Debate: On British Labour?s New Economic Policy

mcdcorbPublished: 25 November 2015
Debate Participants: Themos Demetriou, Michael Roberts and Eric Andersson

“Where Michael Roberts is Wrong” by Themos

In one of his latest posts Michael Roberts questions the validity of the economic philosophy of the new Labour Shadow Chancellor, John McDonnell, as well as his marxist credentials. He points out that in his keynote speech on economics at the Labour Annual Conference he accepts Marx?s analysis of the capitalist system but distances himself from his conclusions about what to do. He goes on to criticise McDonnell?s decision to appoint Keynesian rather than Marxist economists to his panel of economic advisers and forecasts that ?Corbyn and McDonnell?s National Investment Bank will not be enough to deliver sufficiently faster growth as long as the UK economy is still dominated in its strategic sectors by capitalist profit-making companies in the City of London?.

All these points are probably true. However, Michael Roberts? analysis, as all economic analyses for that matter, relies on the assumption of a fairly long survival period of capitalism. John McDonnell in his Conference speech outlines a spate of specific measures that a Corbyn Government will seek to implement and possible ways to finance them. His plan is fairly simple and easy to understand. It does not presuppose the overthrow of capitalism but does not exclude it either. Instead of being lost in arguments about the feasibility of helping the disabled, housing the poor or protecting the NHS within the system, he proposes to do all these and attempt to pay for this programme with measures that will be financed by the contribution of those who can afford it, as well as by what he refers to as ?People?s Quantitative Easing?. Simple. No need to change the system, no need to argue for revolution.

Michael Roberts objects that Corbyn and his government will fail to make the rich pay and will fail to make the capitalist economy work. He is of course right. Capitalism did not hit the rocks simply because the bankers were greedy. Michael Roberts has repeatedly and convincingly shown that the problem is the lack of investment because of the low profitability of today?s industry. This is not going to go away because a Labour Government in Britain will follow an expansionary economic policy. The problem with this objection is that this is not today?s problem for Corbyn. It is very much tomorrow?s. As Roberts himself argues ?British capitalism, along with global capital, is likely to enter another slump before the next British general election in 2020?. It seems to me to be the ultimate folly to ask Corbyn to start now discussing the mechanics of the overthrow of capitalism when he barely commands the support of his own party.

What should be the immediate task for Corbyn and his team?

Coming out of nowhere, they inherited a party that for more than two decades was subjected to the most intense ideological cleansing imaginable. Tony Blair and the New Labourites systematically purged the Labour Party of anything socialist to the point that most British socialists considered it lost for the working class. So thorough was this purge that when Corbyn tried to find 12% of the Labour MPs to support his bid for the leadership he found it near impossible. Indeed, he only secured the 35 signatures needed at the last minute because the right wing felt so secure in their leadership of the Party that some of them lent their signatures to Corbyn in order to ?widen the debate? and to please their local labour Party members into the bargain. As it turned out, the Party membership had other ideas.

The new Labour leadership?s first task is to consolidate their position in the Party and carry its membership and its supporters along with the policies they propose. No matter what their personal politics are, they have to be true to the movement that elevated them to the Labour Party leadership. As such they have to move in step with them and forge a policy for the future together with them. This movement is not yet ready for a break with capitalism. It has to be taken there. For the moment its aspirations are limited to a fairly modest programme of reforms that will benefit the poor with policies that are essentially fair, and policies that place the burden on those who can afford it.

