Tuesday, 6 June 2017

What would a Labour government mean?

There have now been two UK General Election opinion polls which place the Labour party at 40%, with the Conservatives just ahead. Admittedly these are by polling companies which weight more favourably to Labour than others do. It’s quite conceivable that when the election actually occurs in two days’ time, the Conservatives will emerge with a healthy majority. But it’s also possible that by some strange alchemy what was unthinkable a month ago actually comes to pass and the greatest upset in British political history happens.

So it’s worth examining what would be good about an unashamedly social democratic Labour government, where it would likely fail and why, when all is said and done, the mere whiff of a Corbyn-led Labour government is a once in a generation (or maybe once in a lifetime) opportunity that is worth straining every tendon in your body to realise.

What a Labour government would achieve

For more than forty years a seemingly unimpeachable neoliberal dogma has held sway in most corners of the world. That dogma holds that cutting tax rates for corporations and the wealthy will spur investment and economic growth. I call it a dogma for good reason, in that it’s utterly impervious to evidence. Economic growth and rates of investment were far higher the benighted social democratic decades of the 1960s and ‘70s. But the incessant march to cut corporate tax rates has blindly continued. According to the US-based Tax Foundation the worldwide average corporate tax rate declined from 30% in 2003 to 22.5% last year.

There is a flip side to this dogma. Because cutting high end tax rates strangles government revenue and balloons public debt (in the 1980s in America the arch conservative Ronald Reagan doubled public debt), it is usually accompanied by its unloved sibling – austerity. Austerity began in the 1990s under Bill Clinton in the US and was aggressively promoted by international organisations like the OECD and IMF. It was temporarily suspended during the financialised boom years of the early 2000s but returned with avengeance when that all turned to dust after 2008. Austerity was supposed to be a short, sharp shock in Britain but has now become ensconced as a permanent feature of the political landscape.

A Labour government would, for the first time in decades in the West, diverge from this political straitjacket. It would raise corporate tax rates to 26% and hike capital gains tax. It would increase public investment, fund the NHS properly and ditch austerity.

A Corbyn-led Labour government would also abandon the austerity playbook of disciplining those at the bottom of the pile – in the hope that such imposed realism trickles up through the rest of society. A Labour government is committed to ending the work capability assessment and the confetti spraying of benefit sanctions. With one in three workers in Britain suffering precarious employment conditions, it’s possible that a different attitude would take hold – one that doesn’t see workers as mere labour costs, to be treated and disposed of as quarterly profit forecasts dictate.

Where a Labour government might fail

There is however a Keynesian backdrop to Labour’s plans which, in truth, rings hollow. The rise in public investment, funnelled through a National Investment Bank, would substitute for moribund private investment which is at a 50 year low. This kind of public investment would create profit opportunities and lead to increased economic growth, so the thinking goes. Hence tax increases on the wealthy are not simply about fairness and redistribution but would have beneficial and lasting effects on the whole of society.  This is the entrepreneurial state in full bloom.

But if the lure of profit is what drives private investment can the state act as a surrogate when profit-making opportunities are not immediately apparent? Corporate investment is a much larger part of the economy than public investment, and if corporate investment refuses to budge, the state cannot take its place unless the government is willing to countenance a much larger role in the economy. And I don’t see that on Corbyn’s horizon. Hence the question of why private investment is so low needs to be asked.

And timing is crucial. It is nine years since the last recession and many economists warn that another is imminent. According to one non-mainstream economist, Steve Keen, ‘a capitalist economy can no better avoid another financial crisis than a dog can avoid picking up fleas’. If another crash hits, the centrepiece of Labour’s plans – the National Investment Bank – may become swiftly redundant as money is diverted into unemployment benefits and other ‘automatic stabilisers’. Though I would much rather that Corbyn be at the helm in the event of a downturn than the usual suspects. It’s possible, then, that emergency action may be aimed at helping ordinary people, not just banks and major shareholders.

However, despite these caveats, I still think that …

A Labour government now could be a major historical turning point

It’s now close to a decade since the financial crisis – the biggest economic downturn since the Great Depression of the ‘30s – hit. There have been two kinds of elitist political reactions since. One has been to oversee massive intervention in the economy in order to bail out those responsible and protect their financial assets through 12 trillion dollars’ worth of money creation. A race to the bottom has ensued to make sure the ‘wealth creators’ don’t feel scorned. For the vast majority, by contrast, this political dispensation has ordained the pain of austerity and laissez-faire capitalism. The other reaction has been to recognise the huge undercurrent of discontent but displace the wrath onto immigrants, other countries and ‘scroungers’.

Should Corbyn deny the Conservatives a majority on June the 8th, it will be evidence that a palpably different path to those currently on offer has a reservoir of support. The mere fact that 35 or 40% of the public will have knowingly decided they want something different to the prescriptions decreed as inevitable by the mainstream media and governments across the world is something that cannot be erased. 

Corbyn may fail miserably. Or his government may turn out to be a crushing disappointment. Greece happened after all. Few left-wing governments have been successes. But now, of all times, we need to see for ourselves. And once something as disruptive as a Corbyn surge happens to a schlerotic political system such as this one, no matter what transpires subsequently, things never return entirely to the status quo. What happens on Thursday will have ramifications far beyond these shores.

Vote Labour.