Corbynomics and socialist strategy

Corbynomics and socialist strategy

Ever since Jeremy Corbyn emerged as a potential victor in the election for the leadership of the Labour Party, I have argued that socialists have a duty to orientate towards the Labour Party[1]. The alternative is to stand aside from the fiercest struggle in decades for the future of the working class movement in Britain.

Engagement by socialists with the politics of the Labour Party should consist of two principal activities. The first of these is to stand shoulder-to-should with Corbyn’s leadership to defend it from the relentless onslaught of the Labour Party right who, working in close alliance with the British establishment and the whole capitalist class, want to destabilise Corbyn and then remove him.

The anti-Corbyn forces recognise the potentially transformative impact of a Labour leadership that rejects austerity, that supports workers and communities in struggle, and that seeks internationally – against the most obdurate resistance as demonstrated in the parliamentary vote on bombing Syria – to break with great power geopolitics.

The second category of activities is to begin the essential task of drawing up a programme for socialism. For the first time in a generation we have the opportunity to present our politics to the whole labour movement. If we are successful we could make the ideas of socialism part of the commonsense of the working class – the precondition for putting our politics into practice.

Developing a programme that puts the objective of socialism on the table will involve challenging preconceptions about the constraints under which socialists currently operate that are shared by Corbyn, his closest allies, including John McDonnell, Shadow Chancellor of the Exchequer, and many (probably most) socialists – even those who organise outside the Labour Party. It is this conundrum – the gap in ambition between the vision of a socialist society and the limited politics for which most socialists actually fight – that I want to explore in this article.


In an article for The Guardian a couple of weeks ago, John McDonnell spells out the centrality of economic policy to the platform of the Corbyn leadership: “Jeremy Corbyn’s election as Labour leader was predicated on three key pledges. First: a new politics – a more democratic, engaging and kinder politics in both the Labour party and society. Second: a new economics, laying the economic foundations of a prosperous, fairer and sustainable society. Third: a new relationship with the world, based upon a foreign policy promoting mutual cooperation, conflict prevention and resolution rather than military aggression. These pledges are inextricably linked. And the second is absolutely integral to the whole.[2]

He goes on to insist that “If we are to build the fairer, more equal, more democratic and more outward-looking society that we so badly need, Britain must have a healthy, productive and balanced economy”. No politician is going to object to “a healthy, productive and balanced economy” and only a few to McDonnell’s criteria of the good society. The question is how are these sunny uplands to be reached? At the core of the shadow chancellor’s vision (as it was of Corbyn’s campaign platform) is a concept we are going to hear about a lot: “a state that can think and act strategically”.

What does this mean concretely? McDonnell explains: “We know this can be done in a modern society. Finland met its disastrous recession in the 1990s by transforming its economy from an exporter of lumber to an exporter of technology. At the centre of its transition it established the science and technology policy council, drawing on expertise from across business, science, and civil society.

“Labour in government will seek to do the same, establishing an innovation strategy with a clear mission to boost research and development spending and maximise the social and economic benefits from that expenditure. The OECD thinks a developed country such as Britain should be spending a minimum of 3.5% of GDP on infrastructure. A Labour government would exceed that commitment.

“At present companies are sitting on a £400bn cash pile. So we will also look to change the corporate tax system and work constructively with companies to give them incentives to invest wisely….

“…It’s time to look to the future: socialism with an iPad.”

These few paragraphs nicely summarise what McDonnell is trying to do. He is sometimes criticised among Marxists as a “left Keynesian”. And certainly the council of economic advisers he appointed contains come big-name economists who can broadly be labelled Keynesians: Joseph Stiglitz, Thomas Piketty, David Blanchflower, Ann Pettifor.

However, McDonnell’s response to the George Osbourne’s Fiscal Responsibility Bill caused consternation among many Keynesians. Keynesian policy is usually taken to involve the management of aggregate demand via deficit financing. McDonnell, on the contrary, initially proposed to vote for a law that would oblige the government to run a fiscal surplus over the course of the “economic cycle”. He later backtracked on this tactic, saying that while he had no intention of borrowing in good times to fund government spending on consumption items, he would “borrow to invest”. For McDonnell, investment trumps government manipulation of demand as the key objective.

The member of his council of economic advisers who McDonnell most regularly name checks is Mariana Mazzucato whose recent writings have focussed on the critical role of the state in encouraging technological innovation and strategic investment – especially in getting the information technology off the ground and helping companies such as Apple in their early days[3]. This is the vision of the “strategic state” boosting the level of investment around which McDonnell is seeking to build his economic alternative.

There is one group of Marxists in the Labour Party who have been providing consistent theoretical support for McDonnell’s approach. Socialist Action – often referred to as “deep entryists” after they reduced the public-facing evidence of their existence to a minimum in response to the Labour Party purges of the 1980s – have worked closely with Ken Livingstone. They allegedly provided many of his closest advisers during his two terms as London mayor. Simon Fletcher (who may or may not be a member of Socialist Action) was Ken Livingstone’s chief of staff, then Ed Miliband’s trade union liaison officer and is now chief of staff once again, this time in Jeremy Corbyn’s office. Other key players in Ken Livingstone’s former team (making no claims about links to Socialist Action) who have been recruited by Corbyn include deputy chief of staff, Anneliese Midgley, and director of policy and rebuttal, Neale Coleman.

