Growth, not the deficit, will define the economic debate in 2012

And the left need to be ready to take charge of the discussion

George Osborne reminded us earlier this week that figures for GDP growth due to be published on Wednesday could show the economy contracted in the final quarter of 2011, though he was quick to point out that he had not yet seen the figures, nor was he making his own forecast; he was simply restating the view of the independent Office for Budget Responsibility (OBR).

If GDP did shrink in the final quarter of 2011, then the UK economy could be back in recession, based on economists' definition of a recession as two consecutive quarters of declining GDP (though we will have to wait until April to find out if this is really the case). Alternatively, it may be that the economy was flat, or even grew slightly, in which case a recession will technically have been avoided.

However, by focusing on the quarter by quarter numbers, we risk missing the bigger picture. Whether growth in the final quarter of 2011 turns out to have been -0.1 per cent or +0.1 per cent does not change the fact that since the Chancellor set out his austerity programme for the public sector last year, the economy has grown at an anaemic pace.

As a result, the economic recovery has been blown off course. In the first five quarters of recovery from the recent recession - that is from 2009 Q3 to 2010 Q3 - real GDP increased by 3.2 per cent. This is pretty much in line with experience following the two preceding recessions, which, in the first five quarters, saw growth of 3.1 per cent in the 1980s and 3.0 per cent in the 1990s.

But, while the economy recorded growth of 2.7 per cent in the following year of the 1980s recovery and 4.8 per cent in the following year of the 1990s recovery, growth in the UK over the last year has been just 0.5 per cent. If the OBR's forecasts are right, not just for the last quarter of 2011, but also throughout 2012, then this recovery will lag further behind the previous two (the chart includes OBR forecasts for the period 2011 Q4 to 2012 Q4).

This is not all the Chancellor's fault - though the pace of deficit reduction and his austerity rhetoric were contributory factors. The main cause of weakness in high street spending was that people had to spend more on their energy bills and petrol. More recently, the eurozone debt crisis has created uncertainty for businesses, leading to a greater reluctance to make capital investments and recruit additional workers. But weak growth in the UK enabled his opponents to argue that the Chancellor's policies were not working.

What happens in 2012 will depend, to a large extent, on developments in Europe. Petrol prices are already falling and a number of energy companies have announced cuts in their tariffs, so the squeeze on households' spending power looks set to ease. This will support high street demand. But if there is no resolution to the euro zone crisis, confidence will remain depressed and growth is likely to be little better than in 2011 (and if the crisis worsens, then there will probably be no growth at all).

If the economic recovery does pick up pace during 2012, the Chancellor will no doubt trumpet the success of his policies and it will be harder for his critics to be heard. But another year of little to no growth will lead to more calls to the Chancellor for a change of course on deficit reduction (calls that will almost certainly be ignored) and create an environment in which an alternative, growth-centred, economic strategy would get a fair hearing in public debate. If this opportunity arises, the centre-left needs to be ready to seize it.

Tony Dolphin is the senior economist and associate director of the think tank ippr

Tony Dolphin is chief economist at IPPR

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Jeremy Corbyn has transformed Labour from resisting social movements to supporting them

The opposition's new leadership has brought about a historic shift in its relationship with social movements.

“Another world is possible,” declared John McDonnell last month in his first major speech as Labour’s new shadow chancellor. These four words show how Labour’s leadership views its relationship with activists and campaigners outside the Westminster system. The slogan is the motto of the World Social Forum, an annual alternative to the ultra-elite World Economic Forum, formed by social movements across the world to struggle against, and build alternatives to, neoliberalism.

How times change. In a speech given at the George Bush Senior Presidential Library in Texas, United States, in April 2002, Labour leader and British Prime Minister Tony Blair offered his support to the administrators of the global economy, not those demonstrating against them.

He said: “It's time we took on the anti-globalisation protestors who seek to disrupt the meetings international leaders have on these issues. What the poor world needs is not less globalisation but more. Their injustice is not globalisation but being excluded from it. Free enterprise is not their enemy; but their friend.”

