Ed Balls It Up

Ed Balls speech to the Fabian Society today, and his other statements elsewhere are a complete dog's dinner. In an article in Left Foot Forward, Shamik Das writes that it is, “a move that will wrong-foot the Right”. What utter nonsense.

In the speech and his Guardian Interview, Balls says that Labour cannot promise to reverse the Tories cuts when they come to power, and says that they support the attacks on workers wages and pensions, in the State Capitalist Sector, which they would also continue. This latter statement, which would rationally also have to be extended to a pay policy for private sector workers, confirms what I said long ago about the Populist demands being raised by “Compass” and others, and now picked up by the Liberal-Tories. For several years now the Bank of England has been printing money to buy up UK Government Debt. The consequence has been to reduce the value of the pound, and push up inflation to almost treble – even on official measures – its target rate. It does that, because it keeps official interest rates low, because it keeps the property and share price bubbles inflated, and because it inflates away a part of the Government debt. But, several years of high inflation, which despite the BOE claims are likely to continue, because of more money printing, risk causing workers to begin to demand compensating wage rises, which then leads to an inflationary spiral. The populist demands for control of High Pay, (which for the reasons I've set out would never be effective) are merely a cover for introducing extensions to the existing wage freezes to cover all workers, and thereby boost profits.

Its ironic that Balls should capitulate to the Liberal-Tory argument over austerity at this moment, because only yesterday, the bastion of Neo-Liberal orthodoxy – Standard & Poor's – came out in its statements detailing why it was downgrading the Credit Rating of nine Eurozone economies, essentially repeated Balls old mantra that austerity “was hurting but not working”! S& P point out what I have been saying for some time, and indeed what many economists have been saying for some time, including economists within the IMF, OECD etc., which is that austerity measures in many of these countries were going to simply drive down their potential for growth, and thereby make it more difficult, if not impossible for them to cover their debts.

Its obvious why Balls has come out with this statement. Opinion poll after opinion poll has shown that Labour are not breaking through in the argument over austerity. But, Balls new position will if anything have the opposite effect. Were I a floating voter I would read the new position like this. Labour has now capitulated to the truth that the Tories have been speaking for the last few years. That is there is no alternative to austerity. They have not yet admitted culpability for creating the debt in the first place. So, I would conclude that on this basis I may as well vote for the Party that has been honest about the need for austerity, and which has shown in the past that it will introduce the necessary Cuts, however, painful they might be i.e. the Tories.

Were I a Labour voter, or a worker in the State Capitalist sector, I would conclude that there is no difference between Tory and Labour, and so there is no point bothering to vote. Already, the Tories are picking up on the nonsensical position that Labour has now put themselves in. How on Earth can Balls stand up with a straight face in the Commons and say you the Tories should not be implementing these Cuts, which are “too far and too fast”, whilst at the same time saying that he will not only not reverse those Cuts, but will be forced to continue them, and wage curbs in any new Labour Government???

Now, I do actually understand what Balls is saying. He's saying if the Tories didn't introduce Cuts that are “too far and too fast”, then the economy would not go into a nosedive, the effects of that in terms of rising Unemployment creating even bigger deficits, would be avoided, and so a future Labour government would be in a better position to finance Public Expenditure. But, that argument is highly nuanced, and it is very unlikely that anyone who is not an economist would grasp it. Rather than making it easier to argue Labour's position against the Tories, it makes it much harder.

But, of course, there is another response that Labour could have made to their lacklustre performance in the polls. In 1981, when Michael Foot was Labour Leader, he responded to Thatcher's programme of proposed spending cuts, and the high level of unemployment, by leading demonstrations in London, Liverpool, Manchester, and Birmingham to oppose those policies. Thos demonstrations mobilised tens of thousands of people. More than that, Labour's Opinion Poll rating went to 51%! It looked as though Thatcher was going to be out at the next election, if not before as the Wets, and others in her Cabinet took fright, and considered dumping her. She was only saved by the Falklands War.

The Tories continually repeat the mantra that the debt and deficit, which they claim they have to deal with via austerity, was all due to Labour profligacy. It is not true! In the period after 1999 up to 2002/3, Labour was actually paying down the debt. Under the Thatcher and Major Governments, between 1979 and 1997, borrowing accounted for 3.4% of GDP, whereas between 1997 and 2005 it averaged just 1.2%. Moreover, even when Labour did begin to act counter-cyclically, under Brown, the increase in the deficit was nothing extraordinary. It is clear from the data that the significant change DID come in 2008/9, when, even excluding the amounts pumped into the Banks, net debt rose from 36.5% of GDP, to 43.2%, a bigger cumulative rise than in the previous 7 years combined! In other words, the debt and deficit rose only because of the Financial Crisis caused by the Banks.

The reason that increased spending was compatible with such lower levels of borrowing in that earlier period, was precisely because of the economic growth that was taking place, economic growth that was largely due to the global economic environment of strong and increasing growth. But, Labour are unable to get this message across. There is a good reason for that. In the past, for example in 1981, Labour had huge numbers of members who were grass roots activists. I don't want to glorify that, there have been many more periods when the Labour Party has been moribund with its Branches being mere shells. That was the case for much of the 1960's and 70's. But, in the later 70's and early 80's, it was possible for those activists to get these messages across to their workmates, their neighbours, their friends in the Pub or Club.

Labour does not have that kind of Party any more. Much of the membership is passive. Its no longer even necessary to be a TU member, and some LP members I have known, at a rank and file level, have even been opponents of unions! New Labour did not see the rank and file membership as having any role to play in that regard. In fact, there would be too much chance of such members being “off message”. Instead they preferred to rely on spending money on focus groups and so on to find out what they needed to say to win votes, to rely on the mass media to get that message across, which is why they built up close contacts with Murdoch, and why they employed journalistic hacks to present their positions. But, of course, when the media is almost exclusively talking the orthodoxy of the Liberal-Tories, there is no chance of being able to change the national discourse by such means! Changing the discourse, requires a mass membership Party arguing day in day out with members of the class. That is also the reason the sects will never change anything, because if even the largest of them were ten times bigger than they are, they would still be way too small to be able to do that on an effective basis.

I have recently been re-reading Marx's The Eighteenth Brumaire Of Louis Bonaparte Marx's analysis of the events in the years after 1848, and leading up to the coup of Louis Bonaparte, provide an excellent example of how, and why bourgeois parties in a crisis always give ground to those parties to their Right. In doing so, they always undercut the ground that stands beneath their feet, alienating themselves from the class on which they are based, and whose support they need. That is what is happening here with Labour, and Balls' speech, and it will likely have the same consequence, shifting the narrative Right, and bolstering the Liberal-Tories position. Yet, ironically, as Marx sets out there, in this process the positions that bourgeois parties find themselves adopting, in this process, are not those, which in reality benefit the Bourgeoisie. In France, as Marx sets out, the Party of Order, which like the Tories combined the representatives of Big Landed capital, and of the Aristocracy of Finance, was led into describing even those ideas and measures that are fundamental to bourgeois society as “Socialistic”. As this process moved ever rightward, it was the supporters of Bonaparte, who was based on the reactionary elements of the peasantry and petit-bourgeoisie, just as are the Tories, who took that to heart, and began to attack the bourgeois themselves. To add to the complexity, despite the fact that Bonaparte was the representative of these petit-bourgeois elements, it was again them that were destroyed economically, through the rising interest and inflation on the debts they had been encouraged to take out to buy property etc.

C'est plus ça change, plus c'est la même chose.