John McDonnell, Labour’s Shadow Chancellor, had a tough task in this week’s budget debate: his priority was to restore Labour’s credibility and reputation for financial rectitude. Sadly, as he is well aware, the image that will be played incessantly at the next election will be of him brandishing a copy of Chairman Mao’s little red book in the House of Commons in November 2015. His action was inept and he will always find it difficult to move beyond it.
In fact, putting aside the posturing, what he is now saying is well within the mainstream of modern Keynesian economic thought: current account surpluses; borrowing for long term capital projects; investment in skills; and striving for higher productivity through government intervention.
So the harsh truth is that there is no evidence of significant new ideas. What McDonnell is proposing is simply an extension of the policies advocated by Gordon Brown, Alistair Darling and Ed Balls – his predecessors as Labour spokespersons. It can be described as cautious Keynesianism: economic stimulation through planned government intervention. What has happened to the radical economic gurus? When Jeremy Corbyn was surging to election six months ago his warm-up act was Richard Murphy, a Norfolk-based accountant. Murphy’s soundbite was ‘people’s quantitative easing’, a clever presentation of the Keynesian alternative. Now Murphy seems to have dropped entirely from sight and has not been included in McDonnell’s panel of economic advisors.
Someone who is on the panel is David (Danny) Blanchflower. He recently wrote in the New Statesman ‘The new Labour Leaders are not economists and are going to have to learn fast. They will have to accept the realities of capitalism and modern markets.’ Distancing himself from a policy initiative floated by Jeremy Corbyn in a party political broadcast, Blanchflower continued ‘No more silly stuff about companies not being able to pay dividends if they don’t do X or Y’.
I have no doubt that modern Keynesianism, reformulated in some way to reflect the new global economy, offers the best way forward for those of us who believe in social justice. But we may have a long wait before we see a coherent articulation of the concept that will command wide support. The Corbyn-McDonnell axis will not be able to make offer progress along these lines: they do not have the intellectual depth, cannot command support of those who do, and instinctively will resort to posturing and posing.
Sadly many Labour Party activists have invested too much emotional effort to do anything but support them. For the time being it is scarcely worth going to local meetings. Best give it another three months.