It's still the economy stupid

Corbyn's platform is based on building a fair society fit for all, managing the economy with social justice.

This storify looks at Corbyn's economic policy, and reviews some of its supporters arguments, looks at critiques of the Tory deficit fetishists, looks at some criticisms of the policy from Labour and the BBC and concludes with defences from Keynesian and Modern Monetary Theorists. Corbyn's proposals are theoretically sound, will work and will benefit our society at large and the majority of the population. This article is quite long with a number of linked articles. I finish with a quote from Jeremy Smith about the need for economic policy to be theoretically sound and for politicians to tell the truth to voters. These policies are fair and will work. We can only grow our way out of a deficit.

Jeremy proposes a coherent economic policy for investment, growth and tax justice.

The noisiest attack has been made by Chris Leslie MP, who inherited the position of Shadow Chancellor when Ed Balls lost his seat in the General Election; he was appointed by the interim Leader, Harriet Harman. He argues that, for some reason, People's QE will be inflationary when Corporate QE is not and hasn't been. This at a time when deflation is the biggest risk. He adds, correctly, that high inflation impacts the less well off the most.

He was strongly rebutted by Richard Murphy

and David Clarke of "Positive Money", who quotes the weight of academic and practising political economists.

Peston of the BBC, is also a gain sayer with an expectation led critique. The problem to me is that you can't measure expectations nor their causality. He raises Bank of England independence as an axiomatic good thing, but it's part of light touch regulation which the consensus says failed, and it's anti-democratic. Central Bank independence is an ideological tool to place important decisions beyond democracy. The Bank got consumer credit wrong in the mid 2000s and fiscal policy wrong in 2008 - 2010.

Earlier in the month the Centre for Labour Economics co-ordinated a public letter fo 77 academic economists criticising Osborne's deficit fetishism and defending deficit financing. Osborne's economics have no academic nor business economist supports.

Chi Onawurah MP also takes on Osborne economics, pointing out that "Businesses which simply milk their assets go under". This is very much a reply to Osborne's new version of New Labour's Golden Rule, that Government's must run a surplus in the good times. She takes on a number of the stupid household economic rules that the Tories are peddling.

Onawurah works with Professor Mazzucato who has a significant body of work challenging the right wing view that the state should only intervene when markets fail, since the state is a proven source of innovation and public sector investment is a source of innovation and growth. This underpins Corbyn's industrial policy and another reason for people's quantitative easing.

Returning to demand management, John McDonnell MP argues that a Corbyn led party would look to reduce the deficit, it's just that it's not the poor or middle income people that'll pay. He argues for taxing corporations and the rich, withdrawing corporate subsidies and renationalising sectors of the economy, so that our largest and most essential companies are run in the interests of all stakeholders, not just their owners.

But at Prime Economics, Jeremy Smith argues that even McDonnell is succumbing to deficit fetishism and it's not necessary because "the government is [not] like a household". "Living within our means" does not involve running a surplus when times are good, it involves being able to pay for our borrowing [ and our imports ]. Prime Economics points out that the critical affordability ratio is interest payment volume to growth in gross product, which is why low growth is so dangerous. The article also points out that even if Osborne cut the deficit to zero by the end of the Parliament and his track record doesn't look good, then we should still borrow to invest.

In the article above Smith suggests that McDonnell remains too focused on the deficit, and concludes with the following quote,

This quote and point of view is crucial for me, Labour shouldn't be seeking to win on a lie, even a credible lie and deficit fetishism is one.

For more ultra-keynesianism, Alex Little quotes Bill Mitchell, the inventor of Modern Monetary Theory in favour of deficit financing and re-framing the discussion back to full employment and price stability; the fiscal deficit/surplus is an outcome, not a lever.

I built a storify last week, when Chris Leslie made his nineties based contribution suggesting that for some reason using QE to buy bonds in public corporations would be inflationary, while using QE to buy central government bonds is not because it clearly isn't. This is high monetarism from the 1970's and clearly no longer true. I have embedded it immediately below.

I finished it with the pissy little comment that if we consider Burnham and Cooper's candidates for Shadow Chancellor, these are additional reasons to vote against them, and while Kendall's candidate is not known and isn't relevant; I'd not like to see Chuka Umuna in that role either.

Jeremy Smith also looks at all the various candidates have to say, he's not impressed.

He concludes, "... on the issues of basic macroeconomic and fiscal policy, Jeremy Corbyn has, to his credit, expressed the clearest and (macroeconomically) soundest view on the role and acceptability of deficits, and on the distinction between borrowing for current purposes, and for investment purposes. He is also clearer than the others on the need to reduce the deficit by economic activity, not further cuts. "

And to finish here's the policy document itself.