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Let’s hope Cameron is for turning

In his New Year message, the Prime Minister claimed to have all the answers. He clearly doesn’t.

In his New Year message, the Prime Minister claimed to have all the answers. He clearly doesn’t.

David Cameron's official New Year message certainly caught my attention. His comments about the economy are unconvincing codswallop. The US has made it clear that fiscal stimulus and tax cuts are realistic alternatives to the spending cuts – alternatives that Cameron ignores at his peril. It could all go bad, and quickly.

Here is a point-by-point rebuttal to his claims.

1. "We have been living seriously beyond our means. We have to sort this out. Every sensible person knows this."

Actually, we haven't been living beyond our means. We have just been hit by a once-in-a hundred-years financial crisis; it takes a while to recover from such a significant shock. There are many different ways to "sort out" this problem and your way is not the only way.

A better way would be to cut taxes and increase public spending as the United States has just done. As Alan Johnson has argued, raising VAT right now, for starters, looks like a really dumb idea.

2. "The national interest dictates that we do the right thing, which is to act, not the easy thing, which would be to delay. In doing so, we should be clear: Britain has a really bright future to look forward to."

It is plausible that the national interest is best served by delaying paying off the deficit, in order to stimulate growth. Only time will tell whether the steps your government has taken are necessary or not.

Judging by historical precedent, there is a non-negligible probability that these policies will turn out to be a disaster. What if you are wrong, Mr Cameron, and the markets turn against you or growth falters? Then what?

Directionally challenged

3. "The actions we are taking are essential, because they are putting our economy and our country on the right path. Together, we can make 2011 the year that Britain gets back on its feet."

They are certainly not "essential" and there is a significant chance that this is the wrong path. For many, 2011 is going to be a year when they are knocked off their feet. An Ipsos/MORI poll published on 1 January found that British people were among the most pessimistic in the world about their prospects. Only 17 per cent said they expected their financial position to improve in the next six months – half the number that thought the same in Australia (35 per cent) and the United States (34 per cent). Three-quarters of the UK workers said they felt less secure in their job than they did just six months ago.

4. "Eight months ago we inherited an economy in deep trouble. The previous government had racked up the biggest budget deficit in our peacetime history."

Again, our economy was hit by a once-in-a-hundred-years crisis – and the actions of the fiscal and monetary authorities prevented another Great Depression. If I recall, Prime Minister, you and your party opposed these actions and were in favour of all the deregulation that ultimately caused the crisis. So what would you have done differently to resolve it? You had no answer then; why should we believe you have one now?

5. "We only have to look at what's been happening in Greece or Ireland to see the kind of danger we were in. Rising interest rates. Falling confidence. Others questioning whether you are still creditworthy as a country."

Nonsense. What has happened in Greece and Ireland is largely irrelevant, as they are stuck in monetary union. The UK has its own central bank and a floating exchange rate. What is relevant is that fiscal austerity appears to have failed in both countries as growth has been compromised. Bad example. And business and consumer confidence has collapsed in the UK since you took office.

6. "Remember, the deficit we inherited back in May was actually forecast to be bigger than that of Ireland or Greece – or any other developed country for that matter. But we have pulled Britain out of that danger zone."

In fact, the UK was never in a danger zone. But we may well be in one soon, when the coalition's misguided spending cuts and tax increases take effect. The public finances have worsened sharply under the coalition. The latest data showed a big increase in both the size of the debt and the debt-to-GDP ratio.

7. "Through the Budget and the Spending Review we've taken some really tough decisions to rescue our public finances and fundamentally change the direction of our economy."

It is true that the coalition has made a number of announcements, though it remains unclear whether the government will change the economy for the better. At this point we still don't know if it has even made any of the "efficiency savings" it trumpeted in May 2010. It is very likely that destroying large numbers of jobs will fundamentally change the direction of the economy. Ask any young person.

8. "So we have a credible plan for restoring confidence in our economy. But we have to see it through."

Judging by the evidence up to this point, you don't. To repeat, confidence has collapsed and unemployment is rising. Your plan is not credible as it is based on an assumption the private sector will step in, in a way it has never done before. Continuously saying you have to "see it through" is a dangerous strategy. Suppose your plan is entirely wrong-headed, as many believe – including me. You will be in big trouble.

Curb your zeal

9. "We're tackling the deficit because we have to – not out of some ideological zeal. This is a government led by people with a practical desire to sort out this country's problems, not by ideology. When we talk of building a bigger, stronger society, we mean it."

You may well mean it, but simply repeating that it isn't ideological doesn't mean it isn't – or that you know what you are doing. Historical precedent is against you. Plus, your response is exactly what a zealot would say.

10. "We are all in this together."

No we aren't. VAT is a regressive tax. The millionaires in cabinet will not become homeless or become depressed because of worries about paying the bills. The poor, the weak, children, single mothers and the disabled are going to pay a big price for this coalition's doctrinaire attack on them. Rising unemployment and inequality make people unhappy.

Thank goodness, Mr Cameron, you are gaining a reputation as someone who is for turning. My advice is to have a plan B ready.

David Blanchflower is economics editor of the NS and a professor at Dartmouth College, New Hampshire, and the University of Stirling

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

This article first appeared in the 10 January 2011 issue of the New Statesman, Here comes the squeeze

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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.