An era of new economics- John McDonnell’s Speech to Labour Party Conference

John McDonnell yesterday made his first major speech as Shadow Chancellor of the Exchequer at Labour Party Conference in Brighton. This speech showed, ultimately, that Corbyn’s appointment of John McDonnell as shadow chancellor was a clever and appropriate appointment. McDonnell has been largely criticised by the press for being “economically illiterate” despite being the Chair of Finance at the Greater London Council and overseeing a £3bn budget in the early eighties. In that time, the GLC invested heavily in public services, equal opportunities, police accountability and set up a women’s committee and an ethnic minorities committee. Crucially, McDonnell stated in a 2007 interview with The Guardian, that they were attacked for these decisions from all sides but that these ideas are now considered as mainstream. This interview is hopeful- it gives us hope that the ideas being put forward by Corbyn and McDonnell might one day be considered mainstream.

But let’s look at the speech he made yesterday.

It was shorter than most keynote speeches, at around twenty minutes. Where senior Labour politicians of the past, like Ed Miliband spoke for nearly an hour, McDonnell got down to the business of telling his audience what was what and didn’t bother with the platitudes of personal anecdotes or stories of people he had met.

He launched an attack on austerity, exemplifying the effects this Tory government has had on the lives of real people, including Michael O’Sullivan who killed himself as a direct result of being made fit for work.

Rather than simply reasserting the need to “balance the books” and general pandering to the neo-liberal economic consensus, McDonnell gave the conference an introduction to an alternative economic plan-that to the economically literate- is  basic Keynesianism. Debate about economics has become so sanitised over the last thirty years, that even Keynesian economics are seen as “radical” and “extreme” by the right wing press. Most importantly, McDonnell argued that austerity “is not an economic necessity, it’s a political choice”. For too long, being anti-austerity has been confined to the fringes of mainstream politics and economics. There has to be real opposition to the Tories in the House of Commons and it is right that Labour transforms itself as an anti-austerity alternative to the neo-liberal, trickle down economics that has permeated society for the last thirty years.

What became abundantly clear in this speech is that the Labour Party will go into the 2020 election being on the side of working people, rather than the side of the Tory press. Rather than pandering to the Tories’ cuts agenda, Labour will invest heavily in industry and services. McDonnell questioned the progressive credentials of the SNP in Scotland and criticised them on their record of voting against progressive Labour motions. Rightfully, McDonnell laid out plans to tackle tax avoidance from multinationals such as Google and Amazon rather than attack people’s rights to tax credits.

The dominance of neo liberal economics over the last three and a half decades has diluted people’s understanding of economics. It isn’t taught in schools and it can be quite a complex issue to understand. McDonnell’s establishment of an Economic Advisory Committee will be a significant step in educating the public about alternative economic strategies. Where many have criticised Corbyn and McDonnell for taking the Labour Party back to the eighties, McDonnell’s economic plan shows that it is modern and forward looking with the appointment of modern, Nobel Prize winning economic advisors.

This “economic recovery” has been the slowest recovery in a century and has left us teetering on the brink of another recession as George Osborne has based the economic recovery on the biggest drop in wages since Victorian times, growing consumer credit and rising house prices. Our economy is based on increasingly insecure work in the service sector and a deregulated banking sector. It appears that the Tories haven’t learned any lessons from the economic crash.

McDonnell has been criticised for his lack of detail in his speech. Perhaps that may be so as he failed to say how he would implement measures to tackle tax avoidance and raising taxes for the rich, but perhaps it goes without saying that this would be implemented through laws and Labour budgets. He was criticised by Vodafone quickly after his speech, who seem to think that a £41m profit is minimal and by the CBI who criticised him for being anti-business for his plans to force businesses to pay their taxes. If businesses want to take advantage of our education system to train their workers, of our health system to make sure they are fit and healthy, then it is only right that their corporation tax goes towards paying for it.

What McDonnell presented yesterday was a bigger picture. The formalities and specifics can be outlined in policy documents and reports in the coming months and years, but what is clear, is that Labour finally has an alternative economic strategy that they simply have not had in the last five years. Labour under Ed Balls’ shadow chancellorship has run scared of any kind of radical alternative to the failing economic plan of the Tory government that has seen more borrowing, falling wages and insecure work. This is the speech that many have been waiting for from a Labour Shadow Chancellor. We have a real opportunity to transform the way that Britain thinks about the economy. We do not need the Tories pontificating about their economic competence and how we ought to listen. If we look beyond “mainstream” economics, we can come up with an alternative economic plan- and perhaps- a better one.

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