As part of the election campaign, Boris Johnson, Jeremy Corbyn and Jo Swinson recently addressed the captains of industry at a conference of the Confederation of British Industry in London. Swinson asserted that the Lib Dems were the "natural party of business" because they want to stop Brexit. Johnson, meanwhile, promised tax cuts for business as well as “stability”.
“Let’s not beat around the bush, big business didn’t want Brexit,” stated Johnson. “You made that clear in 2016 and this body said it louder than any other…But what is also clear is that what you want now — and have wanted for some time — is certainty."
Big business fears
Big business is certainly alarmed by Brexit. Around 50 per cent of UK exports go to the EU. With Johnson’s deal, the economy could suffer a £70bn hit, according to the National Institute of Economic and Social Research. It claims that GDP in ten years would be 3.5 percent lower than if Britain were to remain in the EU. The economy is estimated to already be 2.5 percent smaller now as a result of the Brexit vote.
Jeremy Corbyn, on the other hand, made a speech outlining reforms to create apprenticeships in green industries. He added that business had “so much to gain” from a Labour victory. While the richest would pay more in tax, there would also be “more investment than you have ever dreamt of”.
The Labour leader continued by saying that, while he understood business’ caution about Labour’s nationalisation programme, he said it was “not an attack” on the free market. Rather, Corbyn said, these nationalisation plans would put the UK in line with European neighbours, where key utilities and transport were in public hands.
This was an attempt by the Labour leader to placate big business. But big business will not be fooled by soothing words. They are only interested in one thing: their profits.
The capitalists do not trust Corbyn because they fear the real pressures that lie behind him - namely the radicalised ranks of workers and youth. While big business is not entirely happy with the maverick Boris Johnson, they fear even more a left-wing Labour government under pressure to deliver for working people.
Crisis of British capitalism
The capitalist class needs a strong government to protect their interests. After all, the future looks very bleak for British capitalism. In the second quarter of this year, productivity in the UK contracted at its fastest rate for five years. This follows a decade of stagnation since the 2008 slump. Investment has been subdued since the middle of 2016, falling by 0.4 percent in the three months to June.
Britain is being left behind by its major competitors. The UK’s lack of productivity growth contrasts with an average of nine percent expansion for the 36 countries of the OECD. In 2016, UK investment remained pitiably low – 116th out of 141 countries in terms of capital investment as a percentage of GDP.
“Business investment collapsed in the wake of the referendum [and] that will weigh on productivity and wages for a long time to come,” explained Paul Johnson, the director of the Institute for Fiscal Studies.
This reflects a deep crisis for British capitalism, taking place at a time of slowing growth internationally. Ten years after the last world slump, Mervyn King, the former governor of the Bank of England warned that the world is on the edge of the repeat of another “financial Armageddon”.
The rich and the rest
At the same time, the super-rich have never had it so good. The Sunday Times Rich List shows Britain’s 1,000 wealthiest individuals and families are sitting on a record £771.3bn, up £47.8bn in just a year.
Meanwhile, about 14 million people in Britain are characterised as living in poverty – 8 million of whom live in families where at least one person is in work, according to the Joseph Rowntree Foundation (JRF), a think-tank.
Jeffrey Winters, a professor of political science at Northwestern University and the author of Oligarchy, said the drive to accumulate more wealth is insatiable. While ordinary people struggle to make ends meet, working tirelessly just to make meagre wages, the ultra-wealthy people “use their money to make money”.
This is the law of capitalism: to accumulate wealth and capital for the sake of accumulation. This results in extreme riches at one end, and extreme poverty and hardship at the other. Welcome to capitalism in the 21st century.
This is the question facing the Labour Party: how to put an end to this misery and give people a decent life. Can the capitalist system be reformed, or do we need to do away with it?
It is clear that Corbyn recognises the problem. He told Labour supporters at the launch of the election campaign: “We both know Britain is run for the selfish interests of the top 1 percent. Our government works only for the ultra-rich, our media is in their pockets, and our systems are rigged to make their lives better and ours worse.”
Under Corbyn, Labour has moved far to the left compared to the Blair years. Corbyn explicitly named Sports Direct tycoon Mike Ashley, large landowner the Duke of Westminster, hedge-fund boss Crispin Odey, and media mogul Rupert Murdoch as representatives of “a corrupt system”.
The 2017 manifesto was the most left-wing for decades. The 2019 manifesto - launched this morning in Birmingham under the title of It’s Time for Real Change - has proven to be even more radical.
It promises a fundamental shift in the balance of power and wealth towards working people. Speaking at the launch event today, Jeremy Corbyn proclaimed that it is “a manifesto full of popular policies that the political establishment has blocked for a generation”.
Included in the manifesto are: abolishing tuition fees; building 150,000 council houses and social homes per year; a windfall tax on fossil fuel companies; free fibre-optic broadband for all; introducing a £10 per hour minimum wage; banning zero-hour contracts; state-owned bus services; publically providing low-cost generic drugs; a 32-hour working week by 2030; introducing sectoral collective bargaining; free prescription charges; abolishing the Bedroom Tax; providing free NHS dental check-ups for everyone - and much more.
