Mehdi Hasan

Mehdi Hasan’s polemical take on politics, economics and foreign affairs

Krugman: Labour is "weak" in its opposition to cuts

The Nobel economist is scathing in his criticism of the two Eds.

By Mehdi Hasan Published 30 May 2012 16:19

Paul Krugman said Labour was "weak". Source: Getty Images

In person, Paul Krugman is short, shy and quiet. But the Nobel Prize-winning economist and New York Times columnist isn’t afraid to hurl verbal hand grenades at his opponents – as I discovered to my amusement when I caught up with him on a visit to London this past week.

Krugman, who was in town to plug his new book End This Depression Now!, struggled to find anything positive to say about the EU’s leaders, President Barack Obama or the Israeli government. But it was the Princeton University professor’s comments about the Labour Party that stood out for me.

He was scathingly critical of Labour’s “weak” opposition to the Conservative-led coalition’s spending cuts. “Certainly, economically, they’re too cautious,” he said, dismissing the party’s plan to halve the deficit over four years.

His comments will make uneasy reading for the two Eds, Balls and Miliband, who are petrified of being tagged as “deficit deniers” by their right-wing critics. Under pressure from the Blairites inside the party, they have been trying to find the right balance between opposing the coalition’s austerity measures in the short run and supporting deficit reduction and cuts in the long run.

Krugman seemed to have little sympathy for them: Labour’s position on austerity, he told me, “has been a kind of ‘We’re like them but only less so’. And it does come across as fairly weak.” He continued: “It does seem odd that when you ask me: ‘Where is the really effective intellectual opposition coming from?’, it seems to be think-tank people and journalists. The opposition is Martin Wolf [of the Financial Times], Jonathan Portes [of the National Institute for Economic and Social Research], Simon Wren-Lewis [of Oxford University], David Blanchflower [of the New Statesman] and me.”

That, he said, is a “sad commentary” on the state of Her Majesty’s Opposition.

To add insult to injury, the Nobel laureate had high praise and much sympathy for Miliband’s predecessor, the much-maligned Gordon Brown. “He has been treated unfairly by history,” he said. “Yes, [Brown] made mistakes, but he is a much better guy than his current reputation suggests.”

I asked Krugman if he stood by his now-famous October 2008 description of the former prime minister as the leader who “saved the world financial system”. The economist nodded furiously. “Yes, he took the lead on the financial rescue which did save the world,” he told me. Without [Brown’s leadership], things would have been much, much worse. He was a smart guy.”

Krugman, a long-standing critic of the European single currency, was also keen to remind me how it was Brown who, as chancellor of the exchequer during the late 1990s, “kept Britain out of the euro. It would be a catastrophe here if Britain were in the euro.”

My full interview with the professor will appear in the New Statesman later this year.

Special Offer: Get 12 issues of New Statesman magazine for just £12

Tags: Budget Deficit Ed Miliband Ed Balls Paul Krugman

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66 comments

Tue, 2012-11-13 13:53 — Bunanun (not verified)

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Sat, 2012-06-30 15:08 — Mr Humanus Wright (not verified)

Once again we are being told about technology in the Civilian Sector that has been in existance within the military sector, 10 to 20 years before it has been openly publicized, within the civilian sector. We are talking about the UKUSA agreement and TTCP agreements, Porton Down (QinetiQ - DSTL - DERA), RSRE (Worcestershire), and DARPA, NASA and CIA-DST. This technology is way passed its' study/experimental stage, and is in full implementation, being used activily on a procedural level, with consent and without consent. If you refer to some of the illegal programs that were being occustrated in the 50s, 60s and 70s, under ARTICHOKE, MKULTRA stemming from 'Operation PaperClip', you can gain an insight to the level of depravity that the medicial, scientific research, intelligence and military establishments were willing to go to, and how there is a huge deception on how these technologies and programs are now being presented to the public audience: William Sargant, St Thomas's Hospital, Donald Ewan Cameron, Harry Bailey and Galbraith, amongs others ... The Radio Telemetry Laboratory, and Military Radiations Signals Intelligence, Neural Oscillations, and the Central Nervous System, with ELF or VLF manipulation; under the subject heading Brain Computer Interface (BCI), Remote Neural Monitoring (RNM) and Synthetic Telepathy. Nano-Medicines have hugely allowed this early pioneering 'torture' experimentation to be unimaginably enhanced beyond all scientific expectations, for manipulation of test subjects/live subjects, 'Unethical Human Experimentation' - in the ten of thousands (every living organism has a unique 'Bioelectric Field').

