By Mark Buckley
Labour’s Shadow Chancellor Rachel Reeves has given a major policy speech in Washington and produced a policy paper (pdf) to offer more detail on what she calls a new ‘securonomics’; to ‘build a new stability in an age of uncertainty’.
The true picture is that it is the economics of the Cold War. It is also a major success of the Biden Administration in reshaping both the economics and the politics of its closest allies in order to serve US interests.
The new policy is made in Washington, as Reeves accepts, citing both the perspective of the US Treasury Secretary Yellen and the policies already being implemented by the Biden Administration.
The US State Department could have drafted the three major threats, the main sources of global insecurity, that are being addressed and identified in the speech. China is first.
“A rising China is unbalancing the old global order of a unipolar world, climate change presents our generation with its greatest moral and economic challenge and new technology threatens to upend everything about how we live and how we work,” Reeves said.
But it is also very much an old policy. State subsidies to prop up ailing industries who refuse to invest is rebranded as ‘industrial strategy’, while opposition to greater trading links with Europe combine with rhetoric about a fairer deal for workers in a rehash of the failed economic cross-party consensus for 1950s Britain.
The speech itself was delivered on 24 May and Labour’s Green Prosperity Plan of £28 billion annual investment in greening the economy is described as its centrepiece. By 9 June the centrepiece was gone, in a flurry of investment reductions, postponements and a lot of nonsense about the fiscal rules. As a result, every other apparent current commitment, such as on workers’ rights must be treated with scepticism.
No credible set of fiscal rules anywhere have ever included a prohibition or even significant limit on Investment. This is because, by definition, there is a direct monetary return on Investment. The only task that remains is to identify specific projects where the return exceeds the cost of borrowing. As current interest rates on British government 10-year bonds (gilts) are substantially below the rate of inflation, funded projects only need to maintain their value in real terms to benefit public finances.
In reality, despite having promoted the idea of substantial green investment for some years, Labour has never published any detailed plans about putting it into effect. Now, the party leadership has retreated even from the growing mainstream consensus that borrowing for Investment is both useful and necessary.
Absent large-scale Investment the result of ‘securonomics’ will be slower growth, lower wages and funds for public services and a failure to meet Britain’s commitment to net zero emissions. It will add to insecurity. But this is inescapable when Labour is tying itself to the US war machine and the economics of the new Cold War.
Image: Official portrait of Rachel Reeves. Picture by Chris McAndrew, CC BY 3.0, via Wikimedia Commons.