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JULY 2022

“Neoliberalism and the IMF are not functioning well”

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Jeremy Corbyn’s economic advisor believes that the European Union has many problems, that it is in crisis and that it needs serious reforms

"Neoliberalism and the IMF are not functioning well"

Interview conducted by Yulia Vladimirova with James Meadway, economic adviser of Jeremy Corbyn, John McDonnell and the Labour Party in Britain, former chief economist of one of the leading research centers of the progressive British New Economics Foundation. As part of Team New Economics Foundation, Meadway is the author of research in macroeconomics and progressive alternatives to austerity policies.

Originally appeared at A-specto, translated by Borislav exclusively for SouthFront

Mr. Meadway, were you surprised by the publication in the Journal of the IMF, “Finance and Development” with the title “Neoliberalism: overexposed?”? It declared cornerstones of the neoliberal agenda as failures. That there’s no benefit from it to boost economic growth or to overcome inequalities. This recognition comes from the ranks of the IMF, the institution that is the most influential proponent of neoliberalism.

No, its not a surprise. Quite often, the research department of the IMF is critical of the Washington Consensus and the neoliberal agenda. Over the past few years many published texts and reports recognize that the free movement of capital does not necessarily mean something nice, especially under certain conditions. There was also criticism of the policies of austerity and reinforcing inequalities, many economists warned that the implementation of austerity measures worsens things badly. So this journal was critical before, but only in specialized texts. Now, for the first time they present reports intended not only for economists, but for the ordinary audience, a text that can be read easily from person to person. What this publication shows is that the neo-liberal ways of thinking, and its economic policy, are completely exhausted. The question is how an alternative would look. Neoliberalism did not fulfill the expectations to perform. It focuses solely on the continuous growth and ignores the inequality between rich and poor. In the UK the results are no less disappointing, our economy is very shaken, more and more people have no money to buy food. The growth of our economy is not going up, but is actually decreasing (contrary to neoliberal expectations). This is due to many factors such as rising household debts. Productivity in Britain has stagnated. This is happening since 2007. And if we need to restore the economy right now, an exit from the EU would undermine our economy even more.

These accessible type of texts from the ranks of the IMF, would they alter the way in which the media writes on the topic, meaning the mainstream media, where one can rarely read an in-depth analysis, criticizing the policy of austerity and the neoliberal agenda.

The actions that the IMF, the European Central Bank, and the Troika applied on Greece were absolutely terrible. This is the problem the IMF actually. Its research department says, “Look, this does not work”, at the same time, IMF policy continues to operate in the same way. So there is a great divide between the research department and the people who implement the policy itself. Because of this we will see publications of critical texts, but what will happen is the opposite.

Social polls on the British referendum are conflicting, the results sometimes tilt towards Brexit, sometimes towards staying in the EU. As an economist, which option do you think is best for British society, for the common man?

"Neoliberalism and the IMF are not functioning well"

James Meadway

The leaders of Labour, Jeremy Corbyn and John McDonnell are very clear about this. They say that Britain should remain in the European Union. They say that the people should remain in the Union, because that is the best for ordinary people, for many reasons. Its exactly ordinary people who need rights to travel freely, and the rights of workers.

Hardly anyone would want visas for the Brits.

The problem is that no one knows what will happen. We are facing uncertainty. Most likely we will need to renegotiate all agreements that Britain has with the European Union. The main risk is that the short-term shock will be very negative for our economy. If we leave the EU with this Conservative government, the likely economic shock will hit many working class people, the poorest and most vulnerable of society. Everyone says that the EU has a lot of problems, that it is in crisis, but we are of the opinion that we should change this Union so it works better than it has worked so far.

In terms of what would happen to the vote, I believe that the people will vote to stay, but I think also a lot of people have still not decided how they will vote, so preliminary studies do not provide the real picture of the mood among the British. Over the past week many people have registered to vote, so a turnaround of any predictions is not excluded. But, as I said, the position of Labour is clear, we want to remain in the European Union and have major reforms in it. We know there are crazy laws like the one that bananas must straight. More and more people and organizations want reforms.

And what do you think is the reason some Britons want out of the EU?

