Fair democratic solutions to the challenges of our modern economy

In his conference speech, which I watched on Labour’s free conference live feed, John McDonnell’s big idea was to democratise our economy and restore collective control over our economic and financial system, including the establishment of a worker’s fund. He recalled that it is now ten years since the great financial crash (GFC) of 2008, pointing out that JK Galbraith in his book on the previous great crash of 1929 remarked that the best protection against repeating it was memory:

“So it’s worth remembering the causes of the crash. There was greed, and yes, the deregulation that turned the City into a multi-billion pound casino. But more importantly it was caused by the power that a small financial elite exercises over our political system. That power meant the bankers and speculators who caused the crisis wouldn’t be the ones who paid for it. It would be our families, working people, our businesses, our young, and especially the most vulnerable in our society. And it’s been eight hard years of austerity and economic failure.”

With 5,000 fellow British citizens sleeping rough on the streets and four million of our children growing up in poverty – despite most of them living in families with at least one wage earner – he said it’s now time to shift the balance of power in the country. He described Brexit as an anti-establishment reaction to such dismal conditions, drawing applause from conference.

McDonnell also drew attention to another key anniversary – it’s now 100 years since Labour adopted Clause IV, “To secure for the workers by hand or brain the full fruits of their industry,” which he said was as relevant today as it was then.

So how do we go about achieving the necessary changes? “We need fair democratic solutions to the challenges of our modern economy. The Labour movement has always believed that democracy shouldn’t stop when we clock on at the factory gate or in the office lobby or like my mum behind the BHS counter. Democracy is at the heart of our socialism.” Like our predecessors and Labour’s founding trade unions, we should always be striving to extend democracy:

“So in 2018 I can tell you that at the heart of our programme is the greatest extension of economic democratic rights that this country has ever seen. And it starts in the workplace.” The balance of power has indisputably been tipped against workers resulting in long hours, low productivity, low pay and the insecurity of zero hours contracts, McDonnell said, praising the recent IPPR report, which he said was a “brilliant critique of the inequality embedded in today’s economy”.

So how will Labour actually redress the balance of power at work? Fulfilling the promise of the late Labour leader, John Smith, workers under a Labour government “will have trade union rights from day one, whether in full time, part time or temporary work. Day one.” And of course Labour “will set a real living wage of 10 pounds an hour”, with wages determined by sectoral collective bargaining and backed up by a drive to close the discriminatory gender gap that disadvantages working women.

“But real power comes from the right to have a collective say at work.” So the running of companies, presently in the control of a small elite, will be democratised under Labour, with one third of the seats on company boards being allocated to workers.

“Power also comes from ownership.” McDonnell pointed out that employee ownership improves productivity and long-term decision making. Therefore Labour will legislate for large companies with over 250 workers – which together employ a total of 11 million people – to transfer 10% of their equity into an inclusive ownership fund, held collectively by the workers and providing the same rights to have a say in the company as any other shares. Dividends of up to 500 pounds per year per worker would then be possible. “True industrial democracy coming to this country.” A proportion of the revenues from these funds will be transferred to public services – our schools, hospitals and social security system – as a social dividend. This is undoubtedly the biggest change from Labour’s last election manifesto and it has already drawn fire from the CBI, whose director general resents the “diktat” that she warns will cause investment to “flee” the country.

And then there will be the return of water, rail, mail and energy back into public ownership, said McDonnell, drawing enthusiastic cheers from conference – a policy that he noted is also hugely popular with the general public. This is no surprise since the privatisation of water, for example, has caused a real terms price increase of 40% with 18 billion pounds paid out as dividends. Water companies are even given more generous tax credits than they actually pay in tax.

But nationalisation will not be a return to the bureaucratic past. With shadow business secretary Rebecca Long-Bailey there will be a review of democracy in public services. And in the case of water, control will be “returned to the hands of local councils, workers and customers” with “unprecedented transparency”. Profiteering, excessive pay and unwarrantedly high dividends will become a thing of the past. Any surpluses will be reinvested, paid out to staff or used to reduce bills, while meeting the highest environmental standards.

People have had enough of the privatisation rip-off so there will no more PFIs, which Labour will bring back in house. There will also be a public and community ownership unit in the treasury. And the regions and nations outside London will benefit from a fairer level of investment. Climate change and environmental problems will also receive a fairer share of the fiscal pie.

On the subject of tax avoidance and money laundering, McDonnell stressed that most businesses and entrepreneurs pay their fair share of tax although there is a minority who avoid tax “on an industrial scale”, thereby denying our schools, hospitals and other public services the resources they need. Shareholder power can be used straightaway to press companies for tax justice and Labour will also launch a campaign to demand that companies pledge to meet fair tax standards.

McDonnell echoed Gordon Brown’s comments on the weakness in economies worldwide since the GFC, which has seen stagnant wages leading to the rise of the racist right across the globe, with even nation states forced into a position of powerlessness. Labour will therefore convene an international forum led by the Nobel economics prizewinner Joseph Stiglitz to open a dialogue on the common risks faced at the current time and the action needed to address these.

On Brexit, McDonnell was clear that it is time for the chaotic Tories to make way for Labour to fight and win a new general election: “Bring it on. We’re ready whenever.” Referring to the demands for a people’s vote he said briefly: “We’re keeping all the options open for democratic engagement on the table”. In any event Labour will respond to the economic mess left by the Tories with a commensurately radical approach.

Looking towards the future under Labour, John McDonnell finished with a nod to the famous left-winger (pun intended) and Liverpool manager: “Like Bill Shankley, we’ll be proud to call that future socialism, solidarity.”

Watch this space – Aditya Chakrabortty has just published a Guardian comment piece predicting an “onslaught” against McDonnell’s declaration of class war!

Aidan Constable, watching conference from Heidelberg, Germany

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