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Putting the Political back into Political Economy

Corbynomics1The reaction to John McDonnell’s announcement that he would aim for a balanced current account, whilst maintaining borrowing for capital investment, revealed a recurrent fault line within left-wing economic thought. At its most banal McDonnell was accused of signing up to George Osborne’s ‘austerity charter’, whilst more sophisticated critics argued such policies would weaken demand and harm economic growth. This article will not address the technicalities of figures and whether Labour should borrow limited amounts rather than aim for a balance (see a critical account here). Instead we will focus on the key political division the fallout from this announcement has revealed, and what it says about the character of ‘Corbynomics’, and the barriers it faces.

During the last thirty years of political setbacks, socialist economic policies have taken a particular battering. This has been very apparent in the predominant responses to the onset of austerity since 2008. Rather than proposals for a fundamental restructuring of the economy, the main left response has been both defensive, and grounded in an argument for why “ideological” cuts are unnecessary and harmful. Invoking mainstream Keyensian economists such as Joseph Stiglitz and Paul Krugman, the argument has gone that government could stimulate an economic recovery through borrowing at cheap rates. Insofar as it went this was welcome, but it was a more or less passive argument that could unite trade unionists, and political forces of the ‘centre-left’ from Labour, to the SNP and Plaid Cymru. At best, the Keynesian approach amounts to a tepid intervention and stimulation of demand.

McDonnell’s proposals are a sharp break from this perspective. They unapologetically place the redistribution of wealth and power at the centre of economic policy, where it belongs. In total this is a buoyant attempt to shift the argument about what macro-economic policy is for. The proposals for a National Investment Bank (NIB), a ten pound an hour minimum wage, and raising taxes on the rich and enforcing corporate taxation signal a major change in the vision of the economy that Labour is putting forward. This was summed up in his Labour conference speech when he spoke of an “entrepreneurial state”, stimulating innovation and its commercialisation, the NIB and an invigorated trade union movement replacing the “rich elite” who presently hold sway.

This brings the core questions of ownership, control, and democracy to the forefront. Rather than economic policy being dictated by concern for the confidence fairy and ‘light touch regulation’, predicated on the seminal importance of how certain the rich are in making a profit, democratic forces will reshape our economy. This is fundamentally tied to a vision of actual rebalancing, through a ‘green new deal’ fostering economically secure and environmentally sustainable manufacturing employment.

However, this is where the big ifs and buts occur. The character of the NIB ranks alongside Trident as a major factor in the future of Corbyn’s policy. Will it merely be an auxiliary to Britain’s globalised financial sector that gives assistance to firms for reasons that extend beyond immediate profit motives, or will it be a tone setting body exercising control over it? This raises the spectre of capital controls, and even how you attempt to collect the taxation that corporations are so expert at avoiding. There’s a reason the centre-left doesn’t propose these sorts of policies anymore. Capital controls were an accepted part of UK regional policy under Labour and Tory governments to distribute industrial investment from the ’core’ South East and Midlands to ‘peripheral’ from the 1940s to the 1970s, but were dismantled in the 1980s as the financial sector we know today took off. Attempting to exercise the form of control that an effective redistributive policy requires would necessitate overturning a political as well as economic paradigm. A connected issue relates to asset bubbles and house prices. With property speculation sucking up so much of UK investment resulting in little to nil productive outcomes, rent control policies would be welcome, but much more is required. Public sector house building would need to be accompanied by investment controls and redirection.

Corbynomics is not nostalgic, redistributive measures and the empowerment of workers must be at the forefront of any socialist economic agenda. But it also remains a malleable entity. Naturally, McDonnell is cautious in outlining policies seen as revolutionary in a country where the political bubble has become fundamentally decoupled from even mainstream economic thinking. The rise of Corbyn and a mass membership and participatory Labour Party has created space and an urgent necessity to have these arguments. As has been said many times before, “economics is too important to be left to economists”; it’s down to all of us.