Nevertheless, these very modest reforms have provoked a vicious reaction from the establishment. When the ?Labour under Corbyn cannot win? attack lost its credibility the focus turned on the probability of a right wing coup to unseat him and the inevitability of a split. Only the scale of his victory prevented such eventualities. But perhaps the most revealing of the attacks against Corbyn was the article in the Daily Mail published on 12 August with the title ?Prime Minister Corbyn… and the 1,000 days that destroyed Britain?. In its fictional setting, it actually describes the sort of thinking the establishment is going through in their quest for a way to crush the budding movement that threatens their supremacy. It would be naive to dismiss it as just a flight of fancy and would-be advisers to Corbyn could do worse than read it very carefully. And lest one thinks that the piece has no relation to reality, here is a beautiful snippet:

The IMF called for drastic cuts in Government spending. The Germans made it plain that Britain could not escape the medicine taken by other EU nations that had found themselves in crisis. London would have to take its orders from Berlin, just as Athens had done. Corbyn simply refused. In an emergency Budget, the new Chancellor of the Exchequer, Diane Abbott, revoked the tax exemptions given to foreign residents in the UK, announced a Capital Levy and Land Tax and raised the top rate of Income Tax to 95 per cent on incomes over a million pounds.

?For too long,? Corbyn said, ?the poor have borne the brunt of the cuts. Now let?s have some austerity for the rich.?
Corbyn also attempted to reintroduce exchange controls, limiting the amount of money anyone could take out of the country. But in a world of instant electronic transfers, money was simply too mobile to be kept in any one place.
And now it really began to move. In a throwback to the 1970s ? the last time the Labour Left tried to defy economic reality ? the rich proved why sky-high tax rates raise rock-bottom revenues.
Faced with giving 95 per cent of their money to Chancellor Abbott, they simply left the country and paid nothing at all.
British Airways reported record ticket sales on first-class flights out of London. And none at all coming back. Multi-millionaire comedians who had once cheered Labour couldn?t see the joke when confronted with a Labour Prime Minister who actually meant what he said about soaking the rich. The summer transfer window saw the Premier League?s biggest football stars departing en masse. One club after another came up for sale as its Arab or American owners ran for the exit. A multi-billion pound league became a two-bob back-water with second-rate players, poverty-stricken clubs and half-empty stadiums.

The writer here is not just making up his fictional story. He is describing fairly closely what happened in Greece and the Syriza Government. In order to overcome such a situation Corbyn and his team, if they become Britain?s Government, have to do much more than follow sound capitalist economic policies, Keynesian or otherwise. They have to take on the establishment in a far more radical fashion. Whether they appreciate it or not, it will be a clash where winner takes all and the vanquished, well, are vanquished. With such a perspective, today?s task is to marshal one?s troops, and in Corbyn?s case, to secure the support of the people. It is irrelevant whether the programme he proposes now can save capitalism ? today?s capitalism has no room for it anyway. The basic requirements for a successful programme is to muster the support of the masses to the point that they will be ready to take on the establishment.

The experience of Greece is important here. Michael Roberts is wrong when he dismisses ?the approach of Greece?s Syriza, which started out with a Marxist ?analysis? of Greek capitalism but which, according to Yanis Varoufakis and Costas Lapavitsas, should be put aside when it comes to policy because Keynesian economics is more relevant ?in practice??. He is also wrong when he conflates Varoufakis? and Lapavitsas? approaches as the two were completely at odds with each other. What he says is true for Lapavitsas but not Varoufakis.

Syriza became a serious contender for power in the spring of 2013 when they came a close second in both of the twin elections of that time. They were not prepared to become the government of Greece, something they suddenly became aware of. By the time of the elections of January 2015 they managed to put the internal workings of their party together and formulate the Thessaloniki Programme, a very modest Government programme that enabled them to win a landslide victory and form a Government. Had they contested the election on a ?revolutionary? programme they would probably not be able either to stay together as a party or win the elections. Once in power, their task was to turn the support for the modest reforms of the Thessaloniki Programme into support for taking on the establishment. This they did with great success during the negotiations with Greece?s creditors, becoming a symbol for change in Europe and internationally. Most importantly, they rallied the Greek people behind them, as the 62% of the referendum showed. One can be justified in considering the capitulation of Tsipras a betrayal, but there is nothing to complain about their actions before that.

