Ditch Blair’s Legacy

Ditch Blair’s legacy  — Editorial

Starmer became leader of the Labour Party in May 2020 on the basis of a 10 point program that Jeremy Corbyn would have had little problem supporting.  Since becoming leader he has had little to say about his 10 point program and has, instead, concentrated his energy on attacking the left wing of the Labour Party, often by using false charges of anti-Semitism.

The electorate have passed interim judgements on Starmer’s leadership of the Labour Party in the Hartlepool and Batley & Spen by-elections.  Hartlepool, held since 1974 by Labour, was lost with a 16% swing to the Tories.  Batley & Spen was held with a majority of only 383 votes.  In the 2017 general election, with Corbyn as leader, Labour’s majority in this seat was some 30,000. 

Starmer realized that his leadership of the Labour Party was in jeopardy and announced that he would spend the summer going round the country, meeting and talking with people and explaining to them why they could trust Labour, again, under his leadership.

The summer is now over but is anyone any clearer why they should vote for Labour?  On August 5th Starmer gave a long interview to the Financial Times (FT).  The interview can be seen as a sort of summing up of his vision for the Labour Party.  

According to the FT ‘Sir Keir Starmer has vowed to “turn the Labour party inside out” as he prepares for an autumn relaunch of his leadership, urging activists to embrace Tony Blair’s political legacy to help the UK’s main opposition party win the next election.  He said it was vital to demonstrate that Labour was not a party of protest but was serious about winning power — and that meant being “very proud” of what it achieved under Blair and his successor as prime minister Gordon Brown when it was last in office.‘

The legacy for which Blair is most remembered is his foreign policy, specifically  the destruction of the functioning Iraq state and the deaths of over 1 million of its citizens.  One assumes it is not the foreign policy legacy that Starmer wishes to embrace, but rather Blair’s domestic legacy.  

It is worth therefore considering Blair’s domestic legacy in some detail.  Blair had inherited a country in which, after 18 years of Tory rule, the ability of working people to defend themselves against the predations of capital had been greatly reduced and in which huge regional inequalities had developed as the old industrial workplaces in the north had been destroyed.  More generally, Blair inherited a Thatcherite view of society in which the elite attached limited importance to the role of the state.  Apart from setting the rules, it was assumed the state should largely stand by and let the market function to produce the best outcomes for the society.  

Blair bought entirely into this Thatcherite view of a modern society with a small state.  Starmer says that “the 1997-2010 Labour administration tackled poverty, improved the prospects of children and began to tackle climate change.”  One could not dispute that.  But so much more needed to be done to reduce the poverty and inequalities that had emerged in 18 years of Tory rule.  Only a much more active and purposeful state, that realised the role it had to play in society, could have made the transformations required.  The Blair and Brown governments failed to create such a purposeful state.  

In 1997 Labour had a 179 majority in Parliament, by 2005 that had been reduced to 66.  Blair’s foreign interventions would have been one reason for that reduction in seats, but the main reason was his refusal to use the power of the state to counteract the failures of the free market.  An increasingly and justifiably resentful northern working class stopped voting for Labour.  They felt their votes were making no difference, that they had ceased to be represented by the Labour Party.

Things became worse for these people after the Global Financial Crisis (GFC) of 2008, resulting in a 2010 Conservative government committed to further reductions in the role of the state in society.  When a hubristic David Cameron dared to give the populace a vote in a referendum where their votes would matter, they delivered their verdicts on the legacies of Thatcher, Blair and Cameron in the vote for Brexit.

Brexit was effectively Blair’s legacy because he had accepted Thatcher’s view of the modern capitalist economy with a minimal role for the state.  Corbyn clearly rejected that minimalist role for the state.  He argued, quite correctly, that the state should step in when the private sector was failing to provide the jobs and standard of living that people needed.  

Corbyn’s view on the role of the state won huge support in the 2017 general election.  It was not a new view.  Rather it was a return to a view of the role of the state that initially came to prominence when Keynes argued in 1936 that capitalist economies might not be able to end recessions or depression without active state intervention.  That view dominated the management of capitalist economies in the US, UK and Europe until the 1970s.

In calling on the Labour Party to embrace the legacy of Tony Blair, Starmer is effectively calling for a return to the idea of minimal state involvement in controlling a country’s economy.  We see this clearly in sections of his interview with the FT.  For instance, he states, in the FT interview, that  “Labour would develop an economic message based on reprioritising government spending — rather than making big additional commitments — and developing a “partnership” between business and an “active government”. 

So at precisely the time that Biden, in the US, is trying to inject an extra $4 trillion of spending into the US economy and the EU is proposing to inject some 1 trillion euros into the European economies, Starmer lacks the courage to call for extra spending into the UK economy.  Instead he calls for ‘reprioritising government spending.’  We take this to mean that an increase in spending in one area will be matched by a reduction in another area. He believes this will make him seem economically responsible. In practice this will mean that those parts of the country that have been neglected for so long will continue to be neglected. In them are the constituencies that Labour needs to win if it is ever to form a government in the foreseeable future.  The abstraction of ‘budgetary responsibility’ against the once again postponed reality of jobs, housing and transport will not appeal to those voters who, in despair, have turned to the Tories.

The issue of a small state versus a large state is politically very important at the moment.  The Tories won 53 ‘Leave’ voting seats from Labour in 2019.  It will be very difficult for the Conservatives to retain those seats if they opt for a small state.  On this issue the Tories are divided.  Sunak wants to reduce the size of the national debt and therefore favours a small state and the return to austerity which that implies.  Johnson is much less concerned about the size of the national debt.  If large state spending is required to hold on to those red wall seats, Johnson will advocate it.  It is unclear how this political battle will play out in the Conservative Party.

But Starmer should be exploiting this division in the Conservative Party by advocating greatly increased state spending to reduce poverty and regional inequality in British society.  A political message based on ‘reprioritising government spending — rather than making big additional commitments’ places him firmly in the Rishi Sunak camp and will make it virtually impossible to get those who switched or abstained in 2019 to return to the Labour camp.

Starmer’s view on economics stems from a false belief that the economics of a currency issuing country is the same as the economics of household.  A household must borrow if its spending exceeds its income.  And it must pay back its debt.  A currency issuing country has no such constraint.  It can spend without borrowing.  Sunak did this when he implemented the Furlough.  He instructed the BoE to mark up the accounts of those entitled to Furlough.  National debt is just the difference between what a government spends into an economy and what it takes out in taxation.  In implementing the Furlough, the government spent some £300 billion more into the economy than was taxed out.  It now owes £300 billion more to the Bank of England (BoE) than it did before.  But since the Treasury owns the BoE, the government owes this money to itself.  

The realization that currency issuing governments can spend as much as they want without having to worry about paying it back has finally been grasped by some politicians – like Biden, Christine Lagarde and Mario Draghi and possibly Boris Johnson.  It is noticeable that now, discussion on the size of the national debt focusses much less on the matter of paying it back and much more on whether it might have inflationary consequences.

It seems that the understanding of the irrelevance of the size of the national debt, which is emerging in the US and Europe, has not yet reached the British Labour Party.  In which case, we can expect another Conservative victory at the next General Election.

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