Is this election turning out to be a Lutheran moment for the Church of Economics? If one listens to the high priests of the dismal science it might seem so. The Institute for Fiscal Studies says neither the Conservatives nor Labour have produced a “credible prospectus” for balancing the nation’s books in this election. The Resolution Foundation says both parties will break their tax and spending rules announced less than a month ago.
Economic sects rely on the faith of the people for their legitimacy. The priesthood are concerned about the radicalism of the two main parties. Boris Johnson wants Brexit over with, whatever the economic cost. Jeremy Corbyn wants to reset the economy along tax-and-spend lines. National debt will rise, warn the experts.
Mr Johnson is not offering to get Brexit done because he wants to bridge the yawning gap between rich and poor. It is popular enough, he reckons, to win the election. This rightly offends economists, who want reason to dictate policy. The self-inflicted blow of a hard Brexit will require state cash being freely spent to soften the impact.
By comparison, Mr Corbyn wants a transformation of the British economy, with plans for workplace democracy, fairer taxation of wealth, and more of the sectoral bargaining that is commonplace in other western economies. The party’s offers of superfast free broadband and compensation for women who lost out as a result of changes to the pension age have thinktankers wondering where the cash will come from.
The answer is that most governments run fiscal deficits most of the time. Labour is right to signal that its fiscal balance will be allowed to move to the level required to maintain the shape of the society it desires – after taking into account the spending decisions of the private sector. Since the late 1970s it has been heresy to suggest that governments ought to put social objectives at least on a par with fiscal ones. But Mr Corbyn is right to put forward a programme that challenges this orthodoxy, whether or not one agrees with every element of it.
Governments over the last nine years have congratulated themselves on fiscal discipline and sound management, even while the economy is evolving in a highly unsustainable manner, with private households taking on record amounts of debt. Prem Sikka of the University of Essex pointed out this week that while government debt has almost doubled since 2010 to a record £1,800bn, “no new industries have been started, university graduates are indebted by fees and every street has potholes”.
The rises and falls of experts depend on their capacity to create “miracles” in times of distress. The failings of one school are inseparable from the birth of its successors. Power tends to beget followers. What might seem like a heretical gamble is likely to be eventually vindicated by the realities of the world beyond this election.
