Your editorial (Labour is radical, but if the Tories start spending, it risks being outflanked, 28 May) calls for a progressive agenda with “creative fiscal and monetary ideas” to abandon “restrictive financial ratios” and outbid the Tories on deficit spending and rising government debt. You make an incontrovertible case for “the decentralising of economic power” and “government spending to take up the slack”. But there are risks, which need to be thought through.
The immediate effect of a deficit spending programme will be a fall in sterling and rising import prices. This will be boosted into a “crisis” by Tory commentators pointing to past precedents (in Latin America, as well as 1979 and 2008). The best counter is to set out a fiscal programme to tax wealth – a land value tax, a progressive reform of council tax on higher-value houses, and stronger taxes on companies extracting monopoly profits and share values in IT and elsewhere. Because the rich would pay mainly out of savings, this would still “take up the slack” without deflating consumer demand, productive investment or productivity.
Alan Bailey
London
• Your editorial on Corbynomics says “Today’s Tories seem to be ditching their austerity rhetoric”. But the March Office for Budget Responsibility report shows that the chancellor has no plans to abandon austerity. Quite the opposite. He plans a further fiscal squeeze between now and 2020 equivalent to 1% of GDP, a further £20bn of spending out of the economy in a combination of public spending cuts (including cuts in in-work benefits) and tax rises.
The only silver lining is that Philip Hammond’s squeeze will be less severe than the one planned by George Osborne in his last budget in 2016. The overall fiscal squeeze under the Tories since 2010 has taken over £130bn of spending out of the economy in a combination of public spending cuts and tax rises; 80% of that squeeze fell on public spending.
Eight years of austerity (and the UK Brexit vote) have brought Britain to the bottom of the growth league among the advanced economies.
Peter Hain
Labour, House of Lords
• It’s welcome to see your leader supporting the Polanyi-inspired ideas on the economy currently being put forward by Corbyn and McDonnell, but as soon as you proffer congratulations, you grudgingly withdraw them by accusing Corbyn of reticence, an absence of creative ideas and timidity. After years of weathering unpleasant and unfair attacks, both personal and political, and the impugning of his integrity across a range of issues, surely Corbyn is to be praised and encouraged for staying in there, consistently principled, despite it all. Why don’t you let him – nay, even encourage him – to keep “his edge”, as you call it, rather than side so often with those who seek to engineer his downfall?
Gillian Dalley
London
• As you note, much of Corbynomics is based on the work of the late Austrian economist Karl Polanyi. Before he died in 1964 he noted that his politics were close to those in the New Reasoner, published 1957-59. The journal was run by two historians, John Saville and EP Thompson, after they quit the Communist party in the wake of the crisis of 1956. Thompson became – and remains 25 years after his death – the foremost theorist of a moral economy.
If, as you suggest, the Tories are moving away from austerity economics, perhaps it’s time for those Labour MPs for whom it is an article of faith to acquaint themselves with Thompson’s work.
Keith Flett
London
• It is very encouraging that leading Labour politicians are responsive to contemporary new left thinking. Your editorial usefully draws attention to this important development. However, my concern is not that the Conservatives will attempt to adopt a debased version of Corbynomics; rather, that the application of an expansionary policy which is not related to the political, economic and environmental context in which it will be applied is likely to lead to disaster for a socialist Labour government.
The huge scale of the problems bequeathed by over 30 years of Thatcherite neoliberalism – underinvestment, low productivity, widening inequalities of income and wealth, and a shredded social fabric – certainly demands a change of direction, away from the promotion of corporate power and marketisation to a system based on cooperation, equality and decentralised power. But the accumulation of social problems and the demands for remedial action, together with costs of Brexit and the threat of environmental degradation, are likely to swamp a Labour government that is not prepared and result in it being “set up to fail”.
Keynes appreciated that there is a limit to deficit spending, even when guaranteed by the authority of the state. It is not a financial conjuring trick but requires careful application, if the result is not to be runaway inflation. Unlike academic economists, Jeremy Corbyn and John McDonnell need to set out very clearly not only their “creative fiscal and monetary ideas” but also the means by which they will be pursued in a precarious global context.
Hedley Taylor
York
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