But leaving political gossip aside, what is significant for the discussion of economic policy is an entirely independent and long-standing initiative of Ken Livingsone’s, the Socialist Economic Bulletin[4]. This was launched in the 1980s with Socialist Action’s leader, John Ross, as editor and principal writer. These days it is an online journal and Michael Burke is its most prolific contributor.

The SEB has long advocated an economic policy that focusses on raising the rate of investment. An article by Michael Burke makes the case: “The level of investment in the British economy was £295 billion in 2014, exactly the same as the pre-crisis level of 2007. But the economy is actually larger 4.2% larger (keeping pace with population growth, but no more than that). Therefore investment is declining as a proportion of GDP. Consumption, not investment is leading very weak growth and this is not sustainable.

“Yet the profit level has also recovered and accounted for 37% of GDP in 2014, compared to 36.1% in 2007. So the Tory policy is not working. Profits have increased by 6.8% in real terms since 2007, but investment is unchanged… These are strikingly indifferent results for 5 years of austerity policies. The profit rate has only barely returned to its pre-crisis level and is well below profitability prior to this century. The same is true for business investment. Both of these are a recipe for continued slow growth.

“The profits recovery has been greater than the investment rebound. As a result, the extremely high level of uninvested profits has actually grown. The level of uninvested profits in the British economy was £355 billion in 2014, compared to £261 billion in 2007.[5]

Michael Burke and John Ross in articles for the SEB have argued that their approach is based on both Karl Marx and a correct interpretation of John Maynard Keynes.

At a conference of the Labour Assembly against Austerity on 14 November one session, which featured Michael Burke and Ann Pettifor on the platform, erupted into a heated debate about what exactly was the significance Keynes. Pettifor complained that at a previous meeting Ken Livingstone had declared he believed in a balanced budget. She had a “fierce disagreement” with this position of Livingstone and Burke. In fact their approach was “a variant of austerity”. Pettifor objected to distinguishing between government expenditure on consumption (which would include hiring teachers and doctors) and government investment – in technical terms, respectively, the current account and the capital account. It was wrong to draw any analogy between individual firms and the government. The government has a central bank – the banking system and money was “a great civilisational invention” – and government spending pays for itself through the multiplier effect.

Keynesian economist Victoria Chick, on the same platform, in her more emollient contribution – which the SEB has published[6] – tended to back up Burke’s take on Keynes rather than Pettifor’s.

What I am interested in, though, are the Marxist underpinnings of SEB’s and Socialist Action’s approach. I take it from Burke’s reference to relatively low levels of profitability that he gives proper weight to Marx’s discussion of the “law of the tendential fall in the rate of profit”. Certainly, he and Ross have no time for any variant of underconsumptionism.

The average rate of profit across an economy is important for two reasons. First, since the average rate of profit conceals a wide range of individual profit rates for different firms, when the average falls, or is relatively low for a prolonged period, those firms in the lower end of the distribution of profit rates are more likely to experience actual losses and either go out of business or incur heavy debt burdens. Low average profitability therefore increases economic instability and can precipitate economic downturns or crashes.

Second, the rate of investment (or rate of accumulation as Marxists tend to call it) is in part determined by the rate of profit. The rate of profit is a measure of the return capitalists receive on the capital they advance. The rate of investment is a measure of how much is additionally invested as a proportion of the same capital advanced in the previous production cycle. Since, in the aggregate, investment has to be funded from the profits (or more accurately the surplus-value) that the economy produces, if the proportion of profits that is reinvested remains constant, a fall in the rate of profit will lead directly to a fall in the rate of investment. And when the rate of investment falls, economic growth will be lower.

What Burke is saying is that as well as the profit rate being lower than “prior to this century” (although it has recovered from its level during the worst of the crisis), the proportion of those profits that are being invested in the British economy has fallen. So he concludes, “Jeremy Corbyn’s economic plan is a moderate, logical and fair one. Big business has the resources to fund the investment the economy needs and as they refuse to invest on a sufficient scale, government will use some of their resources in the interests of society as a whole. Workers and the poor should not pay for a crisis they did not cause. Jeremy Corbyn’s plan for state-led investment offers a way out of the crisis.[7]

Essentially, Burke proposes to raise the proportion of profits that are invested even in the face of a lower rate of profit.

Socialist strategy

But can a government strategy to raise the level of investment in the economy work? In other articles Burke makes it clear that he is not advocating “exhortations or bribes to the private sector to invest”. He sees the proposed Public Investment Bank “supported by measures such as [People’s Quantitative Easing] and changes to the tax system to penalise unlearnt income” as an instrument to “mop up the idle cash of the large corporations, and direct it for productive investment”[8].

