Mike Haynes reviews Economics for the Many, a new book of essays edited by Labour Shadow Chancellor John McDonnell.
Economics for the Many is the book Theresa May misquoted in the House of Commons to ridicule Jeremy Corbyn and John McDonnell, the shadow chancellor. ‘Endorsed by more lies from the UK Prime Minister’ is not a bad advertising slogan. But is it worth buying and reading?
The answer is yes. Edited and introduced by McDonnell, it has sixteen short and often sharp chapters that take us through what is wrong with modern Britain. Only one is by a politician, Barry Gardiner MP – the shadow trade secretary – it is one of the few irritating chapters.1 But it is also a profoundly unsatisfactory book. This is partly because of what it leaves out: there are no chapters devoted to issues like health, education, social welfare and the specific policies needed. But it is also because there is little attempt in the areas that are discussed to show in any detail what viable policies might look like. This points to the deep problems that exist in Corbyn’s Labour and it is helpful to read it to see these too.
This is not a manifesto for revolution. The word socialism is used a few times (it did not appear in the 2017 Corbyn manifesto at all). But the general aspirations are vague – “radically fairer, more democratic, and more sustainable in which the wealth of society… shared by all”. Who could disagree?
The Corbyn-McDonnell programme is about radical reform within the system – not just the capitalist system but the Parliamentary system and the wider system of government, and in the main governance, we have. It is about reform within the electoral cycle, in which a Labour government might be in office one year and out the next. The promised social movement has not been forthcoming and it is not clear how, apart from mobilising for electoral support, it is supposed to fit in should it appear.
Let’s accept this. What would a viable programme look like? My principles would be simple. There needs to be a bigger goal, but in the shorter term clear choices have to be made. You should engage as many people as possible in making these choices, creating structures that might survive. You should urge people to support getting the biggest economic, social, environmental gain for the smallest economic, social and environmental costs. People also need to see positive outcomes materialising in a shorter time frame. It is better to do simple things well than complicated things badly. And you need to beware snake-oil salespeople and projects with huge costs, e.g. consultancy which drains time, energy and resources.
McDonnell has initiated road-shows around the country. But the engagement is limited and more about problems than solutions. And there are some pretty big holes. Not the least of these is the question of what can a radical Chancellor of the Exchequer do working within the system? Is he the driving force or simply the guy who finds the money for other people’s ideas?
Take the major issue of principle. How should a government spend and tax? This is hardly touched on here. Modern Monetary Theorists argue for an extension of basic Keynesian arguments. So long as there is spare capacity in the economy, a government can spend more than is usually allowed and markets will tolerate this. It can recoup spending in higher tax receipts as the economy expands. This also means that you can sidestep the usual constraints imposed by the central bank and the treasury. In this book Ann Pettifor, who is always interesting, comes closest to this view in her chapter on a ‘Green New Deal’. Is this theory right? I will be truthful – I cannot decide. But McDonnell, his team and their advisers have decided: they think it is wrong. They see greater limits to what can be spent. They support the Fiscal Credibility Rule which is set out by Simon Wren-Lewis in his chapter. They want to work through and with the Bank of England and the Treasury.
But you then have to be sharper in your spending and taxing plans. You have to have a way of doing what previous governments have failed to do – taming the Treasury-Bank of England nexus. Take taxes: even the Monetary Theorists think they are important. One of them, Richard Murphy, wrote a book called The Joy of Tax. Britain is a European outlier as a low-spend, low-tax country. How can we tax more?
Prem Sikka, a leading critic of UK accountancy, writes about two ways here. Firstly, we can close “the tax gap”. This is the gap between what should be paid and what is. Yet it is hard to close. For example, part of it is lost Value Added Tax (VAT) payments. These are big because we all get caught up in it in one way or another, whether by paying people off the books or buying stuff from dodgy places online. The second is dealing with tax avoidance – the money that goes to tax havens. More could be done by financing HM Revenue and Customs better to bring global companies to heel but this will involve long legal fights. It will also need agreement on international action to change accountancy rules.
The third way is to raise more by increasing taxes and changing their nature. This is about a lot more than the top 1, 5 or even 10 per cent. It is about increasing the role of progressive direct taxes and diminishing regressive indirect ones. The UK is one of the most centralised, advanced countries but who has the courage to give regions and localities the ability to tax more? The chapter on the regions recognises the importance of ‘fiscal devolution’ but Labour’s tax ideas seem painfully thin and far from courageous.
Then how much do you spend and how do you spend it? A number of authors talk of what needs to be spent but there is no sign of coherence and priorities. Strikingly just as the 2017 Labour manifesto was weak on the issue of welfare spending and levels so it is still omitted here as a subject in its own right, save for the suggestion that parts of it be redefined as ‘social investment’.. Yet we are supposed to believe that as a matter of justice and politics ‘the poor’ are at the centre of Labour’s strategy.
Throwing more money into the existing system is dangerous. If you suddenly double the budget of your boss how would they spend it (and do you get a say)? If they have no idea of their priorities there will be a problem. They will ask: how long have I got this for? If the answer is ‘not sure’ they will want to spend it quickly so long term investment is out. What about staff? Paying people more might reduce your staff turnover but if you can’t be certain that funding is guaranteed your best bet may be more temporary staff. In fact you will probably end up wasting the money just to get rid of it before you lose it. This is what happened to part of New Labour’s genuine increases.
Take mental health. When the current government said we will spend more, the professionals exploded – we need to talk about how! Prevention or cure? Hospitals or community care? Emergency care or long term? Everyone reading this will be able to raise questions like these in their own areas – where is this debate and the space for our input?.
Suggestions, when they are made, are modest. There is a discussion of what we can learn from the experience of progressive cities – for example Preston. I am all for doing everything that can be done. There is merit in local institutions trying to trade locally but there is a scalability problem and the difficulty of the fallacy of composition: if a few do it they can benefit from those that do not. If we all do it then the gains are likely to be diminished. I am for creative ways of raising the ownership issues. Let us have, as is argued here, more workers co-operatives, mutuals and different types of banks. But that leaves the major part of the economy outside of these reforms. What happens when companies are owned globally and part of longer supply chains? One contributor asks this but most do not want to go there. Too often there is a sloppiness on detail which even extends to the editing of the book.2
Then there is the question of the starting position. The chapters make clear that the economy is in a deep structural mess. Its performance and productivity is weak. It will worsen in a crisis and Brexit (the book does not want to go there) is destabilising things even more. But the issue of even a vague hundred-day programme for change is not in the open even though it is normal for the opposition to discuss this with the Civil Service prior to an election.
McDonnell ends his introduction by saying that “a better world is in sight”. We need to win the argument to get there and inspire people. Of course. But discussing how you are going to cross the river and climb the hills you can see immediately ahead might give confidence to people that they can cross the mountains that are looming in the near distance too. Reading this book can kindle our aspirations for change but it also helps to show how far Labour has to go to achieve any of them.
1 Corbyn and McDonnell have shown immense resilience but the performance of the shadow cabinet as a whole has been lamentable. Some of them seem simple opportunists and not very effective ones at that. Gardiner is supposed to be a cut above the rest and a very clever person. His footnotes show off his reading. Sadly his argument seems to me to be inconsistent and, given his role, as shadow trade and climate change minister, about obfuscation and misdirection on key issues.
Economics for the Many is published by Verso