Over recent months Jeremy Corbyn, now Labour Party leader, and John McDonnell, now Shadow Chancellor, have made four major statements on economic policy.
Corbyn issued a document, The Economy in 2020, on 22 July, as part of his Labour leader campaign. McDonnell spoke at Labour Party conference on 29 September, and wrote articles for the Guardian website on 12 August and 12 May. They are a step forward from what we had from Ed Miliband, let alone what we had from Gordon Brown or Tony Blair.
McDonnell and Corbyn commit clearly to restoring union rights and to renationalising rail. They advocate worker and user control over renationalised rail, and “a real living wage”. They also stress reversing job cuts at HMRC (the tax agency), efficiently collecting taxes from corporations, and cuts in government subsidies to business. They say that the mandate of the Bank of England should be changed, and there should be “people’s QE” putting public money into public housing and infrastructure projects.
Corbyn and McDonnell are constrained to step cautiously. The majority of the Parliamentary Labour Party is conservative. Recent Labour Party conferences have had no wide debate about economic strategy, so they cannot appeal much to conference decisions as authority. Those problems, however, do not constrain rank-and-file Labour and trade union activists to limit what we say about economics to support of what Corbyn and McDonnell have already said. On the contrary: they underline the importance of us pushing more radical ideas, winning majorities for them, and creating the space for Corbyn and McDonnell to be able to advance further.
Renationalising Royal Mail is already Labour Party conference policy (and adopted unanimously, too). It is a harder one than renationalising rail, because it could not be done just by taking franchises back into public hands as they come up for renewal. But it should be in the policy, and, like rail, with worker and user control. Labour Party conference in 2012 unanimously voted for the repeal of the Health and Social Care Act, opposed the cuts, demanded the rebuilding of the NHS, paid for by taxing the rich, and call for lifting the exorbitant PFI payments burden on the NHS. That is economic policy too.
McDonnell says that “energy would be socialised from below by the massive expansion of renewable energy production and supply by local communities, local authorities, and co-ops, on the successful German model...”
German energy production is not socialised, but dominated by four large capitalist corporations, RWE, EnBW, E.ON and Vattenfall. With 27.9% of its production from renewables (2013), some of that from smaller-scale local generation, it has done slightly better than the EU average (24.3%) and much better than the UK (7.7%). But Germany also generates an exceptionally high, and in recent times rising, proportion of its energy in the highest-carbon-emission, most-polluting form, from coal and other solid fuels (37.4%, ahead of an EU average of 19.7%). Germany is a model neither for socialisation nor for green policy.
We should create the space for McDonnell to move to a stronger policy by pushing the idea of nationalisation, under worker and user control, of the power industry. McDonnell promises “legislation to replace short-term shareholder value with long-term sustainable economic and social responsibilities as the prime objective of companies”, and more regulation of banks. There already is such legislation, of sorts.
The Companies Act 2006 obliges directors to “promote the success of the company for the benefit of its members as a whole” (not just shareholders) and “to have regard to “the impact of the company’s operations on the community and the environment”. It has not made British capitalism less rapacious. In Germany, as Ursula von der Leyen, one of Merkel’s ministers notes in an official briefing, “many companies have made corporate social responsibility a central part of their business philosophy. It is the quality parameter of sustainable economic management. Responsible companies reduce their ‘ecological footprint’, respect labour and social standards, and engage in community projects”.
That has not stopped Volkswagen falsifying emission tests on its vehicles on a huge scale, and systematically increasing the rate of exploitation in its factories. So long as major economic activities are run for profit in a competitive market, and economic power is held by bosses who prioritise and benefit from those profits, codes of conduct and promises of responsibility will always be secondary. They have to. In a capitalist economy, the boss who seriously puts private profit behind social welfare will find herself or himself out-competed by the more rapacious, and driven out of business.
A drive against corporate tax evasion will be good, but it is not a magic bullet. So long as private-profit bosses have essential control, they will shift revenues across borders and employ deft accountants to minimise taxes. To control investments and revenues, the community needs to own the great machines for producing wealth, not just cajole them with regulations. Particularly important is public ownership of the banks, the hubs of capitalist wealth.
John McDonnell feels obliged to respect Gordon Brown’s policy (pushed through unilaterally straight after the 1997 election, with no previous mention to voters, nor to the Labour Party) of “independence” of the Bank of England from political control. But there is no valid reason why one of the central levers of economic policy should be controlled by unelected officials.
In 1964, the newly-elected, and very moderate, Labour prime minister, Harold Wilson, was quickly confronted by the then governor of the Bank of England, Lord Cromer, with demands for cuts in social spending. Wilson later wrote in his memoirs: “I asked him if this meant that it was impossible for any government, whatever its party label, whatever its manifesto or the policies on which it fought an election, to continue, unless it immediately reverted to full-scale Tory policies…
“We had now reached the situation where a newly elected government was being told by international speculators that the policy on which we had fought the election could not be implemented: that the government was to be forced into adoption of Tory policies to which it was fundamentally opposed...
“The Queen’s First Minister was being asked to bring down the curtain on parliamentary democracy by accepting the doctrine that an election in Britain was a farce, that the British people could not make a choice between policies”.
But Wilson did what Cromer asked. We should be seeking to increase democratic control over the running of the Bank of England, not to reaffirm the absence of control. Economic policy is not just about techniques for promoting growth. It is about what sort of growth, for whom, controlled by whom, at the expense of whom. As Lenin succinctly put it, the central question is “who, whom”. Labour activists should create space for that question to be discussed.