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“I didn’t go into politics to be a hero to the Mail"

When Maurice Glasman called for a freeze on immigration, his fellow Blue Labour supporters distanc

Until very recently, I would not have believed that I would share with Rupert Murdoch the need to make a public apology. But though I would not go so far as to say that this is the most humble day in my life, it does rank with the worst of them.

There are rules that you learn in community organising that inform effective action. "Relationships precede action" is an important one and "Don't allow the position to move ahead of the relationships" is another. A third might be "Don't engage in theoretical speculation in the Fabian Review". I have been punished, and rightly so, for forgetting rules I used to teach and it has felt quite wretched. There is a saying in Italian that there are two kinds of idiot, and the bigger idiot is the one who didn't mean it.

Being described as the "voice of reason" by the Daily Mail is not, as David Cameron says of the cuts, "what I went into politics for". The worst part of it is that Blue Labour is a form of collegial politics, the work of many hands with varied opinions. It was just beginning to find its common themes - about relationships, power and action, democratic resistance to the exploitative pressure of capitalism, broad-based coalitions in support of the common good that defy power elites, and the radical potential of tradition - when the Fabian Review piece was republished in the Daily Telegraph on 18 July. Then it was suddenly all about immigration.

I am sorry for the crassness and thoughtlessness with which my views on immigration were expressed. I made a few mistakes early on and should have learned the lessons. It did not cross my mind that anyone could think that I support the English Defence League (EDL), which I consider a thuggish and violent organisation. When I said in an interview with Progress magazine in April that we should listen to supporters of the EDL, I was arguing that the best way to defeat fascist organisations is to engage with their supporters in a politics of the common good that addresses issues of family housing and safer streets, the living wage and a cap on interest rates.

These are policies that defy market distributions and strengthen the form of common life that we call democratic politics. In the Progress interview, I was making the point that these were not really features of New Labour and that there is a relationship between disconnected elites and right-wing populism. I thought it was an internal discussion with eight Labour Party members and one who couldn't decide whether to renew. But it ended up in the Sun. If I had known that would happen, I would not have used the term "EDL" or said Labour had "lied" about the extent of immigration.

This was a big mistake on my part, as Labour's tradition has always been defined by building relationships between those who are divided: immigrants and local people, atheists and believers, men and women. I knew that the biggest danger was that this would be mistaken for right-wing populism, because the language of Blue Labour is vivid and emotional. It is patriotic, and tries to honour what is honoured by people and work with that. It was a mistake, but I thought I could be forgiven because it was the first time and I had to learn. I vowed to stress in future that this was an anti-fascist, broad-based, democratic and relational politics.

My argument is that Labour was robust in defeating fascism and communism precisely because it had the faithful support of a working class that was loyal to its own form of radical traditionalism. There is a battle with a nationalist politics going on in England and, to win it, we need to work with people whom we have lost; people who feel abandoned and betrayed. Our elite institutions, the City, parliament, the police and the media, are all corrupted in the eyes of the people.

That is the root of fascism: a rage against invisible power and the will to destroy the hold that the elite have over honest, hard-working people. It is also the source of the Labour tra­dition, which emerged from the limits of liberalism and Marxism and argued for ­organised resistance to the rule of the rich through the democratic renewal of ancient ­institutions. This was to be achieved through broad-based organising
between estranged communities: Catholic and Protestant, the skilled and the unskilled.

Labour represents a sublime tradition that I am only just beginning to appreciate. We defeated fascism in Britain with ease, and were not undermined by Stalinists or Trotskyites. For a large part of its history, Labour worked with the idea of a democratic constitution within firms, so that workers would be treated with respect and have power in their working lives. The honouring of work, and its degradation by capitalism, were the common experiences that brought people together and around which Labour organised. There is still exploitation at work; and there are still issues of corporate governance and vocational training and standards that can form the basis of a Labour politics of the common good. That is the point I wanted to make, but it didn't come out that way.