Corbyn is facing an analogous situation as Syriza did in July 2013. He rose on the tide of popular dissatisfaction with austerity and he finds himself leading a Party not yet ready to take on the establishment. He has at most four years to reclaim the Party for the working class and at the same time retain the momentum for the radical politics his election signalled. To do that he needs a modest programme of reforms, the kind he is actually proposing. On the economic front he is probably wise in appointing people like Stiglitz or Piketty on his panel. Counter-inequality policies are badly needed in today?s world and it is their short-term effects that are important, not their long-term feasibility within capitalism. As Keynes would say, in the long term we are all dead. In this case one would hope Capitalism will be the first to go.

When Michael Roberts points out the inadequacies of Keynesian economics, he disregards the political implications of such policies. Trying to lessen inequality may not be enough to save Capitalism but it will either make life better for the less well off or, more probably, lead to a clash that the people will understand and fight for their rights. The Greek people are a fine example of this with their great NO vote in the referendum. It is understandable that Tsipras capitulated without capitalising on this vote only because of the overwhelming strength of his opponents in Europe, something the Greek people could understand, returning him to power in September with almost the same percentage as they did in January.

Corbyn has the opportunity to do better than Syriza. If he manages to rally the Party behind him, he can easily win the next elections and become Prime Minister. Trying to implement his programme ? his modest programme ? will bring him face to face with the ruling class, both British and international. If he has the British people solidly behind him, as Syriza did on the day of the referendum, he will be too strong to be intimidated by Brussels or Washington. Britain is not Greece. It is a world economic, political and military power that by that time will also be a beacon of revolution for the people of Europe and beyond.

Michael Roberts is not wrong in his economic analysis. He is wrong because he treats the game as economic when it is political.

by Themos Demetriou


A reply to Themos from Michael Roberts

Themos has criticised my recent analysis of the economic policies of the new leftist Labour leadership in Britain. He says that, in effect, I am being too hard on the Corbyn-McDonnell policy proposals, in arguing that while they may accept Marx?s analysis of capitalism, instead they have adopted Keynesian policies for ?practical action?.

While Themos accepts that I am correct on this (?All these [points] are probably true.?)?.(?Michael Roberts is not wrong in his economic analysis?), I am wrong because ?he treats the game as economic when it is political?.

I think that what Themos is getting at here is that a Marxist economic analysis is fine but no newly formed leadership for a party of Labour can immediately adopt a full socialist or Marxist programme because it will not be able to take the party membership or, more important, the working class at large, with it on such policies. The class and the movement must be gradually drawn towards the necessity of socialism:
?It seems to me the ultimate folly [strong words!] to ask Corbyn to start now discussing the mechanics of the overthrow of capitalism when he barely commands the support of his own party.? You see, it is necessary for Corbyn-McDonnell ?to move in step with them and forge a policy for the future together with them. This movement is not yet ready for a break with capitalism, it has to be taken there?. So, ?for the moment?, it is right for the new leadership to keep its ?aspirations limited to a fairly modest programme of reforms that will benefit the poor with policies that are essentially fair, policies that place the burden on those who can afford it.?

Indeed, it is better to wait for British capitalism to get into difficulties over the next few years before raising a more radical (Marxist) programme ? ?today?s task is to marshal one?s troops, and in Corbyn?s case, to secure the support of the people. It is irrelevant whether the programme he proposes now can save capitalism ? today?s capitalism has no room for it anyway. The basic requirement for a successful programme is to muster the support of the masses to the point that they will be ready to take on the establishment.?

Well, first let me say that my posts on ?Corbynomics? were mainly economic in argument, namely trying to show that Keynesian economic policies would not succeed in delivering sustainable higher economic growth or higher real incomes or avoid future crises, because they depended on the capitalist sector of the economy investing more. And the capitalist sector would remain the dominant sector of the economy. Corbyn-McDonnell plan only to renationalise the railway network (very gradually over 15 years!). They have stopped short of proposing even returning the monopoly utilities and the postal service to public ownership, let alone taking over the key strategic sectors of the economy, particularly the big five banks. So under their programme, capitalism will remain. The economic point is that this would threaten the success of even the modest reforms proposed.

