Re-published with permission from Shift Magazine. Originally published early 2012.
Shift Magazine: There has been much talk of finding an economic ‘plan B’ in the media recently, notably with the New Statesman publishing nine respected economists’ suggestions for George Osborne in October. Could you briefly outline what you see plan A as being and the politics of those calling for plan B?
David Harvie: Plan A means austerity. The Con-Dem government’s plan is to eliminate the UK’s structural fiscal deficit by 2014–15 – essentially the amount by which the government’s expenditure exceeds its income and hence the amount it must borrow each year. To eliminate this deficit the government plans to make public spending cuts of £130 billion over five years. We know what this means: cuts in child benefits; the closure of libraries, youth centres, swimming pools and the like; the abolition of the educational maintenance allowance (EMA); the tripling of university tuition fees; pay cuts and freezes, increased pension contributions and job losses for public-sector workers.
The government argues that this deficit reduction is necessary in order to reduce the money spent on ‘servicing’ Britain’s public or sovereign debt, i.e. making interest payments to creditors. The cost of servicing debt depends upon two variables: (1) the size of the total debt, and (2) the rate of interest, also known as the ‘cost of borrowing’. Osborne has argued his policies are vindicated by events in the so-called PIIGS – Portugal, Ireland, Italy, Greece, Spain – especially Greece. The ‘markets’ doubt the ability of those states to repay their sovereign debt and thus demand a much higher rate of interest as ‘reward’ for taking the risk of lending to them. In contrast, Britain, with its ‘credible’ deficit-reduction plan, can still borrow ‘cheaply’, which keeps down its debt-servicing costs.
But ‘cost of borrowing’ arguments aside, “plan A” for austerity isn’t working, even on its own terms. What’s perhaps surprising is how much of the criticism has come from quite respectable, mainstream or even neoliberal economists and commentators. David Blanchflower, for example, is a former member of the Bank of England’s Monetary Policy Committee – he is, or was, a capitalist policy-maker. But he has written (just after the publication of Osborne’s Comprehensive Spending Review of October 2010) of the government’s cuts being ‘wildly unnecessary, misguided, doctrinaire and potentially dangerous’ and of ‘the Chancellor jump[ing] off the cliff’. More recently (in November 2011) he wrote:
“It is becoming increasingly apparent that Cameron is A) totally out of his depth when it comes to the economy; B) has no clue what to do to fix the problem; C) has little sympathy for those who are less fortunate than he is. He just doesn’t care. Cameron has failed to recognise that his government’s economic policies are in complete disarray, and all he can do is resort to spin and obfuscation. Austerity in the UK has failed.”
Even Financial Times journalist and arch-neoliberal Martin Wolf has described the government’s policies as ‘fiscal policy set on Kamikaze tightening’.
The problem is that, despite the spending cuts, the deficit isn’t falling as fast as it’s supposed to. This is pretty much for the reasons predicted by Blanchflower and other economists critical of the government. The economy is stagnant and has certainly not recovered in the way Osborne, Cameron, Clegg et al. had hoped. Worker-consumers are not earning and spending, businesses are not investing. So tax receipts (income for the government) are ‘thin’, while spending on out-of-work benefits remains higher than expected. Osborne has admitted that spending cuts will continue into the next parliament, i.e. beyond 2014–15.
But the government has consistently and stubbornly refused to alter its policy. At the end of 2010, the prime minister’s spokesperson argued: “It is quite normal for government officials to be thinking about alternative scenarios [but] ministers haven’t asked for advice on ‘plan B’ because they are very clear that the plan we have is the right plan.”
In the middle of 2011 Osborne boasted: “The rock upon which the stability of the British economy rests at the moment is our credible fiscal plan”, i.e. austerity. And at the end of 2011, Cameron was still sticking to the plan. In this environment, it’s not surprising that many critical voices are proposing alternatives to austerity, and nor is it a surprise they are dubbing them ‘plan B’. As you say, in October, the New Statesman invited nine ‘leading economists’ to write open letters to the chancellor, under the headline ‘This is plan B’. Also in October, the think-tank Compass published a report entitled Plan B: A Good Economy for a Good Society; the report’s launch was coordinated with a letter to The Observer signed by more than a hundred academics, and The Observer weighed in with its own sympathetic editorial.
