Only a week or two after a group of predominately left-leaning economists wrote a letter to the Observer claiming that Labour leadership hopeful Jeremy Corbyn’s economic policies aren’t extreme, a slightly larger group of predominately right-leaning economists has predictably published a letter in the FT saying that, of course, they actually are.
‘We wish to... send this message to counter the impression that might be got from the previous letter of "41 economists" [their quotation marks] that Mr Corybn’s policies command widespread support in the mainstream of the discipline,’ wrote the 55 economists, including the LSE’s John Van Reenan.
There really is nothing like a good academic spat. Unlike senior politicians or business people, professors and lecturers don’t always have large communications teams to soften their tongues. The anti-Corbyn economists take issue with three of his policy ideas.
Nationalisation is first. The economists write that ‘renationalising industries is highly unlikely to improve the performance of its targets, and very likely, if history is anything to go by, to make things worse’. Paying to do so would be ‘a waste of fiscal space’, while not paying (known in some circles as 'stealing') would ‘be extremely damaging to the climate for enterprise in the UK’.
But is Corbyn actually calling for widespread nationalisation? Yes, he’s voiced support for ‘rebalancing the economy’ towards the north and for a resurrection of British manufacturing ‘with a strategic state leading the way’, but he’s denied that he intends to restore Labour’s Clause IV commitment to wider public ownership.
Instead, he’s called for the renationalisation of the railways, the energy sector (possibly) and, bizarrely, RBS (should it be sold off at knock down prices to those greedy capitalist types). Other than the latter (in finance, nationalising banks is generally considered a no-no), that’s not immensely controversial, even if it represents a minority opinion.
Next, the academics take aim at ‘people’s QE’, the rather ludicrous concept of forcing the Bank of England to print money for public investment, and also the claim that ending ‘corporate welfare’ and tackling tax avoidance could raise up to £120bn a year for the Treasury.
As the letter-writers point out, neither is particularly credible, though Corbyn’s allies have clarified that he wasn’t saying £120bn could realistically be reclaimed.
What the writers of this letter don’t address – and what the economists supporting Corbyn focus on – is the issue of austerity. The letter to the Observer claimed that ‘it is the current government’s policy and its objectives which are extreme’, in regard to balancing the budget.
By and large they are right – the pendulum of economic opinion swung away from strict austerity many years ago, meaning at least one key plank of ‘Corbynomics’ is indeed mainstream. There’s plenty that Corbyn has said that isn’t (maximum wages, for example), but unsurprisingly it’s a mix.
Fortunately for British business, Corbyn’s more radical ideas are unlikely to find their way onto statute books any time soon. It’s not just that a relatively hard-left Labour Party is unlikely to win an election. Corbynomics is still being fleshed out, as one would expect the policies of an opposition MP recently thrust into the limelight to be.
It’s likely that, if he has become Labour leader by the end of the month, his less economically literate ideas will by necessity have been weeded out in order to reach a compromise with the centre of the party. In the meantime, we can expect the academics to keep disagreeing with each other - it is, after all, what they do.