Setting the compass

On economics, UK Opposition could be more radical

The British Labour party talks about offering a radical economic alternative. John McDonnell, the new shadow chancellor, has long been associated with anti-establishment ideas such as revoking the independence of the nation's central bank. But the party appears to be struggling to set its policy compass to true left.

Unconventional economic thinking -these days - usually starts with fiscal deficits. Governments, say the contrarians, are foolish if they are rigidly determined to spend no more than they take in. Rather, governments should be bold when companies and consumers are timid. They should use their control of the monetary system to stimulate economic activity by spending more.

Those with leftish political leanings believe that governments are wise to run deficits much of the time. It is the entrenched view of Nobel prize-winning economist Joseph Stiglitz, whom McDonnell has just appointed to an advisory committee. Yet the shadow chancellor told The Guardian newspaper last week that the party would support the current government's charter to run a balanced budget.

McDonnell's pledge to "live within our means" comes with the caveat that investments will be excluded. That leaves some room for policy flexibility. However, powerful forces pull Labour's compass in conventional directions. Investors, governments of the UK's leading trading partners and the world's central bankers shrink from policies which veer from the economic consensus.

But Labour's new group of captive economists might think the approach too tame. Innovation guru Mariana Mazzucato wants the government to invest more and better. Inequality expert Thomas Piketty would tax the rich more and the poor less. The relatively unknown Anastasia Nesvetailova has some radical ideas about restricting borrowing within the financial system.

Still, the UK economic recovery has been sufficiently slow and uneven to give McDonnell and party leader Jeremy Corbyn an opportunity. If they can come up with policies that promise fairer taxes, sensible and imaginative investment and better jobs then the ultimate judges, the voters, might listen.