One of Corbyn’s most important achievements is in extending national debate beyond the limits of neoliberal ideology and challenging the hegemony imposed by Margaret Thatcher. The sell by date of neoliberal dogma was last century, it ought to have expired in Pinochet’s Chile. Yet the Tories continue to flog a dead horse, selling England by the pound, while selling the public very short indeed.
The Tories have frequently shrieked, with vindictive and borderline hysterical relish, that Labour’s pro-social economic policies reflect “fiscal irresponsibility”, but that doesn’t resonate with the government’s calamitous economic record over the past seven years. Nor does it fit with historic facts and empirical accuracy.
The Labour party were in power when the global crash happened. The recession in 2007/8 in the UK was not one that happened as a direct consequence of Labour’s policies. The seeds of The Great Recession were sown in the 80s and 90s. The global crisis of 2008 was the result of the financialization process: of the massive creation of fictitious financial capital and the hegemony of a reactionary ideology, neoliberalism, which is based on the fatally flawed assumption that markets and humans are self-regulating and efficient.
The New Right argued that competition and unrestrained selfishness was of benefit to the whole society in capitalist societies. It asserted that as a nation gets wealthier the wealth will “trickle down” to the poorest citizens, because it is invested and spent thereby creating jobs and prosperity. In fact the global financial crisis has demonstrated only too well that financial markets provide opportunities for investment that extend relatively few extra jobs and that feed a precarious type of prosperity that can be obliterated in just a matter of days.
Labour’s second State of the Economy conference returned to Imperial College in London over the weekend. It confirmed that it is the ideas of the left that are now making the running. Eminent academic economists joined with council and business leaders, and hundreds of ordinary activists to debate and discuss how we can create the economic alternative that is now so urgently needed.
The Labour party has called out the accounting profession, pledging to eradicate poor practices following high-profile corporate collapses. John McDonnell, shadow chancellor, said on Saturday that the collapse of Carillion and a subsequent MP-led investigation into the outsourcing company’s demise had highlighted the “catastrophic failure and inadequacy” of the UK’s regulatory regime, as well as shortcomings in the audit market.
McDonnell said Labour had commissioned an independent review of how Britain’s audit market operates, including how it is policed by regulators. The review will be led by Prem Sikka, a professor of accounting at the University of Sheffield and an outspoken critic of the Big Four audit firms: PwC, Deloitte, KPMG and EY.
The review will examine whether existing regulatory bodies should be merged, abolished or restructured, and will consider the appropriate level of fines for accounting firms when misconduct is exposed. McDonnell said Carillion’s collapse demonstrated that the accounting and pensions regulators “have once more failed to do their jobs” and that “accountants and auditors seem to operate with impunity whilst lining their pockets”.
McDonnell said “The lack of openness, transparency and accountability means nobody ever seems to be punished for their transgressions,” he said. “We have seen it all before. We still await proper investigation of the accounting and auditing shortcomings which led to the banking crash ten years ago.”
The independent review will also focus on the fact that the financial sector has at least 29 overlapping regulators. “This regulatory maze creates enormous opportunities for waste, duplication, obfuscation and buck-passing,” McDonnell said.
“It does not protect consumers or promote confidence. “We need a complete overhaul of the entire regulatory framework for finance and business, to promote openness, transparency, accountability and — where necessary — to impose appropriate punishments,” he added. “There will be no more Carillion scandals on Labour’s watch.”
McDonnell went on to say: “The tide of history has turned against the old neoliberal way of thinking. These ideas – Labour’s ideas – are becoming the new mainstream. Put into place, the next Labour government will build an economy for the many, not the few.”
Just this week, East Coast Mainline was taken out franchising for the third time, and the Treasury Select Committee condemned the directors of Carillion for “stuffing their mouths with gold” whilst the company collapsed. Both are damning examples of how the belief in government that markets and privatisation are the best way to organise society – the ideas of neoliberalism – have failed all but a very few at the top.
Too many governments, influenced by neoliberalism, have viewed effective corporate regulation as a barrier to prosperity, not an essential support. The result is a regulatory system that is not fit for purpose. The financial sector alone has at least 29 overlapping regulators, including the Faculty Office of the Archbishop of Canterbury. The four big accountancy firms dominate the market and operate seemingly with impunity, as the collapse of Carillion demonstrated. Whether their clients win or lose, the big four always seem to ensure they themselves make a profit.
People are sick of losing their jobs, their pensions and their shareholding from corporate failures, but watching the culprits keep their large pay offs, pension pots and bonuses. So I have asked Professor Prem Sikka to examine our regulatory system and bring forward proposals for reform to reinvigorate it.
Labour’s core economic objective is to create a prosperous economy that provides the richest quality of life possible for all our people, with its wealth produced in an environmentally sustainable manner. That means demonstrating how we can create the wealth needed to support this society in the new era of the fourth industrial revolution. And it means showing how we can confront the urgent, existential threat of climate change.
We need to secure major institutional changes to deliver the long-term, patient investment needed in new technologies, which is why Labour will create a National Investment Bank and transform our financial system, ending the excessive focus on short-term gains.
But it also means showing how that wealth can be fairly and sustainable shared. Our structural reforms are aimed at securing what Tony Benn described as an “irreversible shift in wealth and power in favour of working people”.
So we will democratise our economy at every level, massively scaling up the co-operative sector and introducing a “Right to Own” for workers when their companies are up for sale or threatened with takeover. It will require corporate governance reform, giving workers representation on company boards. We will restore trade union rights at work, and are exploring examples of legislation used elsewhere to enable profit sharing and share distribution. The wealth that our society produces includes the data we generate, and Labour will be exploring over the coming months ways in which that wealth can be put back into the hands of those who produce and use it.
Above all, it means improving the quality of people’s lives – not just in improving pay and giving people secure jobs, but in the human quality of people’s relationships and their free time.
We should work to live, not live to work, but under neoliberalism in Britain we seem to have got things the other way round. We work some of the longest hours in Europe to compensate for low investment and low productivity. A British worker produces in five days what a French or German worker produces in four.
As we invest and improve productivity we should look again at how we can reduce working hours, giving people more time for leisure and family life. The great promise of automation and the fourth industrial revolution is that we can liberate people from drudgery at work. But that will not happen without a government committed to making it happen, and able to assess its progress not only against the usual measures of success like GDP, but on metrics that show meaningful impacts for people – like real wages and inequality, and environmental protection, as the Institute for Public Policy Research has recommended.
The tide of history has turned against the old neoliberal way of thinking. These ideas – Labour’s ideas – are becoming the new mainstream. Put into place, the next Labour government will build an economy for the many, not the few.”
John McDonnell is Shadow Chancellor and MP for Hayes and Harlington
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