Matthew Taylor is currently chief executive of the Royal Society of Arts and, before that, was Tony Blair’s most senior policy advisor. Regarded as one of the most original and open-minded thinkers on the left, there is, of course, little room for even the best of Blairites in today’s Labour Party.
Nevertheless, one must welcome any sign of intelligent life when it comes to leftwing thinking on the economy. For instance, here he is blogging on the shallowness of those who think that a spot of stimulus is all it takes to get our economy back on track:
- “When economic debate isn’t focussed on the deficit it tends to focus on growth. The implication is that if only we could have a few years of two or three per cent growth – perhaps spurred by a temporary tax cut or some infrastructure spending – then we would be well on the way to recovery. But this belies the deeper nature of our economic problems.”
This is one of the reasons why the downturns that follow a deep financial crisis are so long lasting. Even if growth picks up, the debt overhang remains, ready to crush the recovery as soon as interest rates twitch upwards.
Then there’s the productivity gap:
- “Back out in the economy at large, there is the huge decline in productivity which has occurred in the last few years, from the already modest base line at which we started when the credit crunch hit. This may in turn help to explain why after a twenty per cent devaluation in the pound in the last few years we are still experiencing a huge balance of payments deficit, one which would be substantially worse were it not for the contribution of the publicly-reviled financial services sector.”
Thank heavens for at least one lefty who understands the true nature of what we’re up against. If only there were more like him. But what if there were? Would that represent an intellectual victory for the right?
The answer to that is yes – in terms of the austerity required to align the scale of our public spending to our current capacity to pay for it. However, if we’re talking about the doctrine of ‘expansionary austerity’ – which holds that a display of fiscal restraint on the part of the government will be enough to get growth back to where it was before the crisis – then the answer is no.
Expansionary austerity – like the gibberings of the neo-Keynesian stimulus monkeys – is just another species of magical thinking. In normal economic circumstances, it may well be possible to influence the ‘animal spirits’ of the market place, thus encouraging economic growth to speed-up or slow-down as required. But there is nothing normal about our current circumstances; our economy is beset by a series of deep structural problems – and it will take deep structural reform to secure our future.
Matthew Taylor sets out six policies he would like to see enacted:
- “we need… to be willing to do some genuinely innovative things in relation to policy on tax (maybe a ‘use it or lose it’ tax on corporate balance sheets), spending (making tough decision on less productive public spending so more can go to those things which boost employment and skills), employment (an urgent national crusade to end long term youth unemployment), training (by 2020 every job should be a learning job), investing assets (using social housing receipts and public sector pension for productive investment) devolving to cities (implementing the Heseltine report and strengthening city regions).”
You may disagree with some, most or even all of these ideas, but at least they represent the ambition of thought that is so desperately required of us today.