Joseph Stiglitz, Mariana Mazzucato, Paul Mason, Yanis Varoufakis

By your advisors shall you be known

Yassamine Mather takes apart John McDonnell’s pledge of responsibility

In the run-up to chancellor George Osborne’s March 16 budget statement, a number of economic predictions have made the headlines, most of them predicting doom and gloom. Speaking to ministers from the G20 countries, the governor of the Bank of England, Mark Carney, warned that “despite seven years of money-printing and near-zero interest rates”, the “vigour of monetary stimulus” has “not been matched by structural measures”.

For his part, Paul Mason, newly appointed advisor to shadow chancellor John McDonnell, wrote in The Guardian: “George Osborne’s recovery is in danger. The only option now is to steal Jeremy Corbyn’s clothes.” According to Mason,

If this is the last quarter of Osborne’s time in the treasury, the sterile correspondence with the bank will stand testimony to a government dead behind the eyes when it comes to monetary policy. The problem is that now his choices are limited. Productivity growth is poor - and will not increase as long as we go on creating low-paid, precarious jobs. Debt stands at 78% of GDP. And, though the banking system has been stabilised, it is still highly exposed to global risks (March 14).


A headline in the Financial Times of March 16 sums up the current state of the economy and the plight of the Conservative chancellor: “Osborne to break second promise in budget of fiscal claustrophobia”.

Throughout all this John McDonnell’s ‘economic policy’ statements have been extremely depressing. Even more so if you happen to read The Independent on Sunday’s John Rentoul:

Listening to John McDonnell’s speech on Friday was a shameless welding of the rhetoric of ‘doing politics differently’ with the policy positions of doing it the same. He said he would “rewrite the economic rules”, and then copied out the rules laid down by his predecessor, Ed Balls. Except that he made them slightly stricter - more ‘austere’, if that is the language you prefer (March 13).


He was, of course, referring to the shadow chancellor’s pledge that under Labour, day-to-day spending would not exceed government income and that a Corbyn administration would “balance the books” over its term of office.

In February, I was listening to a speech McDonnell made at the London School of Economics. The title of the talk gave the game away: “Rewriting the rules of market economy to achieve shared prosperity”. He started by explaining that Labour’s U-turn - he actually uses that term - over Osborne’s austerity measures came about because the Labour conference had “told us to become an anti-austerity party”. This, he said, is why the party opposed the fiscal charter.

He then continued by stating that the Labour leadership had “embarked on a review of the economic situation by respected figures”. This emphasis shows the problem. Who are these “respected” people? One is monetary policy committee member David Blanchflower. Another is Prem Sikka, professor of accounting at Essex University. I have been to talks that Sikka has given - he and Greg Philo work together and they have presented a paper on non-domicile tax status. Their ideas were interesting, but hardly revolutionary. I can imagine that, as the economy gets worse, the Conservatives may have to take action on this question, because it is the kind of thing that will get them votes. Anyway, McDonnell did not name the other “respected figures” in this talk, but they include Mariana Mazzucato, Yanis Varoufakis, Joseph Stiglitz and the above-mentioned Paul Mason.

McDonnell talked of putting forward “the radical alternative which our economy needs”. This economic team will, by May, produce a document explaining the current economic situation and laying out plans for a “balanced” economy. Who is Labour consulting about this? Microsoft, British Telecom, the Confederation of British Industry and the Bank of England. There was no mention of the trade unions, for example. What is the consultation supposed to be about? New ideas. Well if you want new ideas, you do not talk to Microsoft.

The point of this consultation is to “win back economic credibility”. McDonnell emphasised the “public perception” that Labour cannot be trusted to “balance the books”. The LSE lecturer who introduced the shadow chancellor to the audience explained how McDonnell was one of the few Labour politicians who knows how to balance books because of his record in the Greater London Council.

Well, in the case of local authorities, you cannot spend more money than is coming in, but in terms of a national economy this is not the case. There are many instances where a large debt has coincided with substantial growth. It is silly to think that because McDonnell ‘balanced the books’ in the GLC he will therefore do the same when it comes to UK spending, and that this notion will change Labour’s “public perception”. Rather it is the perception of debt itself, and why it is usually not significant, that needs to change. At the end of the day you may not be able to “balance the books” over a given period - which, as I have said, counts for very little in any case. By arguing on these terms McDonnell is digging a hole for himself.