My conversation with the Fabians has been crucial in developing my arguments. So when they asked for an interview I felt honour-bound; and I respect the interviewer, Mary Riddell, whom I find intelligent and fair-minded. I still do. She came to my flat and we spoke on my kitchen balcony. The conversation was wide-ranging and enjoyable. The only problem was that I forgot it was an interview and when I remembered, I thought, it's the Fabians, they'll understand. It ended up on the front page of the Telegraph and then in the Daily Express.

In the part of the conversation about immigration, I was pursuing an argument about democratic politics, not stating a position. Mary asked what I would do about it when there was nothing anyone could do because of European Union law. The first response should have been to say that we need to reimagine the EU. It began as a partnership between Germany and France to resist the commodification of land. The German social market economy, with its vocational training, city parliaments, worker representation on boards and regional banks, is a huge inspiration for me and for others involved in Blue Labour. It has proved more successful than our financially driven, transferrable skills economy. I wrote my PhD on the German social market economy (published as a book, Unnecessary Suffering, in 1996). German ordoliberalism and the social and Christian democratic traditions have all provided important insights, which I have drawn upon in my own thinking. The German social market economy has also proved superior to its rivals in terms of innovation and change. This is a big deal.

The European Union should be about strong city democracy and pro­tection of vocational institutions that preserve knowledge, trust and ethics. Instead, we've got the free movement of capital and people, an EU built around bank takeovers. A crucial part of the Blue Labour agenda is reimagining the EU and returning it to its original principles, which were about strengthening the democratic resistance to a free market in labour and land, in human beings and nature.

I think Labour should take the lead in building democratic alliances across Europe to reassert both democratic politics and international solidarity. I have good relationships with academics and politicians all over Europe who are thinking the same thing - people who are, like me, disappointed with the EU and who wish to see it change.

The cornerstone of my approach to internationalism is my total commitment to free and democratic trade unions in China. The workers there are being exploited without being able to organise resistance to their degradation. We need to support free and democratic trade unions all over the world and renew our organisational solidarity. No one benefits from a low-wage economy other than bosses and tyrants. This is part of the renewal of Labour as a force for democracy and liberty.

Instead of saying all that, I made the argument that a free and democratic people are capable of making their own decisions about immigration and that "we are not an outpost of the UN". That included stopping immigration. What I did not say was that, in the debate, we must be sympathetic to both the immigrant and local populations. They can do harm to each other, or they can build a common life together in which differences and common interests are recognised.

The most important consideration concerns the conditions of poor workers: they should not be played off against each other and nor should newcomers be used to implement a de facto incomes policy that undermines working arrangements, both tacit and formal. This does not lead to economic efficiency or innovation, but to a low-wage, high-churn economy that guarantees neither status nor security for the workers.

For the past decade I have worked through London Citizens with faith communities, many of them immigrant churches and mosques. This has been transformative for me. I have learned that many immigrants put great emphasis on their faith and that this is to be respected. It is precisely because it is necessary to build a common life with new neighbours that we should try to understand their conception of the good and work together on what can be agreed.

The Living Wage Campaign was created and driven by faith communities as a common expression of their conception of the good. In an exploitative system driven by the creation of insatiable desires, we need all the good we can get. The renewal in the years ahead of the common life of our cities, from a combination of new materials, the creation of novel forms of civic life and relational solidarity, is an in­spiring prospect.

What I have learned, above all, is that the present political economy leads to the exploitation of both local and immigrant. If I had been talking about this with Mary seriously, and not casually, I would have mentioned my support for the regularisation of illegal immigrants and my work with the Strangers Into Citizens campaign. I would have spoken more considerately about how hard it is to generate solidarity among people who do not know each other. I would have said that the levels of immigration over the past years have been unprecedented in our history, and how important it is to recognise both the challenge and the possibilities that flow from this. As it was, I talked about what it was possible for a democratic polity to do in principle.

