Wednesday, 20 May 2015

Michael Meacher's excellent summary of Indian Bicycle Marketing.

I would disagree with his conclusions as to what the UK government 'should' be doing, but apart from that, his reader's letter is an excellent summary of the Indian Bicycle Marketing practised by Tories and Labour in the run up to the General Election.

The clever bit is that under the Home-Owner-Ist consensus, Labour aren't allowed to state the bleedin' obvious, that the 'financial crisis' was caused by unbridled land price speculation and rent seeking (the modest deficits the previous Labour government had been running were very regrettable but not in in themselves fatal), so they engaged in an entirely phoney and fictitious war over who would keep deficits down.

From The Guardian letters:

Labour didn’t lose because it failed to support a New Labour business agenda. It lost because it never nailed the Tory lie that Labour left behind a dreadful economic mess – as though the banks and the international recession had nothing to do with it.

And it never challenged the Tory canard that Labour was profligate, when in fact the Thatcher-Major governments in 10 out of their 18 years ratcheted up deficits bigger than Labour’s in any of its 1997-2008 pre-crash years. That left millions of undecided voters at the end who were sympathetic to Ed Miliband’s positive reform programme, but who, faced with the relentless barrage of negative Tory propaganda about Labour’s economic record, felt they couldn’t risk a vote for Labour.

Miliband was right that the banks, the corporate elite and the media had too much power and had abused it by inflating their own incomes and wealth at the expense of everyone else and by seeking to suppress all those forces, notably the unions, that stood up for the vulnerable and dispossessed. He was right that a deregulated predatory capitalism needed reform.

By contrast the New Labour approach was that big cuts needed to be made to pay off the deficit, but slightly more gently, by cutting less far and less fast. However, that was the worst of all worlds. It implied that Labour accepted the Tory framing of the election that Labour caused the financial crash, that the deficit was the central issue and that deep cuts in pay, benefits and public services were the right way to deal it.

All these claims are fundamentally wrong, The right response, which Labour sadly never argued for, was to use public investment to expand the economy, not shrink it. And by increasing jobs and wages, raise tax receipts so the deficit could be paid off faster. It is tragic that this far better alternative was never argued for.

Michael Meacher MP, Labour, Oldham West and Royton.


15 comments:

Random said...

"the modest deficits the previous Labour government had been running were very regrettable but not in in themselves fatal"
?

Random said...

I don't understand this nonsense.
"by seeking to suppress all those forces, notably the unions, that stood up for the vulnerable and dispossessed."
Unions stand up for their workers. Not for the "vulnerable and dispossessed."
"when in fact the Thatcher-Major governments in 10 out of their 18 years ratcheted up deficits bigger than Labour’s in any of its 1997-2008 pre-crash years. "
The labour surpluses in the late 1990s combined with households going into debt and the dot com bubble. Deficits are a normal occurance.
"was to use public investment to expand the economy, not shrink it. And by increasing jobs and wages, raise tax receipts so the deficit could be paid off faster."
Not if people save the money it won't. The right response is to cut taxes.
Standard BS from Meacher. He considers deficits "a problem."

Mark Wadsworth said...

R you have missed the point. MM is left wing we know that. But at least he understands IBM. It is only left and right wingers (eg Nigel Farage) who recognise it or realise it exists. The fact that MM and NF are off on a wrong course is a separate issue. The soft centre parties pretend there are big differences between them but there aren't.

Random said...

"The soft centre parties pretend there are big differences between them but there aren't."
Agreed but replace "centre" with "rent seeking, corrupt morons."

Mark Wadsworth said...

R, Indian Bicycle Marketing isn't actually about policies - it is about 'marketing' and applies where competitors have virtually identical products which they have to pretend are different.

No major party is allowed to point this out. - only outsiders

Meacher and Farage might (or might not) be wrong and themselves be rent seeking corrupt morons, that is irrelevant for these purposes.

Neil Wilson said...

Government deficits are a normal state of affairs because that is what allows people to save financially without others running up huge debts.

To get rid of deficits you have to get rid of excess savings - which is impossible because if people don't have savings, they tend to stop spending until they do.

Mark Wadsworth said...

NW, aha, I guess you are a Modern Monetary Theorist. They all say stuff like that.

Fact is, if you want to encourage household 'savings', then you keep house prices down, works every time, the government has nothing to do with it.

Ralph Musgrave said...

Mark,

Re your claim that “government has nothing to do with” savings, that’s a simple mathematical impossibility. The public sector’s deficit must equal the private sector’s surplus, i.e. “savings” (at the national or international level).

Re the fact that MMTers always “say stuff like that”, that’s not a brilliant anti –MMT argument. Maths teachers are “always saying” that two plus two equals four. Far as I know, two plus two does actually equal four.

Next you say “if you want to encourage household savings”. MMTers do not claim that saving (in the sense of saving up base money or national debt) is inherently worthy or desirable. They simply make the indisputable point (also made by Keynes) namely that saving base money reduces demand, which raises unemployment. Ergo (unless you want excess unemployment) people’s desire to save base money must be met (via deficits). And if anyone else (i.e. a non-MMTer) were to claim that saving base money needs to be “encouraged”, I’d question that.

Finally, why would cutting house prices encourage saving? The question as to whether a cut in house prices encourages savings is of very little importance because (as just stated) the amount of “money saving” per head is pretty unimportant in my view. But if anything, if house prices fell, that would reduce peoples’ net assets (in terms of pounds) so my guess is they’d compensate by trying to restore their net assets to its previous level by hoarding more pounds. I.e. a house price reduction would lead to MORE SAVING I’d guess. But to repeat, that’s not hugely important.

Dinero said...

There can be debts and savings
between parties in the private sector. No mathematical need for government debt for there to be savings in the private sector.

L fairfax said...

Before Gordon Brown created the FSA to look after the banks we had not had a bank run in over 140 years.
If the Bank of England had still been in charge it is probable that they would have continued with that high level of success.
Therefore the banks going best was Gordon's fault for creating the FSA.

Lola said...

Hah! FSMA 2000 was a labour Act. It is one of the most crap pieces of legislation, ever. The useless and social engineering quangos it set up were absolutely fundamental in precipitating the banking problems.
So that's lie No. 1.

L fairfax said...

Lola
Who are you accusing of lying? Michael Meacher or someone else?

Mark Wadsworth said...

RM I will get back to you on that

Din well said

L, LF of course new labour allowed the financial crisis to happen and it is their fault but it happened because of home owner ism, not govt deficits which is what MM said

Lola said...

LF. Meacher. Actually pretty well of the 'labour didn't bankrupt the country deniers.

Lola said...

MW. Exactly. FSMA2000 was essential to overall the client state jerrymandering plan.