Trussonomics is dead, but not before laying a trap for Labour

theguardian.com:

How should Labour and progressives react to the astonishingly rapid collapse of Liz Truss’s economic agenda? The temptation will be to rejoice. Rejoice at the crushing rejection of trickle-down neoliberalism, the humiliation of the Conservative party and the growing likelihood of a Labour majority.

But these will be pyrrhic victories if “Trussgate” leads to a re-embracing of the fiscal conservatism that has dominated British politics for most of the last quarter-century, together with an unquestioning faith that markets know best. The new chancellor, Jeremy Hunt, has committed to public spending cuts across government departments, alongside reversing Truss’s tax cuts. In other words, it’s back to austerity. Hunt has even appointed Rupert Harrison to his new council of economic advisers – the architect of George Osborne’s austerity strategy in the early 2010s and currently adviser to American investment management firm Blackrock.

Unfortunately, the conclusion most will take from the past weeks is a simple one: the government cannot borrow its way out of economic crises. Already the danger signs are there, with Labour determined to reclaim the mantle of being the party of “sound money” (ie getting the deficit down) and FT journalists proclaiming the victory of “orthodox economics”.

Once the markets are calmed, Hunt will seek to reposition the Conservatives as the party of fiscal discipline by reducing spending and daring Labour to say it would do otherwise. The punishment meted out by financial markets to Truss’s borrowing plans will be held up as the ultimate example of the limits of the state’s fiscal power in the face of market forces: Britain’s “Greece moment”.

But Labour and the left must avoid falling into this trap.