Wed, 2012-06-06 20:12 — Daniel J (not verified)

Who cares what the right wing nut jobs say. The mindless rush into austerity during a time of depression is suicide. As the history books about the 1930s all say: if everyone is paying off their debts at the same time we will be in perputual depression. The only way out is for someone to start spending, and during a depression that 'someone' can only be the State.

The neo-liberal elite that has been in control for the last thirty years are not going to let the State loose - that would mean, heaven forbid, that they were wrong!

Those of us on the Left need do nothing, but just watch the neo-Liberals hit Capitalism's self-destruct button; and then bring in system where capitalism works within a Socialist system instead of what we have now - Socialism trying to function in a Capitalist system.

Thu, 2012-06-07 09:59 — rain (not verified)

The government is doing all it can within the constraints of financial responsibility. A few weeks ago David Cameron and Nick Clegg signaled a shift in Government policy towards a fresh emphasis on growth through state-backed investment in housing, infrastructure and youth employment. This is to be welcomed. The Prime Minister told MPs that he wanted to ‘combine’ deficit reduction with ‘innovative ways of using our hard-won economic credibility to kick start the economy, they have suggested that billions of pounds worth of private sector investment would be underwritten by the Treasury, taking advantage of record low interest rates on Government borrowing. Combine these initiatives with an increased lending to small business. Which again is to be also underwritten by the state, and the state-backed mortgage schemes is to be extended. Private sector spending on big infrastructure projects such as new roads and power stations this also is likely to be given treasury guarantees, this will create welcomed new jobs. So what would Labour be doing differently? There's no quick fix no easy opinions, unless someone inside the Labour party are in the possession of a magic wand?

Wed, 2012-06-06 15:15 — SammyW (not verified)

Where is the "scathing remarks"? Did I miss them? grow up Mehdi. Paul Krugman is an economist he is not a politician and you are a mediocre columnist on a ....well what is the NS these days? It seems that half its columnists are closet Tories who the you are too scared to get rid of.

Fri, 2012-07-06 08:54 — Bill23 (not verified)

Mehdi lowers the tone of debate in this publication. Take anything he writes and look at it again a few weeks later. This man mistakenly thinks the US is powering ahead because they have a semi-socalist leader who likes to waste money, and this is what he can't get his head around: money well spent, and money spent on the bureaucratic machine.

Mon, 2012-06-04 12:10 — scampy

Niether Tony the phony Blair or Gordon the clown Brown had ever held government office before labour came to power.
None had any history in banking or finance or even a job Tony the small time lawyer and liar who could answer questions that had not been asked.
Brown a disturbed character and son of the manse forced into marriage in his fifties by homosexual taunts promised no more boom or bust while running up the biggest debt in British history.
Blair a war criminal who got temporary shelter provided by Bush as UN envoy to the middle east and who is not trusted by the Israeli's or the Palesstinians must know he will end at the Hague.

Mon, 2012-06-04 11:43 — mike555

House prices and consumer debt were left to rip for years despite many clear warnings from many people, what were those in power doing about it? Interest rates were too low, house prices were removed from the inflation target (they trebled by the way) , the population grew rapidly and houses for investment were encouraged. Labour was a buy to letters dream while many were priced out of the market by soaring prices. CGT was slashed so those with several houses benefitted even more. This is not my idea of success.

Also what if carrying on spending doesn't result in sustained growth? What then? We've already had hundreds of billions of QE, the housing market has been artficially propped up with all time low rates and people still need to get into masses of debt to buy a home and get on in life, we're not going to get away from this reliance on debt while we don't allow the market to correct. The system encourages and rewards those who get into heavy debt and discourages saving, this is not good for the long term health of the economy.