However, in the light of history, a public investment bank plus a different tax regime for corporations seem inadequate tools for successfully changing the fundamental behaviour of British capitalism while mitigating against the effects of a relatively low rate of profit.

The Labour Party has set about tackling the same essential problem (the failure of private capital to invest in productive industry) twice in the post-war period. Harold Wilson in 1964, fresh from his “white heat of the scientific revolution” speech, established the Department of Economic Affairs as an attempt to reduce the sweeping cross-government powers of the Treasury and launch long-term economic and industrial planning. French “indicative planning” was then seen as a success story and in part was the template for Wilson’s thinking. Led at the start by deputy PM, George Brown, economic planning British style never really got into its stride and the new department was wound up in 1969.

As for the alternative economic strategy that was incorporated into Labour’s 1974 manifesto, that did not survive Tony Benn’s demotion from the Department of Industry. It did live on as an alternative programme that Labour’s left could get behind. But, in both incarnations, the AES involved much stronger measures of control over private capital than McDonnell is currently proposing – strategic stakes by the state and planning agreements with corporations to actually direct the investments they made.

Certainly, both the 1974-70 and 1974-79 Labour governments confronted severe economic difficulties as the post-war boom came to an end and the economy then experienced a sharp downturn. But a Corbyn government will not have an easier ride, so a “moderate, logical and fair” economic plan is all too likely to meet the same fate.

An article on the Socialist Action website makes just this point: “Jeremy Corbyn’s situation is quite different to 1945. The US and Western European economies have passed through the ‘Great Recession’ into the ‘Great Stagnation.’ They have no room to make concessions even to their own populations without seeing capitalism’s strategic resources reduced still further…

“…Given these circumstances US and European capitalisms have little or no ability to attempt to deal with the situation by concessions either domestically or internationally. They are forced to rely internationally on military force and domestically to attack their own population.”

But the article then goes on to lament that superseding capitalism is not feasible: “[R]egrettably, the objective conditions to create socialism do not exist in Britain today – in the sense of taking out of private hands all the key parts of the economy. Such objective conditions for socialism would require a truly huge crisis of capitalism which does exist in some semi-colonial countries but not in Britain. Also for that reason the working class of Britain today, again regrettably, does not understand the need for or as yet want socialism. Any proposal for a Corbyn government that it should attempt to introduce socialism in the proper sense in Britain won’t succeed and would simply lead to losing contact with its own supporters… what is required for a Corbyn government is a left reforming platform. “

But if the economic basis for reformism no longer exists (as the article opens by arguing), why should the attempts of left reformists to “increase state investment by about 3-4% of GDP” succeed in “restart[ing] faster economic growth and therefore fund[ing] social programmes”[9]?

Socialist Action’s conception of the difficulties of actually doing anything about socialism is revealing of a number of flaws in the thinking of much of the left, but two very specifically: an economic determinism that links any move to socialism to economic collapse; and a definition of socialism that leans entirely on ownership.

In the absence of a socialist movement that talks about socialism, economic collapse is only going to lead to a reactionary regime that resorts to whatever measures are necessary to salvage the situation. That will probably involve extensive state control of the economy (as happened in all leading countries during the second world war). This will not be socialism or any form of workers’ state – the regime that emerged would crush any incipient working class movement.

The first step towards socialism – in the sense of creating a new mode of production in which the producers freely associate – must involve the working class takingpolitical control of society, ie, a thorough-going democratisation. Real democracy has direct implications for how the economy should be managed – private corporations disposing of society’s surplus are clearly inimical to democratic control.

A political revolution of this sort can only be made consciously by a working class that has been won to the case for socialism. And once the working class is convinced of that case, it will not be necessary to await capitalism’s final economic crisis before taking action. The problem is that if even socialists refrain from advocating socialism, how is the working class of any country going to even know what socialism is – let alone participate in building the political movement that is the prerequisite for breaking with capitalism?

That is why socialists should now engage with a Labour Party which is supported electorally by the majority of the working class and has direct links with the working class’s own combat organisations, the trade unions. But we need to do so openly as socialists and to join together to agree a socialist programme that meets the challenges we face.

[1] See ‘The Corbyn Phenomenon’, The Project, September 2015 ( and ‘Marxists and the Labour Party’, The Project, November 2015 (

[2] J McDonnell, ‘After the new politics, the new economics’, The Guardian, 20.11.2015

[3] M Mazzucato, ‘The Entrepreneurial State: debunking public vs. private sector myths’, London, 2013

[5] M Burke, ‘Why Corbynomics can succeed’, 29 July 2015: 

[6] V Chick, ‘Corbyn’s election: Rational economics starts here’, 30 November 2015: 

[7] M Burke, op cit

[8] M Burke, ‘Alternative Autumn Statements: Continued Tory Failure Versus Corbynomics’, 25 November 2015: 

[9] ‘After Jeremy Corbyn’s victory – the responsibilities of the British left’, 14 September 2015 (

The Money Changer and his Wife

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