How Jeremy Corbyn’s People’s QE could win Labour the next general election
According to SkyBet, Jeremy Corbyn is the 1/7 favourite to become the next Labour leader this weekend, with Yvette Cooper trailing in second place at 8/1. Bet365 puts the odds at 1/7 and 15/2 respectively.
So if Corbyn is going to lose the leadership race, both the bookies and the political pundits will have to be wrong.
But let’s ignore the difficulties in polling this contest, and say that the bookies and pundits have called it right and Her Majesty’s new leader of the opposition will be Corbyn. Does it then follow that champagne corks will be popping throughout Downing Street?
Scenario one says that this is exactly what will happen.
Just as the 1983 Labour Party manifesto was described as the longest suicide note in history, the expectation will be that the party’s 2020 manifesto could be as long or longer, with commitments extending across railway re-nationalisation, potential energy company nationalisation, a maximum wage (yes maximum), and an end to school choice and the Trident nuclear deterrent.
On my reckoning that’s a lot of upset people, as the public sector shifts back to being producer-led full-stop. What’s more, some of his comments on the Middle East conflict are a bit fruity and will need a fair bit of explaining from a potential Prime Minister. Oh and Russell Brand backs Corbyn, so enough said.
My problem with scenario one is that it’s way too complacent.
Scenario two is very different and recognises that Corbyn could be a very difficult act to campaign against. The electorate appears to be grappling with the issue of authenticity and Corbyn (rightly or wrongly) is perceived to have it in spades.
He’s spent decades saying what he thinks and meaning what he says. People understand his policies – free child care to 18 and university grants instead of tuition fees, for example. Big numbers such as stripping out £93bn in purported tax reliefs and subsidies to the corporate sector, and £120bn in tax evasion and avoidance, suggest he can find lots of money.
His numbers are nonsense but that’s not damaged him thus far. But perhaps most of all, it’s his “people’s quantitative easing” that is the most serious threat to the government.
If Corbyn had proposed QE in 2005, he would have been dismissed as a loony tune. Ten years and a global financial crisis later, QE is the orthodoxy, with even the debate around unorthodox QE perfectly respectable.
People’s QE is on the road towards helicopter money – the central bank creates the money and distributes it directly to the people. In Corbyn’s world, a National Investment Bank would finance transport, energy and broadband infrastructure and issue bonds to finance the projects, which the Bank of England would be instructed to buy. OK, central bank independence is out the window, but that nuance will be lost on the electorate.
People’s QE may or may not be a version of helicopter money. It depends on whether or not the increase in the money supply is permanent (unlike with current gilt purchases, which could be sold by the Bank of England in the future).
But the danger for the government is that, if Corbyn goes down the purist road, he will have Milton Friedman and John Maynard Keynes in his corner, with legions of quotes in support. “Jeremy unites right and left”, an unlikely quote admittedly.
But even if he sticks with a hybrid version, there is a respectable debate as to whether it is or isn’t more effective than current QE. Alternatively, if Corbyn really wants to be a man of the people, he might try pure helicopter money and throw the cash out himself.