Our main political parties see a reputation for economic competence as key for achieving power. The Tory party is reportedly scared that a Brexit disaster will destroy its reputation, which is generally better than Labour’s. It took it a long time to recover its earlier demise after 1992 when the UK crashed out of the European Exchange Rate Mechanism.
Ironically politicians have believed that accepting the economics of austerity is central to being seen to be competent by the wider public. They are still drawn to Thatcher’s picture of the UK as a household and balancing the books. Many economists see this as economic illiteracy. Yet there are influential institutions staffed largely by microeconomists that help reinforce the notion that ‘balancing the books’ is achieved by financing government spending with tax receipts. In reality, argues Ann Pettifor, the public finances are balanced when, after a financial crisis, employment, incomes and economic activity are restored.
The Mint talks to Pettifor about Labour’s attempts to forge a reputation for economic competency on the basis of “new economics”. What does it mean for them and has it worked? Can Labour escape the balancing the household books narrative? Is austerity economics really over?