By Victor Anderson
Difficulties with the Coalition Government’s economic policies are becoming more and more obvious. Public spending cuts spread to the private sector too, as the public sector buys less from private suppliers, and there are also less public sector employees buying goods from the private sector. Thatcher’s famous “household analogy” breaks down – when a household spends money, it’s gone, but when the public sector spends money, that money is handed on to someone else. If it’s not handed on, the economy tends to go into decline.
Over the past few months, a new twist has been added to this story. Aware that they are being criticised for keeping the economy in recession, the Government has embarked on a search for policies to promote growth. Unfortunately their idea of promoting growth is to look into reducing entitlement to maternity leave, bring in legislation to remove environmental protections in the planning system, and now – potentially – to water down their climate and energy policies. A key moment in this process will be the Treasury’s ‘Growth review’ announcement on November 29.
Whilst many people have complained, criticised, marched, and taken various forms of action against Government policies, there has not yet been a really coherent alternative presented. It has been difficult for the Labour Party, because it is too implicated in the failure to properly regulate the finance system, and because disagreements amongst senior members of the party have made it impossible for them to set out an agreed scheme.
However now there is a plan – ‘Plan B’ – published on October 31st by the pressure group / think-tank Compass, the outcome of writing by many different authors. Despite some careful editing, differences in emphasis between different authors and sections of the document are still evident.
The main thrust of the document is Keynesian – a policy of expanding the economy through government spending and investment, stepping in where the private sector and finance markets are failing, boosting jobs and growth. It’s the sort of economic programme which has been put forward on the Left ever since the 1930s.
Although that approach has many strengths, it gets into difficulties when it comes to the environment. On current patterns of production and consumption, economic growth means more carbon emissions and continuing decline in key ecosystems. We could come out of recession and go back into rapidly destroying the life-support systems of the planet.
Plan B therefore tries to set the desire to revive the UK economy in a global and ecological context. It seeks to put the spending and investment primarily into the economy’s greener sectors, such as renewable energy.
There is likely to be a great deal of interest in Plan B. Most of it will centre on the argument with George Osborne’s Plan A. But for anyone who regards themselves as on the Left and green, what will be particularly interesting is whether Plan B succeeds at putting the Left and green elements of its analysis together successfully. Or does the environment need a Plan C?
Yes, Plan B is an advance on Plan A. But it’s not great.
Plan B is criticised here http://bilbo.economicoutlook.net/blog/?p=16719
especially for failing to tackle the household-government analogy that so plagues the popular imagination. Fair point.
The “left”, whatever that means, needs to up its game in terms of discussing the sense/nonsense of the household/firm/economy analogy, and also this nonsense about deficits being bad (which follows from the household budget analogy)
*Con-dems plans – apologies for the mistake
Very glad to finally see an alternative set out to the Lib-dems plans, even if we have been waiting a year and a half.
Just reading the one pager, and one quick criticism:
“What would Plan B entail in the short term?
The cuts would be reversed until the economy is growing strongly”
I’m still confused why on the left and right people don’t realise that this recession, these times are different. We aren’t going to start growing strongly again – we are just going to keep hitting the buffers of a high oil price, high food prices, private and public debt amassing and the damage to the global economy of climate change. Good start, but for me, Plan B still doesn’t deal with the underlying problems (not that that’s an easy or politically feasible task).
For a start, Plan B should speak with Positive Money about improving their analysis before they make recommendations for reforming the banks (http://www.positivemoney.org.uk/our-proposals/video/).
No growth – isn’t that what Greens want? Reducing entitlement to maternity leave – less people – isn’t that what Greens want?
Can Plan A be made green ? http://www.newstatesman.com/blogs/the-staggers/2011/10/quantitative-easing-money