Inside Story

Capitalism in the dock

Britain’s economic model has to change, and that may take another crisis

David Hayes 11 December 2018 2924 words

Cometh the hour? Labour leader Jeremy Corbyn (centre) with shadow home secretary Diane Abbott (left) and shadow chancellor John McDonnell on the final day of this year’s party conference in Liverpool. Paul Ellis/AFP/Getty Images

A single person and a family, neighbours in an English city. The first survives just above a thinning welfare safety net on a daily hamster wheel of juggling jobs, chasing more, and coping with housing costs, amid the attrition of an endless cycle of bills, stress and insecurity. The adults in the second, nominally better off, face a different mix of worries: shielding kids from onerous debt, caring for parents, a pricey commute, a fear of falling.

The shrinking provision of local libraries, post offices, banks, buses and other local services, while unwelcome to both, may affect them unevenly. But they are alike in feeling bound to an economic juggernaut. And whether huddling at the stop or seething on the platform, the same news trickles down from the stratosphere: of consumer rip-offs by energy companies or pension funds, and of unimaginably high salaries and bonuses being paid to the system’s embedded insiders, often far beyond discernible achievement or even in the teeth of failure.

Such experiences, today those of millions, do much to explain the viral spread of the notion that Britain’s capitalist model is broken and in need of thorough repair. Indeed this precise sentiment, give or take the odd word, now joins more demotic views of the Brexit-is-a-mess and all-politicians-are-useless kind as a staple of public dialogue. A pillar of the stratosphere’s liberal-left wing since Will Hutton’s influential The State We’re In came out in 1985, the economy-is-broken viewpoint gained new life in 2008–09 and, as the emergency phase of the financial crisis gave way to the hard grind of retrenchment, took on its current status as the common sense of the age.

Tune out the unremitting Brexit buzz, hard though that is at present, and the most pervasive story being told today is about British capitalism’s failure. Moreover, it’s as likely to be heard from a Conservative politician as a Labour one, from the Financial Times as the Guardian, from a business owner as a trade union leader, or from the archbishop of Canterbury as an Oxford or UCL scholar. It looks and feels like an idea whose time has come, one that even Brexit’s agonies can’t long still. That is both a triumphal endorsement for radicals who long upheld it and a reprimand to centrist and rightist latecomers. And in bridging these divides the fresh consensus also has a potent self-reinforcing effect.

Yet this intellectual and political shift long proved elusive. Even as the brute facts of a post-crash economy churned the everyday social grain, upending lives and narrowing horizons, any leftward move in public attitudes and voting patterns was well hidden. The 2010 election returned the Conservatives to power after thirteen years, albeit in a coalition, and the party went on to win outright in 2015 against a Labour Party whose leader, Ed Miliband, had tacked to the left, explicitly disowning Tony Blair and Gordon Brown’s legacy. Jeremy Corbyn, even more deep-dyed red than the cerebral Miliband, then took over, but for two years made no imprint. A renascent anti-capitalism, much heralded in the wake of the financial implosion, looked either stillborn or (the left’s enemies crowed) defunct.

When did that change? A hive of publications, polemics and initiatives to renew economics as a discipline (some student-led) had planted seeds. So indeed had years of pained self-examination by enlightened pro-capitalists, the Financial Times paramount. The Brexit result, ostensibly about Britain’s membership of the European Union, vivified the debate by belatedly amplifying the social distress in “left behind” areas, much as France’s “yellow vests” upsurge is doing today. Corbyn’s meteoric 2017 campaign then made the political breakthrough, with Labour’s close second in vote share making the party’s agenda — including state-led investment, banking and ownership of utilities — a tenable preview of Britain’s future.

By contrast, Theresa May’s hollow victory exposed, among other failings, her inability to offer a plausible argument about Britain’s problems, economic or other. This contrasts with 2010–16, when David Cameron and his influential chancellor George Osborne framed spending cuts as part of a long-term plan in the national interest, and the price of Labour’s excess.

That duopoly collapsed with Brexit, as Cameron abruptly resigned and Osborne was sacked with relish by his cabinet adversary, May, who had emerged from her home office cocoon to take the leadership. Many voters welcomed her quiet style as fitting the confused post-referendum mood, and her pledge to address society’s “burning injustices” by serving those “just about managing” seemed to hint at a break with the strategy of her tarnished predecessors. But her pledges fell short of a clear, costed and eye-catching economic case, a lack that her election fiasco made painfully obvious.

In the equalising conditions of a campaign, it turned out that Corbyn’s Labour did have a coherent tale. It assailed the years of stringency since the banking bailouts (“austerity is not an economic necessity, it is a political choice”) to portray a burdened society groaning for release and pledge that Labour would build an economy that works “for the many, not the few” (the demon Blair’s slogan, but let that pass). If the party was evasive on Brexit, that only helped it seize the domestic ground and highlight Tory schisms on the matter. In giving shape to what people were living through, the story hit a resounding chord.

