A year ago I wrote that “Labour’s *New* Economic Strategy Makes Me Want To Scream”. With frustration, that is, not delight. Last November John McDonnell, Labour’s shiny new shadow chancellor, was telling us that diversification, innovation and public investment were going save us from the dead-end of Tory austerity. Mr. McDonnell appeared to be as clueless as his predecessors regarding the underlying flaws in our financial and fiscal systems that prevent us from developing a prosperous, sustainable, equitable economy.
What a difference a year makes. Yesterday, writing in the New Statesman, John McDonnell gives us a pretty good summary of how our current economic model fails to do what we need it to do. So what, I hear you say? We all know that John and his pal Jeremy are crusty old socialists who hate the neoliberal free market and want to return to the smoke-filled rooms of the 1960s where Labour ministers and union officials made the deals that led us into the galloping inflation and industrial strife of the 1970s. Well, read on and smell the fresh air…
“…a nostalgic return to the postwar consensus is similarly impossible. Infrastructure rebuilding, the remnants of the British empire, a dramatically different political context and rapidly rising productivity drove wage and tax increases that transformed our society, thanks to the Attlee and Wilson governments.
Now, trend productivity is lower in the UK than in most G7 countries. According to researchers at the Bank of England and elsewhere, underlying growth has been in decline for some time: at least since the start of the 2000s, well before the crash. By some measures, it has been in slow decline since the 1960s. Government investment can – and should – help address this, but state investment cannot compensate fully for sluggish private investment demand.“
That last sentence is hugely encouraging. And it gets better. He goes on to discuss the problem of technological developments that are already replacing medium-skilled jobs and says that our response to the problem:
“…requires original thinking – one possibility is a universal basic income – to suggest how we can make a society with less demand for medium-skilled labour become wealthier and less polarised.“
So here we have a senior socialist politician acknowledging that public investment cannot, by itself, fix the economy and that paid employment is not the magic ingredient for a prosperous, equitable society.
I recently spoke at an event in Glasgow where universal basic income was under discussion. The big draw that night was Jim Sillars, the erstwhile Scottish Labour and latterly SNP politician who describes himself with some pride as “an old socialist”.
He confounded my expectations by speaking with passion and clarity about the changes in the labour market – how technology is replacing the need for all sorts of human labour – and how the pursuit of the old socialist holy grail of full employment is now a fool’s errand.
We need, said Jim, new ideas, new ways of doing economics. Unsurprisingly he remains an advocate of strong government but he said, loud and clear, that the role of the private sector will be crucial in the creation of a new economic model that is both fair and sustainable.
So there’s another one. Another old socialist recognising that left-wing dogma from a previous century does not provide us with the answers that we need for the economic challenges ahead, telling us that we need fundamental, systemic changes to the way that our economy works.
John McDonnell concludes his article with a call to action for the Labour movement:
“Of course our immediate priority is to hold the government to account during the negotiations over Brexit, but at the same time we must be looking ahead to rethink how our economy works. I want the Labour Party to be at the centre of that, and I want as many people to be part of that conversation as possible: through our policymaking structures and at our forthcoming public national and regional economic conferences.”
If you’re a fan of universal basic income or negative interest or sovereign money, please don’t be shy. Tell the man what he needs to hear.