TheEconomistNovember 2nd 2019 191S
hortly before the financial crisis of
2008, a little-known Labour mp pub-
lished a 64-page pamphlet. In “Another
World is Possible: A Manifesto for 21st Cen-
tury Socialism”, John McDonnell laid out
an economic vision which clashed with the
slick, pro-business mantra of Tony Blair’s
New Labour. It praised participatory de-
mocracy in Venezuela and hailed co-ops in
the Basque country, while calling for the
sweeping nationalisation of industry.
The booklet was an attempt by Mr Mc-
Donnell, then on the backbenches, to scup-
per the coronation of Gordon Brown as
leader of the Labour Party and prime minis-
ter in 2007. Mr McDonnell attracted the
support of just 29 mps. A little over a decade
later, Mr Brown is long gone from politics.
New Labour is history. Mr McDonnell is
shadow chancellor and Jeremy Corbyn, his
friend and socialist ally, is leader. Labour
will campaign in Britain’s general election,
to be held on December 12th, on the most
left-wing platform in a generation.The goal, according to Mr McDonnell, is
an “irreversible shift in wealth and power
in favour of working people”. If the party
were to be elected, even as a minority gov-
ernment, it could fundamentally reshape
the British economy, to a degree not seen
since Margaret Thatcher in the 1980s.Now war is declared
For a start, the party pledges to end the Con-
servatives’ programme of fiscal austerity.
Reversing cuts to day-to-day department
spending since 2010 would cost some
£50bn ($64bn, or 2.4% of gdp). At least
£25bn a year would be put towards infra-
structure investment, in part through the
creation of a “national investment bank”.
Water and energy firms would be brought
into public ownership. The Bank of Eng-
land would be given a new mandate. The
state would forcibly transfer 10% of the
equity of large companies to their workers
and compel pharmaceutical firms to sup-
ply drugs cheaply. Private schools would beabolished. Britain’s working week could
fall from five days to four.
The prospect of a majority Labour gov-
ernment worries most economists. It is not
clear that Britain’s public finances are
strong enough to allow for a borrowing
binge, especially in the face of an ageing
population. A credible commitment from
the central bank to keep inflation under
control, and from the government to re-
spect private-property rights, are the build-
ing blocks of a sustainable economy.
Britain is almost uniquely vulnerable to
a radical shift in policy. The country runs a
current-account deficit of 5% of gdp, large
by rich-country standards, meaning that it
is highly reliant on inflows of foreign capi-
tal. Foreigners own a quarter of the out-
standing stock of British government
bonds. Investors’ trust in the British gov-
ernment and the country’s institutions,
which rose during the 1990s (see chart 1, on
next page), has already been tested by the
financial crisis, the Scottish independence
referendum of 2014 and Brexit. A loss of
faith would send the pound plunging, in-
crease the cost of government borrowing
and imperil financial stability.
In 2017 a partner at Goldman Sachs re-
marked, echoing the French President Em-
manuel Macron’s quip over his predeces-
sor’s 2012 campaign pledge to set a top
income-tax rate of 75%, that Britain under
Mr Corbyn would be like “Cuba without theDowning Street calling
Labour is trying to woo British voters with a radical, left-wing agendaBriefing Corbyn’s Labour Party