Class, the left-wing British think-tank, funded by the trade unions, held its second major meeting to discuss the state of the British economy and society and the policies to deal with it. The theme title was ‘Britain at the Crossroads’ and, naturally, the issue of Brexit dominated the sessions.
But the conference was kicked off with a keynote speech by the leftist leader of the opposition Labour Party, Jeremy Corbyn. His speech covered a lot of ground: the lost decade for the majority of Brits since the global financial crash and Great Recession, which has seen real incomes fall for the majority, six million working at below a ‘living wage’, one million on ‘zero hours’ contracts and another million on temporary contracts with few rights, as well as millions of self-employed earning even less. As Corbyn said, back in 2010, 40,000 people took food parcels, now it was one million.
Corbyn pointed out how the welfare state had been decimated, finance and industry had been ‘deregulated’ and state services had been privatised for profit, while education and health services had been hollowed out. Research and development had been stunted. His aim was to reverse this and begin a programme of investment in industry, education, communications and housing.
But how was this to be done? Through a National Investment Bank and a £500bn programme of investment; the raising of corporation tax and closing the tax gap of avoidance and evasion of tax by companies and rich individuals. “Business must contribute”, Corbyn said.
Other main speakers welcomed this approach. Paul Mason, the now famous broadcaster and author of Post-Capitalism, told us that ‘free market capitalism’ had failed and neo-liberal globalisation had ground to a halt. But there was no New Deal a la Roosevelt of the 1930s available this time. Mason said we needed “to defend globalisation” and build a “new form of capitalism that can work for poor people”. As for Brexit, it would be possible to get through a ‘Brexit-lite’ where free access to Europe’s markets and the free movement of people could be preserved, but it would require sensible appreciation of people’s genuine fears of immigration and “alliance of all progressive forces with Labour like the SNP and the Liberal Democrats” (and perhaps even the pro-EU Tory wing) to defeat the reactionary ‘hard Brexit’ Tory government.
Now I have discussed the economic analysis and policies of Class in a previous post. And for that matter, the policies advocated by Corbyn and McDonnell, the new leftist leadership of the Labour party. They want to change things for the better for the majority. But are their policies up to the task? They are clearly sold on the ideas of the Keynesians: more public spending and investment funded by borrowing and ‘monetary financing’ by the central bank of government spending, along with higher taxes on the corporations. I have dealt with this approach in previous posts.
The problem is that the dominant capitalist sector in the British economy is to be left untouched and yet it is the failure of the capitalist sector that led to the Great Recession and the subsequent ‘lost decade’ of the Long Depression. If all Labour is going to do is tax the corporations more (making business ‘contribute’) and fund the banks and industry by printing money, then this will only lower profitability further while encouraging another credit boom. An investment strike by capitalism will not be compensated for by a government-led investment programme that just adds 1-2% of GDP in investment when the capitalist sector invests over 15% of GDP. And the latter will not be touched.
Although John McDonnell has recently hinted at a more radical approach, just as it was in the last Class conference, in this conference, public ownership of the banks and the ‘commanding heights’ of the economy as a basis for investment and planning is still a ‘no, no’ among those at Class and their advisers.
This was again revealed at the session on banking reform. All the speakers were excellent and clear in what they had to say. Steve Keen, head of economics at Kingston University and renowned heterodox author of ‘Debunking Economics’ that demolishes the tenets of mainstream neo-classical economics, told us that the global financial crash was the product of excessive private debt and credit bubbles, not public debt. Others like Sarah Jane Clifton of the Jubilee Debt campaign and Fran Boait of Positive Money said we should write off this debt that weighs down the economy so that households can spend and small businesses invest again.
Tony Greenham, ex banker and now director at the RSA told us that, since the end of the crash, banking regulation had still failed. The big banks were just ‘unregulatable’; and the culture of the banks had hardly changed with their ‘get rich’ quick actions, the misselling of assets, frauds and grotesque salaries and bonuses. The big five UK banks continued to control the market and small and local banks had no role. The banking system remained unfit for purpose to help the public.
Despite this clear analysis, the solutions proposed by the platform specifically excluded the obvious: the taking over of the big five banks by the state under democratic accountability to turn them into a public service for households and business and end their speculative adventures. This was rejected in favour of the “BBC approach”, namely you have one public sector company that competes with the private sector (ITV, Sky) and forces them to toe the line (that’s working well in media!). In banking, that would mean using the still majority public owned RBS and turning it into a series of regional banks, as in Germany.
The example of Germany was a little ironic given the current demise of Germany’s biggest bank, Deutsche, regarded by the IMF as having the most ‘systemic’ risk in the whole banking world. Germany’s local banks would go down with Deutsche if it collapsed.
It seemed that the Class guest speakers had not read the short ‘think piece’ on the banks, published under the Class banner and on the conference stalls, written by Costas Lapavitsas, financial economics professor at SOAS, London. In that paper, Lapavitsas is clear: “regulation alone will not be enough….The question of public ownership…must also be placed on the agenda.. re-establishing public ownership over key areas of the economy would … provide a broader basis for public investment and the systematic creation of employment”. Lapavitsas went on: “if the public interest was fully represented and democratically expressed within finance, it could re-establish public service as a superior motive to private gain across the economy”. This sentiment was by-passed by the Class guest speakers.
When asked what we could do about the big investment banks that dominated the City of London; and what we could do about reducing regular private sector debt bubbles globally, neither Tony nor Steve had an answer (Keen: “I don’t know”). So, for a start, I refer you to the pamphlet by the FBU.
So there it is; Britain is at a crossroads. The Conservative government is careering towards a ‘hard Brexit’ where British capital loses its European free market access and where 3m immigrants in Britain face an uncertain future and where even the City of London’s banks are thinking of moving out. Sterling has plummeted and will drive inflation of prices in the shops well above any wage increases over the next year. The British people are going to get poorer, even if there is no new global slump.
The left Labour leaders and their Class advisers can see this clearly and are dedicated to defend and improve the interests of the majority over the 1%. But their policies, for me, still seem inadequate for the task ahead.