Starmer, a new chapter?

Starmer, a new chapter?

Late last week, Kier Starmer made what was billed as the first of his major policy speeches. You can see it here, and read it here. (I have only read it.) Some people’s reactions seem instant, and I am not sure how well thought out they are. My first instinct on reading some of what the usual culprits are saying about the “Recovery Bonds” is, “Hmm. Left wingers can’t complain we want to use fiscal policy to kick start the economy and complain when @Keir_Starmer and @AnnelieseDodds want to use bonds to fund it. Bond financing of fiscal debt is axiomatic”. I add that missing out of mentioning and criticising Brexit continues the mistake of only permitting the Tories to talk about the growing disaster, you’d think we’d learned the message over deficit fetishism, we can’t let the Tories set the narrative unchallenged. Silence on climate change is also very disappointing.

The investment ambition is weak, like Miliband’s promise of 1m homes over the parliament, 100,000 new business seems small beer given 1.7m unemployed and the low rates of capital formation a feature endemic in British capitalism since 2010. “High wages, High skills” is not a strategy, it’s a slogan unless we can pick the next winners of the creative destruction process. This can be done via the market, even with public money (look at the EU’s Horizon 2020 & its predecessor FP7) or by technocratic or democratic rationing, but 100,000 startups is not enough compared with £500bn funded National/regional Investment Bank[s] offered in the 2017/9 manifesto. Since part of this future is healthcare and old age care, notorious low wage sectors, there will need to be income redistribution policies to ensure that wages and earnings in the personal care industries are sufficient for the purposes of justice and the generation of innovation. The inequality and injustice exposed by CV19’s disclosure of what is genuinely essential needs to be rectified. The silence on sick pay and redundancy payments is also disappointing. Another part of the post covid, next generation recovery must be green manufacturing and science, which is why the country needs an industrial policy and yet again, Brexit and our exit of the Horizon 2020 programme will not be a help with this.

Phil BC, the public sociologist, is not so excited by the economics, and even less to with what it says about the strategy. Phil criticises the steps away from the promises of industrial democracy & democratic nationalisations. I think he’s right and this, I think, aligns with my critique which I also made of the Dodds speech that there’s no industrial strategy, we have no way of helping the next generation winners succeed. Actually it’s not quite the same, the industrial democracy proposals were about power in the economy, an industrial policy is about the classic questions of economics; what we make and do, who does it, with what, and who gets it. Phil concludes his post with a comment on political strategy,

[Starmerism] is capable of taking on new, interesting, and innovative policy ideas. But strategically, this was no departure from what we’ve seen up until now and was, explicitly, a divorce from the Corbynism it happily gestured to a year ago. … Try as he might, he cannot avoid the issue. Keir Starmer either locates Labour in the interests of the rising generation and sticks up for its core vote, as Corbynism partially managed, or he loses. The political calculus is that simple.

Phil BC – on his blog

James Meadway is equally calm about the economics as far as it goes but is concerned that like with grand political strategy, Starmer is fighting the last election and maybe the one before. He points out that the elite consensus is now anti-austerity and that an ideologically light Tory Party can spend money and make token gestures towards climate change control, particularly if it involves chucking cash at companies owned by their doners. Meadway says,

… but Johnson has spotted the same. He and those around him are starting to lay out a programme for a reinvigorated, economically interventionist and environmentally-tinged Conservatism, which, if they pull it off, could plausibly cement the party in power for the next decade.

Labour’s aim should be to disrupt that effort as far as possible – not to goad them into making it happen.

James Meadway – New Statesman

Meadway asks us all to share the intellectual load as he argues that there can be no return to the social justice models of pre-pandemic Britain, and it’s this potentially compelling tide that makes a comparison with 1945 possible. People returned from WWII, empowered and determined not to return to the poverty, social injustice and pro-fascist defence & security polices of the inter-war Tories and took down Churchill with them. But continuing with the theme of ’45, it is alleged that Churchill said of Attlee, “A modest man with much to be modest about.” This must also be part of Kier’s hope, because in 45, the orator lost although when it comes to oratory, as in so much else, Johnson is not Churchill, but Attlee was surrounded by giants, Starmer is not. Perhaps presidentialism doesn’t suit Labour.

So on economics, strategy and justice, it’s all a bit meh, but also dangerous for Labour. If Starmer, his consiglieri and acolytes misjudge the Tories and/or our core decides that the compromises with Blue Labour are too much and if Brexit’s costs gets worse as more of the exit deadlines pass, his collusion with Brexit and errors of psephological judgement will also cost him and Labour dear. …

Brexit, the next trade deadlines

Brexit, the next trade deadlines

Brexit is not yet done, this, from the Institute of Govt., shows the upcoming deadlines for further agreement. most importantly in the short term, financial services equivalence and data adequacy. Slightly later in the year, is the new definition for food safety documentation required to export British food to the EU and Northern Ireland.

