The leader of the British Labour Party (currently) Keir Starmer gave an —— Keynote Speech – Confederation of British Industry Annual Meeting to be held in Birmingham on November 22, 2021. If you have read or heard it, you will know that his leadership marked the return of the British Labour Party as a class traitor. He first said that “The Labour Party has restarted business”, which should be “The Labour Party is the agent of business.” He emphasized that the future of the UK depends on the business sector. The profit growth is stronger than it is now. Everyone will benefit from it. The profit is very high. Growing. Even at the most basic level, the statement ignores the evidence. But for the leader of the Labor Party, this will cause trouble for the party. So what’s new.
It is easy for Starmer to fall into the storyline of neoliberalism-“Our public finances are in a fragile state.”
what does this mean?
What is a non-fragile state?
He emphasized that the Labour Party’s fiscal rules represented a “commitment to fiscal discipline”.
what does this mean?
Well, obviously this means that the Labour Party:
…Never spend money for it…We really don’t think that the way to solve all problems is to spend money.
No government should spend money on this.
Fiscal policy has one purpose-to promote social well-being.
There are many aspects to this goal, and its changes are sufficient to ensure that a rich and varied spending plan is required in the face of non-government sectors that rarely want to spend all of their income in each period.
The state ensures that the government already Continued fiscal deficits may plunge the economy into recession.
I discussed this requirement in this blog post- Full employment fiscal deficit situation (April 13, 2011).
Since the UK’s external deficit is about 1.5% (or slightly higher) of GDP, the fiscal deficit must continue to account for at least 1.5% of GDP for the domestic private sector to achieve a balance of payments.
If the private domestic sector wants to save as a whole (thus being able to reduce its high debt), then the fiscal deficit must be higher finance Overall savings.
Fiscal discipline is working within these limits to ensure that people have jobs and opportunities.
At the Labour Party conference in September, the Shadow Chancellor of Finance made these comments on her—— speech:
…We will formulate fiscal rules to restrain the next Labor Party government to ensure that we always spend and control debt wisely so that we have ways to transform schools, hospitals and communities, and pay for investments in new industries and industries. The job that our country desperately needs.
Pay attention to the problem.
The Labour Party believes that fiscal rules provide a “means” for the British government to spend on necessary items.
How does this work?
How can self-imposed rules—some kind of expenditure ratio or other—prevent the Bank of England from crediting bank accounts on behalf of the Treasury?
And what it means to keep “debt under control”, apart from the obvious-the debt issuance of the British government is always under their control-can they do it.
How much do they issue-under their control.
What deadline do they issue-under their control.
How much revenue they will pay-completely controlled by them through the Bank of England.
This discussion of out-of-control debt has led to a “threshold industry” in which avid economists manipulate data to calculate the level of public debt, beyond which the government is at risk of bankruptcy.
We saw during the global financial crisis that this led us-along the slippery slope of spreadsheet pranks-Rogoff/Reinhardt style.
The current labor rules seem to be closely related to the following: 2-17 Fiscal Credit Rules ——This basically doesn’t work.
You can see my criticism of this stupid behavior in this blog post- UK Labor Fiscal Credit Rules-some further final comments (October 23, 2018)-It contains many links to reviews that I have built over time.
Please note that just before the 2019 election, they changed the rules without any major announcement because they thought I was right. On the whole, this is inconsistent and unachievable.
The morning before his speech to CBI, Stammer wrote an Op Ed article for City.AM (November 22, 2021) – Political drama distracts from the crisis facing British businesses – This helps to determine his agenda.
He played the “labor shortage” card, and more and more evidence showed that after years of being able to keep wages at a low level, some companies were unwilling to pay reasonable wages instead of shortages.
But then he claimed that the Labour Party was:
…Business parties.
It is not the Workers’ Party, from which it got its name.
But business parties.
Then he claimed:
When a company is profitable, we all do it. The role of the government in supporting this is unquestionable.
Whether you look at it from a macroeconomic perspective or from a sectoral (micro) perspective, this statement seems to be inconsistent with the facts.
It is best for the Labour Party leader to say “When wages rise, we will all benefit.”
It all depends on what we mean by benefit.
I checked my database.
The chart below shows the evolution of UK wages and profit shares from 1948 to 2020.
So the wage share is the total wages (from the Blue Book National Accounts), including wages and salaries, and employers’ contributions as a percentage of nominal GDP.
The profit share is the percentage of the company’s total profit to nominal GDP.
I have scaled the axis to get more distribution in the line to help explain.
It is important to distinguish between cyclical patterns and trends.
