It has been dubbed “Corbynomics”, a tribute to the best-seller Freakonomics by Stephen Dubner and Steven Levitt, which spawned a string of something-nomics books and columns. But the economic policies espoused by Jeremy Corbyn belong to a much longer tradition of writers and thinkers seeking an ideal human society – egalitarian, in which basic needs are satisfied, where people contribute according to their abilities, and where those who are struggling are helped along the way.
The theme goes back directly to the fictional island society in the Atlantic imagined by Sir Thomas More in his book Utopia in 1516, though arguably he was picking up earlier Christian and pagan traditions. More recent attempts at describing such societies include Edward Bellamy’s Looking Backward, published in 1888, about an idealised Boston in the year 2000, and H. G. Wells’ A Modern Utopia, published in 1905.
Aldous Huxley’s Brave New World and George Orwell’s 1984 you could see as anti-Utopian novels, describing what happened when such societies went wrong. Nevertheless, the idea that governments can engineer, if not an ideal society, at least a better-run one is deeply seductive. That, I think, explains the undoubted appeal of Jeremy Corbyn’s economic policies – particularly to people too young to remember Britain in the 1970s, when the Labour government attempted some elements of the policies he now advocates.
His aim, set out in his economic manifesto The Economy in 2020, is simple: “Labour,” he writes, “must create a balanced economy that ensures workers and government share fairly in the wealth creation process, that encourages and supports innovation in every sector of the economy; and that invests in skills and infrastructure to build an economy that is more sustainable and more equal.”
What could be wrong with that? The trouble – or appeal – of his ideas comes in the detail. Several elements, set out in that paper or made in recent speeches, include a partial reinstatement of the famous Clause Four of the post-war Labour government on nationalisation. A renationalisation of the railways and a possible part-nationalisation of the energy companies. There is also the threat that further sales of government assets, such as Royal Bank of Scotland shares, would be reversed either without compensation or with any profits people had made on their purchases confiscated.
Another element is a return to a much more redistributive taxation. He described the return to a 50 per cent top rate of income tax in a recent speech as “very modest”; the message in that manifesto is that he would want to go much further. Corporate taxes would be increased. In the paper, Corbyn said that tax reliefs and incentives for business cost £93bn a year, “money that would be better used in direct public investment”. Such funds could be directed to a National Investment Bank to invest in infrastructure and hi-tech industries.
It was the other potential source of funding for investment that has caused the greatest waves: the idea that the Bank of England’s quantitative easing should be used for this purpose. “Quantitative easing for people”, as he puts it.
That plan was put forward by Richard Murphy, Corbyn writes, “one of many economists making that case”. That leads into the issue of just how many economists do support these plans. More than 40 wrote a round robin letter to The Guardian arguing that his policies were not extreme but were supported by many in the economics profession. The response was a letter by 55 economists to The Times stating that his policies would be deeply damaging. It would be invidious to go through the two lists name by name, but it is fair to observe that the second lot were situated at rather more highly respected institutions than the first, and included several high-profile opponents of the economic policies of both the coalition and the present government.
There are two broad lines of criticism that you can make of Corbynomics. One is that these policies have been tried in the past and rejected because they have, as that second group of economists argued, proved damaging. The other is that they require an extremely authoritarian state.
On the first, take the idea that the tax system should be more redistributive, as it was in the 1970s, when the top income tax rate on earned income was 83 per cent. The tax system appeared more redistributive because tax rates were more progressive, but actually they were less so partly because the well-paid took a much smaller proportion of their income in salary and more in expenses. This was the period when the company-car boom took off, as people were given cars and free petrol instead of cash. The top 1 per cent of earners contributed just over 10 per cent of income tax; now that figure is nearly 30 per cent.
Or take the idea that QE should be used to fund a National Investment Bank. There are lots of problems here. One is that the direction of business investment in the ’70s proved a disaster: governments backed losers, not winners. And the proposal misunderstands how QE works: the Bank of England is buying government stock – i.e. lending to the government – not helping the banks instead of people.
But, for me, the greater objection is not that Corbynomics would be damaging, or even that it ignores the progress made in cutting inequality (according to the Institute for Fiscal Studies, absolute poverty declined from 34 per cent of UK families in 1997 to 16 per cent last year). Rather, it is that the proposals are deeply authoritarian.
A government that nationalises without compensation? One that directs business investment? Corbynomics might not be truly Orwellian, but it does reflect government omniscience. As the Labour MP Douglas Jay wrote in 1937 in The Socialist Case: “The gentleman in Whitehall really does know better what is good for people than the people know themselves.”
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