Thursday, September 17, 2015

Backwards to the future

The policies of new Labour leader Jeremy Corbyn are coming under scrutiny - particularly on economics.
"Let's do the Time Warp Again!"
(Picture of Jeremy Corbyn as an old Labour icon from the Economist)

Giving evidence at the House of Commons Treasury select committee, Bank of England governor Mark Carney was asked by Labour MP John Mann about a number of Corbyn policies, such as "people's QE" and did not pull his punches in his reply.

Mr Carney said: “The issue would be imperilling potentially the achievement of price stability. The consequence of that of course would be inflationary.

“The people who tend to get hurt the most by inflation are the poor, the elderly, those that can’t hedge themselves – that’s been the experience throughout history and I’m sure that will be the experience in the future if the Bank of England were not to conduct policy not consistent with achieving its mandate from parliament.”

Printing more money to expand the economy can sometimes help an economy emerge from the specific situation of a recession characterised by weak demand, if it is managed by careful people who are aware of the risks they are running and are careful not to overdo it.

Putting the printing presses into full speed is nearly always a recipe for disastrous inflation.

The Economist magazine described Mr Corbyn's election here as leading Britain's left into a political timewarp.

"Mr Corbyn’s election is bad for the Labour Party and bad for Britain, too," says the magazine.

"His “new politics” has nothing to offer but the exhausted, hollow formulas which his predecessors abandoned for the very good reason that they failed."

"Only in the timewarp of Mr Corbyn’s hard-left fraternity could a programme of renationalisation and enhanced trade-union activism be the solution to inequality." 

"If you could create macroeconomic stability by bringing the Bank of England back under the government’s thumb, then Britain would not have spent the post-war decades lurching from politically engineered booms to post-election busts."

"Time and again, Mr Corbyn spots a genuine problem only to respond with a flawed policy."
(For example ...)
"He is right that Britain sorely lacks housing. But rent controls would only exacerbate the shortage."

I don't think Mr Corbyn's opponents are going to have to look to issues like whether he sings the national anthem or what his shadow chancellor once said about the IRA to assemble a powerful critique of Labour's new leader.

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