It was a failed action that generated the wrong reaction. It generated not debate, but denunciation; it did not improve relationships but threatened them. It was bad political craftsmanship, and that is unforgivable. There is great energy and beauty in Blue Labour when it strives towards the common good by building alliances and relationships between estranged positions. There is much wrong, however, when it stumbles into an ugly position without honouring the complexity of the ethics and human concerns. Agitation ought to be for a purpose, and this was conversational arrogance. If you mess up, you "eat crow", as they say in the US. That's a golden rule, and I have had to eat loads, and will have to eat more before the true position can be heard once more.

Ed Miliband has opened up great possibilities with his handling of the Murdoch affair. There are now dreams to dream: about the BBC as a regional force for the public interest and for local accountability, vocational training and broadcasting of music; of a renewed local press funded by local banks and owned by local people; of introducing a balance of interest within every institution, in every sector; of a bold Labour politics that brings hope and energy to the people and is worthy of their renewed ­respect and trust.

It ill be a relief to many that I intend to take a vow of silence for the summer. I will reflect on what I have done right and what I have done wrong. And I shall learn from my experience. I will ask how I can help Labour generate a winning agenda by bringing politics and power to people who are alone and bereft, and a vocation and childcare to those without assets. For the vices of arrogance, vanity and carelessness, I am sorry.

Maurice Glasman is a Labour peer and director of the Faith and Citizenship Programme at London Metropolitan University

Maurice Glasman is a Labour peer and director of the faith and citizenship programme at London Metropolitan University

This article first appeared in the 01 August 2011 issue of the New Statesman, The rise of the far right

MILES COLE
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The new Brexit economics

George Osborne’s austerity plan – now abandoned by the Tories – was the most costly macroeconomic policy mistake since the 1930s.

George Osborne is no longer chancellor, sacked by the post-Brexit Prime Minister, Theresa May. Philip Hammond, the new Chancellor, has yet to announce detailed plans but he has indicated that the real economy rather than the deficit is his priority. The senior Conservatives Sajid Javid and Stephen Crabb have advocated substantial increases in public-sector infrastructure investment, noting how cheap it is for the government to borrow. The argument that Osborne and the Conservatives had been making since 2010 – that the priority for macroeconomic policy had to be to reduce the government’s budget deficit – seems to have been brushed aside.

Is there a good economic reason why Brexit in particular should require abandoning austerity economics? I would argue that the Tory obsession with the budget deficit has had very little to do with economics for the past four or five years. Instead, it has been a political ruse with two intentions: to help win elections and to reduce the size of the state. That Britain’s macroeconomic policy was dictated by politics rather than economics was a precursor for the Brexit vote. However, austerity had already begun to reach its political sell-by date, and Brexit marks its end.

To understand why austerity today is opposed by nearly all economists, and to grasp the partial nature of any Conservative rethink, it is important to know why it began and how it evolved. By 2010 the biggest recession since the Second World War had led to rapid increases in government budget deficits around the world. It is inevitable that deficits (the difference between government spending and tax receipts) increase in a recession, because taxes fall as incomes fall, but government spending rises further because benefit payments increase with rising unemployment. We experienced record deficits in 2010 simply because the recession was unusually severe.

In 2009 governments had raised spending and cut taxes in an effort to moderate the recession. This was done because the macroeconomic stabilisation tool of choice, nominal short-term interest rates, had become impotent once these rates hit their lower bound near zero. Keynes described the same situation in the 1930s as a liquidity trap, but most economists today use a more straightforward description: the problem of the zero lower bound (ZLB). Cutting rates below this lower bound might not stimulate demand because people could avoid them by holding cash. The textbook response to the problem is to use fiscal policy to stimulate the economy, which involves raising spending and cutting taxes. Most studies suggest that the recession would have been even worse without this expansionary fiscal policy in 2009.