  1. David Pavett says:

    This is a vital debate for the Corbyn project and I am glad that Ewan Gibbs and Nathaniel Blondel are rising to the challenge. It will not do to look back to a (largely dreamed) social democratic past when Keynsian policies allegedly solved all our economic problems. What is common to orthodox Keynesians (e.g. Krugman) and post-Keynesian monetary theorists (e.g. Ann Pettifor) is that they claim to have technical fixes which will solve capitalism’s problems.

    This is the dream of the last 90 years that we now have the techniques required to stabilise capitalism. The edition of Encyclopaedia Britannica that appeared just before the 1929 crash had an article explaining that crashes were a thing of the past. Wind forward to Gordon Brown’s assurances before 2008 of no more boom and bust!

    Now we need economics to be fully set in its social setting and to consider the limitations of capitalist relations of production. On that front it would seem that McDonnell and Corbyn are ahead of most of the left which still things that a return to Keynesian policies will solve our problems.

    Just how McDonnell will deal with the varying advice he gets from his panel of experts is another matter. They are clearly not all going to agree with each other. And what about the Shadow Cabinet as a whole? Will they run training sessions to bring them up to speed on political economy? They surely need it. So does the rest of the Party. Can we have a national education programme and debate on this throughout the Party? We need it.

  2. David Ellis says:

    The piece is correct. The fundamental question for discussion is that of power. Who is boss, the capitalist or the worker? Will a Labour government prop up the dictatorship of capital through the bourgeois Westminster parliament or perhaps via more nakedly violent means given that capitalism no longer functions and is disintegrating or will the democratic organs of the socialist revolution impose the dictatorship of the proletariat on capital and what would that dictatorship look like?

    For a start any new National Investment Bank would have to have a monopoly of credit to prevent the privateers from establishing their counterfeit claims on the social product via credit bubbles and Ponzi Scams costing the nations trillions and undermining the currency. It would have to lend at base rate to small business and facilitate social investment in accordance with a democratic plan. End the bail out and bring the staff, estates and deposits of the bankrupt banks into administration to be used to form such a bank.

    It would have to establish a regime, not an aspiration for but a regime, of full-employment by which every school and college leaver and every unemployed worker is bought into the local workforce to share in the productive work with each paid the minimum of a trades union living wage. Capital can no longer be allowed to maintain a reserve army of unemployed workers.

    It would have to replace the fat cat executives that treat the UK as a private trough and who are imposed by corporate shareholders or via political patronage or the old school tie network with managers and leaders elected by the workforce and answerable to the democratic government.

    It would have to bring the means of production and exchange into public ownership so that democratic control can be exercised over it and they can be marshalled in the interests of society as a whole instead of just private sectarian interests.

    It would need to build a state apparatus that could suppress the bourgeois counter revolution and be a leaver for the realisation of the democratic aspirations of the people intent on its own eventual disappearance.

    It would have to replace the Union with a federation of sovereign nations and declare Another Europe is Possible. One that does not require workers to chase each others’ tails across the continent in search of ever more crappy wages and ever more meagre welfare but which operates a regime of full employment in each of its members nations and pays a Europe-wide living wage to its workers. One which swaps its imperialist relationship with the Middle East and Africa for one of co-development that allows Arab and African nations to ditch tyranny and embrace democracy.

  3. Verity says:

    Hearing this morning of the projected deficits this winter for a number of hospitals raised the thought that in the current situation some additional ‘consumer’ spending will be necessary because of past failings of investments (i.e. failure to invest in required nurse and doctor training). Although the investment we have relied upon has been from ‘third world’ nations (e.g. nurses from the Philippines). The additional costs of agency staff reflects the high costs of poor planning to meet uncontrolled movements of EU peoples. I hope there are not too many demands for this category of spending because much of the gains from loosing Trident will be required to invest in alternative industry development to secure employment in this sector.

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