Labour’s new economic advisory panellist on why he joined up

John McDonnell, Labour's shadow chancellor, has created a new advisory panel of high-profile economists.

John McDonnell, Labour’s shadow chancellor, has created a new advisory panel of high-profile economists.

Professor Simon Wren-Lewis explains his reasons for joining the Labour Party’s new economic advisory panel:

I might have said no … if I thought the advisory panel was for presentation only, and all advice would be ignored. I have no reason for believing that in this case, and some grounds for thinking the opposite, which I discuss today in the Independent. In particular their position on fiscal policy is similar to the one I suggested here, although getting the message clear probably requires some work.

One rather sad comment on the formation of this group is that those joining it will be forever tainted by associating themselves with a “hard left dinasours”. Or to put it another way, its members should have said no to the Labour party leadership because they now have pariah status. As I pointed out in the Independent article, the current leadership will have to come to some kind of accommodation with the rest of the parliamentary party, and so Labour policies are unlikely to be the kind of far-left platform that many in the media seem happy to imagine. As Labour are the main opposition to the current government, and I think their macro policies are pretty awful, it would have been bizzare indeed if I had said no to this invitation.

Source: mainly macro: On giving advice

The Independent article, to which Prof Wren-Lewis refers, again (welcomely) trashes the Tory ‘household credit card’ view of economics, which has come under heavy criticism since it was resurrected on the BBC’s Question Time last week. In it, he writes:

The worry is that a majority of the public have been irretrievably won over to the view that the economy as a whole is no more complicated than a household budget. We have maxed out our national credit card, and we must put things in order as soon as possible. As any undergraduate studying economics will tell you, that view is quite wrong. The pessimism comes from a belief that appeals to intuitive common sense will always win out over appeals to academic understanding.

A good case can therefore be made that the public is not inherently obsessed by the deficit. In particular, George Osborne’s plan for surpluses on the overall budget gives Labour an opportunity to turn the tables. If the Labour opposition commit themselves to something like achieving balance on current expenditure, this makes public investment the dividing line between the two parties. Labour can argue that while they intend to invest more in houses, schools, hospitals and flood defences, the Conservatives want to knuckle under in case there is another financial crisis.

In short, Labour intends to invest in the future, while the Conservatives will not because they are obsessed with the deficit… If anti-austerity rhetoric can be linked to investing in the future, it could become a vote winner.

The smart strategy is to take the long view, and focus on policies that move the party’s platform to the left in ways that the majority of the parliamentary party are comfortable with. This means focusing on a pro-investment, anti-inequality agenda, which could include a substantial increase in public-sector house building, and leaving issues like renationalisation for later. The recent announcement that Labour will renationalise the railways one franchise at a time is an example of this pragmatic approach.

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2 thoughts on “Labour’s new economic advisory panellist on why he joined up

  1. stephen brophy

    This sounds like the answer to the tory dogma! Common sense can be twisted so people vote against their best interests, the tories are good at this misleading of the public! They have even convinced the public that privatisation of the NHS is inevitable which is a lie.

  2. mohandeer

    Excellent, there has never before been arrayed such a plethora of profoundly gifted fiscal economists running a country let alone a party as Corbyn and McDonnell have managed to enlist. Richard Murphy is now teaching at the City University so he probably won’t be able to devote so much of his time with his blog, but his book is now available as is the work of many of the other names on the panel. The Labour Party must be mightily pleased that they have been able to convene quarterly meetings between these big names. The LP’s inability to offer a fiscally responsible economic strategy was why so many people like myself would not trust Labour to run the country, now they will be able to allay the fears of those who doubted them. Gordon Brown and Alistair Darling did in fact perform something of a miracle after the Lehman crisis, so they must be pleased for the Labour Party. They left the country far better off in facing down the market crash which we are facing again. This time, Osborne has left us with no manoeuvrability and because of his irresponsible policies and the inherent mistakes that have manifested themselves we have had the longest/slowest recovery on what was a good platform, since records began.

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