Pitfalls of Corbynomics

While the right is aghast at Jeremy Corbyn’s economic plans, Paul Demarty wonders just how radical they really are

The bourgeoisie is not, it seems, a class with a particularly refined sense of gratitude.

Many have been the economic sticking points in modern history during which the ruling class has turned to the ideas of John Maynard Keynes to get the wheels turning again. Variants of his prescriptions were employed in the American New Deal and even Nazi Germany during the great depression; the post-war consensus was based on yet another idiosyncratic interpretation; and the two great crises of the 21st century - the dot-com bubble and the 2008 financial crash - saw immediate and aggressive government action to stabilise matters. ‘Chicago boy’ Robert Lucas even admitted: “I guess everyone is a Keynesian in a foxhole”.1

Yet, as soon as the immediate situation becomes less dire, Keynes is reinterred, and it is once again declared impossible to ‘buck the market’. The Bob Lucases of the world return to laughing at him in economics research seminars. And those who dare to propose heterodox economic policies are rounded upon as so many flat-earthers and utopians. There is no alternative - and this time we really, really mean it.

Such is the nature of bourgeois wailing about Jeremy Corbyn’s economic proposals. His policies would appear, by the standards of the 1960s or 70s, to be wildly rightwing - a piddling top-rate income tax of 50%? - yet are now treated as if they amounted to the forced collectivisation of agriculture. Run-of-the-mill Keynesianism is all the more hysterically presented in the rightwing press, the more modest and ‘sensible’ it is pitched by Corbyn and his allies.

Economics of the rabbit-hole

Casting a critical eye over it all ourselves, we alight first of all on an open letter, released a few weeks ago, from two-score-odd ‘economists’, headed by David Blanchflower, late of the Bank of England’s monetary policy committee. Getting Blanchflower’s John Hancock on the letter was a bit of a coup, as the headlines focused on him, rather than everyone else on the list, many of whom seem oddly familiar. We find Alan Freeman, John Weeks, John Ross (all from the shadowy ex-Trot group, Socialist Action), Susan Pashkoff (Left Unity - for a while, at least), James Meadway (Counterfire) and several others who are probably not knocking back double whiskies with Bob Lucas on a regular basis. I suppose an economist is never just an economist.

It is Socialist Action whose fingerprints are smeared most widely over Corbyn’s economic package; although their ideas, such as they are, are merely cribbed from the ‘alternative economic strategy’ (AES) that united the ‘official’ Communist Party and the Labour left in the mid-to-late 70s and after, and therefore no doubt familiar to Corbyn himself. Hence an op-ed in TheObserver:

To succeed, we need to build shared economic growth. This government is failing to reform the economy, and hoping that the same failed economic neglect that led to the crash will somehow lead to a different result this time. We need a strategic state, not an absentee government. This absence is producing yawning inequality, which the [Organisation for Economic Cooperation and Development] says is stunting our growth.2

Such is the presentation: we need to get back to solid growth, which means investment in industry, better jobs and so on. Only then, it seems, will the OECD be happy! So obvious is the wisdom of his prescription, it seems bizarre that chancellor George Osborne and the like have not alighted on it themselves; and indeed, in this left-Keynesian view of the world (shared by more eminent economists than those already mentioned, like Joseph Stiglitz and Paul Krugman), the explanation is simply that neoliberals are afflicted with ideological fanaticism. Unfortunately, matters are not so simple.

Jumping the train

Of all his policies, it would seem initially that Corbyn is on safest ground when it comes to rail renationalisation. This is due primarily to the fact that the privatisation of the railways has straightforwardly been a disaster. Even by the standards of privatisation as a whole, this is an inglorious episode.

Breaking British Rail into Railtrack (which looked after infrastructure) and a myriad of franchisees operating routes probably seemed like a good idea to the Major government, in order to stop one single monolithic entity ‘holding the country to ransom’. Of course, all that resulted was a whole series of de facto monopolies, each of which individually has the power to hold the country to ransom. Railtrack had to be renationalised rapidly after that much vaunted private-sector efficiency led to a series of grisly crashes.

As for the franchisees, service has gotten worse, fares have been hiked, and vast troves of public money have been ploughed into subsidies, meaning we all pay twice for a rail journey - as taxpayer and at point of use - and get appalling value for money on both ends. (One of the recipients of such largesse, amusingly, is the German state-owned Deutsche Bahn - thus is the famously efficient transport of central Europe funded in part by the plunder of the British treasury.) We cannot object to Corbyn’s view that this amounts to “larcenous levels of profiteering”. The sense that this is simply unacceptable is growing, and even Ed Miliband had to commit to at least allowing a state operator to compete for franchises. If ever there was an issue on which left Keynesians seemed like the last bastion of common sense, and neoliberals a bunch of out-of-touch zealots, this is surely it.