Corbyn’s feat in taking Labour so near to power discomfited many at the higher end of business and finance. An insurgent left-winger putting a privileged elite on notice was an electrifying new alignment of electoral politics with a restless zeitgeist. It’s also true that London’s anxious City networks had themselves been hosting reports and conferences about what’s wrong with capitalism and what is to be done. In this sense at least, old and new Leninists were already on the same page. But Labour, with shadow chancellor John McDonnell emerging as a key figure, was forcing the pace. In the shadow of his menacing reassurance, the very language of an embattled corporate sector spoke of a pre-emptive re-education program.

A few examples illustrate the point. At a conference of the FT City Network in October 2017, four months after the election, Nigel Rudd of aerospace engineers Meggitt said that capitalism had been “hijacked by the management class” and “made it possible to become seriously rich without taking any financial risks,” concluding: “The general public instinctively resents this and will take revenge on a system that they see as unfair.” Carolyn Fairbairn, head of the Confederation of British Industry, referred to “a fixation on shareholder value at the expense of purpose, and the toxic issues of payment of tax and executive pay” as among capitalism’s “wrong turnings” that “stand in the way of redemption.”

Robert Scannell, ex-chair of Marks & Spencer, said companies’ and investors’ short-term focus meant capitalism had “lost its way,” while Anne Richards, chief executive of fund manager M&G, warned that “we will see capitalism rejected unless it finds a way of fundamentally addressing [current] anxiety.” A “reboot” or at least “evolution” was needed, all agreed.

Justin Welby, the ex–oil industry executive who now runs the Church of England, had just signed off a preliminary report alongside the heads of McKinsey, Siemens UK and twenty-one other luminaries for the centre-left Institute for Public Policy Research, or IPPR, which noted the UK economy’s “deep and longstanding weaknesses.” Their commission, set up after the Brexit vote in mid 2016, concluded its two years’ work with Prosperity and Justice: A Plan for the New Economy. “The economy is not working for millions of people and needs fundamental reform,” is the core message of its 338 pages. A “rebalancing of economic power” is needed to “redress injustices and inequalities,” which can only be done if “economic justice [is] ‘hard-wired’ into the way the economy works.”

A week later, on 5 September, the archbishop returned to the theme with a visionary speech to the Trades Union Congress, where he chided a low-pay economy “that allocates rewards through power not for labour,” instancing the “economic injustice” and “oppression of the employed” that act to “diminish human dignity and treat labour as mere resource, like capital.” The gig economy and zero-hours contracts were, said Welby, the “reincarnation of an ancient evil.”

He did not name the system, as Rowan Williams, his predecessor as archbishop of Canterbury, had in a 2016 lecture decrying “capitalism’s tendency to reduce everything to commodity and property.” The days are long vanished when the Anglican Church could jokily be referred to as “the Tory party at prayer,” or indeed any business organisation as the Conservatives’ natural ally.

Such top-drawer sources, spicing censure with a degree of contrition, find an echo even among cabinet ministers learning warily to deploy the obligatory “r” word. The lugubrious chancellor Philip Hammond now wants to “reinvigorate capitalism for the digital age,” while David Lidington, speaking to Onward, an optimistic new Tory outfit, goes with the sweep of history to favour a “responsible” version.

Much fiercer is the right-leaning press, where columnists have long charted where and how the British economic approach is failing. The Telegraph’s “campaign for capitalism,” launched in October, heralded more despair than cheerleading in its own pages. A gigantic pay deal at the housing company (or land bank) Persimmon, says business editor Ben Wright, “is the kind of incident that risks bringing the whole system into disrepute,” asking: “Who will save capitalism from the capitalists?” Thanks to “rapacious [corporate] behaviour and egregious executive pay,” says his Daily Mail counterpart Alex Brummer, “capitalism in Britain is making itself a prime target for Jeremy Corbyn’s socialist creed.” Citing wealth inequality, wage stagnation and unaffordable homes as examples of the system’s “crisis,” the Times’s economics editor Philip Aldrick concludes that “the tide has turned against capitalism, and is sweeping in.”

Equally harsh verdicts in left-tilting papers, if from the same end of the social scale, adopt a more professedly bottom-up perspective. The “claim that Britain’s economic model is systemically unjust was recently deemed radical and extreme. Now it is indisputable,” says a Guardian editorial, while rising star Grace Blakeley of the IPPR — the think tank kicking away New Labour dust in its own Corbynite swerve — seeks a policy agenda that “challenges the hegemony of financial capital, revoking its privileges and placing the powers of investment back under democratic control. In doing so, we might just be able to move beyond capitalism altogether.”

From across the spectrum, the critiques overlap in their insistence on justice, their focus on inequality, and their ethical dimension. Reference to power-holders’ supercharged rewards plays a crucial symbolic role, not least when lubricated by evident greed and cronyism. More vivid in the public mind than the mechanics or statistics of the financial crash, such scandals have involved top figures in banks, privatised industries, quangos and companies — recently Persimmon and Carillion (a construction behemoth, liquidated in January with vast liabilities). At a time of widespread hardship, the actions of men such as RBS’s Fred Goodwin and Persimmon’s Jeff Fairburn are lethally effective in discrediting the economic order that encourages them.