Fiscal stimulus changed to fiscal contraction, more popularly known as austerity, in most of the major economies in 2010, but the reasons for this change varied from country to country. George Osborne used three different arguments to justify substantial spending cuts and tax increases before and after the coalition government was formed. The first was that unconventional monetary policy (quantitative easing, or QE) could replace the role of lower interest rates in stimulating the economy. As QE was completely untested, this was wishful thinking: the Bank of England was bound to act cautiously, because it had no idea what impact QE would have. The second was that a fiscal policy contraction would in fact expand the economy because it would inspire consumer and business confidence. This idea, disputed by most economists at the time, has now lost all credibility.

***

The third reason for trying to cut the deficit was that the financial markets would not buy government debt without it. At first, this rationale seemed to be confirmed by events as the eurozone crisis developed, and so it became the main justification for the policy. However, by 2012 it was becoming clear to many economists that the debt crisis in Ireland, Portugal and Spain was peculiar to the eurozone, and in particular to the failure of the European Central Bank (ECB) to act as a lender of last resort, buying government debt when the market failed to.

In September 2012 the ECB changed its policy and the eurozone crisis beyond Greece came to an end. This was the main reason why renewed problems in Greece last year did not lead to any contagion in the markets. Yet it is not something that the ECB will admit, because it places responsibility for the crisis at its door.

By 2012 two other things had also become clear to economists. First, governments outside the eurozone were having no problems selling their debt, as interest rates on this reached record lows. There was an obvious reason why this should be so: with central banks buying large quantities of government debt as a result of QE, there was absolutely no chance that governments would default. Nor have I ever seen any evidence that there was any likelihood of a UK debt funding crisis in 2010, beyond the irrelevant warnings of those “close to the markets”. Second, the austerity policy had done considerable harm. In macroeconomic terms the recovery from recession had been derailed. With the help of analysis from the Office for Budget Responsibility, I calculated that the GDP lost as a result of austerity implied an average cost for each UK household of at least £4,000.

Following these events, the number of academic economists who supported austerity became very small (they had always been a minority). How much of the UK deficit was cyclical or structural was irrelevant: at the ZLB, fiscal policy should stimulate, and the deficit should be dealt with once the recession was over.

Yet you would not know this from the public debate. Osborne continued to insist that deficit reduction be a priority, and his belief seemed to have become hard-wired into nearly all media discussion. So perverse was this for standard macroeconomics that I christened it “mediamacro”: the reduction of macroeconomics to the logic of household finance. Even parts of the Labour Party seemed to be succumbing to a mediamacro view, until the fiscal credibility rule introduced in March by the shadow chancellor, John McDonnell. (This included an explicit knockout from the deficit target if interest rates hit the ZLB, allowing fiscal policy to focus on recovering from recession.)

It is obvious why a focus on the deficit was politically attractive for Osborne. After 2010 the coalition government adopted the mantra that the deficit had been caused by the previous Labour government’s profligacy, even though it was almost entirely a consequence of the recession. The Tories were “clearing up the mess Labour left”, and so austerity could be blamed on their predecessors. Labour foolishly decided not to challenge this myth, and so it became what could be termed a “politicised truth”. It allowed the media to say that Osborne was more competent at running the economy than his predecessors. Much of the public, hearing only mediamacro, agreed.

An obsession with cutting the deficit was attractive to the Tories, as it helped them to appear competent. It also enabled them to achieve their ideological goal of shrinking the state. I have described this elsewhere as “deficit deceit”: using manufactured fear about the deficit to achieve otherwise unpopular reductions in public spending.

The UK recovery from the 2008/2009 recession was the weakest on record. Although employment showed strong growth from 2013, this may have owed much to an unprecedented decline in real wages and stagnant productivity growth. By the main metrics by which economists judge the success of an economy, the period of the coalition government looked very poor. Many economists tried to point this out during the 2015 election but they were largely ignored. When a survey of macroeconomists showed that most thought austerity had been harmful, the broadcast media found letters from business leaders supporting the Conservative position more newsworthy.

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In my view, mediamacro and its focus on the deficit played an important role in winning the Conservatives the 2015 general election. I believe Osborne thought so, too, and so he ­decided to try to repeat his success. Although the level of government debt was close to being stabilised, he decided to embark on a further period of fiscal consolidation so that he could achieve a budget surplus.

