For decades, all over the world, a single question has constrained the ambition of socialists: ‘How are you going to pay for it?’ This question is what has kept the Conservatives in power for the last ten years, allowing them to implement one of the most brutal austerity regimes imposed voluntarily by any advanced economy. Today, this question haunts Labour canvassers on the doorstep – and many say that they still don’t have a convincing answer.
The technical response, which Labour has been reinforcing for the last three years, is twofold. On the one hand, Labour will borrow to invest, which will expand economic output and increase tax revenues, allowing the borrowing to be repaid over the long term. The analogy used most often to describe this strategy is that of a struggling business – would it close early, sell off its stock and cut back on advertising to save money, or would it invest to increase its sales?
On the other hand, Labour will tax the rich to support higher overall levels of current spending. Over the last several decades, wealth and income inequality have risen but top marginal income tax rates have fallen. Corporation tax has plummeted as successive UK governments have helped to catalyse a global race to the bottom. 56% of the population now think the gap between the wealthy and the rest of the population has widened too much, according to polling by IPPR and YouGov.
These arguments are not convincing to the arbiters of economic credibility. They cling to the idea – contrary to all available evidence – that borrowing to invest doesn’t work because rational economic actors will save today in order to account for the likely increases in taxes down the line, and because it pushes up interest rates and ‘crowds out’ private investment. Taxing the rich is, of course, a no-go because their investment is what keeps the economy afloat.
All the evidence suggests these arguments are nonsense. All one has to do is look at the response to the New Deal, the Chinese stimulus programme or, for that matter, the Second World War to see that higher rates of investment and higher taxes on wealth can boost growth. Moreover, interest rates today are lower than they’ve been in decades and the wealthy are too busy ploughing their money into stock markets and real estate to create jobs or deal with the climate crisis.
Study after study has shown that mission-orientated public investment is central to productivity, sustainability and growth. The so-called golden age of capitalism was a time of high taxes on the wealthy, high levels of investment, and strong productivity. If appeals to economic expertise mattered, then Labour would be winning the debate.
The thing is, they don’t – at least not for the left. Labour has used mainstream economic theory as a crutch, even though the very language it uses is designed to prop up the status quo. We cannot fight the right on their terms – doing so only reinforces the ideology that the case for austerity was somehow rational, when it was always political.
The argument for austerity was rooted in the lived experience of financial capitalism. The government approached a highly indebted, precarious and anxious population with a message that resonated with them on a very fundamental level: we all want nice things, but sometimes we simply can’t afford them.
When voters ask the question ‘how are you going to pay for it’ they aren’t asking for an education in mainstream economics. They’re asking a question rooted in the experience of living in a capitalist economy built on exploitation, debt and poverty: namely, ‘if I can’t afford to take out a loan to pay for the things I need to survive and thrive, then why should it be any different for the government?’
The effective answer to that question isn’t ‘actually, we can borrow to invest’, or ‘actually, money is a social construct’ – it has to be rooted in peoples’ lived experience. The only convincing way to answer that question is that most of us can’t afford the things we need to survive because we’re paid less than we deserve for the work we do – because the rich monopolise the returns from our hard work.
Big businesses, bankers and landlords all extract wealth from working people and use it to prop up their lavish lifestyles. The wealthiest man in the UK could pay for about a third of Labour’s spending pledges on his own. Meanwhile, children in this country are filling their pockets with food at school because their parents can’t afford to feed them; some girls are missing school altogether because they can’t afford sanitary products.
The only way to build support for radical economic and political transformation is to change the terms of the debate. We don’t advocate public investment because it will boost profits that will trickle down to everyone else; we advocate ending austerity because it will reduce inequality, boost workers’ power and facilitate decarbonisation. We don’t advocate taxing the rich because it’s better for growth; we advocate taxing the rich because working people are the ones who create the wealth, and that wealth should be returned to them. These arguments are not only more compelling, they also lead naturally to arguments for much deeper political and economic transformation.
At root, the answer to ‘but how are you going to pay for it?’ is not economic, its political. A tiny elite monopolises wealth and power in this country – Labour’s economic agenda is about effecting an irreversible shift of wealth and power away from this tiny elite and towards working people.
Grace Blakeley is an economic commentator and author of Stolen: How to save the world from financialisation.