Shadow chancellor John McDonnell has pledged that the next Labour government “would surpass even the 1945 Clement Attlee government for radical reform”.
Labour’s left wing leadership set out their alternative to the free market at a 1,000-strong conference on the “new economy” last Saturday. It represented an important break with recent Labour policy.
New Labour’s strategy in the 1990s and 2000s was simple—let profits rip and plough some of the tax revenue into public services while prising them open for privatisation. After this blew up spectacularly with the financial crisis and the ruling class turning to austerity, Labour became the Tories’ apologists with austerity-lite.
This wasn’t just about political cowardice. It flowed from Labour’s capitulation to Margaret Thatcher’s claim that there is no alternative to the free market.
Now McDonnell has promised to crack down on bankers and make sure Britain “no longer acts as a tax haven for the super rich”. More fundamentally, McDonnell said he had a vision of “socialism from below”.
He says this means a “transformation in how capitalism in Britain operates” that will bring about “fairer, democratic, sustainable prosperity shared by all”.
The Labour leadership’s economic strategy is being pulled in two directions—between boosting capitalism and challenging it. Those on the Labour left are committed to standing up for workers, yet still talk of governing in a “national interest”. Radical ideas are floated but then often withdrawn.
So when Jeremy Corbyn’s leadership campaign took off, his team floated the idea of “People’s Quantitative Easing” (PQE). Instead of the Bank of England creating credit to prop up banks, Labour would invest in infrastructure and public services. Hardly anything is heard about PQE now.
McDonnell’s team of advisers are mainly moderate Keynesians, such as former World Bank chief economist Joseph Stiglitz. Their main aim is to rein in the banks, rebuild a manufacturing base and boost private investment to aid British capitalism.
McDonnell said on Saturday that the “entrepreneurial state” was key to this.
Corbyn explained this would mean “a genuinely mixed economy of public and social enterprise alongside a private sector”. While there would be space for “collective and shared forms of ownership” the economy would still run according to the logic of profit and loss.
Boosting “private investment” means allowing profits to rise. During the height of the steel crisis McDonnell said that Labour favoured nationalisation—but only as a temporary last resort.
A socialist alternative would be nationalisation with steel produced for social need, not profit. But McDonnell said Labour wouldn’t back full nationalisation because its job was to build an “entrepreneurial state”.
In the 1960s then Labour prime minister Harold Wilson said the “white heat of the technological revolution” would transform British capitalism. But he argued that only a socialist government could harness it through a similar “entrepreneurial state” policy.
As capitalism dipped into crisis at the end of the 1960s, Labour tried to rule in the “national interest”—and sided with the bosses.
McDonnell’s speech went further and drew on the ideas of the Labour left during the 1970s. Its “Alternative Economic Strategy” was wracked with the same contradictions, but had some elements that challenged the market.
Attlee’s government made radical reforms at the beginning of one of capitalism’s longest booms when bosses were more willing to make concessions.
The scope for bosses to concede such reforms today, with capitalism mired in crisis, is low and they will try to crush the slightest challenge to austerity. It will take mass working class struggle to wrestle reforms from the bosses—and push beyond the limits of the Labour left’s vision.
McDonnell used to describe his pastime as “generally fermenting the overthrow of capitalism”. That has to remain the objective.