The devil, of course, is in the details, which - as with many of Corbyn’s policy platforms - are currently rather lacking. Larceny it may be, but rail franchises are legally binding contracts; the sensible option would be to cancel them as aggressively and rapidly as possible, but the courts will take a different view. Will a Corbyn government be willing to face them down? He does not tell us; never mind tell us how.

More ‘realistic’ proponents of rail renationalisation have previously suggested just letting the franchises lapse, and bringing the routes into public ownership as and when they do. This, however, is surely an invitation to even greater levels of sabotage than are currently committed by First Group and the like.

Global dimension

The problems multiply when we consider Corbyn’s wider economic project. His great gambit is to ... promise to get rid of the deficit, an objective Osborne has singularly failed to meet. A Corbyn government will go about the task differently: that strategic state again, borrowing to put money in people’s pockets (“people’s quantitative easing”); clamping down on £120 billion of tax revenues lost to evasion, avoidance or merely HMRC’s failure to pursue miscreants; and getting rid of £96 billion-worth of subsidies to big business.

Private Eye has shot a few holes in the numbers here (August 21): principally, the £120 billion lost tax figure comes from Richard Murphy, who seems to make a living selling tax research to trade unions and worthy NGOs, but may be wildly overestimating the amount that can easily be reclaimed; and the £96 billion subsidies go primarily to productive industry, so a government committed to ‘rebalancing’ Britain away from financial services would find it difficult to cut.

The latter point is telling: why should Britain be forced to prop up its productive industries with enormous subsidies? Answering this question brings us to the Achilles heel of ‘Corbynomics’, and the AES before that - capitalism is an international system, with an international division of labour. British industry needs propping up for the same reason as French or American agriculture: it cannot compete ‘fairly’ with the cheap labour and favourable conditions of business available to global capital at the periphery.

If we take as our starting point the British state, there are two ways to ‘rebalance’ the economy. The first is to fight fair and square: drive down wage levels to a point comparable with China. The second is to do what is already being done: use Britain’s comparatively favourable position in the global pecking order to subsidise industry (by the by, throwing people elsewhere into penury). The picture is complicated further by the fact that - however big the tax gap is - the treasury is funded in large part by creaming off a little of the money made so plentifully in the City of London’s financial services operations. Britain is a special tax haven - we run most of the other ones too.

There’s the rub. You can be committed to sustainable growth in Britain, skilling up the workforce and all the rest; or you can be a consistent anti-imperialist. You cannot be both.

The obvious rebuke is that any progressive government should be committed to levelling up standards of living across the globe. Yet this merely exacerbates the basic flaw in the AES and its cousins - doing so requires united international action. It requires people in country X to act against their immediate sectional interest, for the benefit of the people of country Y, and ultimately humanity as a whole. It is class politics which opens the way to such action - not reheated Keynesianism.

United international action is required most of all, however, to deal with the fall-out of even daring to reverse elements of the neoliberal offensive at all. We have, in very recent history, the humiliation of Syriza in Greece; and, while Britain is not in a situation remotely comparable to Greece, and does not have a clutch of ‘institutions’ breathing threateningly down its neck, we can guarantee that a Corbyn government will induce immediate flight of capital on some scale, fervid speculation on foreign exchange and other international markets, and otherwise induce the wrath of capitalism as an international system.

Like any good left Labourite, Corbyn is unwilling - indeed, unable - to confront this dimension of capitalism. It is even, somewhat, the ‘original sin’ of all Keynesian doctrines: a methodological nationalism, that treats the circuits of capital within the territory of a given state as mainly self-sufficient, with international trade and the like abstracted away from the picture. The great high point of this world view came in the post-war era, where - however - it was precisely forced on the whole of western Europe by the geopolitical imperatives of the United States: that is, it was implemented internationally - not to ensure good growth rates, but to keep the Soviet Union and its sympathisers at bay.

It is, of course, possible to win reforms under capitalism; it is possible to buck the market quite radically. One cannot do so by being reasonable, however - it is necessary to put the capitalist class in fear of its property, or even its continued existence. Tony Blair, in what was either a last-ditch appeal to Labour members or a pre-emptive act of sabotage, accused Corbyn of living in an Alice in Wonderland-style parallel universe (speaking, of course, from that topsy-turvy 10th dimension where the Iraq war was not a disaster and peace in the Middle East is that bit closer due to the efforts of one T Blair).

The kernel of truth remains, however tarnished and pathetic a figure Blair is today: you cannot buck the market like thisl


1. http://business.time.com/2008/10/28/bob-lucas-on-the-comeback-of-keynesianism.

2.The Observer August 23.