Over the last few months the new Labour leadership has been conducting a series of meetings, rallies and workshops to discuss the idea of the “New Economics”. The need for such an initiative is clear; the post-Blair party is struggling to re-establish a clear identity, and the new leadership are fighting to establish their politics on a recalcitrant Parliamentary Labour Party. With the mass media daily calling for Corbyn to be ousted and power hungry and bitter right wing MPs pathetically scrabbling to deliver the blow that might prove fatal, enthusing the members and the wider electorate around a vision of a Labour government is crucial.
McDonnell, advised by a small army of Keynesian and semi-Keynesian economic advisors, has laid out his stall in several speeches, The “Coop speech” in January and his speech to the New Economics Forum in May.
In it he outlines the key points of Labour’s economic strategy, which presumably will inform the nature of the debates at this year’s conference. His vision is ambitious in its historical sweep, asserting that he wants us “to surpass even the Attlee Government for radical reform”. This is crucial; for too long the Labour party – and even parts of the Labour left – have regarded state run nationalisation as synonymous with socialism. The nationalisations that occurred in the Attlee government of 1945 were limited only to the 20 per cent most bankrupt parts of the economy – and even then with astronomical sums paid in “compensation”. They also merely incorporated the already existing management structures of the old private industries, something many workers at the time felt was a real retreat on what they believed a Labour government would do.
McDonnell also makes great play on the failure of free market capitalism and austerity; the inevitable growth of inequality, tax dodging, attacks on the poor and lack of business accountability. All of these things would be fought by a Labour government. A welcome return to some “old” Labour values. So how to do this? The main planks of his strategy are a Fiscal Credibility Rule (FCR) to reduce the deficit, expansion of cooperatives and a “National Investment Bank”.
Other policies include “fairer” taxation on the rich and a house building programme, which are welcome but not particularly new ground. More important is the central thrust of the New Economics, which exposes a problem that runs through it. Simply, it attempts to plot a new path for moving beyond free market capitalism (transforming capitalism, in John’s words), taking in a detour through non-confrontational measures before finally ending up in a mixed economy that would leave most of capitalism intact.
These criticisms are worth raising because McDonnell has been an avowedly socialist figure, an explicit anticapitalist and someone who in the past has invoked Marx. Many people are inspired by Corbyn because they see in him a credible alternative vision of the future that rejects the values of the present. As such we must engage with Corbynomics on those terms.
The problem with cooperatives
The big advance Corbynomics seems to present is on the role of cooperatives. Appealing to the largely forgotten cooperative movement of 19th century capitalism, McDonnell praises the “more than 7,000 independent cooperatives throughout the UK, contributing £35bn to the economy”, pointing out that “worker-managed companies enjoy a productivity bonus of 6-14 per cent”. He wants to double the number of cooperatives in Britain, expanding the scope for worker run businesses, using the example of Italy’s Marcora Law, which matches funding for workers to use their unemployment benefits to turn failing businesses into cooperatives.
What would a Marcora Law mean in Britain? Firstly it can only ever apply to small and medium sized business. The capital required to bail out an airline industry or a steel plant is simply too great for employees to manage. The ex-workers would now invest their money in the company turned cooperative, taking the entrepreneurial risk on its success themselves. Afterwards the return on investment is matched by the profit that such an enterprise can make, turning the workforce effectively into self employed labourers.
Of course, cooperatives can be a useful form of defending jobs and manufacturing in a capitalist crisis. They show that workers can run their own workplace under democratic control. Larger cooperatives usually have managers, but they are elected and held accountable to the workforce. Their role in Venezuela under Chavez was seen as a component of the wider Bolivarian socialist revolution, a post-capitalist model of working and ownership that avoided the pitfalls of “state socialism” whilst also escaping the ravages of free market capitalism (of course it was all made possible by nationalisation of the oil industry but we’ll skip that for now). Advocates also point to the Mondragon Corporation, a cooperative in the Basque region – the largest in the world and the seventh largest company in Spain, which employs over 80,000 people.
But there are two notes of caution to be sounded here. The first is that in the context of McDonnell’s speeches, when he avoids the question of widespread socialisation of the key sectors of the economy already in private hands, merely expanding the cooperative movement (through workers and the state bailing out small and medium sized enterprises?) he avoids the question of the big capitalists and their power over the economy. The notion that we can get past capitalism through the building up of workers’ cooperatives was popular with the revisionists in pre-WW1 Marxism as a way of avoiding the bigger questions of economic, political and social power. The real strength of the capitalists is through the nexus of property relations at the heart of the economy that is making the big bucks. All we have for that is more taxation – a step forward but not even close to what is needed.
