The crisis is far from over – debating alternatives

The following is Ken Livingstone’s introduction to this coming Saturday’s Progressive London conference agenda.

Today’s conference is an opportunity to assess the scale of the global economic crisis and to discuss alternative economic policies to meet the challenges it poses.

We will address three broad areas: the crisis and alternative economic policies, the shift in the world economy from the US to Asia and some of the ways in which the economy is changing which have to be understood in order to advance.

One of the myths promoted every week in the media is that economic recovery is round the corner. There is a theory underlying this: that ‘confidence’ or what Keynes called ‘animal spirits’ are key to economic recovery. The idea, therefore, is to exaggerate and talk up every glimmer of light and recovery will follow from resulting psychology of optimism.

This theory has no basis in fact. The reality is the reverse of this supposed cause and effect. The worst economic crisis since 1929 created the loss of confidence and only real economic progress will revive it.

Nevertheless it influences virtually the entire media. That is why they are full of stories about recovery being around the corner only to have the illusions they foster dashed by the latest hard economic data.

The facts are clear. The world has seen the biggest financial collapse since 1929, followed by a fall in international trade which is so far more rapid than after 1929 and dramatically falling economic output in every major economy in the world other than China and India.

This has been followed by a collapse in levels in investment in the United States and all large economies – again apart from China and India. The main determinant of economic growth is investment and therefore, the sharp falls in this will result in either stagnation or continuing falls in economic output.

This means that, at a minimum, while the pace of economic decline will not continue indefinitely, we face a prolonged period of stagnation at best – accompanied by dramatically rising unemployment, falling living standards and pressures to cut spending on public services.

These are the facts which supporters of social progress have to address. They require radical alternative economic policies to protect the great majority of the population who have no responsibility for the crisis they now face.

These include:

• Nationalisation and direct control of the core of the banking sector in order to restore lending to businesses and individuals;
• A major programme of public investment to reverse the decline in overall investment.
• Massive public intervention where the private sector has failed – as in the house building and construction industries and public transport, for example.
• Re-examining the priorities of public spending to protect public services and eliminate waste by reducing military spending at least to the level of Germany, abandoning the proposed new generation of nuclear weapons, scrapping ID cards and other areas which contribute nothing to social justice or economic growth.
• Re-orienting the London and British economy to the most dynamic parts of the world economy, above all China and India, and pushing forward those economic sectors which can benefit from, and contribute to, their growth.
• Putting London and Britain at the cutting edge of the new economy emerging in both the service and manufacturing sectors, such as the creative industries, the internet and so on.

These are some of my views on the realities we face and the steps necessary to address them. We have many eminent speakers at today’s meeting who will have a great deal to contribute to the analysis of the economic situation and what we should do to go forward.

The Global Economic Crisis – Why the Crisis is Far From Over; Debating the Economic Alternatives. Organised by Progressive London. Saturday 11 July 2009.

Speakers include Ken Livingstone, Vince Cable MP, Geoffrey Robinson MP, Diane Abbott MP, Kevin Maguire (Daily Mirror), Prof Danny Quah (LSE), Steve Hart (Unite), Jenny Jones AM, Claude Moraes MEP, Megan Dobney (SERTUC), Graham Turner (author, “the Credit Crunch”), Wally Olins, John Biggs AM, Simon Weller (Aslef), Kamaljeet Jandu (GMB), Sam Tarry (Young Labour).

Registration details at www.progressivelondon.org.uk