The focus this week has been on Philip Hammond’s Budget.
The opinions of the shadow chancellor have been rather in the background by comparison.
But John McDonnell is doing us all a favour at the moment. He is busily promoting a collection of essays which he edited, under the title “Economics for the Many”.
These cover a wide range of policy areas, and are written by a mixture of politicians, think-tankers, and academics sympathetic to the shadow chancellor. The book contains a substantial introduction by McDonnell himself, and so is a useful guide to his thinking.
McDonnell appears to believe that spending vast amounts of money on nationalising industries will cost the taxpayer nothing.
From a balance sheet perspective, this is technically correct. The government could issue debt to take over the rail companies, say, but this would be balanced by the value of assets acquired.
This misses the point. If someone were mad enough to lend you £10m to buy a house valued at that amount, your household balance sheet would not have changed. But how would you service the debt, and what rate of interest would you be required to pay?
The rate of interest on UK government bonds is currently low, at around 1.5 per cent. But this is determined by the markets, not by government diktat. If the markets lose confidence, the rate can change rapidly. In recent years, Italy, Spain and Portugal have all seen rates in the six to eight per cent range. And in Greece, they were as high as 23 per cent.
McDonnell is silent on how he would ensure that the same thing would not happen here.
Some of the essays in his edited volume share this silence. One of them, somewhat ironically, points out the dangers of debt levels being too high. Admittedly this refers to household debt and not public sector debt, but no recommendation is made on how the problem can be solved.
In the same way, several contributors attack the discipline of economics. We read, for example, that it needs to be “more diverse and representative of the society it serves”. Yet no argument is put forward which offers a scientifically superior explanation of events to that of standard economic theory.
To be fair, most of the essays do put forward proposals. But the striking feature is not their radicalism – it is how dull and unimaginative they are.
So, for example, when new firms are launched based on new technologies, they should be set up as cooperatives. Cooperation as a form of business model has been around since the Rochdale Pioneers in 1844. It has not exactly set the world alight.
There is much talk in the media about how Jeremy Corbyn’s Labour party has captured the zeitgeist. This is not reflected in the opinion polls, where the Tories remain obstinately in the lead.
But if it has, these essays suggest that we are not in for an exciting and innovative future. Rather, we will be condemned to a repeat of the dismal and depressing 1970s.
