It's the economy stupid - what the Labour Party needs to do

It's the economy stupid - what the Labour Party needs to do

The economy has always been Labour’s Achilles Heel in terms of it being able to win elections. This perceived short-coming is, it has to be said, not all of its own doing. The Tory mantra that Labour cannot be trusted to run the economy, has had a dripping water effect on public perceptions. The Labour Party has allowed the Conservatives to determine the debate and set the economic agenda for far too long. It has allowed them to blame Labour for the global crisis and portray the financial collapse of the banks as a public spending crisis.

However, the clear bankruptcy of the neo-liberal economic model has presented the Labour Party with the rare opportunity of retaking the initiative. The Tories have also demonstrated their bankruptcy in the realm of ideas and like lunatics, continue to implement the same policies in the hope that the outcome will somehow change.

With John McDonnell as shadow chancellor, we have for the first time a socialist economist at the helm, one who listens, consults and offers intelligent insight. He is supremely aware that Labour has to regain public confidence and  demonstrate that it can run the economy better than the Tories, but he also knows that this will involve a fight.

Earlier in the year he gave a lecture entitled, The New Economics, at the LSE where he laid out his vision, his programme and ideas for a radical economic rethink. For this purpose, he has set up an Economic Advisory Council made up of some of the world’s leading progressive economists to examine how a future Labour government could radically turn around our economy.

He has been talking and listening to people in key areas of the economy: trade unionists, small business people, public and private sector representatives, steel workers facing job cuts, the TUC and CBI.  He’s looking for new ideas, he says; he is not tabling a cut-and–dried economic blueprint, but is asking for input from everyone; he knows he alone can not have all the answers, that is why he is appealing for everyone to contribute. However, his bottom line is that the neo-liberal model has failed and we have to construct a new one that can create jobs, bring about fairer wealth distribution and implement a more equitable tax system, a model that will promote social cohesion and stability not division. We must have a new economic policy to deliver such change he argues. We have to end the austerity policies that have hit working people and do nothing to revitalise the economy. We also need to articulate new ideas for state intervention in the economy; the old post-war nationalised industries did not work as efficiently as they could have done, and a centralised state-owned system as in the old Soviet Union is certainly not the answer either.

McDonnell has asked his Economic Council to look at the role of the Treasury, HMRC and judge whether it is fit for purpose, and he has called for a comprehensive tax review.

How can it be that the failed policies of the past are still dominating the political and economic debate? While he is very aware that we need a radical rethink, he also knows that we will have a fight on our hands to get the message across t the general public. That is the main challenge the Labour Party now faces.

Socialists should welcome his approach. In the past there has been a strong tendency on the part of all socialists to imagine that when the banks and the means of production are taken into public/state ownership, then everything will run smoothly. The lessons from the socialist countries of Eastern Europe are that that is far from the case. There the complete abolition of private enterprise and the centralisation of decision-making led to a stifling of initiative, bureaucratisation and widespread inefficiency. State ownership of itself is not the solution. Rather, what is needed is strong state intervention to regulate working and employing practices as well as a robust, adequately staffed tax regime that is fair without stifling private initiative. There should be roles in our society for public, private and co-operative forms of ownership. Large and multi-national corporations can be reined in if such measures are put in place and rigorously implemented, with a tax system that prevents the accumulation of untold wealth by a few individuals. The state should be there to set the rules, regulate and tax in ways that ensure a fairer system, not to function as chief employer and micro-manager. Hopefully, the result of McDonnell’s consultation will come up with the necessary ideas to begin the necessary transformation of our economic system and begin building a fairer society.