by Anthony Painter

Following his very well received Bloomberg speech, I cautioned back in September on Uncut against a “no retreat, no surrender” political strategy. Ed Balls is now shadow chancellor. He faces a number of challenges. One of which is how to respond to the Bloomberg speech.

Actually the speech – if followed to its logical conclusion – provides a powerful political narrative that in some ways resolves one of Labour’s current problems: how does it free itself from the perceived failures of its past?

The speech had a core argument that was anything but deficit denial. It was actually a different strategy for dealing with the deficit. Counter-intuitively, but based on completely sound Keynesian economics, Ed Balls argued that, in these circumstances, government should pursue an expansionist fiscal policy. The result will be an economy that grows more quickly and creates more jobs. The government’s counterargument is that in an open economy there are limits to the degree to which you can do this. Furthermore, they said, by May 2010 the UK was breaching those limits (there was scant evidence for this as tracking long term interest rates demonstrates; though the argument was of risk rather than immediacy). (more…)