As such, the appeal to the radical tradition of the cooperative movement, from the Rochdale pioneers of 1844 and the Society of Weaves in Fenwick 1769 or even during the English Civil war in the mid 17th century, demonstrates the problem. These cooperative schemes are referring to a time before monopoly capitalism, before imperialism, before the profound interpenetration of financial capital with industrial and commercial capital. Setting up cooperatives is easy when the best the capitalists can muster is a similar sized workshop. Setting up a cooperative supermarket in the face a market dominated by Tesco and Sainsbury’s is just bad business sense. Why not nationalise the supermarkets instead?
The second is that workers’ cooperatives, no matter how democratic or even how large they are, still operate within the capitalist system of exchange. There would still be a market that they would sell their goods through, and that means that if another company is exploiting their workforce more efficiently and reducing prices then workers’ cooperatives must compete – or die.
That is why many cooperatives have only survived through generous state handouts and subsidies. In the case of Mondragon, 20 per cent of their workforce were on short-term, part-time contracts and could be “easily shed”, as Guardian journalists reported at the time. If that is the preferred model then it begs the question, why not just transform industries into socialised and democratically run enterprises? Because the cooperatives have to make their money, you end up with scandals where supposedly ethical worker-managed enterprises end up doing deals with rotten businesses to make money. The cooperative CATURVEN in Venezula has been very successful because it sells machinery to Caterpillar Inc., the company that designs specialist house demolition armoured bulldozers for Israel to use in the West Bank. McDonnell himself pointed to the problem of the Co-operative Bank, “an institution behaving too little like a co-op and too much like a commercial bank.” Quite – it had to compete with HSBC and NatWest in a crowded market.
The truth is that the cooperatives are expounded in place of a sweeping programme of socialisation of the key industries in the economy; as Marx called for “despotic inroads into private property”. The cooperatives make over £35bn, but even double that would only be a fraction of the value of national GDP. The reluctance to seize industries and businesses from the rich was demonstrated around the Port Talbot disaster. McDonnell says he wants “to nationalise to stabilise the [steel] industry”. But in interviews given at the start of the crisis he said steel should be nationalised to be stabilised before being returned to the market. This is just a repeat of the most right wing version of nationalisation from Labour’s history, not that it is a transformative act on the economy on the way to socialism but that it is a bulwark against market failure, public money to save private companies. If a government goes to the trouble of nationalising it, they why not just keep it in publicly owned hands?
This goes even more for the question of the banking sector. Part of Corbyn’s election programme was for a “National Investment Bank”. McDonnell explains it will help fund “the big infrastructure projects, like high speed rail” and provide finance to small business. But now the New Economics is looking to the liberal policy of breaking up the national banks. In January’s speech McDonnell’s preference was for looking “to break up these monopolies, introducing real competition and choice. Regional and local banks, prudently run and with a public service mandate, have to be part of the solution here.”
Making the financial market more competitive by smashing the banks up is a ridiculous solution – one preferred by the Liberal Democrats in 2010 – not something a socialist shadow chancellor should be advocating. Why are we even countenancing introducing a better market with “real competition” in finance? The solution is to amalgamate the banks, to combine their assets and operations, to socialise them under democratic and accountable public ownership and wield them as a weapon to develop planning in our economy.
Another brain trust idea from McDonnell’s advisors is for an “Economic and Innovation Forum which will provide a space where representatives of businesses, unions, and wider civil society can come together with government at a national level”. But to wary ears it sounds like merely a repetition of the call for a National Enterprise Board (NEB) that was popular on the right of the party in the 1950s as an alternative to nationalisation, and then taken up by the left in the 1970s as a way of avoiding a headlong clash with the interests of the British ruling class. The NEB failed when Benn headed it up in the 1970s; lack of investment and lack of interest from the “representatives of business” meant that it was an appeal for co-partnership between bosses and workers at a time when the bosses wanted to play hard ball. They were deeply suspicious of the Wilson government in 1974-76 because they thought it was too left wing – the same goes even more for a possible Corbyn government!