There are people who raise the issue of migration, but our leaders very clearly speak out against discrimination. It is difficult to predict what would make people vote for Brexit. Labour is clear that the benefits for Britain, if we remain in the EU, will be much larger. People who come to work in Britain such as Bulgarians and Romanians, have contributed a lot in the last decade in terms of taxes and public services. This additional money coming into our country and the economic benefits to the UK, are very clear.

Both Labour and the Tories are for the UK to remain in the EU, but both parties differ in their positions. Why?

David Cameron’s call for us to remain in the EU is associated with completely different reasons than those of Jeremy Corbyn. I and Corbyn, believe that this Union can be used as a framework for cooperation, which already exists anyway, as I mentioned already its beneficial for workers’ rights in Europe, security, control and protection. Many labor unions say that the EU can better protect the rights of workers, rather than if Britain leaves the EU with some conservatives in power. The case of David Cameron, however, is different. The whole preoccupation with this referendum is related to a long-standing dispute in the Conservative Party, which has continued for 20-30 years. Nobody really wants this referendum, but we must go through it. This is an internal issue for conservatives since at least the late 80s and early 90s, right around the time of the signing of the Maastricht Treaty. And this referendum is happening, so that David Cameron can manipulate the Conservative Party. I do not think the British are interested at all in this referendum. This is an internal matter for the Conservative Party and it only affects it. Others are forced to make a decision. Such is the situation with the Tories – half of them want to remain in the EU, the other half do not want. David Cameron and George Osborne are for remaining, but the other part of the Conservative Party supports leaving. For example, Boris Johnson, the former Mayor of London, stated that Britain would be better off outside of the EU, but I think this has more to do with his personal ambitions and interests. There is division in the party, which would use this referendum to see what is best for British capitalism.

Do you not think that Britain could be more independent with a possible Brexit and not be subject to the failures and mistakes of the EU?

Nobody knows exactly what will happen if we leave the EU. That’s why we think we should not leave. There is a huge uncertainty. Such a thing has not happened before. But major financial institutions warn, that the shock of Brexit could put the country into an economic recession. As to the long term, who knows … As I said, the Labour Party calls for a vote to stay, but to reform of the institutions. This is courageous. If you look at Europe since the crisis began, more and more movements call for something to be done, to be changed, that things can not continue like this. Take “Podemos” in Spain, which performed strongly in the Spanish elections. The truth is that people should realize that by their actions and struggles, things could be changed. This is the position of Labour.

Do you believe that these movements can alter the structure and decision-making in the EU?

I think this is realized by many young people in Europe, especially after the financial crisis in 2008. After it, things look completely different, there is talk of system instability and uncertainty in the world because the financial markets. 2008 also unites us, because we were all witnesses of what happened. Young people especially are very excited by the themes of providing jobs, services, public sector, and education. These are sectors that need to be put on the table and given attention. You know, today there are many people who have no certainty regarding their jobs. This is one of the problems caused by what happened in 2008, and those problems are deepening more and more. This is also seen by supporters of Bernie Sanders in the US. Its impressive and inspiring. All of this rising criticism against the old, neoliberal course of the economy can have an impact. There are more people who state: see, things are not going well, let’s change them! We need to prove that Margaret Thatcher is not right when she said that there is no alternative. On the contrary, there is. It is important to understand that this is not a failure of the European Union, but of the politicians in it. All this shows is that politicians have failed to come up with decisions that would solve the problems of the people.

What is the transformation of the Labour Party after the election of Jeremy Corbin for its leader, what does he bring that is new?

His election as leader reflects the desire of many people in the Labour Party who have paid 3 pounds (there was a voting system introduced that requires giving 3 pounds to vote). For him voted many people who want to see something different in this party. A party that did not win the last elections, nor the previous. So we have to think about what we do and what we want to do, and how to learn from failures. We must not stop saying to supporters of the Labour Party, that they should not accept the way the world is developing, and they should not accept what happened to our economy in 2008, or the policy of austerity that this conservative majority government is applying with the largest possible range of austerity measures. All this is giving us the feeling that we live in the time of the 30s. This is a process of tearing the institutions. I will give the example of the erosion of the National Health System in Britain, something that is so popular, and that enjoys tremendous support, and something that people are trying to preserve. This Conservative government has for years tried to do the opposite, to ruin this institution, so people don’t actually benefit from it. They cut aid to people with disabilities. This year the government voted it to reduce social care for people with disabilities so they can save 3,000 pounds per year. They receive benefits because they are disabled, they need help to live in normal conditions. This is an absolutely devastating policy. At the same time they reduced the amount of taxes for the richest people in Britain, this takes effect next year: instead of 45,000 pounds a year, they will pay 42 385, and save 2615 pounds. This policy should compel people to support Jeremy Corbyn. This also happens in other parts of Europe and can totally destroy our lives.

