I wonder if John McDonnell arrives at dinner parties with devilled eggs? Or perhaps he’s partial to a prawn cocktail? Maybe a bottle of Blue Nun?
I wonder only because of his plan to nationalise “core industries”. British cuisine and the British economy have, thankfully, evolved and adapted in the last thirty years. But given McDonnell’s interpretation of what constitutes “core industries” – rail, mail, and energy – one is left pondering his palate.
The UK has “gone digital”, and with it, what is essential to the economy has changed. Which begs the question: if McDonnell truly believes state ownership to be the superior economic model, why only nationalise the devilled eggs?
First consider Royal Mail. The delivery of goods and packages, both domestic and commercial, is clearly a core industry. The £6.2bn UK parcels market is highly competitive, but Royal Mail’s share is just 41 per cent.
Arguably, consumers don’t want a specific service, just equivalent choice. Whether the van delivering your package is red, yellow, or orange is arbitrary. So why is one element of a vibrant market so vital as to be worthy of nationalisation?
Now consider the social media industry. It’s worth billions more, employs millions of people directly and indirectly, and has many more stakeholders. By measure of market share, give or take, Facebook is to the UK social media industry what Royal Mail is to the UK parcels industry.
Like Royal Mail, Facebook is critical communication infrastructure. One would imagine the tech company fits perfectly with “core industry” criteria.
Indeed, considering the amount of debt proposed for other nationalisation plans – £176bn according to the Centre for Policy Studies – issuing bonds to purchase a controlling stake in the tech giant isn’t any more ludicrous than spending £90bn on nationalising water.
McDonnell insists his plans won’t cost the taxpayer a penny, which is misleading. Issuing bonds is to take on debt to purchase liabilities. If those liabilities underperform, the taxpayers foot the bill. So purchasing a stake in Facebook – which has risen over 500 per cent since its flotation – might be a good hedge.
Of course, the above would never happen for innumerable reasons – primarily that it’s ludicrous, but also that Facebook wouldn’t allow it.
Regardless, if McDonnell seriously believes that the state can better run a firm than private individuals competing in a free market – that his alternative to capitalism will succeed – why stop with boring old industries?
The answer is threefold. First, is so-called “creative destruction” – the beating heart of the digital economy. New titans of industry emerge by outflanking competition with innovation. It’s impossible for the state to behave like Silicon Valley without a profit incentive.
McDonnell must be aware that you can’t simply replace a competitive market with a monopoly. But the success of such firms contradicts the belief that state ownership is superior. So rather than admit flawed principles, expect firms to be shut down with stifling regulation masquerading as a public good in this socialist utopia.
Second, this scheme has to be sold to Labour’s core voters – young people. Few 18 year-olds could give two hoots about the socioeconomic merits of centralised price controls, but take away their Uber, and as we witnessed last year, boy will they sign petitions.
Third, is a combination of intransigence and spite. McDonnell and co have been beating the same drum, with remarkable consistency, for three decades. Their ideology always trumps pragmatism. But when that ideology conflicts with reality, the blinkers go on.
Rail, mail and energy have been, largely, successfully privatised by successive Tory governments.
Undoing that is mere spite.
As proposed, McDonnell’s nationalisation plans – his purported “alternative to capitalism” – is merely taking back control of yesterday’s economy. He’s bringing devilled eggs to the party.
So go on John, I dare you, serve up something we can really get our teeth into.