In 2002, Labour’s leadership wanted to take on social movements. Now, it intends to engage with and support them. “The new kind of politics” of Labour’s new leader, Jeremy Corbyn, is about more than focusing on issues over personalities and (anti-) presentational changes.

It is also “a new politics which is based on returning the Labour party to its roots. And the roots of the Labour party was as a social movement, representing the vast majority of working people in this country,” as McDonnell, Corbyn’s closest political ally, explains to the New Statesman.

Campaigners outside of the Labour party are excited. John Hilary, executive director of War on Want, a campaigning anti-poverty NGO, tells the New Statesman, “there’s a really positive impulse to the Corbyn/McDonnell leadership reaching out” to social movements. For Hilary, the immediate policy changes on TTIP – the EU-US investor rights, regulation harmonisation and non-tariff barriers deal negotiated behind closed doors – and a Financial Transaction Tax have already sent “a message to a disenfranchised part of the electorate that Labour is back”.

But, for the campaigners outside of the Labour party, this moment is not without risks. Political parties have a long record of crushing the autonomy of social movements.

“It’s important they aren’t incorporated or have to work on the terms of the political system. It’s a matter of a respectful relationship,” explains Hilary Wainwright, a political activist and founder and co-editor of Red Pepper magazine. Wainwright argues for “close engagement [between Labour and outside campaigners] that isn’t a bossy dominating one. One that seeks to collaborate, not govern”.

McDonnell agrees. “The most important thing,” he says, “is that all of the campaigns and social movements that are campaigning at the moment and those that will campaign in the future, need to maintain their autonomy from government and political parties. We respect that . . . Otherwise, we’ll undermine their vitality and their independence.”

To remain “strong, independent and radical” is “the most helpful” campaigners can be to Labour’s leadership, according to Hilary. Labour’s leadership “don’t look to us to make the sort of political compromises that they might have to do in order to hold a much broader spectrum of people together. What we can do best is hold that line as we believe it be right and support the Labour leadership in taking a line as close as possible to that”, he says.

The task for social movements and campaigners outside of the party is “to show how there will be popular support for radical and principled positions”, according to Hilary.

To win in 2020, Labour will “bring together a coalition of social movements that have changed the political climate in this country and, as a result of that, changed the electoral potential of the Labour Party as well”, says McDonnell. For Labour’s shadow chancellor, the people's views on issues are complex and fluid rather than static, making the job of politicians to bump up as close to them as possible.

Movements can help shift political common sense in Labour’s direction. Just as UK Uncut placed the issue of tax avoidance and tax justice firmly on the political map, so too can other campaigners shift the political terrain.

This movement-focused perspective may, in part, explain why the Corbyn campaign chose to transform itself last week into the Momentum movement, a grassroots network open to those without Labour membership cards. This approach stands in contrast to Blair’s leadership campaign that evolved into Progress, a New Labour pressure group and think tank made up of party members.

In order to allow movements the space to change the terms of the debate and for Labour to develop policy in conjunction with them, the party needs “to engage with movements on their own terms”, according to Wainwright. This means “the party leadership need to find out where people are struggling and where people are campaigning and specifically work with them”, she continues.

McDonnell says it will. He says Labour “want to work alongside them, give them a parliamentary voice, give them a voice in government but, more importantly, assist them in the work that they do within the wide community, both in meetings, demonstrations and on picket lines”.

This position is not one you would expect from McDonnell’s five more recent predecessors: Chris Leslie, Ed Balls, Alan Johnson, Alistair Darling, Gordon Brown. So, “this may seem like a unique moment if you’re looking just within the British context. But, if you look outside Britain it’s actually much more in touch with movements in many places in the world”, says Hilary.

He adds: “Political parties are going to have to have much more honest engagements between parliamentary politics and the social movement hinterland. For us, it just means that in a wonderful way, Britain is catching up with the rest of the world.”

McDonnell too sees this shift in how Labour engages with movements as “a historic change that modernises the Labour party”.

But, perhaps for Labour, this is a recurrence rather than a transformation. The party grew out of Britain’s biggest social movement: the unions. Labour’s new leadership’s openness to campaigners “modernises it by taking it back to being a social movement again”, says McDonnell.