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Success of Corbynomics will depend on 'public trust', claims Lord Turner Success of Corbynomics will depend on 'public trust', claims Lord Turner
(5 months later)
Labour’s radical new leader may struggle to win over voters to “Corbynomics” because leftwingers are less trusted with public money, according to former City watchdog Lord Turner.Labour’s radical new leader may struggle to win over voters to “Corbynomics” because leftwingers are less trusted with public money, according to former City watchdog Lord Turner.
Turner, who chaired the Financial Services Authority at the height of the sub-prime crisis, says the “technical case” for “People’s QE”, the policy at the centre of Corbynomics, which involves ordering the Bank of England to create money to pay for infrastructure projects, is “incontrovertible”.Turner, who chaired the Financial Services Authority at the height of the sub-prime crisis, says the “technical case” for “People’s QE”, the policy at the centre of Corbynomics, which involves ordering the Bank of England to create money to pay for infrastructure projects, is “incontrovertible”.
But as the shadow chancellor, John McDonnell, prepares to deliver his first major speech in the job to Labour’s annual conference in Brighton later on Monday, Turner says the party’s new-found radicalism may undermine confidence in its policies.But as the shadow chancellor, John McDonnell, prepares to deliver his first major speech in the job to Labour’s annual conference in Brighton later on Monday, Turner says the party’s new-found radicalism may undermine confidence in its policies.
In an interview with Juncture magazine, published on Monday by thinktank the Institute for Public Policy Research (IPPR), he warns that the success of such “monetary financing” depends on public trust that it will not be over-used and potentially undermine the value of the pound and stoke inflation.In an interview with Juncture magazine, published on Monday by thinktank the Institute for Public Policy Research (IPPR), he warns that the success of such “monetary financing” depends on public trust that it will not be over-used and potentially undermine the value of the pound and stoke inflation.
“The legitimate concern is that if monetary finance is proposed by people who come from a strongly socialist tradition – a tradition that has tended to reject the idea of any disciplines on public expenditure – there is a danger in practice that it would be used to excess. That is the concern which Corbyn would have to address,” he warns.“The legitimate concern is that if monetary finance is proposed by people who come from a strongly socialist tradition – a tradition that has tended to reject the idea of any disciplines on public expenditure – there is a danger in practice that it would be used to excess. That is the concern which Corbyn would have to address,” he warns.
“Paradoxically, the governments best placed to use overt money finance without generating legitimate concerns about its misuse, and without therefore generating harmful market reactions, would be those whose overall commitment to a capitalist market economy is unquestioned.”“Paradoxically, the governments best placed to use overt money finance without generating legitimate concerns about its misuse, and without therefore generating harmful market reactions, would be those whose overall commitment to a capitalist market economy is unquestioned.”
The comments come as the shadow chancellor has reportedly recruited six anti-austerity economists, including Joseph Stiglitz, Thomas Piketty and Ann Pettifor, to help counteract the perception that Labour cannot be trusted with the public finances, according to the Sunday Times.The comments come as the shadow chancellor has reportedly recruited six anti-austerity economists, including Joseph Stiglitz, Thomas Piketty and Ann Pettifor, to help counteract the perception that Labour cannot be trusted with the public finances, according to the Sunday Times.
Turner also counsels Corbyn and his colleagues against promising a swingeing tax grab on the rich. “I think this is always the challenge for progressive politics: you can successfully propose making the tax system somewhat more progressive, but if you go too far, you won’t get a more progressive tax system at all, because you won’t get elected.”Turner also counsels Corbyn and his colleagues against promising a swingeing tax grab on the rich. “I think this is always the challenge for progressive politics: you can successfully propose making the tax system somewhat more progressive, but if you go too far, you won’t get a more progressive tax system at all, because you won’t get elected.”
The Bank of England has carried out £375bn-worth of quantitative easing (QE) since the global financial crisis, creating the money electronically and using it to buy government bonds.The Bank of England has carried out £375bn-worth of quantitative easing (QE) since the global financial crisis, creating the money electronically and using it to buy government bonds.
The author of much of Corbyn’s economic platform, tax campaigner Richard Murphy, , has called for QE to be used in any future crisis to pay for infrastructure projects, boosting growth and creating jobs, instead of going into City investors’ portfolios. The author of much of Corbyn’s economic platform, tax campaigner Richard Murphy,, has called for QE to be used in any future crisis to pay for infrastructure projects, boosting growth and creating jobs, instead of going into City investors’ portfolios.
But many mainstream economists, while agreeing that the policy is possible, are nervous that it could ultimately result in inflation, or alternatively, force the Bank to pull the plug on long-term infrastructure projects if the economy starts to overheat.But many mainstream economists, while agreeing that the policy is possible, are nervous that it could ultimately result in inflation, or alternatively, force the Bank to pull the plug on long-term infrastructure projects if the economy starts to overheat.
Turner says that rather than the People’s QE, he would be likely to advocate “helicopter money”, an idea first mooted by the American monetarist Milton Friedman, by which central banks create money and give it directly to consumers in the event of any future economic downturn.Turner says that rather than the People’s QE, he would be likely to advocate “helicopter money”, an idea first mooted by the American monetarist Milton Friedman, by which central banks create money and give it directly to consumers in the event of any future economic downturn.
Turner’s enthusiasm for unorthodox policies was seen as scotching his bid to run the Bank of England in 2012, a job that went instead to Canadian Mark Carney.Turner’s enthusiasm for unorthodox policies was seen as scotching his bid to run the Bank of England in 2012, a job that went instead to Canadian Mark Carney.
Separately, Hans Eichel, the former German finance minister, will be in London this week to argue for the European Central Bank – which is undertaking €60bn (£44bn) a month of QE to offset a slowing economy – to use the money to invest in European infrastructure, in an echo of Corbyn’s approach.Separately, Hans Eichel, the former German finance minister, will be in London this week to argue for the European Central Bank – which is undertaking €60bn (£44bn) a month of QE to offset a slowing economy – to use the money to invest in European infrastructure, in an echo of Corbyn’s approach.
“He now believes the ECB needs to get more aggressive, and he believes they should direct their financing towards small business and towards infrastructure,” said David Marsh, managing director of research group OMFIF, which will be hosting Eichel.“He now believes the ECB needs to get more aggressive, and he believes they should direct their financing towards small business and towards infrastructure,” said David Marsh, managing director of research group OMFIF, which will be hosting Eichel.