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Stumbling and Mumbling

Author: chris dillow   |   Latest post: Wed, 9 Oct 2019, 2:08 PM

 

Capitalists for Corbyn

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The Telegraph says some (a few) investment bankers would prefer a Corbyn government to a no-deal Brexit. There are good reasons for this.

This sounds a strange thing to say, given some of Labour's rhetoric and their proposals for higher corporate and top income taxes; the nationalization of utilities; the dilution of current shareholders' ownership; and strict restrictions (pdf) on property speculation. It's also the case that finance has been very happy with the post-2010 mix of fiscal conservatism and monetary activism, which Labour will end.

Despite all this, a Corbyn government offers some things which look unlikely under Johnson.

One is a degree of stability. Of course, Corbyn cannot offer swift certainty about the course of Brexit. But he will take the worst-case scenario of no-deal Brexit off the table. And in trade talks with the EU he is likely to put greater weight than the Tories on economic interests than on conceptions of sovereignty. Johnson's "fuck business" remark showed that he prioritizes nationalism over commerce. Corbyn won't do this.

This matters. Uncertainty, as Nick Bloom has shown, is bad for investment, productivity and growth. And as I've said, it's also bad for equity valuations. We've known for years that markets hate uncertainty, and that people will pay a high price to reduce it. For some capitalists, Corbyn is that price.

A second thing Labour offers is a degree of economic growth. It at least knows that productivity has stagnated for more than ten years and is thinking about how to react to this. We know from the experience of the 1950s and 60s and from recent European history that capitalist economies can thrive with highish personal taxes, a degree of co-determination, and big public sectors. Capitalism does not require small government or neoliberalism.

Of course, the experience of the US economy and S&P 500 since the 80s suggests that profit-led growth is best (pdf) for capitalists. But sometimes (pdf), this is not an option - if, like now, pro-capitalist policies fail to induce strong rises in capital spending. When this is the case, wage-led (pdf) growth (pdf) is a reasonable second-best. And Labour offers the chance - only chance - of this. Jenner

But there's something else. Successful capitalism requires not just growth but also legitimacy. It's not accident that, from the late 19th century onwards, almost all capitalist states developed degrees of redistributive taxation and welfare states. These were necessary to buy off public discontent. Something similar might be needed today. High inequality, crumbling public services and the inflicting of uncertainty and harassment upon millions of residents risk undermining public support for the existing order. In tackling these, Labour will help shore up the legitimacy of some sort of capitalist system.

From this perspective, a Labour government offers capitalists a form of inoculation: a small illness to prevent a worse one.

Or, to change the metaphor, parasites need a healthy host. The more intelligent members of the capitalist class - who are perhaps under-represented in the media - are not hyperventilating hysterics and so can see this.

It tells us a lot about the degenerate state of the Tory party that it might be less able than Corbyn to offer capitalism what it needs.

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