Nobel Prize-winning economist attacks Tory spending plans

Joseph Stiglitz tells the NS that Cameron and Osborne are "scaremongering".

In a forthcoming interview with Jonathan Derbyshire and Mehdi Hasan of the New Statesman, the Nobel Prize-winning US economist Joseph Stiglitz says that he is "incredulous" at the Conservatives' plans to cut spending. He describes Tory economic policy as "Hooverite" and dismisses as "crazy" and "fear-mongering" the claim that Britain is at risk of defaulting on its debts.

His response to David Cameron's and George Osborne's plans to cut spending: "Incredulous . . . We [Keynesians] had a victory for a year and then back come the Hooverites."

On Conservative claims that Britain is in danger of a Greek-style debt crisis and risks losing its AAA credit rating: "I think it's fear-mongering and I think the notion that the rating agencies, which did such a terrible job over rating all these products -- that we should show deference to their judgement of good economic policy seems outrageous."

On the suggestion, put about by George Osborne, among others, that Britain is at risk of default: "I say you're crazy -- economically you clearly have the capacity to pay. The debt situation has been worse in other countries at other times. This is all scaremongering, perhaps linked to politics, perhaps rigged to an economic agenda, but it's out of touch with reality. One of the advantages that you have is that you have your own central bank that can buy some of these bonds to stabilise their price."

On what will happen to unemployment if the Tories expand monetary policy: "I don't think there is much scope for monetary expansion . . . without engaging in new risks for the economy . . . So under the current framework it would almost certainly lead to higher unemployment."

On Gordon Brown: "I think he is . . . genuinely committed to broad social goals -- climate change, developing countries, fixing globalisation."

On whether Brown would make a good future head of the IMF or World Bank once he leaves Downing Street: "Yes. These are issues that he cares about passionately and that he understands and is very engaged in. He really did play a big role in reshaping the G20."

(Read Paul Mason's review for the NS of Stiglitz's new book, Freefall, here.)

Jonathan Derbyshire is Managing Editor of Prospect. He was formerly Culture Editor of the New Statesman.

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Leader: The divisions within Labour

Labour’s divisions have rendered it unfit for government at a moment of profound political change.

Labour is a party torn between its parliamentary and activist wings. Since Jeremy Corbyn, who this week appealed desperately for unity, was re-elected by a landslide last September, Labour has become the first opposition in 35 years to lose a ­by-election to the governing party and has continually trailed the Conservatives by a double-digit margin. Yet polling suggests that, were Mr Corbyn’s leadership challenged again, he would win by a comfortable margin. Meanwhile, many of the party’s most gifted and experienced MPs refuse to serve on the front bench. In 2015 Mr Corbyn made the leadership ballot only with the aid of political opponents such as Margaret Beckett and Frank Field. Of the 36 MPs who nominated him, just 15 went on to vote for him.

Having hugely underestimated the strength of the Labour left once, the Parliamentary Labour Party (PLP) will not do so again. In the contest that will follow Mr Corbyn’s eventual departure, the centrists could lock out potential successors such as the shadow business secretary, Rebecca Long-Bailey. Under Labour’s current rules, candidates require support from at least 15 per cent of the party’s MPs and MEPs.

This conundrum explains the attempt by Mr Corbyn’s supporters to reduce the threshold to 5 per cent. The “McDonnell amendment” (named after the shadow chancellor, who failed to make the ballot in 2007 and 2010) is being championed by the Bennite Campaign for Labour Party Democracy and Jon Lansman of Momentum, who is interviewed by Tanya Gold on page 34. “For 20 years the left was denied a voice,” he tweeted to the party’s deputy leader, Tom Watson, on 19 March. “We will deny a voice to no one. We face big challenges, and we need our mass membership to win again.”

The passage of the amendment at this year’s Labour conference would aid Mr Lansman’s decades-long quest to bring the party under the full control of activists. MPs have already lost the third of the vote they held under the electoral college system. They face losing what little influence they retain.

No Labour leader has received less support from his MPs than Mr Corbyn. However, the amendment would enable the election of an even more unpopular figure. For this reason, it should be resolutely opposed. One should respect the motivation of the members and activists, yet Labour must remain a party capable of appealing to a majority of people, a party that is capable of winning elections.

Since it was founded, Labour has been an explicitly parliamentary party. As Clause One of its constitution states: “[The party’s] purpose is to organise and maintain in Parliament and in the country a political Labour Party.” The absurdity of a leader opposed by as much as 95 per cent of his own MPs is incompatible with this mission. Those who do not enjoy the backing of their parliamentary colleagues will struggle to persuade the voters that they deserve their support.

Labour’s divisions have rendered it unfit for government at a moment of profound political change. Rather than formalising this split, the party needs to overcome it – or prepare for one of the greatest defeats in its history.

This article first appeared in the 23 March 2017 issue of the New Statesman, Trump's permanent revolution