I might say more when I have studied it, but I have written recently about financial services, and extensively on the need for & likelihood of a data adequacy agreement. …

Thinking about macroeconomics with Anneliese Dodds

Thinking about macroeconomics with Anneliese Dodds

While writing, Responsible Opposition, about Sir Kier Starmer’s 1st speech of the year, I pointed out that Anneliese Dodds would be giving the Mais Lecture, which had been previewed in the Financial Times (paywall). They said that she will,

 …  call for a ‘responsible fiscal framework’ based on ‘pragmatism, not dogmatism’  … [and] … signal … that the Labour party is backing away from the hard-left economic policies of former leader Jeremy Corbyn, seeking instead to fight the Conservatives on economic competence and protecting the UK’s recovery from the damage caused by the Covid-19 pandemic.

Chris Giles – Financial Times

The speech has now been delivered and I heard/watched it live. The first thing to say is that I do not consider this to be a repudiation of late stage Corbynomics.

I needed help to work out what was said, it was a very low key speech, certainly not in the style of a UCATT shop steward, more in the style of one of the academics from the cast of Inspector Morse. There was no emphasis and so we need to work out what’s important and what is just said in passing. Stephen Bush points out the unusual nexus of welcome from James Meadway & Chris Giles, he writes,

… [ the speech] attracted a glowing write-up from the FT’s influential economics editor Chris Giles and an approving tweet from James Meadway, the adviser who more than anyone bar John McDonnell himself shaped the Labour Party’s economic strategy under Corbyn

Stephen bush – New Statesman

Meadway’s tweet was trolled by Richard Murphy, who was one of the authors of Corbyn’s original Corbynomics manifesto and is a supporter of modern monetary theory (MMT), but Labour stepped away from these monetary & fiscal policy  ideas after 2016.

I found the speech underwhelming, almost academic in its tone, which given the host may have been appropriate. I am certainly of the view that it is not a step away from or a rejection of McDonnel’s policies. If anything, the call for a ‘responsible fiscal framework’ based on ‘pragmatism, not dogmatism’ is an attack on Osborne and the politics of austerity and his remaining fans in the Tory party. She praised the independence of the Bank of England, but this has had its problems; it failed in 2008 and it was politicians that rescued the economy and the argument for its independence is based on the argument that politicians and their electors can’t be trusted to make the right decisions. If those decisions are painful, why should they? Independence is a way of baking in neo-liberalism. She was clear however that monetary policy is not enough to build a successful macroeconomy.

Over-relying on monetary policy levers for economic growth – as the UK has arguably done for the past decade – can lead to undesirable outcomes. Without accompanying fiscal action, low interest rates and gargantuan quantitative easing programmes can exacerbate inequality and concentrate economic gains in the hands of those who were already asset-rich, at the expense of those who rely on income from their labour. Risky indebtedness, especially combined with a highly unequal distribution of assets, can exacerbate inequality.

Anneliese Dodds

She spoke on fiscal policy; did she repeat McDonnel’s Golden rule? If she did, she qualified it by saying that borrowing to invest is only available because of the low interest rates. I have two things to say, firstly, I thought interest rates are a policy instrument, so if a government which is a currency sovereign wants them low, then low they are! Secondly, defining what is current account expenditure is not simple. Why is the education budget not considered an investment in human capital?

Is this as good as it gets? We are to be grateful that a Labour Shadow Chancellor still intends to borrow to invest and that monetarism is no longer part of Labour’s macro-economic tool kit.

On the upside she mentioned wealth inequality and aggregate low wages as constraints to growth but no mention of remediation which would be an effective wealth tax, a better minimum wage, reformed procurement policies and labour law reform. She also mentioned critically the growth in value of unproductive assets, such as art and wine; but surely this is the result of quantitative easing and a side effect of the increasing marginal propensity to save by the rich, again addressable by a wealth tax.

She announced a series of technical changes to the budget management process, all of which are good, but not particularly left wing and so likely to be nicked by the Tories. These consist of ensuring equality & carbon impact analyses on the budget and spending plans and placing a longer term time frame on the budget together with using more very long term bonds.

I also noted that while it seems that Labour is committed to a high wage, high skill economy, our reticence to talk about the means by which we select the short and medium term winners is not talked about; under Corbyn’s leadership, the new National Investment Bank was to be the instrument for seeding innovation and new jobs, but the means of funding it, and the way in which loans and grant were to be allocated remains unclear.

I submitted a question on this i.e. selecting industrial and innovation winners, which the moderator, Prof. Barbara Casu put as her first question; if Anneliese Dodds had wanted to talk in detail, this would have been in the speech, it wasn’t and her answer to Professor Casu’s question added no clarity.

It was a very technocratic speech, delivered in a technocratic style, presumably designed not to frighten the horses. It was a rejection of both modern monetary theory (MMT) and fiscal consolidation but not a manifesto for socialism.


The speech was introduced by the Dean of Faculty at CASS, Paulo Volpin, and the questions moderated by the Professor of Banking, Barbara Casu. Both would seem have been initially educated in Italy, I hope that the new immigration rules post Brexit will allow others to follow their route and come to the UK to teach.

