Labour: the party of business?

Is Labour now the party of business? This is the question posed by the fact that the CBI has endorsed Jeremy Corbyn’s support for the UK to be part of a customs union with the EU.

I know, I know. The question seems absurd given Labour’s calls for nationalization of utilities and higher corporate taxes*. From two other perspectives, however, the question is sensible.

First, let’s assume that businesses’ interest is in having a high profit rate.

This rate, by identity, is equal to the share of profits in output, multiplied by the output-capital ratio.

Many of Labour’s policies might be bad for the share of profits – such as higher minimum wages, greater regulation of exploitative practices and stronger workers’ rights.

But they might well be good for the output-capital ratio. A looser fiscal policy would have this effect, insofar as it is not offset by tighter monetary policy.

And several Labour policies might well expand profit opportunities. Infrastructure investment would have this effect, as would a Mazzucato-style “entrepreneurial state” – one which helps the private sector with research and development. And Labour’s National Investment Bank is (pdf):

a response to the failure of the UK banking sector to provide longer- term loan funding for enterprises, for small and medium-sized enterprises especially, or to support innovation in forms of productive organisations.

It is perhaps insufficiently appreciated that many smaller businessmen (and ex-businessmen!) despise bankers, and would welcome anything that reduces their dependence upon them.

There is, though, a second perspective here. In the long-term, business needs not just profits but also legitimacy. And a system in which real wages for the many stagnate and in which young people have no hope of owning property, whilst a handful of people make millions and dodge taxes is one that lacks legitimacy. In removing egregious injustices, Labour promises to save capitalism from the capitalists, to use Rajan and Zingales’ words (pdf), by shoring up support for a reformed system.

This poses the question: what is business? The grasping (and inefficient) plutocrat is only part of the story. There are 2.8 million businesses in the UK. For every Philip Green or Fred Goodwin there are thousands of decent people struggling to make a payroll in the face of unreliable bankers, road congestion and an idiot Brexit policy. Labour can speak to these. Ed Miliband’s distinction between producers and predators was a good one.

You might think all this is hard to square with claims that Corbyn and McDonnell are Marxists. I’m not so sure they are. They are instead radcial(ish) social democrats whose priority is to improve living conditions for workers. They are Marxists insofar as they perceive – rightly – that capitalism is failing to do this. But they are willing to give a reformed capitalism a chance to deliver the goods again. There are many types of capitalism besides kleptomaniac neoliberalism – even though much of our imbecile press cannot see this.  

You might also question how many votes there are in appealing to business. There are none at all if this means cosying up to elites. But this is the opposite of what Labour is doing. It is, instead, showing an awareness of the real needs of real people. And that is much more than a Brexit-addled Tory party is doing.

* If you believe the incidence of corporate taxes falls upon workers or consumers – in the form if higher prices or lower wages – then they are not anti-business, except insofar as they are bad for the general economy.

Comments

[Jonathan da Silva]

Aren't they [Corbyn McDonnell] in the lexicon and nomenclature of the old Marxist left, I was around, Centrists? This seems for reasons probably to do with the 30 year gap in large mobile left to have come to mean people who consider themselves in the Centre which it was never used to mean. I mean Social Democrats or Liberals but even Benn would barely have been considered a Centrist as not a Marxist but certainly McDonnell and maybe Corbyn.

One aspect of modern political mores I don't get is why people would self describe as moderate (although I agree they are) and why they despite the war, torture, PFI, rendition, locking up child refugees, not cleaning hospitals, 90 day detention ambition, silencing whistleblowers in NHS, neo Lib stuff like charging for hospital car parking and monetising the friends of hospital tea ladies for Costa et al machines, lax bank regulation, QE/Land Ramping/Speculation etc etc consider themselves anything but extremists and authoritarians for all their 'centre' ness.

[Dipper]

"They are instead radcial(ish) social democrats whose priority is to improve living conditions for workers."

yes of course. that's why there are lots of photos of Corbyn and McDonnell meeting Scandinavian style social democrats and not a single one anywhere of Corbyn and McDonnell with hard left nutters like Chavez or Maduro or photos of either of them appearing on stages surrounded by communist flags.

[e]

Another great post. However, Labour has always been the party of business. The relationship is, of course, symbiotic. If only our management were required to know this, our capitalism might function for the better. The thing about accusations of “Marxism”, wacky right-wing evangelists have been using and abusing the term for so long in order to have something to say, it now has no coherent meaning outside the pages of dusty academia. Among everyday voters its just a recognised term of abuse; much like wanker or prick...a conversation stopper.

[Cjcjc]

So on a Labour victory you will be advising your IC readers to load up on sterling as the UK will obviously be flooded with foreign investment seeking this higher profit rate.
Got it.

[Noah Carl]

Until about 18 months ago when he began to smell the wafts of power emanating from Downing Street, wasn't Corbyn among the most Eurosceptic MPs in the House of Commons?

[Arthur Murray]

@ Dipper

You can learn a lot from photo-journalism. I never knew that when Trump was interviewed by Gove, that Murdoch was present. Luckily "The Times" splashed a front-page photograph of the the three of them.
And then, the day after Davis had to leave the EU negotiations early, there was a photograph of Dacre and Davis eating together on the front of the "Daily Mail".
And what about all those photographs of Cameron on a bird-shooting weekend in the "Daily Telegraph"?

[Andreas Paterson]

cjcjc - Labour's plans are fiscally expansionary, so we'd expect to see interest rates rise more quickly on a Labour victory. So being long sterling on the expectation of a Labour victory would make sense.

[Dave Timoney]

@Dipper,

Maduro, like Chavez before him, isn't a Marxist but a Bolivarian. His worldview is essentially sovereigntist, which in the circumstances of Venezuela tends towards anti-americanism and autarky. Chavez's leftism was largely confined to limited participative democracy and coops, both of which would find favour with all but the most statist social democrats these days. While the government has become more authoritarian under Maduro, this is well within the norm for Venezuela.

Also, bear in mind that the red flag is a pan-left symbol, which was originally adopted by socialists in 1848. There isn't actually a communist flag as such, merely national variants that have appropriated red background. As with SWP banners at rallies, red flags tell you little about the sympathies of speakers.

[Dipper]

@ from Arse to Elbow

well I'm sure you're right about Venezuela. the problem is that Corbyn and his followers didn't say that. They said Venezuela is a template for the UK. shows socialism in action etc.

I'll have to dash now as I've got to look up all those Scandanavian Social Democrat quotes on restricting free press, wealth tax, wholesale nationalisation etc. I may be a while.

[Dipper]

@ Arthur Murray - what are you on about? Nice to see you don't challenge the basics of my argument.

@ from Arse to Elbow. Knew I'd forgotten something. Seizing people's houses. Always a popular social-democrat policy in Scandinavia.

[Blissex]

«wasn't Corbyn among the most Eurosceptic MPs in the House of Commons?»

Up to you to provide the evidence for that, to prove that J Corbyn lies when he says that he has been a 75% pro-EU for many years.

[Cjcjc]

@andreas that’s not all they are though!