After the virus: no return to the old economy

As the Covid recession hits, Adam Peggs lays out alternative economic proposals the Labour left should be demanding

September 19, 2020 · 7 min read
City of London skyline

Just a few months ago it seemed that the rapidly escalating coronavirus crisis spelled the end of the UK’s old economic settlement. Massive-scale state intervention was taking place to pay wages and avert redundancies, the creed of privatisation seemed endangered and there was expectation of a further infrastructure spending round. Despite the Labour left being roundly defeated, both last December and again in early April, it seemed that an imitation of the left’s programme was genuinely on the cards.

While that outcome now seems less clear, the status quo in economic policy looks shaky. The Conservatives appear to be considering hiking capital gains tax and creating a new semi-nationalised bank. Some Tories are even calling for a full-blown wealth tax and a National Investment Bank. Only 6 per cent of the public want a return to the pre-pandemic economy.

Over the past five years, Labour has championed a real alternative. An economy that challenges the primacy of private profit: profoundly fairer, more democratic and more equal. To a large extent, the component parts of this vision were embraced by the public. Consequently, the Labour left still remain well-placed to shape the conversation on the United Kingdom’s economic future.

Democratic public ownership

At the heart of neoliberalism, the prevailing phase of capitalism, is financialisation. Dismantling it will require addressing and radically reconfiguring the role of the financial sector, not least in Britain. If we want an economy which reflects different priorities then we will need to change the role played by the sector.

Last year Christine Berry and Laurie Macfarlane produced a key report for Labour which called for a ‘public banking ecosystem’. Developing its proposals further could be key for building a post-coronavirus economy which puts social needs ahead of private accumulation.

We already own 76 per cent of the Royal Bank of Scotland and this should rise to 100 per cent. As John Marlow has argued, this could ‘crowd out’ the private sector. Costa Rica’s Popular Banco is one real-world example of a public bank that pursues the public good, rather than just providing cheap credit to boost private businesses and effectively subsidising owners of private capital – as can be the case with some National Investment Banks. Crucially, public banks should be fostering alternative models of ownership.

Common ownership is a key and already extremely popular demand. There will be pressure on Labour to backslide and to replace support for nationalisation with support for cooperative or community ownership or public-benefit corporations (a model relatively common in the United States). The left will need to oppose this and fight for the real thing – democratic public ownership. Only democratic public ownership can guarantee a stake for all of society in our utility companies and essential services, rather than just public oversight. Only democratic public ownership will reverse privatisation, rather than altering its terms.

Labour leader Keir Starmer promised in early March that public ownership of energy would appear in the 2024 manifesto. During the leadership contest, he also pledged to bring telecoms giant BT Openreach into public ownership, a policy that could facilitate fast and cheap or free broadband. The left must hold Starmer to account on these commitments and defend them from inevitable pushback – and we should not stop there. Public construction companies could speed up the implementation of a mass council housing programme. After coronavirus, the case for publicly-owned care homes should also be clear.

Increased unionisation and a four-day week

As lockdown ends there is a need to rebuild the economy by protecting existing jobs and creating new ones where there have been job losses. But what we don’t need is a return to overwork. This country has some of the longest working hours in Europe. Before Thatcherism, the UK was on track to achieve a four-day working week by 2040.

Labour’s 2019 manifesto was a landmark document: the first time in four decades that a major party had demanded a shorter working week. The proposal was popular, even if the party needed to do much more work. Reviving or reconfiguring that pledge would make absolute sense.

The focus on jobs must include a focus on trade unionisation. Sometimes, even on the left, this focus has been missing. Britain has among the most draconian trade union restrictions in the Global North. If we are to rebuild working class power, ensuring workers have the means to get organised is fundamental. A resurgent trade union movement will have a chance to make its voice heard.

Comprehensive wealth taxes

A dedicated wealth tax which targets the tax payers’ net worth, not just their income derived from capital gains or dividends, is vital for a major shift in the distribution of wealth and economic power. Wealth taxes are popular – making them a convenient policy to campaign on and to easily mobilise support around. Emmanuel Saez and Gabriel Zucman have already produced extensive work on wealth taxes and how to avoid the pitfalls of past iterations. This work could be of huge use to the left, so it is good to see some promising noises on wealth taxation from the new Shadow Chancellor.

Further, Keval Bharadia has made a clear and articulate case for a comprehensive financial transactions tax to promote international economic justice. By taking a step to bringing the wealth of the rich under greater control, wealth taxes can also contribute to eroding the role the investments of wealthy Britons play in the exploitation of the Global South.

A great deal of energy is already flowing into pushing for a new post-pandemic social and economic settlement. Boris Johnson’s Conservative Party will dominate the next phase. Yet the sheer weight of public opinion, the anger of the generations whose prospects have been marred by two major economic crises in twelve years, and the recent successes of the left in shaping the conversation on the economy will not count for nothing. Let’s hope they can count for enough.

Adam Peggs is a writer and activist based in Hackney, London.

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