Fri, 2012-06-08 18:54 — matthew fox (not verified)

CGT rates were merged in 2008, strange how Bozo555 is ignorant of the facts.

In 2008, house prices suffered a double digit decline, so if the plan was to turbo charged prices, it failed miserable.

Bozo555, for love of money, can't tell you why CGT rates had been merged, then again, someone has to feed him.

One day, probably in 50 years time, he will understand what other factors drive house prices.

Fri, 2012-06-08 20:15 — mike555

Fox, CGT was slashed to 18%, those with second and more homes saw the rate slashed, explain how it wasn't? You can't, as you will demonstrate. You know it was slashed I know it was, everyone knows it was, it is public knowledge. A nice big bonus for the wealthy property developer, and multiple home owners.

House prices dropped a lot in 2008, but this was after they had tripled, then went up in 2009, 2010 and 2011 according to the Nationwide (the index Fox has used before).

Fri, 2012-06-08 20:45 — matthew fox (not verified)

Temper temper Bozo555.

Excuse me chump, you will find for the record, in 2008, the two CGT rates merged, am I right old chap or am I right.

It the two rates weren't merged, then tell me when the single rate was slashed, come on it is easy genius.

I see you don't want to tell me why the rates were merged, I wonder why? Then again, you have avoided that question for well over 18 months.

So your using the Nationwide house price index now, have you become bored of the DCLG index?

Bozo555 loves using the DCLG index, it is a whopping 15% higher then the other 3 house indexes he has been using over the last two years.

Consistency is not really is strong point.

Fri, 2012-06-08 21:53 — mike555

Fox I answered your CGT questions months ago, go and look, but I can prove myself correct all over again if you really want. Why don't you post up the answers instead of asking me again? You can't say rates weren't slashed I see, you know they were, here's what you said in 2011:

"According to you, Labour slashed GCT to 18% on second homes, they did, but not specifically for second homes"

A nice big bonus for rich multi home owners from New Labour at a time when many couldn't even afford a home to live in.

As for your house price comments Fox, they're not even worth a response.

Sat, 2012-06-09 05:34 — matthew fox (not verified)

Oh no you didn't Bozo555. Strange how your struggling to rebut my argument that CGT rates were merged in 2008, are you now telling me it didn't happen?

When you rant, you seem to miss so many facts, why is that?

To this day, you can't tell me why the rates were merged, yet more silence from Bozo555. This is important, because we need to know the motivation of merging GCT rates. Was it to help people with second or multiple properties?
A rational, sane person would say no, but Bozo555 being a tool, he wants to go there.

That is the problem with you, you never let facts get in the way of a good story.

With responses like " All I Said " and " I type too fast " you have a great habit of undercutting yourself.

Sat, 2012-06-09 09:01 — mike555

Fox, I have answered you go and look, you have a long list of unanswered questions, anyone can see who answers questions and who ducks them. The reason doesn't matter, it had the result of slashing CGT on second homes. Are you saying it's ok that it helped multi property owners if that wasn't the reason behind the slashing of CGT? Don't you think they knew the effect it would have? What a bizarre conclusion to draw.

Tue, 2012-06-12 19:02 — matthew fox (not verified)

Is that another no Bozo555?

Please stop avoiding a very legitimate question, the reason is important, very important, so do you forget it.

I see you are moaning about the effects, but again you don't want to address why the rates were merged.

If I was you, I toddle off, and come back to me with an explanation of why the Labour government merged the rates.

Wed, 2012-06-13 19:34 — mike555

We've been through all this before and I proved myself correct as usual. Explain how CGT wasn't slashed on second homes, you can't.

Tue, 2012-06-05 09:54 — mcquade

Mike, QE is not spending. The funds are released to the financial elite, namely the banks, and there is absolutely no guarantee they will release it into the wider economy to stimulate demand etc. And as it stands, the banks have used it for themelves (shoring up their balance sheets and increasing their capital requirenments). Quantitative easing is therefore nothing more than an exercise in redistribution from the many to the benefit of the privileged few who screwed up the economyt in the first place.

