Having seen off the miserable challenge of Owen Smith and the Blairites, both Jeremy Corbyn and John McDonnell gave emboldened speeches to this year’s Labour Party conference. These were the speeches that the right wing did not want. Rather than trying to imitate the Tories, as previous Labour leaders have done, both Corbyn and McDonnell set out their vision for a Britain transformed. They even dared to use the “s” word – socialism.
In order to carry out their progressive policies and promises, however, we must tell the truth: Keynesian measures such as increased taxation and borrowing will not be enough. Real power must be taken out of the hands of the billionaires and the bankers, with the commanding heights of the economy placed under the democratic control of the working class. In short, a socialist transformation of society is needed.
Break with the past
In stark contrast to the austerity-lite programme of Ed Miliband, McDonnell promised to “call a halt to this government’s austerity programme”. This was backed up by Corbyn, who reconfirmed his commitment to fighting the Tories, who he lambasted as the “party of the privileged few”, saying, “Tory governments deregulate, they outsource and privatise, they stand by as inequality grows”.
Such class-based rhetoric is to be warmly welcomed, and was well received by Corbyn supporters at the Party conference and the parallel Momentum-organised festival. The so-called “moderates”, however, were not smiling, since this attack could equally be levelled against the New Labour governments of Blair and Brown, and is at the heart of the polarisation within the Labour Party.
On the one side are the 172-or-so right-wing Labour MPs and their supporters amongst pro-cuts councillors and Party bureaucrats, who when in power have overseen deregulation and privatisations, to the benefit of the ruling class. On the other side are Corbyn and his supporters – the overwhelming majority of the members and affiliated trade unionists – who want a government that is on the side of the working class and that fights to end austerity.
“21st Century Socialism”
Focusing on the need to be ready to fight the Tories in the event of a snap election, Corbyn fleshed out his ten campaign pledges, which he confirmed would be the main focus of attack in an election campaign. These included:
“Full employment; a homes guarantee; security at work; a strong public NHS and social care; a National Education Service for all; action on climate change; public ownership and control of our services; a cut in inequality of income and wealth; action to secure an equal society; and peace and justice at the heart of foreign policy.”
Taken together, this forms part of what Corbyn described as “the socialism of the 21st century”. Corbyn and McDonnell pledged that Labour would build more than one million new homes (half of them council houses), control rents, re-nationalise the railways, introduce a £10 minimum wage, as well as other progressive measures such as repealing the Trade Union Act.
With the Tories continuing to implement ever more brutal austerity on the working class, such a programme, far from being “unelectable”, would be extremely popular amongst millions of workers and youth. The key questions that will be raised however are: with a massive hole in the public finances, how will this be funded? Is any of this actually possible?
Tax the rich
Corbyn and McDonnell are keen that the rich should be paying more tax, in order to fund such reforms. For example, Corbyn stated that by raising corporation tax by 1.5%, this could fund the return of the Education Maintenance Allowance to college students, and grants to university students.
McDonnell went further, and promised to “end the scourge of tax avoidance” by creating a new Tax Enforcement Unit at HMRC. On top of this, the Labour would develop “the policies that will shift the tax burden more fairly, away from those who earn wages and salaries and onto those who hold wealth.”
This is of course correct: those with the ability to pay should be contributing more. The key problem is those able to contribute the most are also able to pay vast sums to an army of lawyers and accountants in order to cook up avoidance schemes to get themselves off the hook.
It is one thing to raise the tax rates on the rich; it is another to actually get it collected. Even with HMRC better resourced, it will still be more profitable for companies to attempt every trick and scam in the book in order to avoid paying more tax.
The extent to which the rich will go to in order to hold onto their vast fortunes was evidenced when the French “Socialist” government promised to raise a 75% tax rate on the highest earners a few years back. Within months of coming to power, this policy had to be abandoned due to the backlash of the rich, which when faced with higher taxes, simply began to move their money off-shore. On top of this, the French capitalists promised an investment strike – in effect blackmailing the government to abandon its policy.
Ultimately, even if higher taxes could be collected from the rich, it will be a drop in the ocean compared to the problems facing the British economy. For example, higher tax revenues will be unable to resolve the crisis of British steel, which arises from a worldwide crisis of overproduction. And the problems facing the steel sector are simply the tip of the iceberg.
As well as raising taxes, a key pillar of Corbyn and McDonnell’s plan is the creation of a “National Investment Bank with £500 billion of investment to bring our broadband, our railways, our housing and our energy infrastructure up to scratch.”
This £500 billion would be raised by borrowing at “historically low interest rates” on the international money markets. On the surface, this sounds like a great idea: if the government has no money now, no problem – we can borrow it and pay it back later. However, what is missing from this idea is an understanding of why interest rates are at historical lows.
Banks only lend money in order to receive more money back. Interest rates on government debt are at rock bottom due to the worldwide crisis of capitalism. With lending to companies seen as risky, particularly ahead of the next world slump, banks are keen to invest their money in “safe assets” – typically government debt, which in the absence of the bankruptcy of the state will be guaranteed to be repaid. Therefore the demand for government debt is high, which keeps interest rates low.
