Labour’s macro-economics, “Back to the Future”

Dave Levy
6 min readJul 29, 2022
Photo by Towfiqu barbhuiya on Unsplash

Starmer made another speech on economics on Monday 25th July. It is reported in the Guardian, and possibly summarised with this quote,

Starmer has been trying to pitch Labour as the party of fiscal prudence and will say: “With me and with Rachel Reeves [the shadow chancellor], you will always get sound finances; careful spending; strong, secure and fair growth. There will be no magic-money-tree economics with us.” From the Guardian,

The limits of growth & debt

This takes a lot of unpacking, firstly, whether the questions of what we make (or do), how we make (or do) it and who gets what we make (or do) are no longer the crucial systemic questions that economic systems need to answer. Questions of funding old age and care, and combatting climate change are now central to good economic system design; the days when capitalism was progressive are over. While he doesn’t frame the same question, Will Wardley points out that fiscal discipline is incompatible with a Green New Deal although Starmer denies the dichotomy.

Starmer recognises the vitriolic anger that hard work doesn’t pay enough and while we recognise that this is a system caused by 12 years of Tory misrule, he won’t support strikers who seek to rectify this state of affairs.

Rachel Reeves made a speech earlier in the month, as part of the launch of the Resolution Foundation’s 2030 economic review called “Stagnation Nation”. The words of the speech were posted to the Labour press site and she sought to clarify Labour’s position on the debt and deficit, I quote her later in the article but Starmer states,

So we will not announce a single penny of day-to-day spending without saying how we would pay for it. We will only borrow to invest to meet the challenges of the future — that’s what our Climate Investment Pledge is all about. And we will set a target to reduce debt as an overall share of our economy.

Sir Kier Starmer

Richard Murphy in a thread on the speeches, points out that for some economists, growth and fiscal policy are orthogonal, i.e. a nation can afford what we make and do, fiscal policy has nothing to do with it. It helps remind us that economic theory is just that, there is no proof that…

Dave Levy

Brit, Londoner, economist, Labour, privacy, cybersecurity, traveller, father - mainly writing about UK politics & IT,