The institutional turn: Labour's new political economy.
| Author | Guinan, Joe |
| Position | EDITORIAL |
As Shadow Chancellor John McDonnell likes to say: 'Another world is not just possible, it is within reach'. Largely unnoticed by its enemies within and without, the Corbyn project is cohering around a programme for transformative change that could form the basis for a new political-economic settlement in Britain. Building on popular elements of Labour's 2017 manifesto, For the Many Not the Few, and encompassing cutting edge thinking from the Alternative Models of Ownership report and beyond, the leadership is assembling the tools and strategies to enable a Labour government to pursue a bold transformation of the British economy organised around ownership, control, democracy, and participation. (1) Rolled out across the whole economy, this could amount to a radical programme for dismantling and displacing corporate and financial power in Britain. It could constrain and undermine the social and economic basis of the neoliberal order, just as Thatcher destroyed her opponents' strength by liquidating the public sector, shuttering entire industries, smashing the trade unions, and disinvesting in working class communities.
This 'institutional turn' in Labour's thinking under Corbyn is a direct response to the magnitude of the challenges now confronting the country. These deepening problems--wage stagnation, underinvestment, low productivity, widening inequalities of income and wealth, not to mention the looming effects of climate change--are not simply accidental or the result of poor policy choices, but the predictable outcomes of the basic organisation of the economy. The institutional arrangements at the heart of today's British capitalism--concentrated private ownership, corporate dominance, and the overweening might of London-based finance capital--together form a powerful engine for the extraction of value and its distribution upwards. It is this basic institutional design that drives the outcomes we are seeing in terms of crumbling public infrastructure, social atomisation, environmental degradation, and a widespread sense of popular disempowerment. Our current system is programmed not to meet citizens' needs but rather to steadily concentrate the lion's share of economic gains in the hands of a small elite. More than half of all wealth in the United Kingdom is now held by the top ten per cent, with around twenty per cent held by the top one per cent, and inequality continues to grow. (2) If we are serious about addressing real economic challenges then we need a different set of institutions and arrangements capable of producing sustainable, lasting, and more democratic outcomes--an economy 'for the many not the few'.
Remarkably, the Labour Party is now promising to deliver just such fundamental change. Jeremy Corbyn's leadership has opened up space for a far broader political conversation on the economy than has been possible in decades. 'Co-operatives, shared ownership, and workplace democracy', John McDonnell has stated, 'all have a central role to play here'--'here' being at the heart of what he terms 'the new economics'. (3) Corbyn, for his part, has promised 'decisive action to make finance the servant of industry not the masters of all' and called for local councils to be given more freedom to run utilities and services in order to 'roll back the tide of forced privatisation' and allow communities to shape and secure their economic future. (4) Not since the 1970s and early 1980s--when the Party was committed to bringing about what Tony Benn termed 'a fundamental and irreversible shift in the balance of power and wealth in favour of working people and their families'--has Labour put forward as bold a plan for the transformation of Britain. (5) Instead of the extractive and concentrating forces of corporate capitalism, the emerging new political economy is circulatory and place-based, decentralising economic power, rebuilding and stabilising regions and local communities, allowing for the possibility of real democracy and participation, and providing the long-run institutional and policy support for a new politics dedicated to achieving genuine social change. (6)
It's easy to miss just how radical all this really is, in the original sense of getting at the root of the matter. When it comes to economic fundamentals, there has been a decades-long deficit of new thinking and ideas on the left. Where they have not capitulated totally to neoliberalism, most social democrats have been splashing around far downstream from where the real action is, seeking a way forward through 'tax-and-spend' transfer policies and modest redistribution. This has been true even of some of the most creative interventions. Thomas Piketty, for instance, in his best-selling book Capital in the Twenty-First Century--a masterwork of statistical analysis of capital accumulation that demonstrated capitalism's 'fundamental force for divergence'--largely avoided grappling with the deep structural determinants of who owns capital, focusing instead on 'regulating capital' via a global wealth tax. But given that returns to capital are increasing at the expense of labour's share, and that automation threatens to accelerate these trends, it's only natural that we should be looking at broadening and democratising ownership. (7) Nobel Laureate Robert Solow commented to this effect during a 2014 panel on Piketty's book in Washington, D.C. Among the 'things we can do', Solow observed, 'democratising the ownership of wealth is perhaps the most obvious'. Ultimately, as has become increasingly clear, a truly impactful alternative left strategy must go after capital itself.
The Labour Party started to face up to the limitations of 'merely redistributive' economic strategies under the leadership of Ed Miliband, whose thinking on predistribution offered at least the beginnings of a radical reinvention of social democracy. (8) Miliband's efforts to shift Labour's thinking were hampered by opposition from excessively cautious elements in the Party, and ran headlong into the lack of left-wing 'intellectual infrastructure' beyond the leader's office, something with which (as our colleague Christine Berry has pointed out) the Corbyn project is also contending. (9) In this sense, Miliband was ahead of his time--and it's encouraging to see more ambitious institutional thinking now coming from sources such as the Institute for Public Policy Research (IPPR), with ideas around the transformation of corporate governance and the creation of a citizens' wealth fund emanating from the promising Commission on Economic Justice. (10) Of course, there was always an appetite for more radical political economy among theorists further to the left, exemplified in the continuing work of Hilary Wainwright or in Corbyn adviser Andrew Fisher's 2014 book The Failed Experiment. (11)
Today, however, the need for far-reaching solutions to pressing economic difficulties is finally being recognized more broadly. Radical approaches to economic thinking are issuing from the centre-left, as well as from the Corbyn camp. As Daniel Chandler points out in this issue, Rachel Reeves' work on The Everyday Economy differs from McDonnell's 'new economics' in its conceptualisation of the importance of work and in its communitarian orientation. Yet there are striking similarities with the Corbyn approach in her...
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