But the policies proposed here are a mixed bag. There is no single ‘plan B’; rather there is loose set of various plan Bs. The authors of these plan Bs are equally heterogeneous, united only by the fact that they are critical of the government’s current policies. The Compass group is left-of-centre and the authors of its plan B report include a number of socialists; the list of signatories of The Observer letter included individuals that I would call comrades. Plan B advocates also include members of think-tanks such as the New Economics Foundation, which is best described as ‘progressive’. Towards the other end of the plan B spectrum are thoroughly mainstream economists, such as Blanchflower, the ex-MPC member; Christopher Pissarides, who received the Nobel prize in 2010 for his ‘analysis of markets with search frictions’; Jeffery Sachs, unrepentant architect of ‘shock therapy’ in Bolivia, Poland and Russia from the mid-1980s to the early ’90s; and George Magnus, an advisor to UBS Investment Bank.
SM: Do you see plan B as having the potential to resolve the current crisis? If so for whom?
DH: Well, as I’ve said, the various policies suggested under the plan B heading are a mixed bag. Those advocated in the Compass report are the most comprehensive and coherent. They propose a whole range of policies including: new investment in renewable energy and energy-efficiency; new investment in public transport; a new round of ‘quantitative easing’; increasing benefit levels; increasing the minimum wage; ‘tackling executive pay at the top’; ‘reforming the city and the banks’; reducing working time; more public provision of childcare; encouraging trade-union membership; encouraging employee-owned firms and cooperatives; requiring workers’ councils for large firms.
Many of these policies are very attractive: there’s nothing like three plus decades of neoliberalism to make you feel a certain nostalgia for social democracy! Certainly policies like this would go some way towards resolving what Ed Miliband has described as ‘a “quiet crisis” unfolding in British households squeezed and disoriented by stagnant incomes and inflation, leading to a steady decline in living standards’; and which is really a crisis of social reproduction, that is, a crisis in our ability to reproduce ourselves as 21st-century humans. But this plan, like the yearning for social democracy, is also utterly utopian. The models of political organisation that built and sustained social democratic institutions no longer exist. What makes Compass’s plan B quite unrealistic is the absence of any socio-political actor that could actually make it happen. The plan seems to be addressed to politicians and policy-makers. But in the absence of mass organisations of the working class and, more generally, mass struggles applying pressure from below, why on earth would they even attempt to implement a set of policies so clearly against the short-term interests of capital – certainly the sectors of capital most dominant in the UK? (Whether such a plan B might be in the longer-term interests of capital is a much more open question, but we know that capital is myopic.)
The policies advocated by the nine economists in the New Statesman are as partial – mostly just a couple of policy fillips – as they are heterogeneous. At one extreme, Ann Pettifor’s ‘launch a green new deal’ is, like Compass’s plan B, quite attractive but also rather utopian. At the other, Pissarides suggests that VAT should be cut from 20% to 17.5% and that the Chancellor ‘should start the spending cuts gradually and respond to the state of the economy. It should go deeper only when the recovery is more robust’. It’s possible the ‘more flexible approach’ Pissarides advocates might ‘work’, but it’s hard to see how any spending cuts can ever be in our interests.
SM: Can you see tensions and differences between the various visions of plan B? How might those of us on the Left intervene?
DH: Yes, there are many tensions and differences between the various visions of plan B. Perhaps one way of distinguishing them is between those that seem to be human-centred, i.e. focusing on human needs, and those that are economy-centred. This is why much of what Compass suggests is attractive. It seems to start from our needs and the economic implications follows. This is clear in its proposal to:
“train a vast carbon army to crawl over all the buildings in the UK making them energy efficient and fitting renewables such as solar photovoltaics. This will generate a huge range of jobs from engineers, energy accountants through to solar roof fitters, loft insulators and draught strippers.
But we should be suspicious of proposals that start off from the need for ‘employment generation’ in general. We have numerous needs (many of them not currently met), including warm and well-insulated buildings; and I think we have work – by which I mean purposeful human activity – to do to meet those needs. But saying we have work to do to fulfil our needs is very different from saying we need jobs!