But Themos is right, economics cannot be divorced from politics and economic policies must also account for political strategy and tactics. But is it right that the new Labour leaders should start from the view that whatever might be the best economic policy for the people should be jettisoned (?for the moment?) because the party and people won?t go along with it? How are we going to ?educate? them to a socialist policy if we don?t put it forward (?for the moment?)?

Themos makes the telling point that the new Labour leaders have a good period of time (four years) to promote their policies ? yes, I would say four long years to spell out the superiority of a socialist programme. But Themos disagrees. Don?t adopt radical socialist measures, instead Corbyn ?needs a modest programme of reforms, the kind he is actually proposing?.

Themos says that this is the lesson to draw from the events in Greece. He knows better than me the situation in Greece and how Syriza came to power. Maybe he is right that Syriza would never have got into government if it had adopted a full socialist programme – ?Had they contested the election on a ?revolutionary? programme they would probably not be able either to stay together as a party or win the elections.?

Themos says I am wrong to dismiss ?the approach of Greece?s Syriza, which started out with a Marxist ?analysis? of Greek capitalism but which, according to Yanis Varoufakis and Costas Lapavitsas, should be put aside when it comes to policy because Keynesian economics is more relevant ?in practice??.
On the latter point, I don?t think I have wrongly ?conflated? Varoufakis and Lapavitsas as both adopting a ?two-stage? approach of first, moderate policies and then, socialist policies later.

Let me quote Varafoukis from his long essay on his views: ?it is the Left?s historical duty, at this particular juncture, to stabilise capitalism; to save European capitalism from itself and from the inane handlers of the Eurozone?s inevitable crisis?.

In this essay, Varafoukis specifically rejects the idea of adopting ?socialist change? based on his experience of the struggle against Margaret Thatcher in the 1980s when he was in the UK. ?What good did we achieve in Britain in the early 1980s by promoting an agenda of socialist change that British society scorned while falling headlong into Mrs Thatcher?s neoliberal trap? Precisely none.?

Apparently, for Varafoukis, it was a waste of time advocating socialist policies (assuming the left did then) in the 1980s because the people of Britain just swallowed Thatcherism hook, line and sinker (just a point, Thatcher never gained more than 40% of the vote in any election and most voters voted against her in all elections). Apparently socialist policies will only be worth advocating, after we have saved capitalism. But then what would be the point?

As for Lapavitsas, see this quote from his interview with Jacobin magazine:

?Marxism is about overturning capitalism and heading towards socialism. It has always been about that, and it will remain about that. Keynesianism is not about that. It?s about improving capitalism and even rescuing it from itself. That?s exactly right. However, when it comes to issues of policy such as fiscal policy, exchange-rate policy, banking policy, and so on ? issues on which the Marxist left must necessarily position itself if it is to do serious politics rather than denouncing the world from small rooms ? then you will rapidly discover that, like it or not, the concepts that Keynes used, the concepts that Keynesianism has worked with, play an indispensable role in working out strategy, which remains Marxist. That?s the point I?m making. Unfortunately, there is no other way. And the sooner that Marxists realize that, the more relevant and realistic their own positions will become.?

All I can say on Greece is that the Greek people seemed to be more radical than the Syriza leadership in the end, voting 62% to reject the Troika bailout package (as Themos points out) amid a barrage of pro-Troika propaganda outside and inside Greece ? to the surprise of Tsipras, I think. That was the moment for the socialist alternative, it seems to me. But it was not taken up. Maybe that is the lesson for Corbyn-McDonnell too if and when they get into government. In a way, since leaving government, in some of the things he has said, Varafoukis has recognised that he was behind the curve of the Greek people. But it?s too late for him.

I think Themos? approach underestimates the willingness of the wider working class to support socialist measures if presented to them effectively. I can say with a bit more knowledge that the British people have been consistently more radical than the Labour and trade union leaders. In the last 35 years of ?neo-liberalism? adopted by Conservatives and Labour leaders alike, with the dismantling of the welfare state, wholesale privatisations and anti-trade union legislation and deregulation of big business and the finance sector, in every public opinion poll, the British public has firmly rejected all these measures ? and been ignored. Indeed, in a recent poll 84% of those asked wanted an untouched National Health Service, 68% wanted public ownership of the energy companies, 67% wanted the Royal Mail to stay publicly owned and 66% wanted the rail network back in public hands. They were not asked about the banks.