New technology

There was a lot of talk in McDonnell’s speech about new technology, including what he called the iPad “shared economy”. Labour is moving with the times! He seemed to be feeding off Paul Mason’s idea that new technology will not only bring people into the discussion, but also allow them to share the wealth. According to Mason and his co-thinkers, such technology will radically change society all by itself - no need for a revolution.

A problem with this kind of thinking is that the massive growth in the use of mobile technologies has not created the kind of economic growth that some had predicted. Automation and advances in artificial intelligence have not got us out of the economic crisis. The reason why this is the case is clear. Anyone who knows how business regards new technologies will tell you why things are not so simple. The kind of research and development that, say, Mazzucato talks about just will not happen and all this talk of the economic benefits of automation is simply pretence. Increased productivity means the displacement of labour and a fall in the rate of surplus value - the way capital uses automation means it is highly unlikely to ‘create prosperity’ or ‘revolutionise the economy’.

McDonnell went on to talk of creating an “inclusive, climate-change-sensitive economy, based on rapid technological change”. The terminology is very useful, in that it can be deconstructed to help us understand what is going on. When listening to the speech, for a moment I thought I was in one of the business meetings I have to attend for my job - it had not crossed my mind that such language could be used by anyone on the left.

Obviously business does not argue for a ‘non-inclusive’ economy - in fact capital is more likely to contend that we already have an “inclusive” one. They want to be inclusive (in their own terms, of course). Nor will capitalists admit that they are climate-change deniers - business claims to be on the side of environmentalists, just like some might call themselves feminists.

I can understand that Labour thinks this strategy will win votes. But this language of ‘new business’ is not the language of ordinary people. It is the jargon of computer programmers, chief technology officers and CEOs. More importantly, it is not a sensible approach when it comes to economic stagnation. Even more importantly, it is part of an approach which creates illusions in the possibility of solutions within capitalism: bit-by-bit we can achieve progressive change without militant struggle, thanks to new technology.


Probably one of McDonnell’s better advisors is Joseph Stiglitz. His latest book, Rewriting the rules of the American economy, is concerned with the current scale of inequality - in fact there is a whole section of capital that has become a little anxious about this. According to Stiglitz, the causes of such inequality are structural: neoliberal policies have resulted in low taxes, limited regulation, weakened demand and poor growth.

The interesting part is that Stiglitz does not say why capitalism went down this road - why it gave up on what Thomas Piketty calls the golden years of the 1945-75 period. It was because they were not sustainable. Piketty is correct in saying that those 30 years were the exception. In general, capitalism does not concern itself unduly with the distribution of wealth or with workers’ conditions. The 1980s was not some ‘strange period’, but an inevitable consequence of a 30-year period that occurred following two world wars, because of the strength of the communist parties in Europe and the existence of the Soviet Union. Unless you grasp the exceptional character of that period, it is difficult to understand why it ended. Stiglitz blames Reagan and Thatcher, but in reality it was a whole historical period that was coming to an end - those 30 years are not going to be repeated. The idea that it could be repeated (a) on a national scale and (b) in the current world situation is fantasy land.

One thing that has changed since the 1980s is the way in which capital has become even more globalised - its structures have changed, including the relationship between capital and individual states. The way capitalism as a global entity can intervene in politics has changed considerably. However much you might wish that was not the case, it is going to be impossible to reverse that within the current order. Imagine John McDonnell as chancellor of a Labour government. He is not going to have real power and he is not going to be able to do much in this global economy.

It has been argued that today we are dealing with 10 major monopolies and that these monopolies basically control most of the productive sector across the world. In many ways this globalisation has exposed the true nature of capital. It has demonstrated why capital is aggressive, why it cannot be controlled and why it has such a destructive effect. The 1930s saw, if you like, a poor man’s version of global capital - the genuine article is before us now. It shows its character ever more clearly through wars, failed states and the way it atomises and sucks labour dry. This cannot be changed, however much we introduce new technologies.

Contrary to what we may think, whilst it may appear that there is a multitude of brand names, the most prominent are owned by a small number of monopolies. For example in the auto industry, quite a lot of Scandinavian car companies and so on are actually owned by German companies. This is important because the control these monopolies have over the economy makes them extremely powerful in relation to states and state regulation. If socialism could not be achieved in one state 30 years ago, talking about it now is even more absurd. And in this sense Stiglitz’s arguments are not going to help. I can see why you might wheel out a Nobel prizewinner in an attempt to impress the media, but in many ways this so-called ‘sharing technology’ means that anyone who can read what these people say will come to the conclusion that this is cloud-cuckoo-land stuff. You might impress a Daily Mirror journalist, but any informed person will just think, ‘How would this come about?’

