Tuesday, March 5, 2013

How Labour can beat the Conservatives on the economy

The Cameron government, in spite of its combination of continual incompetence and failing policies, has two main arguments against the Labour opposition's economic policy.
Cameron, Osborne and their allies give the repeated criticism of Labour that firstly, Labour's economic policy would increase borrowing and not reduce the deficit; and second, that it was Labour's overspending and lax financial controls that led to the financial crisis in the UK.

The Labour party, to its shame, still lacks a serious reply against the Conservatives' accusations.

Labour may be comfortably ahead in the polls, but that lead may well shrink significantly in the next two years up to the election. I watched "Question Time" last week, with Angela Eagle MP as Labour's representative on the panel. Faced with the typical accusation from a female Conservative MP (that Labour would only increase borrowing even more, and failed to regulate the banks when in office), the Labour MP was forced on the back foot, lamely talking about "good" and "bad" borrowing.
It was appalling to watch, and completely avoidable. The Conservative stance against Labour is not only amoral, it is also completely deceitful.

For a start, Conservatives chiding Labour for failing to control the banks is utterly absurd - the kettle calling the pot black - when the Conservatives while Labour were in office, were against even Labour's "light touch" approach to regulation, preferring as little as possible.
If the Conservatives had been in office at the time, the banks would have done either the same as before, or behaved even worse. For the Conservatives to claim otherwise is simply unbelievable.

Second, the Conservatives still go on to claim that the massive deficit was the result of Labour overspending, as though the financial crisis was a result of government overspending. Even a cursory look at the government's finances at the time would tell you that the government bailing out the banks created a massive hole (still to be filled) from the catastrophic failure of the banks to keep even a rudimentary control of their balance sheets. The massive debt is a result of the government needing to pay off the huge losses it took on from the banks. Yes, the Labour government's spending was unsustainable in the long-run, but the claim that this is the primary reason for the government's debt is simply dishonest. Simple as that.

Lastly, the Conservatives deride Labour's plan for the economy as simply more borrowing. This is a remark that is as insulting as it is infantile. Considering that the Conservatives are supposed to be the party of business, if a business followed the Conservatives' logic, no business would ever considering investing in anything. Conservatives either refuse to see (or are intellectually incapable of seeing) the difference between "spending" and "investment". The Obama administration's plan, like FDR's during the Depression, is one centred on using government money to invest in the economy. This is also Labour's plan, as far as I can tell. But the Conservatives, like the Republicans across the pond, either refuse to see or cannot see, the simple economics behind this idea.
So this is what Labour should be saying in response to the Conservatives' repeated accusation: an entrepreneur, and any sound business, knows that you have to invest in your future to grow and adapt to a changing economy. A business needs to lend money from investors to fund an expansion project; a self-employed worker needs a loan in order to build is business. All businesses need to borrow sometimes in order to invest in their future. Government operates on the same principle. When the economy is failing, a private business is understandably reluctant to take risks; this is where government comes in, to rectify the stagnant market, and stimulate demand through investment. This is what government is for when the private sector lacks confidence. Labour do not need to mention the "toxic" word "borrowing"; they should be emphasizing how government should be "investing" in Britain's future. It is only serious government investment that will ensure that Britain has a future worth talking about.
It is for this reason why the Conservatives' belief that the private sector by itself will drag the country out of such a deep recession is not only false, it is dangerous to the economy.  

If Labour simply used the three main points to counter the Conservatives' criticisms of Labour, the government would have nothing left to say.

No comments:

Post a Comment