This demand will only remain high however, so long as investors are re-assured that their debt will actually be repaid. Part of this means taking measures to tackle the enormous deficit in the public finances, without which the public debt will continue to skyrocket. At a certain point, the debt becomes unpayable, as was the situation in Greece and Spain in the past few years.
Therefore, so long as Britain has a government that is committed to cutting spending and therefore eliminating the deficit, the interest rates can remain historically low. If instead the government were to announce a massive increase in spending – such as adding half a trillion pounds to the already huge public debt of £1.6tn – interest rates would go through the roof.
Even if the government were able to borrow £500bn cheaply, this would not solve the crisis in Britain, which is an integral part of the deep global crisis of capitalism.
The “Entrepreneurial State”
McDonnell elaborated his economic programme in his speech to the Labour conference, which was influenced heavily by the ideas of Mariana Mazzucato, an economist and author of the book The Entrepreneurial State. As well as investing heavily in infrastructure and housing, the state – according to Mazzucato and McDonnell – would increase its role in research and development, thus spurring economic growth. In a follow up interview with Radio Four, the shadow chancellor explained:
“The state has a role in the economy, working with entrepreneurs and wealth creators [?!], developing and investing in the long term, in patient, long-term investment in research and development and science, helping people develop the products and the markets in that way to create a prosperous society.”
Aside from the contradiction of trying to support both the exploiters and exploited at the same time, this argument ignores the real cause of the crisis: a crisis of overproduction.
It is not a lack of research and development, or even a lack of credit, that is holding the economy back. Plenty of money is sitting in the bank accounts of big business – in Britain alone there is an estimated £700-800bn sitting in cash in the bank accounts of the biggest companies.
This money, however, is not invested, since – as a result of the world crisis – these companies are already struggling to profitably sell what they produce, let alone investing to increase production. This is evidenced by the fact that British businesses are on average only running at 81% capacity. In many countries it is even lower – between 70 to 75%.
Of course we are for more money being spent on scientific research and developing new technologies. But under a system where production is only for profit, such highly technical industries face the prospect of sitting idle or being shut down, since the commodities they produce cannot be sold profitably on the world market.
Such a situation arises due to the fact that the working class is only paid a fraction of the value it produces in the form of wages. The rest goes as surplus value to the ruling class, in the form of profit, interest, and rent. It is therefore impossible for the working class to buy back the total value of the goods that are produced, hence a crisis of overproduction.
Neither will increasing state investment in infrastructure or housing solve this problem, as is argued by the Keynesians. This was the strategy of the Chinese government, which beginning in 2009 embarked on the world’s biggest Keynesian investment programme, spending over $586bn on infrastructure projects and developing industry.
Despite offering temporary respite to the economy, the result is now an even bigger crisis of overproduction, with massive excess capacity in heavy industries such as steel, coal, and concrete, hand-in-hand with the near bankruptcy of local authorities and state-owned enterprises. Between 2007 and 2016, China’s debt has mushroomed from 148% of GDP to 237%. Rather then resolving the crisis, therefore, government stimulus and spending has only set it up on a far higher level.
Corbyn ended his speech by announcing his vision of “socialism in the 21st century”:
“With new forms of democratic public ownership, driven by investment in the technology and industries of the future, with decent jobs, education and housing for all with local services run by and for people not outsourced to faceless corporations.”
If this is to succeed, such democratic public ownership must include all the key levers of the economy: the banks, the top 150-or-so monopolies, and the land, as well as transport and distribution systems, which must be placed under the democratic control of the working class. Only by placing real control in the hands of workers can we “shake up how our major corporations work and change how our economy is owned and managed”, as promised by McDonnell.
Unfortunately, this is not what is currently envisioned by “new forms of public ownership”, as evidenced by McDonnell’s references in his speech to doubling the “co-operative sector”, and introducing a “’Right to Own’, giving workers first refusal on a proposal for worker ownership when their company faces a change of ownership or closure”.
This sounds like a nice idea, but how will this help workers on the minimum wage? Or those at any of the big monopolies which dominate the economy? As if the workers at Tata Steel could raise amongst themselves the billions required to buy out the company…
Instead of setting up workers’ cooperatives to try to out-compete the big monopolies, we should campaign to take the existing big business into public ownership, and operate them according to a socialist plan of production, based on need.
If this were to done, all the ten points of Corbyn’s programme would be fully achievable. We could rapidly build millions of council homes, rather than the hundreds of thousands promised. We could raise the minimum wage to far above £10 an hour. We could achieve full employment by reducing the working week with no loss of pay. The billions of pounds sitting idly could be used to properly fund decent healthcare and education. But none of this will happen unless we break with the market.
Fight for socialism
Coming out of this conference, the real battle in the Labour Party is only just beginning. Corbyn’s enemies in the PLP and the bureaucracy have shown what they are capable of this summer. Those MPs who are unprepared to accept Corbyn’s (increased) mandate must be replaced at the earliest opportunity by those prepared to fight for the interests of the working class.
Hand-in-hand with this is the struggle over the party programme. We must learn from the failed attempts of Keynesians to try to manage capitalism – i.e. attempts to square the circle. Instead we must argue for the only real alternative: for the working class to take real control of the economy, both in Britain and internationally.