Varoufakis and Mazzucato

Another advisor is Yanis Varoufakis. I want to leave aside how he dealt with being in the Syriza government, negotiated with the European Central Bank and so on. One of the main problems with Varoufakis, and Mason, is not simply that they are media personalities who do not say much, but that what they say is quite dangerous: the idea, for example, that a ‘Marxist economy’ inevitably ‘leads to Pol Pot or Stalin’. I found a quote from Varoufakis, where he argues that Marx was too dogmatic and “did not consider the possibility that the creation of a workers’ state would force capitalism to become more civilised, while the workers’ state would be infected with the virus of totalitarianism”. The conclusion from this is very clear: while a workers’ state will degenerate, its existence will force concessions under capitalism, which will become more equitable. You could argue that during the Keynesian period the idea that there existed some kind of workers’ state impacted on capitalism, but to argue that a workers’ state is inevitably going to end in Stalinism is a terrible statement to make. Varoufakis complements this by declaring that we need to “save capitalism from itself”.

At the time of the Greek negotiations he argued that Europe’s present crisis is not merely a threat for workers, for the dispossessed, for the bankers. No, “Europe’s current posture poses a threat to civilisation, as we know it.” I am not quite sure if the European crisis represented a crisis of civilisation as we know it - this assumes a very Eurocentric view of the world, apart from anything else.

However, let us assume the crisis does have such historic significance. He argues that this is why it is “the left’s historic duty, at this particular juncture, to stabilise capitalism; to save European capitalism from itself and from the inane handlers of the euro zone’s inevitable crisis”. This idea is used to justify wholesale reform and thus the saving of capitalism. He goes on to say that the failure of the UK left in the 1980s arose because a programme with an agenda for socialist change was scorned by British society and that is why nothing could be achieved. He is actually arguing that proposals to counter Thatcherism were too far to the left.

Finally there is Mariana Mazzucato. Her book, The entrepreneurial state, contains some very good points. I have seen arguments against what she is saying in regard to the state’s role in innovation and technological progress, with critics claiming that her arguments are valid only in relation to Europe and not the USA. In fact quite a lot of her examples are from the US, but this has been the response nonetheless.

She is right to argue against the illusion that Microsoft created or discovered the internet. She is right in explaining the role of the state in creating the technologies that gave us the global positioning system (GPS), touchscreens and the Siri app, for example. She argues that governments should remain in the forefront of that kind of entrepreneurial work because they can be far-sighted and can actually look at what humanity needs. Her argument is that in order for the economy to progress there should be more government funding for research and development.

While there is an element of truth in this, the problem once again is that you cannot reverse the clock. For decades research and development, at least in the UK, has been moved out of universities, except for the elite institutions. Those groups that get funding from the government do so for what I would call ‘test and control’. Cheap labour at universities is used for testing when companies do not want to pay for research and development - 90% of university research has now become business-orientated. It has got government funding, contrary to what McDonnell and Mazzucato are saying, but it is not innovative, it is not going to bring about a sharing economy and it is not going to bring us Mason’s iPad-orientated, tech-aware working class that will change the world.

For all the attention that has already been focused on biotech, pharmaceuticals and automation innovations, nothing has moved in the last 10 years beyond the maintenance of previous achievements. This is a problem - we have come to the cusp of many breakthroughs, but no further, and it is unlikely that state intervention will change that in the current economic climate. The uncertainties of the economic situation has produced a retreat from innovative work. It is not simply that an injection of state money can solve this - if that was the case, I am sure that the Obama administration, for one, would have intervened.

Mazzucato’s book has been received well by many, but I do not see it as a panacea which can lift the economy out of its present impasse and reduce the levels of inequality.

To sum up, the Keynesian solution of Stiglitz, the ‘saving capitalism’ solution of Varoufakis, the technological innovation solution of Mazzucato, and the whole language of shared, participatory economics rather than socialism are not going to resolve things for capital. If there is a crisis, I could imagine quite a lot of this language being adopted by sections of the Conservatives Party.

That is why hiding behind ‘respected’ figures and using the language of ‘fiscal credibility’ and ‘responsibility’ is not going to help Labour. Some of McDonnell’s ideas may be slightly more innovative than those of Ed Miliband, but they will not help Corbyn, never mind save the economy.