For money stimulation to be truly effective, the government needs to find another way to get it to each and every individual in the land - perhaps they should start helicopter drops.

Wed, 2012-06-06 19:59 — mike555

Mcqauade, I didn't say QE was spending. We were told QE would have to be reversed but there is absolutely no sign of that happening anytime soon, there will be even more if anything, I'm sure that will give the bankers a nice bonus. The lesson is clear for the next generation, don't bother being sensible with your money, those in heavy debt get all the help, those who are sensible pay the price. This is not good in the long term.

Tue, 2012-06-05 09:53 — mcquade

For money stimulation to be truly effective, the government needs to find another way to get it to each and every individual in the land - perhaps they should start helicopter drops.

Mon, 2012-06-04 13:54 — matthew fox (not verified)

Yawn, never has so much been written, by so few, and nothing of note to report.

Strange who Bozo555 does not understand government's borrow because of declining revenues.

Not so long ago, Bozo555 complained about low interest rates, even though we weren't in recession. Now we are in recession, his logic is now interest rates are now appropriate.

Mon, 2012-06-04 14:04 — mike555

Oh look it's Fox with nothing constructive to say about all of that, and more childish Bozo555 insults.

Mon, 2012-06-04 15:07 — matthew fox (not verified)

Constructive? You haven't got enough brains to defend your comments cretin.

Here is a classic example of how this government makes sure people won't get on.

http://www.bbc.co.uk/news/health-18128637

Do you think the 200,000 low income families, who lost their working tax credits, and lied to about getting extra hours,will be able to further themselves?

Mon, 2012-06-04 16:18 — mike555

Oh look more childish insults. If people didn't have to spend so much on housing they'd have more money to spend on other things, but you don't appear to understand the effect the tripling of house prices had on peoples lives.

Mon, 2012-06-04 18:39 — matthew fox (not verified)

Look more none rebuttals. People have to spend money on food and transport as well wally brain, didn't you get the email.

Come on idiot, let us talk about food and transport, two subject you never want to talk about.

Would you like to know the current food inflation rate, I will give you a clue, it is well over 3%.

Do you have the first idea who much people spend on transport?

http://www.guardian.co.uk/business/2011/nov/29/household-spending-transp...

It appears, yet again, you don't understand the effect issues like food and transport have on people's lives, then again, your mother is still feeding you.

Wed, 2012-06-06 19:07 — mike555

Fox, you know full well I've long argued inflation is a problem, as for the transport thing what on earth are you on about? What is it you don't like about people calling for more affordable housing? I think people getting in to masses of debt to buy homes is bad, what do you think?

Fri, 2012-06-08 18:41 — matthew fox (not verified)

No, your the problem idiot.

The transport thing, excuse me cretin, what am I on about. Let me refresh you mind.

http://www.ons.gov.uk/ons/rel/family-spending/family-spending/family-spe...

Calling for more affordable housing, remind me how many council houses Thatcher sold?

Fri, 2012-06-08 20:27 — mike555

Oh look more insults from Fox. You're not making any sense, what is your point on Transport? I think inflation is a problem, I've long argued this as you well know, talking of inflation what effect do you think the tripling of house prices had on people? Especially the low paid? The biggest purchase of peoples' lives. You don't want to say because you know what the answer is.

I don't defend the Tories, stop deflecting the point. Labour were in for 13 years to do something about housing. House prices tripled under New Labour.

Sat, 2012-06-09 05:47 — matthew fox (not verified)

Well what are you here for Bozo555, to inform?

Oh look, your denial from Bozo555.

My point on Transport, well that it affects people on low income, like food Bozo555.
Strange how you don't want to talk about the impact of Food and Transport costs on low income families, they are real issues Bozo555, people do eat and use public transport, didn't you get the email?

Can't you understand a very simple chart, Transport is the biggest expenditure for households, or is that way beyond your very limited comprehension?

Don't forget, not so long ago, you told me that Housing was biggest expenditure for households, yet when I showed you the figures from the ONS, that in 2009, Transport was the biggest expenditure, you then decided to change your line of attack, saying housing was always in the top two.