Furthermore, Labour will renationalise key industries, including water, the railways, Royal Mail, the National Grid, and the broadband arm of BT, Openreach. They would also do away with outsourcing and private finance initiative schemes.
Labour also promises to introduce “inclusive ownership funds” that would transfer 10 percent of the shares in every large company from shareholders to workers. The policy would apply to all UK-based companies with more than 250 staff.
In addition, a Labour government would commit to £400bn of new state borrowing, to help finance increased public spending, investment in infrastructure, and the creation of a million green jobs. This will be part of a Green Industrial Revolution to stop climate change, alongside a ‘housing revolution’ to tackle Britain’s housing crisis.
Socialist Appeal welcomes every single step forward and reform that benefits working people.
To gain victory, Labour needs to cut across the slander and lies of the capitalist media. It needs to cut across the scepticism about past Labour governments, which failed to deliver and prepared the ground for the return of the Tories. It needs to cut across the scepticism towards Labour councils, which have implemented brutal cuts. Above all, it needs to inspire millions with a socialist vision of the future.
A Labour government under Corbyn would be the most left-wing Britain has ever seen. But the threat posed by a radical Labour government would not be treated lightly by big business and the City of London. They regard Corbyn as a danger to their power and their system. While they could live with increased borrowing (especially for infrastructure), they fear that appetite comes with eating. Labour could be pushed dramatically to the left.
“The relatively modest renationalisation programme would likely be the start of widespread nationalisation and the undermining of liberal regulated capitalism that has brought so much prosperity to this country,” states Terry Scuoler, former chief executive, EFF, the manufacturers’ association.
Carolyn Fairbairn, director-general of the CBI, warned about the potential the consequences of a Labour government. “We look at the policies on the table and we have real concerns that they are going to crack the foundations of our economy.”
According to the Tory chancellor Sajid Javid, there would be “an economic crisis within months”. That depends on capitalist investors and the bond markets, who will strike when the time comes. They will first attempt to blackmail a Labour government, as in the past, to carry out ‘pro-business’ policies. If that fails, they will take further measures to undermine a Corbyn government by causing a flight of capital and forcing up interest rates.
Banks and corporations own most government debt (bonds). This can be used to pressurise governments.
Learning from history
According to Ann Pettifor, an economic advisor to John McDonnell, big business has nothing to fear. Labour will ultimately be pragmatic. “You just have to look at past Labour governments,” she says. “The party is prepared to work with business and the City of London.”
But that is precisely the problem! If Labour follows the road of past Labour governments and attempts to work within the confines of capitalism, it will end in shipwreck. We need to learn the lessons of past Labour governments in order to understand the way forward. Those who do not learn from history will be doomed to repeat it.
When Harold Wilson, a past Labour prime minister, attempted to introduce mild reforms, he was met with a furious campaign of resistance by the ruling class. Wilson later revealed the conspiracy to defeat the government by a strike of capital:
“I do not recall that he [the Tory leader Edward Heath] ever condemned the strike of capital by his friends in the City, designed to force the hands of a Labour government, designed to pressure us into Tory policies, designed to bring us down.”
Unfortunately, instead of publicly denouncing this conspiracy and mobilising the labour movement, Wilson gave in to this blackmail.
Other Labour governments have taken the same path. This is where the attempt to work within the capitalist system ends up. It is not a question of personalities or intentions. Where the economy is privately owned, it is not the government that dictates to the market, but the market that dictates to the government.
If Labour is to guarantee the reforms that it has promised, then it needs to break with capitalism. This was the vision of the old Clause 4 from 1918, which talked about the need for the common ownership of the means of production, distribution and exchange.
Capitalism is in crisis in Britain and internationally. The British economy was in deep decline well before Brexit. It has suffered a long-term decline due to the utter failure of the ruling class to invest and modernise British industry.
Manufacturing has gone to the wall, as one sector after another has been taken over by foreign capitalists, eager to pick at the scraps of Britain’s industries. Indian-owned Tata Steel has announced job losses in the UK as a “cost cutting” measure.
British business has invested its cash abroad, or into property speculation and financial manipulation. It is not interested in investing for the long-term, but only in short-term profits. Instead of investing, the capitalists in Britain have been sitting on piles of cash, to the tune of £700bn. Industries have been shutdown or sold off.
In the slump of 2008-09, big business and the banks in Britain were bailed out to the tune of £1,000 billion. Then taxpayers were asked to pick up the bill. Austerity was introduced as a result. And the cuts continue to this day.
Over-capacity is rife in industry, which has not yet recovered from the catastrophic impact of the economic slump. Wages are still below 2008 levels, ten years later.
