Yes, that’s right – it is Labour that has won endorsement for its economic plan.
You wouldn’t believe that if you were reading This Writer’s Twitter feed, though.
After neoliberal mouthpiece Kate Andrews appeared on the BBC’s Politics Live, spouting drivel in opposition to Labour, I tweeted in support – and received what seemed like hundreds of indignant responses from armchair economists across the UK.
But here are the hard facts, courtesy of The Independent:
Labour has received the firm backing of 163 prominent economists who say the party understands the nation’s deep-seated problems and has devised a “serious programme” for dealing with them.
The group said Labour’s plans to invest in homes, schools and infrastructure make “basic economic sense”, partly because borrowing costs are at a historic low.
The government must step in to invest where the private sector has failed to, directing capital towards the rapid decarbonisation of energy, transport, housing, industry and farming, they said.
“As the IMF has acknowledged, when interest payments are low and investment raises economic growth, public debt is sustainable.”
The 163 economists who signed the letter pointed out that a number of Labour’s proposals are considered orthodox in other wealthy social democratic countries.
Germany has a successful national investment bank, for example, and most European countries – unlike the UK – give workers some form of representation on boards and a stake in their employer.
“It seems clear to us that the Labour party has not only understood the deep problems we face, but has devised serious proposals for dealing with them.
“We believe it deserves to form the next government.”
I don’t know if Simon Wren-Lewis, author of the Mainly Macro blog, is among those 163 economists, but it seems he supports Labour too – and has attacked what he calls the “standard excuse” for opposing its plans, which is how to pay for them:
The figure for the increase in current spending and taxes is large. I personally would not call it colossal but it is large. I would argue that reflects the extent of the squeeze we have seen on the public sector since 2010.
But what about the argument that it makes the share of government current spending in GDP the highest since the 1970s? A much better comparison is to look at other countries.
What Labour’s plans do is to move the UK from the bottom of the league table in terms of the size of the state to somewhere around the middle.
Who is going to pay for getting us to the average of European countries. Under Labour’s plans it is the rich and corporations.
There is no ‘black hole’ in Labour’s costings.
Most analysis misses the elephant in the room, and that is Brexit.
I think it is highly likely Brexit will not happen under Labour, and even if it did it would be far less costly than either the Tories plans, or the effects embodied in the OBR base numbers that many people use. For this reason the LibDems have talked about a ‘Remain bonus’ (in the incredible event they could form a majority government). Labour will also get this bonus.
As to the investment part of the programme, the key issue is once again whether the investment is needed and well spent.
We should not be talking about whether it is safe to borrow it.
There is virtually no chance that this money will not be available at low long term real interest rates.
No one should be scared of investing in the future of our economy and the planet, whether its by adding 2% or more to the deficit.
If you read some people there will be an immediate run on sterling as capital takes its money out of the UK. Of course if enough people believe this nonsense it might happen, for a day or two.
But the one area where Labour are not radical is macroeconomic policy design. We will have Bank of England independence and a solid state of the art fiscal rule. As soon as that becomes clear any depreciation will be more than reversed, and I suspect there will be an appreciation from day 1. Sterling will appreciate on the expectations of an end to a hard Brexit and rising interest rates.
We should ignore the tired old discourse about whether we can pay for it, and focus on the benefits each individual spending increase or investment project might bring, and on the revitalisation of the economy that this manifesto will generate.
My critics were certainly thinking in ways outlined – and dismissed – by the 163 economists and Professor Wren-Lewis.
Do they have any arguments that can survive the analysis above? I doubt it.
Until they provide some, the economic opinion is clear: Vote Labour.
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