Then to double down on the madness, you complained about me using out of date figures, even though I am dependent on the ONS to supply the figures.

Haven't you noticed Bozo555, in 2010, Transport is still the biggest household expenditure.

Wed, 2012-06-13 20:00 — mike555

I fully acknowledge the cost of food and transport, I've long argued inflation is a problem. What have you got to say about the tripling of house prices under New Labour? Nothing as far as I can tell. The cost of housing is real and affects peoples lives, even more so for younger people.

I said people spend more on Housing than Petrol, you ridiculed me and posted up some stats about Transport and then disappeared when I asked you to tell us how much of Transport was made up of Petrol. The stats you posted backed up what I said when you read them properly, which is why you didn't answer the question. Anyone can read it to see.

Nothing you can say about me changes the fact that house prices tripled under New Labour.

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Sun, 2012-06-03 14:01 — andyGCC (not verified)

Yaaaaaaawn........Krugman has a Nobel prize so we must all believe him? No, I don't think so. He was wrong on Japan and is now advocating more spending, when the UK private sector keeps retrenching every time the Bank of England announces more money printing. In the end we have ended up in a slump and will not recover. As one friend recently told me, forget blaming Ed, Brown, Balls, the Bank of England, derivatives, regulation; the simple matter is that the UK does not manufacture much any more!

p.s. Krugman may well be wrong in his praise of Gordon Brown. The London G20 meeting, led by Brown, fooled the World that the worst was over in 2009/10. The current Euro banking crisis and coming global recession is proof that policymakers gave the patient lots of morphine, without addressing the nature of the injury.

Sun, 2012-06-03 19:15 — matthew fox (not verified)

More Krugman hating. Wrong about Japan, really, in the same Osborne was right about the UK economy.

If you had watched the beating Krugman gave out to the two tories on Newsnight, he silenced them with the fact at the end, US businesses complained about a lack of demand, not about regulations or taxes.

So now you are blaming QE on a slumping private sector, how original. You need to complain to the CBI, they have a different take on QE.

http://www.cbi.org.uk/media-centre/press-releases/2012/02/cbi-reaction-t...

Sun, 2012-06-03 12:51 — Anglocynn (not verified)

We have too many people in this country and sooner:-

Either England gets an English Parliament or Scotlands leaves (Either way would stop left wing minority populated nations of Scotland and Wales using their Mps to dictate terms to what is predominately a right wing England

We still dont have a referendum on an English Parliament and the EU (last referendum was when it was set of small number of trading countries). Only then will England be able to control immigration of any kind and so by doing control the out of control benefit system that was NEVER envisaged by Bevan in the 1st place when the population of UK pre 1950's was less then 45 million and certainly a lot more poor then now.

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Sat, 2012-06-02 10:42 — rain (not verified)

What cuts?

Thu, 2012-05-31 19:25 — Attrition47

Do you and Kruman think that Liarbour isn't part of the coalition?

Sat, 2012-06-02 12:51 — kenelmist (not verified)

Liars - don't get me started on Clegg and Cameron - fraudsters and fools.

Sun, 2012-06-03 13:01 — Anglocynn (not verified)

Unlike of course the truly fine examples of the Labour Mps and party.

....

Dont make me laugh.

Labour are hypocrites why ..
1) Thanks to Brown who sold most of our gold for 25% of current prices
2) nearly 3 million net immigration since labour came to office no doubt in the hope to increase the number of voters on their side .
3) Immigration is the elephant in the room and unless you support it or an immigrant yourself , you not allowed to say anything about it incase it jeaporidises your career etc etc . Despite what people actually think . It has caused a burden on our housing , employment situation , strain in infrastucture and education system.
4) bankupted our country , just like the last time labour left office in 1979.

Sun, 2012-06-03 12:55 — Anglocynn (not verified)

Unlike of course the left wing Labour Party and unions.