And the talk of consensus by McDonnell is a dangerous one. It is understandable for electoral reasons of course, the Labour left does not want to appear to be too “wild”, but the point is that there is no consensus, and one could only be forced by breaking the will of the bosses to resist it. In the face of a ruling elite that is imbued with neoliberalism and a Thatcherite arrogance of the right to manage, what does consensus mean for them? Thatcher was so successful precisely because she rejected the old consensus, which was unravelling anyway. Rather than the weakness of the Callaghan government trying to hold together a dying post-war agreement, Thatcher knew exactly what she had to do: forge a new economic reality by smashing the old one.
The new revisionism
The difference over the banking sector points to a more fundamental question of strategy. If this New Economics is Corbynomics, then it seems to be a way of avoiding the hard questions over how to get rid of capitalism. Socialism is an economy where production, distribution and exchange are in collective hands and there is a democratically planned allocation of work, resources and time. A socialised, democratic banking system is a crucial part of getting socialism, just as the National Health Service – though imperfect – is an essential part of a socialist health strategy even today.
Corbynomics’ proponents seem to be averse to nationalisation, either because “it didn’t work” in the past or because supposed top-down state run companies are not the way to get to socialism. Of course! As with all revisionisms, there is a grain of truth in it. Yes, the Labour Party has traditionally seen nationalisation as turning a private company into a state run company. In terms of undermining the profit making capacity of the capitalists this is a step forward, but on its own it is not socialism.
But socialists never thought it was and have always been critical of the state run companies. A better term is socialisation, because it isn’t simply about a government taking ownership of a business in the national interest, it is about the transformative act of seizing industry and services and democratically running them. This does not mean state appointed managers, it means committees and organisations of workers, consumers and service users. Socialisation, not of the bottom 20 per cent most unprofitable sectors, but of the most profitable and most useful for running our society is an integral part of a socialist, post-capitalist economic strategy. Socialisation is also a step towards a planned economy. Cooperatives might form a part of that but they cannot replace it.
Likewise, without a strategy to tackle the actual bases of economic and political power that the wealthy have, then this is all just the noise before defeat. A Corbyn government would have to be far more radical, far reaching and more audacious. It cannot repeat the same failed left polices of the Alternative Economic Strategy (AES) of the 1970s – a programme that also fiddled with the edges of capitalism but didn’t dare to take the fight to the enemy on the question of property relations. McDonnell opposed the AES, as he explained in an interview in 2006, because he “didn’t see it doing anything by way of challenging the power bases or offering public ownership on the basis democratic control of either any sector of industry, or the economy overall”. Indeed!
The tone and thrust of the New Economics has a history in the Labour Party. It smacks of variations on the right’s arguments from the 1950s during the “revisionism debate” between Gaitskell’s followers and Bevan’s. The revisionists – intellectuals like John Strachey and Tony Crossland – won the Labour Party to a position against widespread nationalisation, favouring using the “entrepreneurial state” to harness a regulated market to provide social justice. The mixed economy was heralded then as the “third way” between American capitalism and Russian Sovietism; today the mixed economy is the new approach away from what is portrayed as the state socialism of 1945.
When Wilson won the leadership election in 1963 people thought it was the end of revisionism, but it was actually the triumph of it. Wilson had no interest in using nationalisation to battle capitalist property or power, preferring to look to a partnership of bosses and workers to stimulate the economy with new technology. McDonnell was channelling Wilson’s ghost when he said: “new technology and new ways of working could help create a better, more prosperous society” – something straight out of the Ministry of Technology in 1968.
Of course the Labour left would be horrified and violently reject any attempt to link McDonnell with Gaitskell’s revisionism – but that is not what is being argued. McDonnell’s socialism must be understood in the context of a Labour Party that is in retreat from even the socialist rhetoric of the 1930s and 1940s, one that shrinks from a structural challenge to capitalism. New Labour was really born in the early 1960s; the New Economics looks back to the kind of politics the left advocated in the 1970s to find a new way forward, informed as it is by the cooperative movement’s earlier stages of capitalism.
Corbynomics rests on the correct observation that “Whatever the achievements of the past, we cannot simply turn the clock back – whether to 1997, 1964, or 1945.” Very true, but the mix of policies being presented here, even if they were introduced, would achieve only a reversal of the worst excesses of neoliberalism before introducing the kind of policies Italian social democracy offered up in the 1980s. In a world indoctrinated on Regan, Thatcher and Blair, it is too timid, too scared of its own shadow to really shift the balance.