Another way of thinking through the various plan Bs is to look at what they say on the questions of economic growth and debt. And I think we should understand these twin questions as fault-lines or even frontlines of struggle. Take Sachs’s open letter to Osborne, for example:
‘As you know, I supported your government’s call for getting the deficit under control and I like it that this coalition government is taking a five-year perspective and laying out a medium-term expenditure framework. It was and is important to get deficits under control…’
Once we accept proposals that aim to grow our way out of this crisis – ‘to keep the economy moving forward’ as Magnus writes in his letter – or proposals that accept the logic that some cuts are necessary to ‘control’ the deficit, then we are on enemy terrain.
If we on the Left are to intervene in debates around plan B – and I think we should – then our interventions should focus, firstly, on trying to open up these twin fault-lines around the questions of economic growth and debt and emphasising that human needs must be prioritised. Secondly, they must make the basic point that human beings make history: ‘class struggle is the motor of history’, as the old Marxist dictum has it. That is, we have to start where we are and we have to start from human beings’ concrete practices – regardless of whether we call these practices ‘struggle’ or not – rather than looking upwards to politicians and policy-makers. This is the real flaw in plan B – human agency is completely ignored.
SM: In the context of a deepening crisis and increasingly authoritarian ‘management’ by the state what might an anti-capitalist Plan C look like?
DH: Plan C follows from the above, but I don’t know exactly what it might look like. I don’t think there will be a single plan C, more likely a range of plan Cs. Or it might be better to think of plan C as a perspective. I don’t think it’s too glib to say that plan A for austerity prioritises markets, while plan B is much more state-orientated. Plan C then must take us beyond both states and markets; and so it can only be a movement and a perspective. Perhaps C stands for commons (or commoning), or communism (or communisation).
We have to start from where we are, from practices that people are already engaged in: this includes various struggles, such as the student movement, the occupy movement, struggles of public-sector workers and electricians. It might also include people’s attempts to meet their own human needs – i.e. manage their own social reproduction – outside of market relations. This is what people are doing when they occupy an abandoned bank, say, and create a library and a crèche and meeting space and so on: they are challenging private property and creating commons.
It’s also what people would be doing if they were to find some way of refusing to pay market prices for energy or transport. Such strategies of “self-reduction” were widespread in Italy in the 1970s. They have also been adopted in post-apartheid South Africa with ‘struggle electricians’ reconnecting neighbours’ cut-off power. And they are now emerging in parts of Greece as well. It’s what people would be doing if they were to repudiate debt – mortgage debt, student debt, credit card debt – and refuse to pay. Here we have the examples of the anti-poll tax movement in Britain in the late 1980s and early ’90s, and in the US there are thevery recent attempts both to launch a mass campaign of non-payment of student debt and to prevent foreclosures of homes and evictions.
I don’t think plan C should be about campaigns so much as about politicising existing practices, attempting to join dots, and this might include politicising the plan Bs, that is, highlighting the fault-lines on growth, debt and human needs.
To reiterate some of the above, plan A for austerity hardly qualifies as a plan at all: it’s simply more of the same, and more of the same isn’t even working on its own terms. There is no single plan B, more a broad set of plan Bs; but they mostly share the aspiration to be Plan-like, that is, Plan with a capital P, assuming the certainty, and with it the arrogance, of old Soviet Five Year Plans. ‘Plan C’ is more of a perspective, a perspective that can help guide our movement; it’s a way of trying to understand our world, a way of looking at what’s happening. If it’s a plan at all, then it’s a very open and flexible one. Perhaps it’s better to think of plan C as a compass – not to be confused with the Compass group discussed above. Like a compass, plan C is a guide to movement, an aid for navigating difficult terrain. But it’s not fool proof. A compass requires careful interpretation and certain ‘corrections’ must be made depending on your location. After all, whatever the attractions of magnetic communism, we’re seeking something truer!
David Harvie is a member of the writing collective The Free Association (www.freelyassociating.org), whose book Moments of Excess is published by PM Press, and an editor of Turbulence: Ideas for Movement (www.turbulence.org.uk) as well as a member of Plan C.