https://consciousnessofsheep.co.uk/2024/07/10/labour-has-already-failed/ Labour’s UK election victory last week might be seen as a triumph of cynicism. The strategy – abandoning core “progressive” voters in metropolitan seats (who have nowhere else to go) in favour of marginal voters elsewhere – paid off handsomely – Labour winning 412 seats on a vote share lower than Blair’s post-Iraq war election in 2005, and far lower than Corbyn managed in 2017. As anticipated, critics have already jumped on the obvious unfairness of the electoral system, which gave Labour 63 percent of the seats from just 34 percent of the votes, while Reform UK won just one percent of the seats on 14 percent of the votes, and the Tories were reduced to 19 percent of the seats from 24 percent of the votes. But in terms of realpolitik, this is irrelevant, since the system is designed to produce five-year dictatorships in preference to the insecure forms of government produced by proportional systems. Opposition parties can no more get rid of Labour before 2029 than they could get rid of the Tories between 2019 and 2024.
The Labour “victory” though, is rendered largely meaningless by the nature of the (many) crises facing the UK. Because, while the labour government will have absolute control over legislation, almost all of the problems before us are administrative… and it has been several decades since UK governments last administered anything even remotely competently. Indeed, within just a few hours of allocating the key government positions, Labour has already failed two key tests on economic and industrial policy.
First, new Chancellor, Rachel Reeves, took to the airwaves on Saturday to make the economically illiterate claim that there isn’t enough money to achieve Labour’s goals. In part this is the usual post-election attempt to blame any immediate economic problems on the outgoing government. But it also perpetuates the nonsense magic money tree version of money presented by a dangerously out of touch establishment media, which assumes that the government must somehow find money before it can spend. In reality, and within limits, government can borrow or simply “print” as much money as it wants so long as it sets a sufficiently high tax rate to prevent inflation. Moreover, it is a matter of choice where those taxes are raised – just because the Tories gave the already wealthy a free pass does not mean Labour has to follow suit.
Even more dangerous than this faked misunderstanding of money creation though, is Reeves’ determination to maintain Tory borrowing rules which attenuate economic crises by starving the economy of cash. This is because the majority of money – around 97 percent – is borrowed into existence when banks make loans to companies and households… the remaining three percent is borrowed into existence by government (although it could simply create it directly at the stroke of a keyboard). In periods like the present, when (across the western economies) banks have tightened lending standards, and thus lowered the currency in circulation, the last thing businesses and households need is for government to cut its borrowing too. And yet, this is precisely what the Tory borrowing rules do – something that Sharon Graham, Head of the Unite union, has apparently failed to persuade Reeves to change immediately, correctly arguing that waiting for growth to appear will not work for the UK’s collapsing infrastructure and public services.
With the UK economy set to shrink further – GDP fell back to 0.0% in May, undermining the Tory claim that the UK was growing – the government might act as a borrower of last resort to mitigate the impact on services and critical infrastructure. But by following an increasingly discredited neoliberal economic orthodoxy, Labour look set to add to the UK’s gathering collapse by attempting to “balance the books” during a downturn. Nor is this simply a feature of fiscal policy. The second area where Labour have already failed is in industrial policy, as the incoming Business Secretary has refused to overturn the Tory decision to allow the closure of the UK’s virgin steelmaking capacity – opting instead for the widely-criticised decision to rely on recycling instead.
This does not bode well for critical infrastructure and public services more generally, since the current iteration of Labour seems to be following the neoliberal Blairite approach of an earlier – and far more prosperous – era, when private investment could fill the gap left by a government constrained by European union state aid rules. Indeed, one of the few positive – but unused – outcomes of Brexit is precisely that UK governments are now free to invest directly in industries – like steelmaking – which are vital to the future health of the economy, even if they cannot be run profitably in private hands.
In both fiscal and industrial policy then, Labour has eschewed pulling some of the few levers which might allow them to affect change. Meanwhile, even as the new government ministers were finding their new offices, key infrastructure that is bound to be needed in future was being closed. Not just one of the blast furnaces at Port Talbot, but also the 2GW coal-fired Radcliff-on-Soar power station (which has kept the lights on during cold snaps in the last few winters) and the demolition of two car factories in Bridgend and Swindon (partly due to Brexit, but more to the looming ban on new ICE vehicles at the end of the decade). This in addition to a general increase in business closures and redundancies across the UK as the economy slows.
We needed a new economic philosophy to replace the discredited neoliberal consensus. But Labour’s dismally predictable response is just more of the same, with mythical foreign investors riding to the rescue of an otherwise doomed UK economy. This might have worked in the Blair years when the oil was flowing and there were still a few public assets to sell off. But modern Britain is no longer a place that attracts the investment capital it used to, even as the need for such investment has grown exponentially. And as the economic storm clouds gather, despite the new occupants of Versailles-on-Thames, failure is already built-in.The last working-class hero in England.
Clio the cat, ? July 1997 - 1 May 2016 Kira the cat, ? ? 2010 - 3 August 2018 Jasper the Ruffian cat ? ? ? - 4 November 2021
"...This is because the majority of money – around 97 percent – is borrowed into existence when banks make loans to companies and households… the remaining three percent is borrowed into existence by government (although it could simply create it directly at the stroke of a keyboard)."
He makes some good points but this is misleading. Where does he think government spending comes from? Public sector wages? The health service? local government budgets? Education budgets? Transport budgets? etc etc.
The government creates all the money to enable these things of course and just like the monies created by other banks where re-payments to the lender is money destroyed, taxes returned to the government are also monies destroyed or removed from the system.
Government can create as much money as it requires and indeed does to pay for all these things: it could not be otherwise. Moreover, if it can show a believable growth and return can be enabled by any capital investment it can do near anything it wishes without destroying confidence in the currency.
The problem lies with the Idee fixe that a government has to borrow money from private sources by means of bonds, or indeed by more idiotic means such as the PFI schemes and PPI's. Bonds are merely a religious tribute paid to the notion of private capital in a capitalist society...but the other forms of public borrowing are rentier scams: endless subsidies for the wealthy.
Of course we have seen the truth of the matter in action. In actuality as in the banking crisis, it is the central bank: ie. The government and through them the public whom act as security for the private system and who are the actual lenders of last resort.
-Nothing will get done until we stop pretending that it is the tail that wags the dog.
But of course nothing will get done anyway because our politicians are mere bureaucrats with no experience of anything real whatsoever. People without even the imagination to inspire an idea, never mind the practical abilities to execute one.
I think he is confused with actual notes and coins which I believe make up 3% of the money, and the rest is all just electronic numbers in various bank computers.
"I think he is confused with actual notes and coins which I believe make up 3% of the money."
Yes I suspected that was the case. It seems a quite common & remarkably wrong assumption, leading to the obtuse idea that this is all the money government creates: especially when Government spending accounts for over 45% of the countries GDP.
This spending power is of course is why parasite organisations like the Conservative party actually exist. Despite the rhetoric that they all believe in a free market, it's easier to take a government job where you coterie of fellow crooks divert those funds into areas which will enrich you... than actually God forbid "compete" in that legendary "free market" they all supposedly worship.
-The blatant illegal crookery we saw in the PPE Covid scandal alongside was only the norm laid bare.
on July 11, 2024, 9:26 pm