Capitalists for Corbyn

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.

But there’s something else. Successful capitalism requires not just growth but also legitimacy. It’s not accident that, from the late 19^th 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.

Comments

[Dipper]

you link to an article 'Brexit's impact', but the article is completely wrong.

It goes on about t'he effects of Brexit' but we haven't left! Any consequences of actually leaving haven't happened yet.

It would be more accurate too say it is 'the effects of failing to deliver the Brexit vote'

So its a piece of misrepresentation.

[Jim]

Yes because the party whose stated public policy is that its going to negotiate a deal to leave the EU then campaign against it in a referendum is the one offering stability.

Do you actually read what you write? Or are you just permanently blinded by the 'Left good, Right bad' blinkers?

[King Lear]

"I will have such revenges on you both,
That all the world shall--I will do such things,--
What they are, yet I know not: but they shall be
The terrors of the earth. You think I'll weep
No, I'll not weep:
I have full cause of weeping; but this heart
Shall break into a hundred thousand flaws,
Or ere I'll weep. O fool, I shall go mad!"

[King Lear]

Meant that as a reply to @Dipper, my bad...

[Dave Timoney]

@Jim, Labour's policy is to give voters a choice between a soft Brexit and remain. From the perspective of the City, both outcomes would be highly predictable and together they represent economic, if not political, stability going forward.

The point of Chris's post is the rationale of the City, not the internal coherence of Labour's position.

[Dipper]

@ Dave Timoney.

Why offer a choice? If Labour would be happy to implement soft Brexit why don't they do that now? Parliament requested the people gave them an instruction, and the people gave it. Why would you ask again if you have a perfectly acceptable way of implementing the previous request of the people?

This parliament has spent two years telling us they are representatives not delegates, and act on their consciences not under instruction, so why would they now seek instruction?

[Dipper]

... and just to make a point, why should I, as a Leaver, accept a deal that has been put together by two parties neither of whom believes in it and both who would prefer the UK stays, as a valid implementation of the referendum result?

[AllanW]

Dipper; "why should I, as a Leaver, accept a [soft Brexit] deal that has been put together by two parties neither of whom believes in it and both who would prefer the UK stays, as a valid implementation of the referendum result?"

Err ... because then you'd be rational in your thinking? If you rejected the soft Brexit deal they concoct and deliver just because of who created the deal you'd be guilty of a mistake in your thinking. A category error.