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British Labour Party is mad to sign up to the ‘Charter of Budget Responsibility’

In the UK Guardian article (September 26, 2015) – John McDonnell: Labour will match Osborne and live within our means – analysis of the position being taken by the new Shadow Chancellor in Britain, John McDonnell was provided. I have to say it seems to have caused some serious conniptions among those disposed to Modern Monetary Theory (MMT) if I am to judge by the E-mails I have received in the last 36 hours and the tweeting activity that followed the publication. But if we consider what he said carefully, it may not be as bad as the Guardian headlines suggest. However, his statement discloses a deep insecurity in the Corbyn camp that leaves them adopting fiscal rules that are the hallmark of the neo-liberals. It retains focus on the fiscal balance, however, decomposed into current and capital, whereas the focus should be on creating full employment and prosperity. The adoption of the Tory fiscal rule – the so-called – Charter of Budget Responsibility – still provides some flexibility for government to avoid harsh austerity. However, it can easily become a source of unnecessary rigidity, which prevents the government from fulfilling its responsibilities to advance welfare. Overall, the insecurity it betrays is the worrying part of this statement. This blog is in two parts – today is more conceptual (and longer). Tomorrow – will be more empirical (and much shorter). We will conclude that the British Labour Party is mad to sign up to the ‘Charter of Budget Responsibility’, which is a chimera – it is not a responsible framework at all.

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