear Jeremy Corbyn. The MP Ben Bradshaw has even seemed to accuse Momentum of organising a conspiracy to physically attack Labour MPs.

The real conspiracy is much bigger than that. Hundreds of thousands of people are arriving, enthusiastic and determined, into the Labour party. These people, and their ability to convince the communities of which they are a part, threaten Britain’s political equilibrium, both the Conservatives and the Labour establishment. When the greatest hope for Labour becomes your greatest nightmare, you have good call to feel alarmed.