Pushing the limits of Corbynomics

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The more radical elements of Corbyn and McDonnell's economic policies can challenge the logic of capitalism

The ire on the right and the applause on the left provoked by “Corbynomics” demonstrate that you can move a long way to the left by standing still. Jeremy Corbyn and John McDonnell have long opposed the pro-market consensus among successive governments since Jim Callaghan adopted monetarism in the late 1970s. Compared with that consensus, their ideas are both radical and welcome.

When Corbyn suddenly emerged as the front-runner in the leadership race, he hastily developed an economic programme. Corbyn has consistently opposed Tory austerity, with some mainstream backing. As a letter in the Guardian by 41 economists in support of Corbyn pointed out, even “the conservative IMF” has questioned the need for George Osborne’s endless austerity.

Other early policies owed much to the tax justice campaigner Richard Murphy, in particular the proposal for “people’s quantitative easing”. The idea is that if the Bank of England is printing money to stimulate the economy, rather than using the money to purchase bonds from the banks, the money could be put in the hands of local authorities, who could then build homes or schools, or a national investment bank, which could fund infrastructure projects.

However, since Corbyn’s election, this proposal has lost prominence and a new team of advisers appointed. This includes economists who have challenged elements of the neoliberal orthodoxy, such as Joseph Stiglitz, Thomas Piketty and Ann Pettifor. Joining them is David Blanchflower, formerly of the Bank of England’s Monetary Policy Committee, who writes that he is “not a Jeremy Corbyn supporter” and argues, “The new Labour leaders…have to accept the realities of capitalism and modern markets, like it or not.” That advice has been taken to heart. A recent speech by McDonnell set out three priorities for a future Labour government. The first was “responsible financing”, keeping the deficit down. The second was using “the government’s capacities wisely” to promote research and development in targeted areas. The third was unlocking “the potential of the wider economy”, which means anything from promoting small businesses to backing workers’ co-ops.

There is not much that would trouble earlier Labour leaders here. Even McDonnell’s voguish “socialism with an iPad”, an attempt to attract hi-tech investment, echoes Harold Wilson’s “white heat of technology” from the 1960s. The more radical edge of Corbynomics also draws on social democratic traditions, in this case the policies of the movement around Tony Benn from the late 1970s, known as the “alternative economic strategy”. That strategy came as traditional Labour policy ran up against the limitations of the economic crisis with the end of the long post-war boom.

While Labour would drift right and ultimately degenerate into the two-headed neoliberal monster of Tony Blair and Gordon Brown, for a time those on the left of Labour were pushed towards more radical solutions. Their strategy involved the state taking on a bigger role in planning and directing private investment, along with regulation of cross-border trade and financial flows. Such a strategy contains elements that point in opposing directions.

First, there is the question of whether the measures are primarily to rescue the system or to challenge it. When the financial crisis broke in 2007-8, the government bailed out a number of banks. These publicly-owned firms did nothing to limit the impact of the crisis on workers and the aim was to return them to the private sector. A similar logic applies to Tory plans to take a stake in the steel industry.

If, by contrast, the steel plants were taken over to produce in order to meet social needs, regardless of profitability, it would suggest a different kind of logic, one that undermines the assumption that capitalism is the only way of running an economy.

The issue with Labour’s reforms has always been that they identify a common national interest, benefiting both capitalists and workers. However, capitalism is not just unequal because it is badly run; it is inherently unequal because it pivots around the exploitation of one class by another. That means reforms that genuinely improve things for workers often hurt capitalist firms, and must be advocated despite damaging corporate profitability and competitiveness.

This leads to a second point. Previous reforming governments, in Britain and elsewhere, have faced terrible adversity — both within the state and from the capitalist class. Today, in conditions of subdued profitability, the space for a reformist programme is quite narrow. Forcing through changes that hit capital can necessitate intense class struggle. As the Marxist Colin Sparks wrote of Stuart Holland’s version of the alternative economic strategy in the 1970s, “If there is no mass mobilisation of the working class then there cannot be…any real prospect of his programme succeeding. But if there is such a mobilisation, then how is it to be stopped at the programme?”

We should welcome Corbyn and McDonnell opening up a debate about how capitalism is run. Our job is to identify those elements that undermine the logic of capitalism and can draw workers into collective struggle to achieve them, and, when we do win, argue to keep fighting.