The idea that Keynesian measures - deficit financing - can solve the crisis of capitalism is utopian. We cannot spend our way out of a crisis. Debts in Britain and internationally are already at historic high levels. Household debt is at eye-watering levels. Years of austerity and wage stagnation has pushed millions of families deep into the red.
It is true that capitalism is suffering from a chronic lack of demand. But this is a reflection of the impasse of the system. It is not simply a question of ‘demand’, but of profitable markets, which are scarce.
Capitalism is suffering from worldwide over-production. There is too much steel; too many cars; too many factories producing for limited markets. Capitalism has reached its limits and there is a slowdown everywhere.
Of course, we are not producing too much from the point of view of society’s needs, but according to the profitability of the capitalist market. The object of capitalism is not fulfilling needs, but making profits.
Government spending must come from taking from elsewhere in the real economy. If you tax workers, you will cut consumption. If you tax big business, they will reduce investment further. Either way, you bite into demand. Even if the government borrows, this has to be paid back - with interest. There is no such thing as a free lunch.
Nightmare of capitalism
At the end of the day, the economy is in the hands of big business. It is run on a capitalist basis, based upon the maximisation of profits. That is their sole criterion. If they can’t make profits, they will not produce. It is as simple as that.
But as Marx explained, profits come from the unpaid labour of the working class. Over the past 30 or 40 years, there has been an intensification of the exploitation of the working class, as the capitalists pushed up the rate of profit.
There is increased pressure and toil everywhere. In the process, workers have been engaged in a ferocious race to the bottom, the results of which we can see today. We live only to work until we drop, all geared to making the rich richer. This is not the ugly face of capitalism, but the real face of capitalism.
The only way a Labour government can put an end to this nightmare is to introduce bold socialist measures to take over the economy. This means nationalisation of the banks, finance houses, land and the giant corporations that dominate our economy.
This should be done by introducing emergency legislation. There should be no compensation to the fat cats. Industry must be planned under democratic workers’ control and management. This would allow us to run the economy on the basis of need and not profit.
The working week
On this basis we could eliminate all the waste produced by capitalism - the duplication and squandering of resources. We would then have the means to cut pollution and guarantee decent jobs for all.
We could immediately cut the working day and working week, without any loss of pay. New technology, robotics, and AI could be used to eliminate all arduous work and lighten workloads - unlike under capitalism where the introduction of technology only creates unemployment.
In 1930, British economist John Maynard Keynes predicted that technological change and productivity improvements would eventually lead to a 15 hour working week. But today, most people still work 40 hours or more per week. We have the scientific and productive capacity today to introduce a 15 hour week. But this is impossible on a capitalist basis, which only seeks to maximise profitability.
Only by doing away with the laws of capitalist production and introducing rational democratic planning is it possible to slash the working week and raise living standards. Instead of growth rates of 1 or 2 percent, we could have growth rates of 10, 20 and 30 per cent per year. This would allow is to introduce all the reforms promised by Labour - and far more!
Where is the money?
Labour’s critics always ask: where is the money going to come from to provide all these reforms? It is true that on the basis of capitalism, this is not possible. Capitalism is in crisis and cannot afford reforms. In fact, the crisis of capitalism means that only counter-reforms are on offer.
“You can have this plan for real change,” Jeremy Corbyn announced at the manifesto launch today, “because you don’t need money to buy it: you just need a vote”.
In other words, all of Labour’s pledges will be paid for by taxing big business and the super-rich. 95% of taxpayers, Corbyn and McDonnell have assured, will personally see no rise in taxes.
But the attempt to get around the affordability question by talking about increased taxes on the rich is unconvincing. We are in favour of the rich paying more in taxes. This has its limits, however. After all, the wealthy pay an army of lawyers and experts to hide their money from the taxman.
Rather than focussing on taxation, we must take over the means of production that produce the wealth in society. When the working class collectively owns and plans the economy, we will be able to create the wealth and resources for a massive rise in living standards. On the basis of capitalist crisis, on the other hand, we are only offered austerity and falling living standards.
Even on the present basis, where there is a massive under-utilisation of productive capacity, the size of UK GDP is £2.16 trillion. A modest 10 per cent rise in production would mean an extra £216bn per year. A 20 per cent rise would be an extra £432bn per year. We could double our GDP in five years.
Here is where the money would come from for genuine reforms: from a socialist plan of production, with investment for needs, not profits. Imagine the limitless possibilities which would result from a nationalised planned economy. We could completely transform the lives of everyone in Britain.
Attempting to patch up capitalism is like attempting to bring the dead back to life. The whole history of Labour governments speaks against it.
These ideas of fundamental change are not utopian, but based on reality. The conditions for genuine socialism exist.
Only a bold socialist programme - putting an end to capitalism - can offer a real way forward. Simply tinkering with capitalism will only bring disappointment and failure. As the old adage says, you can’t plan what you don’t control, and you don’t control what you don’t own.
We cannot wait any longer. The task of the next Labour government is to carry through the socialist transformation of society.