I have written previously about Corbynomics on this blog and also on MMT on my bliog, and on my wiki, and on QMT in my obituary on David Graeber, on the blog. …

Finance in the City

Finance in the City

I made a blog on linkedin; a lot of money left the City on the 4th Jan, the first day of trading after the end of the UK’s brexit transition period. The article has a bit of explanation and a bit of prediction; more could follow and some of the market infrastructure companies and lawyers may need to do so too. While non European finance will likely remain in London, and provide both volume and gravity, the death of LIFFE showed that things can change.

Bloomberg are not so equanimous, and express their views in an article behind a “please pay us” splash screen; it’s a review of the leading merchant bank’s economists talking about the investment opportunities in the UK now that we have an idea of the new framework defining the terms of Trade. Many are neutral, the headline quotes the ‘bear’.

I am not sure, I suspect that the gravitational effect of world trade in non-Euro shares and the trade in currencies will maintain a critical mass giving the skills and infrastructure the reason to stay in London. What’s gone is gone but we need the Government to get on top of the negotiations on “equivalence”, which will determine the banks’ ability to serve both the EU market and EU citizens in the UK.  …

On macroeconomics, in memory of David Graeber

On macroeconomics, in memory of David Graeber

David Graeber died a couple of months ago on 2nd Sept. I never met him but was introduced to his work by my son who pointed me at "On Flying Cars and declining rate of profit", and he was introduced to me as one of the world’s leading anarchist thinkers; he was teaching at Goldsmiths which is close to where I live. I didn't feel it appropriate to write anything at the time, however I was clearing up my desktop and came across "Against Economics", which is a review of Robert Skidelsky's book, "Money & Government: the past and future of economics". It is through these two articles, and his tweet stream, that I came to know him; there is much wisdom in these articles. In this blog post, I comment on three things which I think especially important. Firstly, the nature of capitalism has changed. Capitalism is no longer progressive, and its defenders are moving towards arguing there is no alternative. The problems that the economic system needs to solve are no longer growth and the resource allocation required to deliver it, but, in his words, "how to deal with increasing technological productivity, decreasing real demand for labor, and the effective management of care work, without also destroying the Earth". This would also require an equitable distribution of wealth and income, the lack which is one of the chief criticisms of capitalism. Secondly that amongst the fatal flaws in economics as a science is the truth that systems that promise a benevolent equilibrium cannot rely on expectations of exogenous rewards to act as stabilisers. Thirdly, I look at his critique of the quantitative theory of money, and his positioning of credit and debt as an exclusively social construct. For more, see below/overleaf ...

Saving Jobs

Yesterday Rishi Sunak announced the next stage of support for the economy to see us through a coronavirus winter and mitigate some of the job destruction inherent within Brexit. It seems to be a short term working subsidy. It is described in the Guardian in an article entitled, “Covid scheme: UK government to cover 22% of worker pay for six months”. It requires employers to pay workers 55% wages for 33% hours. Below/overleaf, I also look at Richard Seymour and Rebecca Long Bailey's comments. ... ...

ARM in play again

ARM in play again

I was interested to learn that ARM is in play again, although curious to learn that Nvidia might be its suitor, and even more interested to learn that Nvidia has overtaken Intel as the world’s largest chip fab. How did that happen? Nvidia sell on consoles as well as PC/laptops and games platforms are it seems another good whose demand has been boosted by CV19 and that the global demand for cycles has been driven by HPC and AI recently where the Nvidia  are competing architecturally with Intel, although they need a CPU to complete their portfolio. It may be a better fit than I’d thought.

I have to laugh a bit, as Intel drove the final RISC players out of the market by leveraging the volume of the consumer product design, and it would seem, have been bitten in the arse by the same thing. These products require volume, and production will coalesce towards the low price duopoly.

ARM was bought by Softbank, for £24bn cash, just under 4 years ago; they are a Japanese venture/hedge fund which has famously had it its own problems. I wonder what they did with the money as some of their principals are now bleating for state protection as Nvidia is a allegedly an inappropriate owner of the chip designers. The Verge heralded it as another proof that intellectual property has value. The Register reports that the big stake holders have been insuring themselves against losing access to the intellectual property.

In this article on the BBC, they returned to Herman Hauser, one of ARM’s founders, who voted against the deal in 2016 who shares his fears for access to the technology of bought by another market participant, and possibly the decommitment to the Cambridge campus, which is a security of supply issue, but this Govt. is unlikely to do much and it should be safer owned by someone who wants the ideas rather than an organisation which just considers it a red-ink line in the P&L. …

Automating the professionals

Automating the professionals

I attended a seminar the other day which raised some questions in my mind about the next and prior waves of automation, the location of value creation and the legal/social barriers to adoption. Much is spoken of the use of artificial intelligence to augment or replace professional workers and this note briefly looks at this. It examines the nature of decisions and the need to transparently serve a human rights agenda, the question of regulation and assessment by one’s peers, and why it’s so hard to organise Trade Unions amongst the software authors. …