1) reason why we have no industries that are british owned of any worth in uk is because of beligerent unions in the1950s-1970s and bad management (Im alright Jack parodied the workplace for a reason)

Thu, 2012-06-07 21:38 — Mary Jackson (not verified)

SO NOTHING TO DO WITH MAD MAGGIE CLOSEING DOWN INDUSTRIES,? AND ALL THE FREEDOM YOU ENJOY TO DAY HAVE BEEN FOUGHT FOR BY THE UNIONS, IF THE tORIES HAD THIER WAY YOU WOULD STILL BE GOING UP CHIMMEYS, STILL NEVER MIND THE WAY THINGS ARE GOING YOU MAY BE YET

Thu, 2012-05-31 17:57 — Mrs.Josephine Hyde-Hartley (not verified)

I disagree. This I say, is a “sad commentary” on the state of Her Majesty’s Opposition;

"..this world of ours, prominent as it is for using duplicity as its survival weapon and for burying hopes alive, is no longer sustainable and in (already criminally delayed) need of refurbishment?"

( as seen in this article by Zigmunt Bauman - http://www.guardian.co.uk/commentisfree/2012/may/31/downward-mobility-eu...)

Thu, 2012-05-31 11:46 — mike cobley (not verified)

It all comes down to the deficit, or rather that half of it which derived exclusively from the insane greed and criminal incompetence of the banking/financial sector. The solution is clear - those British institutions holding UK debt must be 'persuaded' to cancel it; if not, they should be taken into public ownership under which that same debt can then be cancelled, then after some sensible restructuring they can be returned to the market sector.

Thus the stinking, rancid millstone of the deficit is cut down to manageable proportions. Case solved.

Thu, 2012-05-31 11:00 — E Hart (not verified)

Labour is weak. The other truism about the party is that it always sells its constituency down the river.

Labour has evolved into a party which has no intellectual basis for its existence. Like it or not Old Labour at least had Clause 4 (which it had no intention of introducing) and favoured a mixed economy (underscored by a strategy) - this modern neutered variant has nothing. That's why it is fundamentally weak on the points Krugman mentions - it doesn't have the same objections to the market it would once have had. In reality, Labour is a slightly left of centre Tory Party.

It wasn't great before - indeed, it was largely unelectable - but Blair-Brown killed its soul. So, in the debate on what to do next, it has few policies to offer and no vision. It is the party of default and that's why it hopes and believes it will have to do nothing but exist to win - by default. This is the electoral malaise of the moment throughout Europe and especially in the US - the pluralism of clones.

It's pitiful. Still, it could be worse. We could be in the fiscal straightjacket called the euro being wheeled around the sanitorium by Dr Merkel von Krankenhaus. We at least have the opportunity to euthanase our economy by following the edicts of Fuggers of Austerity.

Thu, 2012-05-31 19:29 — Attrition47

Good points except the remark about Liarbour being a left of centre Tory partei. Liarbour ir a far right partei like the Official Tories and the Other Tories. Clause 4 was a dead letter by the way.

Thu, 2012-05-31 19:59 — E Hart (not verified)

I was being generous. Clause 4 - a dead letter? Absolutely.

Thu, 2012-05-31 09:25 — Super Huey (not verified)

His point about Labour being weak is all but true at the very least in this article. Look at the alternative... There isn't one!

Currently to date Labour has no credible policies on the economic mess they contributed to all they do is complain/deny about it, but apparently they would do the same but 'slower'. Oh great! Ed expects us to vote for him because we're hard up on cash only to find out that if he were to be elected he would carry out the same austerity for two more years (take-over period) and then slow it down?

The pending truth is that his party wants more borrowing and spending but he knows all too well that the word 'borrowing' is toxic and the Tories will have a field day, so what should he do? - for starters make up his friggin mind at least we know what his party stands for.

Fri, 2012-06-01 00:38 — Glen Shakespeare (not verified)

You should try listening to Krugman and then you would realise how pathetic your comments are. It is spending that will get us out of this mess. Because of the war declared on the public sector the private sector is sitting on something like £700bn due to lack of demand. That kills the Tory argument straight away. The private sector will not invest in the economy when the economy is not worth investing in. The government hold the key to our recovery but have chosen the ridiculous path of austerity instead. Here's hoping the Europe wide dissent against austerity reaches these shores.

Thu, 2012-05-31 07:13 — Livers (not verified)

He is not a politician.

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