Facing an adoring crowd at the Labour party conference, Jeremy Corbyn announced that “the Tories are on notice, and Labour is on the threshold of power.”
A year ago, that would have sounded ridiculous. A year later, you have to consider the possibility.
We have to take seriously the fact that the most left-wing leader and shadow chancellor in Labour’s history could take the keys to Number 10 and Number 11 in the coming years. It’s unlikely, but it is possible – and therein lies a huge economic threat.
Corbyn’s party conference speech promised to end what he called “the failed doctrine of neoliberalism”. He promised a Labour government would take an active role in restructuring the economy. It would introduce a new model of economic management and create a new and dynamic role for the public sector.
More than once he also talked about economic change being “managed”, which was pretty obvious code for state-controlled.
Of course, all this has been tried before, again and again, all over the world. And the lessons from economic history are that: 1) such policies prove to be unaffordable and the governments implementing them sink in a sea of debt and deficit; 2) issues of state failure, not market failure, become the dominating feature, with all sorts of unintended consequences from interventionist policies; 3) tax and spend policies undermine the supply side of the economy and competitiveness, with the result that economic growth weakens.
The inevitable result of all these factors is that it all ends in tears, with savage cuts in public spending.
Economic history 101 shows that the most prosperous economies are the ones which have chosen freedom and free markets over statism. Free markets have been the greatest wealth creator and driving force for prosperity in history. In stark contrast, socialism has failed everywhere it has been tried.
Before you quote the Nordics back at me remember that those economies also encourage freedom and competition in public services.
Corbyn blames this “failed” doctrine of neoliberalism” and free markets, when he knows full well that if you look at tax and spend and regulation – a total state intervention index – the state accounts for more than half of the economy. Failed neoliberalism is a straw man.
Moreover, when he proposes policies such as rent controls, he conveniently ignores the fact that the problems in the UK housing market are attributable to government intervention and planning. The idea that the UK housing market is a free market is a joke.
Sure, there will always be market failures, but that should be the determinant of whether or not there is state intervention. Ideological hatred of free markets is a lousy way to make policy.
Corbyn wants to extend public services democracy away from Whitehall. True democracy would be the devolution of spending power to every citizen. Be it vouchers in education or payment passports in health, free at the point of use is still possible, but we need a revolution in choice to deliver those public services.
If somebody tells you they want to take an active role in restructuring the economy, with a new model of economic management that includes a dynamic role for the public sector, ask them where on earth has that ever worked in the history of the world?