Themos is so right when he says that Britain is not Greece and that ?it is a world economic, political and military power? that could be ?a beacon of revolution for the people of Europe and beyond?. The issue at debate is whether it is better for the new Corbyn leadership to push just a ?modest programme? (anti-austerity, taxing the rich more, trade union rights etc) that supposedly will unite the party and gradually bring the people behind them, as Syriza did; or instead adopt socialist policies (i.e. ones that pose the replacement of the dominant capitalist sector with a planned publicly owned economy) from the start.

As Themos says, even adopting just a ?modest programme? will bring Corbyn-McDonnell ?face to face with the ruling class, both British and international.? A united movement is essential to overcome that. My point is that unity around policies that won?t work may weaken that unity at just such a moment (is that not the lesson of Syriza and Greece?). Instead, we need unity of purpose around policies that will ?irreversibly shift the balance of power and wealth in favour of working people? (Tony Benn).


Comment by Eric Andersson (in Facebook)

I mainly agree with Michael Roberts, but I also think that the discussion about alternatives to keynesianism has to be connected to very concrete questions of tactics.

I think Roberts is right in that if we don’t push for a socialist alternative, how will we ever change mass consciousness and the terms of debate within the progressive mass movements? The risk is that it will always be the wrong time to pursue socialist policies.

One way to concreticize the discussion is to bring up the issue of revolutionary timing. In Greece, one historic “window” was during the referendum. With a better preparation, this window could have had even greater potential.

In Venezuela, the defeat of the coup of 2002 presented another such window. Unfortunately, it was not seized upon, although the radicalization of the revolution in 2003-2006 must be understood against the backdrop of (the successfully countered) reactionary offensives between 2002-2004.

Some key elements of such “Windows” are often that they have a defensive element and that there’s a feeling that something’s got to give.

The discussions we’ve had in the past year about Greece have, I think, contributed to us thinking more concretely about how to act in a very specific situation. Although I don’t agree with all proposals for things to do, I think it is a big step forward that we are starting to move away from simple slogans to concrete discussions of tactics and strategy. This is necessary if we are to be taken seriously within the mass movements.


1 thought on “Debate: On British Labour?s New Economic Policy”

  1. Without wishing to sound condescending I wish to congratulate the above authors for their mature approach to a series of very challenging issues. While they have a number of disagreements, they have chosen to tackle them in a constructive way.
    It was not always thus. How I remember the vitriol that was poured on ones opponents when they were deemed to have betrayed whichever line or group the writer was a member of. The publications that went through line by line, word by word, the ‘false’ analysis of their opponents (always another group on the left – who were following the wrong path)
    The difference now is that it is not just small groups in a room throwing rocks at each other, or passing resolutions as if their life depended on it. (I remember one group having a caucus meeting in the gents toilets at the Chesterfield Socialist Conference – to be fair to them, their women members may also have been meeting in their toilets).
    Something significant has happened. Huge numbers have come together to say that they want to see change.
    Our responsibility is to do all in our power to assist that, even if from a distance.
    New Zealand/Aotearoa is now my home. I have no wish to return to live in the UK. However I must admit that the Corbyn election is making me think.
    The truth is that I am still scratching my head over (a) Corbyn’s victory and (b) the fact that he is still there.
    The recent happenings in Greece help in that they show on the one hand how easily things can go off the rails but on the other, may assist traditionally insular Brits in realising that they can learn from elsewhere.
    Something significant has happened – it is beholden on all of us who wish to see positive change in the world, to do all in our power to assist that process. Putting forward views in a reasonable manner is part of that. Not so much because of our own sensibilities (those who have been around for a while), but because of the chilling effect that being ‘punched in the face’ has on others.


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