Jeremy Corbyn launched a scathing attack on “the establishment” in his speech to the British Chambers of Commerce on Thursday. The Labour party leader said:
We want to see a break with the failed economic orthodoxy that has gripped the establishment in this country for a generation.
Corbyn is talking about ‘neoliberalism’ when he speaks of the “failed economic orthodoxy”. Neoliberalism is an economic approach characterised by unregulated (‘liberal’) financial markets, privatisation and the stripping back of government spending. Corbyn continued:
We will put public investment in science, technology and the green industries of the future front and centre stage. Only by driving up the rate of investment will we achieve the higher productivity we need for rising living standards for all.
Indeed, intelligent public investment in technology is the most forward-looking policy one could have. According to a recent mass study by the Bank of America, up to 35% of UK jobs are at risk of being taken over by machines within just 20 years. If we share the fruits of robotic labour fairly, it makes sense to speed up the process. This way, we can transition into a more liberated society, where menial work is automated.
Here, Corbyn is offering up an alternative economic policy to neoliberalism: one based on public investment. The current prevailing argument is that we don’t have enough money to invest. However, this does not actually make any economic sense: Through investment, the state makes money, like any business would. For example, take social housing. Our combined funds are used to build houses for each other, then, the person who owns that particular house pays rent back to the state, for the cost of that house. Not only do people get the security of home ownership, the investment also stimulates the economy through creating demand for jobs and materials. Or, take flood defences: for every £1 spent, the taxpayer saves £8 in reducing later economic damage.
Whereas the neoliberal approach has left us with an unprecedented housing crisis, in which the private sector can charge rip-off rents for our basic need for shelter. The average rent paid by tenants reached a record high of – a mindblowing – £816 per month last year. Similarly, the neoliberal approach has left us with cuts in flood defence spending, which then costs a bomb when disaster strikes, as we saw with the mass flooding in December.
Corbyn then flipped the conventional meaning of “wealth creator” on its head:
Only an economy that is run for the wealth creators – the technicians, entrepreneurs, designers, shopfloor workers, and the self-employed – and puts them in the driving seat … is going to deliver prosperity for all.
A prevalent misconception is that just because someone ‘owns’ a corporation, they are the “wealth creators”. The Tories say:
Britain must champion the wealth creators
Yet, it does not make any sense to call only a few individuals ‘wealth creators’. All the workers at a company are ‘wealth creators’, not just those at the top.
Corbyn then took aim at the neoliberal policies of New Labour:
It wasn’t government that was the problem in 2007 and 2008, when the banking sector nearly drove the entire economy to the point of collapse.
The New Labour approach was to opt for ‘light touch regulation’ of finance – and then sit back and collect the tax revenues.
But you cannot base a decent social policy on an unsustainable economic policy. And we cannot outsource economic policy to the City of London. That has not served our economy well, and it has not served business well.
While it was the reckless, profit-seeking financial sector that caused the crisis, it is the responsibility of the government to stop it from happening. This Conservative government have continued New Labour’s neoliberal policies, which has resulted in the Bank of England warning this may have triggered a financial crisis “greater than 2007”.
At the conference, Corbyn then called for investment in broadband:
The evidence is clear that only the public sector and public investment can guarantee the super-fast broadband network in every part of Britain the essential low-cost connections people and businesses need in a 21st century economy.
It’s 2016, we all need fast internet. If we paid for it together, it would be cheaper. That is co-operative public ownership in a nutshell: ‘If we all need it, why not pay for it together, and own it together, because it will be cheaper?’
The neoliberal status quo is in tatters. It is up to us to bring new economic ideas into the mainstream, or problems like the housing crisis and skyrocketing income disparity will continue.
In his speech on Thursday, Corbyn offered thoughtful public investment as an antidote to the poisonous economic orthodoxy of neoliberalism. This is not the ideology of a maverick, but mainstream contemporary macroeconomics. We should heed the advice of the experts.
Featured image via Labour website.