There is, of course, latent tension between judging capitalism mainly on grounds of unchecked moral breach and viewing it as systemically flawed. In practical terms the one tends to alteration of culture and behaviour, and at most better regulation, the other (as highlighted in Blakeley’s words) to institutional and legal overhaul. But most genuine change requires both elements. In principle, this remarkable convergence on the defects of the British way might create momentum for a strategic focus on a core of agreed remedies.

For a mix of generic and Brexit-centric reasons, it’s not happening. A leaden prime minister and her drifting administration have neither the imagination nor the tools needed for such a large-minded effort. Brexit’s monopoly of the government’s energy and attention has left essential reform in troubled areas — housing, prisons, transport, health, social care, education, police and crime — ad hoc and under-resourced.

More broadly, the Brexit “mess” — as Peter Mares calls it in his on-the-button survey — is levering the divisions of the referendum into abiding polarisation, sucking any instincts for compromise from the political air. In this winner-takes-all political culture, the tightness of the 2016 vote and the all-round distress since then makes everyone in Britain a loser. The optimism that drives successful change is lacking, even when, as over capitalism, the need for it — and a consensus around much of its substance — is tangible. If this logjam continues, Britain is going to talk itself out of the job before getting started, with only a Geoff Dyer–style book to show for it: Fixing Capitalism for People Who Can’t Be Bothered to Do It.

Supporters of Corbyn’s Labour can justly reply: since the party leadership and our campaigning made it a headline issue, leading to the storming advance of 2017, being bothered is clearly our raison d’être. For them, continued economic insecurity vindicates Labour’s wager, and the next election can’t come soon enough, irrespective of Brexit’s turmoil.

The case may skate over the party’s poll ratings (at best, a small lead) and Jeremy’s (a bigger lag), as well as internal divisions and scandals. But it gains credence from the Tories’ neglect of what was once their flagship economic vessel: less capitalism as such — an idea rarely popular, and now in retreat — than a strong market economy with a social purpose. The Tories are competitive when their policy mix casts the individual and national interest into credible shape. Under the secretive May, they have nothing of the kind to sell.

Labour’s own shop window is packed, and the party is staying focused on its sole objective: winning power. What animates its leadership is the view that current uncertainties will produce tactical openings that can be bent to a strategic aim. John McDonnell’s calculation in particular is that Labour, at last in the left’s grip, its economic program popular, has a once-in-a-lifetime chance not just to reach government but to transform society. Through his lens even Brexit fades in gravity beside a crisis of capitalism that must not, at any cost, go to waste.

With the case for economic remodelling now clinched, the test is whether a bullet point version can win at the hustings and from day one be implemented as the people’s will — in effect, by a government of revolutionary democrats. A Corbyn-led administration — though the steely McDonnell is infinitely more plausible as a Robespierre — would banish the ancien régime and succeed Clement Attlee’s and Margaret Thatcher’s as the third genuinely radical government in Britain’s post-1945 history.

That Labour’s diagnosis of the economy’s ills recharged the post-crash debate, and continues to drive it, is already some achievement. The party’s 2017 manifesto (promising more houses, health funding, wealth taxes, student grants, free childcare and more) was in equal measure bold and profligate. McDonnell’s recent upgrade promises to put workers on company boards and grant them a mandatory 10 per cent of equity, and to extend union rights to gig merchants.

McDonnell’s refrain echoes “the worse, the better” of the nineteenth-century Russian writer Nikolai Chernyshevsky (both men studied for the priesthood): “The greater the mess we inherit, the more radical we have to be; the greater the need for change, the greater the opportunity we have to create that change.” The implicit admission is that Labour’s inheritance, if it gets so far, will also limit what it can do. McDonnell, whose hobby, listed in Who’s Who, is “generally fermenting the overthrow of capitalism,” knows well Marx’s observation that people “make their own history, but they do not make it as they please [or] under self-selected circumstances, but under circumstances existing already, given and transmitted from the past.”

The space between McDonnell’s pledge and Marx’s caveat gives today’s revolutionary democrats sleepless nights. At vital moments on the way to power, they will need fate (timing, luck, human factors) to smile on them. Another major transnational financial shock, inevitably hammering a vulnerable UK, is in that category. This Labour leadership would view it as ideological vindication and political windfall: a golden chance to make its changes irreversible.

Local tremors are now a daily event. Brexit has at last gone critical, the House of Commons having prised it from Theresa May’s dreary grasp. The possibilities include a Tory coup, another referendum or general election, a no-deal exit, staying in the European Union or a halfway house, party schisms and realignments. All are hostage to the desperate, self-preserving deal that May is trying to get past her party, the Commons and the people. Her late choice to pull a vote scheduled for 11 December, after devoting every sinew to it in face of certain defeat, confirms the vacuum of political judgement and impulsion at the heart of government.

No Brexit outcome can by itself solve Britain’s economic superstress or give it a shot of ideas and energy. But something has to give in both areas. So wretched is May’s version of Brexitannia as permanent limbo that the mere glimmer of a new venture is curative, not on behalf of a particular result but for the lost thrill of a true contest of politics and ideas — free of tumbrils, all being well. Jeremy Corbyn and John McDonnell may yet be coming for us all. •