The end of neoliberalism
Labour’s second State of the Economy conference returns to Imperial College in London this weekend. It confirms that is the ideas of the left that are now making the running. Eminent academic economists will join with council and business leaders, and hundreds of ordinary activists to debate and discuss how we can create the economic alternative that is now so urgently needed.
Just this week, East Coast Mainline was taken out franchising for the third time, and the Treasury Select Committee condemned the directors of Carillion for “stuffing their mouths with gold” whilst the company collapsed. Both are damning examples of how the belief in government that markets and privatisation are the best way to organise society – the ideas of neoliberalism – have failed all but a very few at the top.
Too many governments, influenced by neoliberalism, have viewed effective corporate regulation as a barrier to prosperity, not an essential support. The result is a regulatory system that is not fit for purpose. The financial sector alone has at least 29 overlapping regulators, including the Faculty Office of the Archbishop of Canterbury. The four big accountancy firms dominate the market and operate seemingly with impunity, as the collapse of Carillion demonstrated. Whether their clients win or lose, the big four always seem to ensure they themselves make a profit.
People are sick of losing their jobs, their pensions and their shareholding from corporate failures, but watching the culprits keep their large pay offs, pension pots and bonuses. So I have asked Professor Prem Sikka to examine our regulatory system and bring forward proposals for reform to reinvigorate it.
Labour’s core economic objective is to create a prosperous economy that provides the richest quality of life possible for all our people, with its wealth produced in an environmentally sustainable manner. That means demonstrating how we can create the wealth needed to support this society in the new era of the fourth industrial revolution. And it means showing how we can confront the urgent, existential threat of climate change.
We need to secure major institutional changes to deliver the long-term, patient investment needed in new technologies, which is why Labour will create a National Investment Bank and transform our financial system, ending the excessive focus on short-term gains.
But it also means showing how that wealth can be fairly and sustainable shared. Our structural reforms are aimed at securing what Tony Benn described as an “irreversible shift in wealth and power in favour of working people”.
So we will democratise our economy at every level, massively scaling up the co-operative sector and introducing a “Right to Own” for workers when their companies are up for sale or threatened with takeover. It will require corporate governance reform, giving workers representation on company boards. We will restore trade union rights at work, and are exploring examples of legislation used elsewhere to enable profit sharing and share distribution. The wealth that our society produces includes the data we generate, and Labour will be exploring over the coming months ways in which that wealth can be put back into the hands of those who produce and use it.
Above all, it means improving the quality of people’s lives – not just in improving pay and giving people secure jobs, but in the human quality of people’s relationships and their free time.
We should work to live, not live to work, but under neoliberalism in Britain we seem to have got things the other way round. We work some of the longest hours in Europe to compensate for low investment and low productivity. A British worker produces in five days what a French or German worker produces in four.
As we invest and improve productivity we should look again at how we can reduce working hours, giving people more time for leisure and family life. The great promise of automation and the fourth industrial revolution is that we can liberate people from drudgery at work. But that will not happen without a government committed to making it happen, and able to assess its progress not only against the usual measures of success like GDP, but on metrics that show meaningful impacts for people – like real wages and inequality, and environmental protection, as the Institute for Public Policy Research has recommended.
The tide of history has turned against the old neoliberal way of thinking. These ideas – Labour’s ideas – are becoming the new mainstream. Put into place, the next Labour government will build an economy for the many, not the few.
John McDonnell is Shadow Chancellor and MP for Hayes and Harlington.
What insubstantial guff. This isn’t going to bring about a fundamental shift in wealth and power in favour of working people and their families. Meaningless talk about democratising at every level and massively scaling up the cooperative sector! The co-ops idea is always wheeled out when nationalisation is ruled out. Tony Benn tried promoting them to no good effect as Industry Secretary after Harold Wilson had vetoed the substantial extension of public ownership.
What is needed is a planned economy enforced through public ownership as the dominant form of property ownership. Unfortunately such an idea goes down like a lead balloon with today’s Labour Left which is predominantly liberal not socialist. We are far from the days of Jewish socialists like Karl Marx and Rosa Luxemburg. And the way in which today’s Jewish Leftists constantly deflect themselves from the socialist programme into endless Israel/Palestine/Zionism/anti-Semitism is just one displacement activity among many for those who do not really wish to replace capitalism.
I have been impressed by John McDonnell’s approach to re-exploring our wealth creation strategies in the face of technological advances. It does seem that short-term company decisions to boost profits and attract investors is compromising their longer-term viability, and the whole incentive system needs to be changed.
The Tory focus on simply attracting companies with tax reductions, without any direction based on a National long-term GDP growth strategy for the UK may help companies themselves but will not necessarily be in the best long-term National interest. We do need a long-term growth strategy, which will include determining the share of Financial Services in our future portfolio, and a balance of risk investment when it comes to innovative technologies.
Improving regulatory mechanisms is well over-due and it is surprising so little has been done since we are well aware of the contribution excessive de-regulation made to the financial crash.
So it does seem that neoliberalism driven by ever increasing profit ratios may have reached its limits, and the concentration of the benefits of GDP growth may be just one symptom. We cant just leave it to companies and markets to detetmine our future, increased strategic and regulatory intervention are urgent.