Economic Theory

If this is the new ‘mainstream economics’, God help us

Jeremy Corbyn’s Labour Party has a new economic committee, made up of high-profile names such as Danny Blanchflower, Simon Wren-Lewis, Thomas Piketty, Joseph Stiglitz and Mariana Mazzucato. As I said in my City AM column today, all of these names have made large contributions in their own fields of economics, but collectively they would certainly represent a paradigm shift in economic thinking in the UK were their ideas implemented.

Simon Wren-Lewis in particular though has been at pains to highlight just how ‘mainstream’ the economic views of Corbyn are. Both he and Paul Krugman have made a big play of how reasonable Corbyn’s fiscal policy stance is in particular.

Fiscal policy is certainly an area of fierce debate among academic economists. But given Wren-Lewis makes such a virtue of areas of consensus in economics and what is mainstream, I’m still shocked that he and others would choose to sign up to a party with so many views outside of basic economic orthodoxy.

Here are just a selection of the view we’ve been served up over the past few days which would presumably make a programme for government for Labour:

–          The books can be balanced solely by raising the sustainable growth rate and clamping down on tax avoidance

–          That spending cuts constitute ‘austerity’ but tax rises do not

–          That ‘globalisation seems to be about low wages for the poor

–          That rent controls are a solution to the housing crisis

–          That landlords should not be allowed to deduct costs such as repairs before assessment for tax

–          That the government needs to build tonnes of council homes

–          That we should introduce a statutory ‘Living Wage’ based on the cost of living

–          That the gender pay gap is due to discrimination

–          That taxpayers subsidise poverty paying bosses through tax credits

–          That aggressive industrial policy through central government will raise the growth rate of the economy

–          That we should even consider mandating the Bank of England to target ‘employment’

–          That the state should intervene to protect failing industries, and that Italy was a good role model for achieving this

–          That self-employment is synonymous with entrepreneurship

–          That there’s a corporate welfare bill of £93 billion

–          That £120 billion of extra revenue could be collected from clamping down on tax avoidance, evasion, and pro-rich tax breaks

–          That manufacturing is deserving of special treatment

–          That direct overt financing of government spending by the central bank should occur in ‘extreme times’

Of course, on all of these issues there is a degree of economic debate. And economic illiteracy is unfortunately par for the course with most politicians, of all parties. But for prominent economists to put their reputations on the line by backing such a programme so publicly beggars belief. None of these viewpoints can be considered mainstream.

Ryan Bourne is the IEA’s Head of Public Policy.

Head of Public Policy and Director, Paragon Initiative

Ryan Bourne is Head of Public Policy at the IEA and Director of The Paragon Initiative. Ryan was educated at Magdalene College, Cambridge where he achieved a double-first in Economics at undergraduate level and later an MPhil qualification. Prior to joining the IEA, Ryan worked for a year at the economic consultancy firm Frontier Economics on competition and public policy issues. After leaving Frontier in 2010, Ryan joined the Centre for Policy Studies think tank in Westminster, first as an Economics Researcher and subsequently as Head of Economic Research. There, he was responsible for writing, editing and commissioning economic reports across a broad range of areas, as well as organisation of economic-themed events and roundtables. Ryan appears regularly in the national media, including writing for The Times, the Daily Telegraph, ConservativeHome and Spectator Coffee House, and appearing on broadcast, including BBC News, Newsnight, Sky News, Jeff Randall Live, Reuters and LBC radio. He is currently a weekly columnist for CityAM.

1 thought on “If this is the new ‘mainstream economics’, God help us”

  1. Posted 29/09/2015 at 15:59 | Permalink

    His points all seem perfectly reasonable to me.

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