You are considered one of the architects of the new economic policy of the Labour Party. What are its peculiarities?

I am rather an adviser of the Labour Party and its leaders in terms of economic policy. In the party, there is an ongoing debate, this is not something that stands written and remains static over time. My ideas include a range of many things. Most importantly, however, is to show that there are alternatives and that we can come out of the neoliberal way of thinking. Communication with different entities, business and trade unions is important, so we can change to economic structure in a different direction from that which it has had for a very long time. We must use the traditions of the United Kingdom related to working property and workers’ unions. Why not change the structure of commercial enterprises and their shareholders, so that workers can get easier shares in companies in which they work at. That would increase the ability of workers to have an impact in the workplace. Why not tell people that if they work this job, they can earn a part of it and develop it themselves. Cooperative movements, have a strong history precisely in the UK. John McDonnell, finance minister of the so-called “shadow government” is the financial spokesman of the opposition in parliament, last week talked about the introduction of an unconditional basic income. Instead of a person receiving income only if unemployed or disabled, it would be better for everyone to receive unconditional income. The world is changing and there are new needs, you need to think creatively and in a social direction. We can not evolve for the better with insecure jobs, low pay and poor conditions. Labour’s offer really applies, its not an idealistic fantasy. This is exactly what needs to be done urgently. We have ideas. The most important thing for Labour is to have an open discussion on all important issues. A few weeks ago there was a big conference in London starring Joseph Stiglitz and many global economists on the topic of what alternatives for the economy can be. So we should develop plans and an economic policy through talks, discussion and debates on alternatives to the policy of austerity and the failures of the Conservatives.

As we have seen, however, a left alternative party like Syriza could not apply its left economic program to tackle the crisis in Greece. Nobody allowed it, by contrast, it was forced to sit in the corner for daring to resist the neoliberal European masters. These so-called alternatives are seen as “frivolous,” “fun,” “idealistic”, “romantic” and not as something applicable.

Greece’s problem is that it is in the monetary union and is tied to the euro. I’m glad that at least Britain did not join it and that Gordon Brown had a clear position against it. The monetary union was the main problem of the government of Syriza. It’s all about the banking system, so as you saw last year, there was a huge need for the European Central Bank to “nourish” the Greek government. It is a feature of the Greek experience, which can not happen in the UK. If you have a program and people choose it, we can apply it. What I would say is that we can act on the basis of winding the clock. In terms of the Labour Party in Britain and the left in general, we must prove that neoliberalism and the IMF do not really function well. We are not saying that we should return to the time before 1979, 1965 or something of that sort. We are not trying to turn back the clock. But we can wind it in a completely new way and I believe we can be very creative. The idea that the left has a program that tells people “it’s all right, we will find the solution for you” will cause many to accept it. What is most important for the Labour Party, is to get people talking about a decentralization of democracy and that there are opportunities for deviations from the neoliberal policies that do not require us to roll back the clock.

Britain does not have the experience of other European countries with the left, and because of this a “demonization” of the left has nothing to do with that in Bulgaria and other countries that had communist regimes and because of which the left is experiencing difficulties in their legitimacy. Labour has always been with a broad democracy and we have always been for social democracy.

The challenge to be able to unite with social-democratic parties in Europe would be in support of a true social democracy, such as it existed in the past. A large, organized working class. That was the world in the 50s, 60s and 70s with strong national institutions. Today the conditions for the existence of social democracy do not appear to exist. And the biggest challenge is to create this version of the left. To think differently, to create a progressive policy for welfare and overcoming inequality. People desire to have a real sense of democracy and to control their lives. Labour is about more job security of the contracts and payment, as well as to enhance productivity, control, and the social care system. All that combined, is roughly the economic program of the Labour Party. These things have been left out of the previous Labour governments, it is time to change the rules of the game.

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