Osborne’s austerity plans after 2015 were different from what happened in 2010 for a number of reasons. First, while 2010 austerity also occurred in the US and the eurozone, 2015 austerity was largely a UK affair. Second, by 2015 the Bank of England had decided that interest rates could go lower than their current level if need be. We are therefore no longer at the ZLB and, in theory, the impact of fiscal consolidation on demand could be offset by reducing interest rates, as long as no adverse shocks hit the economy. The argument against fiscal consolidation was rather that it increased the vulnerability of the economy if a negative shock occurred. As we have seen, Brexit is just this kind of shock.

In this respect, abandoning Osborne’s surplus target makes sense. However, there were many other strong arguments against going for surplus. The strongest of these was the case for additional public-sector investment at a time when interest rates were extremely low. Osborne loved appearing in the media wearing a hard hat and talked the talk on investment, but in reality his fiscal plans involved a steadily decreasing share of public investment in GDP. Labour’s fiscal rules, like those of the coalition government, have targeted the deficit excluding public investment, precisely so that investment could increase when the circumstances were right. In 2015 the circumstances were as right as they can be. The Organisation for Economic Co-operation and Development, the International Monetary Fund and pretty well every economist agreed.

Brexit only reinforces this argument. Yet Brexit will also almost certainly worsen the deficit. This is why the recent acceptance by the Tories that public-sector investment should rise is significant. They may have ­decided that they have got all they could hope to achieve from deficit deceit, and that now is the time to focus on the real needs of the economy, given the short- and medium-term drag on growth caused by Brexit.

It is also worth noting that although the Conservatives have, in effect, disowned Osborne’s 2015 austerity, they still insist their 2010 policy was correct. This partial change of heart is little comfort to those of us who have been arguing against austerity for the past six years. In 2015 the Conservatives persuaded voters that electing Ed Miliband as prime minister and Ed Balls as chancellor was taking a big risk with the economy. What it would have meant, in fact, is that we would already be getting the public investment the Conservatives are now calling for, and we would have avoided both the uncertainty before the EU referendum and Brexit itself.

Many economists before the 2015 election said the same thing, but they made no impact on mediamacro. The number of economists who supported Osborne’s new fiscal charter was vanishingly small but it seemed to matter not one bit. This suggests that if a leading political party wants to ignore mainstream economics and academic economists in favour of simplistic ideas, it can get away with doing so.

As I wrote in March, the failure of debate made me very concerned about the outcome of the EU referendum. Economists were as united as they ever are that Brexit would involve significant economic costs, and the scale of these costs is probably greater than the average loss due to austerity, simply because they are repeated year after year. Yet our warnings were easily deflected with the slogan “Project Fear”, borrowed from the SNP’s nickname for the No campaign in the 2014 Scottish referendum.

It remains unclear whether economists’ warnings were ignored because they were never heard fully or because they were not trusted, but in either case economics as a profession needs to think seriously about what it can do to make itself more relevant. We do not want economics in the UK to change from being called the dismal science to becoming the “I told you so” science.

Some things will not change following the Brexit vote. Mediamacro will go on obsessing about the deficit, and the Conservatives will go on wanting to cut many parts of government expenditure so that they can cut taxes. But the signs are that deficit deceit, creating an imperative that budget deficits must be cut as a pretext for reducing the size of the state, has come to an end in the UK. It will go down in history as probably the most costly macroeconomic policy mistake since the 1930s, causing a great deal of misery to many people’s lives.

Simon Wren-Lewis is a professor of economic policy at the Blavatnik School of Government, University of Oxford. He blogs at: mainlymacro.blogspot.com

 Simon Wren-Lewis is is Professor of Economic Policy in the Blavatnik School of Government at Oxford University, and a fellow of Merton College. He blogs at mainlymacro.

This article first appeared in the 21 July 2016 issue of the New Statesman, The English Revolt