The media circus around Jeremy Corbyn’s bid to retain leadership of the Labour party focuses too much on the personalities and not enough on the economic policies, which actually show a latter-day New Deal in the making.
Corbyn has rejected the trickle-down economic theory favoured by the Conservatives and New Labour. The liberal economist JK Galbraith likened it to the “horse-and-sparrow theory”, which argued that if you continue to feed the horse enough oats, some will pass through to the road for the sparrows. Well, the sparrows have seen their share of the economy shrink.
The data published by the Office for National Statistics show that at the end of 2015, workers’ share of gross domestic product (GDP) sank to 49.7% (see Table D on page 44 of the PDF file downloadable from here), compared with 65.1% in 1976.
This is the biggest rate of decline in any western economy. Proponents of neoliberalism claim that workers’ low share of the GDP is the outcome of market forces.
Yet it is hard to recall any public demand for low wages and accompanying social squalor. Wages are the outcome of the power of labour and that has been severely eroded by government-sponsored weakening of trade unions.
In 1979, the UK had 13 million trade union members, representing 55.4% of the workforce. By 2014, despite a larger total workforce, trade union membership had declined to about 6.4 million, representing about 25% of all workers.
The weakening of trade unions has eroded the workers’ ability to negotiate with employers.
A key strand of Corbyn’s policies is to strengthen workers’ ability to secure a larger share of the wealth generated by their own brawn, brain and skills.
Towards this end, Corbyn has promised to repeal anti-trade union laws and promote collective bargaining by giving employees the right to organise through a union and negotiate their pay, terms and conditions at work.
Any mention of “collective bargaining” is likely to send neoliberals into convulsions even though big business has been using collective bargaining for decades to advance its interests. Banks, supermarkets, phone, gas, water, electricity and other companies collectively negotiate with governments to secure their economic interests.
Finance directors of the 100 largest UK-listed companies, known as The 100 Group, pool their resources to secure advantages by shaping consumer protection, tax, regulation, competition, trade and other government policies. If big business is able to engage in collective bargaining, it is only fair that workers should also be enabled by law to collectively advance their interests.
Boosting workers’ share of GDP seems to be a key part of Corbyn’s policies, as without adequate purchasing power people cannot stimulate the economy. An alternative would be to encourage people to borrow and spend, but that route led us to the 2007-08 financial crisis and danger signs are already flashing.
Currently, personal debt stands at £1.48tn and is projected to rise to £2.5tn by 2020. The capacity of individuals to take on additional borrowing is low and redistribution of income is the only sustainable policy.
With this in mind, Corbyn advocates wage councils to set working conditions, a decent living wage and the abolition of zero-hours contracts to end the appalling insecurity caused by such working arrangements.
Public sector workers have faced wage freezes and cuts in their real wages since 2008. They too have family responsibilities and Corbyn has promised to provide “an inflation-plus pay rise for public sector workers”. He has called for an end to workplace discrimination by requiring firms to publish data about the gender pay gap.
Further changes to dialogue about a division of the economic cake come through proposals to change corporate governance.
Corbyn particularly wants to enact measures that would prevent directors and shareholders from extracting cash and then dumping companies, leaving employees, pension scheme members and taxpayers to pick up the tab.
In the coming days we may well hear more about how workers and other stakeholders are to be represented on the boards of large companies, together with details of stakeholder votes on limiting excessive executive remuneration.
Jobs and prospects of decent pay would be boosted by investment in infrastructure and new industries. Labour has promised to create a new national investment bank and invest £500bn to reinvigorate the economy.
The burden of debt on young people and their families would be reduced by the abolition of tuition fees. This would enable many to start businesses and join the home ownership ladder, which is an increasingly distant dream for many.
Corbyn has been upfront about how various financial measures are to be funded. These include a marginal rate of 50% on taxable incomes above £150,000 and an increase in corporation tax rate. A reversal of the £15bn corporation tax cut announced by the chancellor in March alone would fund the abolition of the £10bn tuition fee.
In a relatively short time, Corbyn has laid foundations of a New Deal that would ensure economic gains are shared more equitably. Of course, lots more needs to be done – and the media can play a vital role in stimulating the debate rather than obsessing over personalities.
