Yesterday, I went to a meeting on Brexit, Free-movement and immigration; conversation in the bar afterwards segued from, “why did a Corbyn led PLP argue to abstain on the Tories Immigration Act?” via a  post match analysis of Lewisham Deptford’s Brexit/Anti-Brexit meeting to consider the radicalism of Labour’s 2017 Manifesto and the development of macro economic policy since then; it doesn’t do so well when compared with the Corbynomics of 2015. One of the key developments since then has been the development of Labour’s Fiscal Credibility Rule, which promises to only borrow to invest.

To those who think this is smart, I ask why so-called current account spending on education is not seen as “investing” in Human Capital, but this is not it’s main problem.

However, I awoke this morning to see one of Richard Murphy’s tweets where he is contending with Jonathan Portes & Simon Wren Lewis, the rule’s author’s it would seem. It got a little testy. Anyway, here’s Richard, detoxifying, or not the twitter spat, and making the point that the Fiscal Credibility Rule is not based on Modern Monetary Theory. because it acknowledges the monetary constraint, and not the real world one. Murphy refers to his earlier piece, A challenge to Simon Wren-Lewis on modern monetary theory and Labour’s fiscal credibility rule in which he critiques the Fiscal Credibility Rule. My precis of his position is that the rule is based on a neo-classical approach, fundamentally legitimises austerity and fetishises debt reduction. I had a look for the Portes/Wren Lewis original position and assume that “Issues in the design of fiscal policy rules” is it.

My research took me to this, which Bill Mitchell claims to be his last words on the Fiscal Credibility Rule, the article contains the following powerful line,

The problem is that this reinforces the narrative that deficits and public debt are in some way ‘bad’ and as I note below this will not turn out well.

One of the problem’s exposed by Bill Mitchell’s article is that it suggests that the Fiscal Credibility Rule is a bit like Lord Buckethead’s nuclear deterrent policy, it only works if the secret is kept, in this case that Labour does not believe that the Fiscal Credibility Rule is a necessary macro-economic constraint even if the economists that wrote it do so.

ooOOOoo

To some extent, this article is just a reading list, there’s not so much of me in it., but I have promised myself a precis of Chapter 7/8 of Fazi and Mitchell’s Reclaiming the State, which is a relatively simple and short exposition of MMT.

Fiscal credibility, ptui!
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2 thoughts on “Fiscal credibility, ptui!

  • 5th February 2019 at 7:53 am
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    While writing this, Richard Murphy has written another blog article,
    Labour’s fiscal rule is Osbornomics”
    , again, don’t know if I’d go that far. Murphy argues that the rule’s rebalencing of the power of the technocratic Bank of England vs. the democratically elected Treasury is an on road to Osbornomics.

  • 5th February 2019 at 8:02 am
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    James Meadway, one of McDonnel’s advisors ,joined in the debate in 2016, on Medium. I think, he’s a bit rude in accusing Richard of having a stronger desire to comment than to understand. I think Meadway’s comments are economically weak and do not address the central MMT critique.

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