Obviously, during this period, the profit share has been increasing, while the wage share has fallen sharply. Under the leadership of the Callahan Labor Government (with Dennis Healy as prime minister), this trend accelerated when they turned to monetarists.
The Margaret Thatcher government just continued this process.
You cannot conclude that the increasing profit (in absolute value and share) during this period is good for everyone.
During this period, the vast majority of workers regressed.
In addition, after 2002, as the share of wages fell, the share of profits began to show an upward trend again.
At the micro level, I remember reading about the disaster caused by privatized regional water agencies in the UK a few months ago.
This Guardian article (July 9, 2021)- England’s water system: the last privatized monopoly-now – Reports say that the water department failed to protect the water supply system (leaching sewage into the river and killing animals), destroying local agriculture, etc.
The authorities have already shouldered huge debts, which are used to profit shareholders (through huge dividend payments) rather than “fixing leaking pipes or handling works.”
Over the same period (since privatization):
…The customer’s water bill has increased by 40% over the inflation rate. It is water users who pay for network upgrades like them, while shareholders leave with cash paid by higher debts.
On June 5, 2018, the GMB Alliance released the results of a collaboration with Corporate Watch, which are summarized in this press release—— With the bill soaring, water fat cat pants 58 million pounds.
The results speak for themselves.
The bosses of the privatized water sector deposited huge salaries and bonuses, while workers’ wages increased slowly.
So at this level, Starmer’s statement is boring.
I can delve into some miniature examples that show the same content.
When I read this article on the so-called with-it media, The New Statesman (January 14, 2019), I remembered how terrifying the British progressive narrative is— Why a 70% tax rate requires capital controls.
People keep sending me messages-look, if you MMTs behave your way, global financial markets will shut down the UK.
They cited various so-called “leftist” figures in British public life as the authority for the statement.
Starmer’s reasoning is consistent with the stupidity expressed in this article.
This article rehearses all the anxiety that the British left has been afflicting the Labour Party since the mid-1970s, when Dennis Healey lied to the people, claiming that the government had no money and had to Britain borrows money. International Monetary Fund.
For example, this article uses François Mitterrand’s famous austerity shift in 1983 as an example to illustrate how global capital successfully extorted sovereign governments that issue their own currencies.
I fully proved the wrong conclusion drawn in my book– Eurozone dystopia: large-scale collective thinking and denial (Released in May 2015).
We have provided more evidence in the following areas: Reclaiming the State: A Progressive Vision of Sovereignty in the Post-Neoliberal World (Pluto Books, September 2017).
No blackmail.
Finance Minister Delor (Delor) was already obsessed with the “Frans Fortress” strategy when he accepted the monetarist Kurt aid. He persuaded Mitterrand that the only way out for France is to act like Germany and to indulge in ensuring the strength of the franc, which will enable France to lead the further integration of Europe.
If the French government had already withdrawn from ERM and told the financial market to jump, there would be no need for austerity.
They backed down because they accepted neoliberalism and abandoned the socialist road.
The real giveaway paragraph in the article—it really defines the demise of the British Labor Party as a collective voice that promotes the well-being of workers—it talks about raising the tax rate for high-income earners (the same logic applies, increasing the deficit to help workers):
…But any socialist government that tries to do so will be severely punished by the “market.”
This is why the Labor Party believes that it must be a commercial party.
The British media personnel who interviewed me or the Labour Party hackers who attacked my views kept asking me this question.
They need to answer this question-how can the market really punish a sovereign government that floats and issues its own currency like the British government?
Supporters of this view point to the events that led to Black Wednesday (September 16, 1992) in the early 1990s. After Soros and his mob attacked the pound, Britain was forced to withdraw from the ERM.
The problem with this example is that it does not apply to flexible currencies in the foreign exchange market.
When speculators know that the government intends to protect parity, short selling a currency that is fixed to other currencies is one thing.
However, when the currency is floating and the government refuses to intervene, trying to adopt the same speculative strategy is a disaster for short sellers.
No supporter-the “cities will kill the pound” narrative-can clarify exactly how this will happen.
The reality is that in extreme cases, capital controls may be required.
But long before such demand emerged, sovereign governments like the United Kingdom had all the ammunition needed to make speculative selling unprofitable.
Ask the speculators who have lost billions of dollars in trying to short Japanese government 10-year bonds in the past 30 years.
None of them have much happiness.
in conclusion
Unless the British Labor Party breaks this mentality-they must somehow appease business lobbying groups, especially the financial gambling industry, otherwise they will propose wrong policies and risk election failure.
That’s enough for today!
(c) Copyright 2021 William Mitchell. all rights reserved.
