“Fiscal rules” row is a sidetrack

That debate is warming up about Labour government policy is good. That some of it is focused on “fiscal rules” is bad.

Public services and public-sector pay cannot be fixed by tweaking fiscal rules. They require taxing the rich: wealth tax, capital gains tax, higher income tax on very high incomes, higher corporation tax.

If world capitalism lurches into a full-scale crash over the next year — and it could — it will require more: public ownership and democratic control of high finance.

Since the late 1980s, as world financial markets have accelerated, almost all even minimally capitalistically-developed countries in the world have devised “fiscal rules” of some sort. Every Britain government since 1997 has had (varied) “fiscal rules”. When John McDonnell was Shadow Chancellor, he proposed “fiscal rules”.

Truth to tell, all the versions are shoddy. They all depend on notional predictions of economic conditions in some years’ time.

They are a gesture designed, and to some degree effective, to convince the non-UK wealthy who hold one third of UK governent IOUs that the pound will retain some buying power and they’d better not sell off those IOUs or refuse to buy new ones.

In the short term, even a workers’ government would have to make such gestures. The Bolshevik government in Russia adopted the gold standard — another gesture — in 1922, to halt huge inflation.

In previous eras, and in Germany more recently, some capitalist governments have had “hyper” fiscal rules, such as balancing the government’s budget each year. One of John Maynard Keynes’s achievements was to convince economists, and then most bourgeois politicians, that that was irrational even in bourgeois terms.

However wretched Rachel Reeve’s economics, she is not on that “hyper” track. The UK budget has a deficit of 5.1%, greater than any other rich country except notoriously troubled France and the USA (which is also troubled, but has more leeway to run continual deficits because of the dominant role of the dollar in world trade).

The UK is paying interest on its IOUs at 5.0%, higher than the USA, France, or any other rich country.

In the abstract, defter “fiscal rules” than Reeves’s can surely be designed (and they may work — as long as they are not seen to come in through working-class pressure!) To see our role as expert advisers on that front is wrong.

Our slogan should not be “change the fiscal rules”, but “seize the loot of the ultra-rich”.