There is a dawning recognition that a new kind of economy is needed: fairer, more inclusive, less exploitative, less destructive of society and the planet. “We’re in a time when people are much more open to radical economic ideas,” says Michael Jacobs, a former prime ministerial adviser to Gordon Brown. “The voters have revolted against neoliberalism. The international economic institutions – the World Bank, the International Monetary Fund – are recognising its downsides.” Meanwhile, the 2008 financial crisis and the previously unthinkable government interventions that halted it have discredited two central neoliberal orthodoxies: that capitalism cannot fail, and that governments cannot step in to change how the economy works. [...]
The new leftwing economics wants to see the redistribution of economic power, so that it is held by everyone – just as political power is held by everyone in a healthy democracy. This redistribution of power could involve employees taking ownership of part of every company; or local politicians reshaping their city’s economy to favour local, ethical businesses over large corporations; or national politicians making co-operatives a capitalist norm. [...]
And yet, outside McDonnell’s circle and the transatlantic radical left, the new economics has gone largely unnoticed – or been casually derided. The black holes of Brexit and the Tory leadership contest are partly responsible, sucking attention away from everything else. But so is the radical nature of the new economics itself. Transforming or ending capitalism as we know it – the new economists differ as to which is the goal – is a difficult idea for most British politicians and journalists to take on board. After half a century accepting the economic status quo, they associate any leftwing alternatives to it either with out-of-date postwar social democracy – aka “the 70s” – or with leftwing authoritarianism, with present-day Venezuela or the Soviet Union. [...]
Contrary to his usual portrayal as a statist ogre, McDonnell believes there are limits to how far the left can increase taxes and government spending. In his view, many voters are unwilling, or simply unable, to pay much more tax – especially when living standards are squeezed, as now. He also believes that central government has lost authority: it is seen as simultaneously too weak, short of money thanks to austerity; and too strong – too intrusive and domineering towards citizens. Instead of relying on the state to create a better society, one of McDonnell’s close allies argues, leftwing governments, at both the municipal and national level, “have to get into changing how capitalism works”. [...]
Yet the problem for the left with settling for “a different capitalism”, however temporarily, is that it may simply enable capitalism to regroup, and then resume its Darwinian progress. Arguably this is exactly what happened in Britain during the last century. After the politically explosive economic slump of the 1930s – the precursor to today’s crisis of capitalism – during the postwar years many business leaders seemed to accept the need for a more egalitarian economy, and developed close relationships with Labour politicians. But once the economy and society had been stabilised, and rightwingers such as Thatcher started making a seductive case for a return to raw capitalism, the businessmen switched sides.
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