Sunday, 16 July 2017

Brexit and Blair

Tony Blair claims that a Jeremy Corbyn led Labour government would, in combination with Brexit, "floor" Britain. Blair's prognosis on Corbyn has hardly shifted since 2015 when he famously claimed that supporters of the left winger should "get a heart transplant." Blair has always said he wouldn't want to win on a Corbyn style platform because it would be "bad" for Britain. Brexit is hardly a factor, so why the coupling of the two now?

These fittingly vague assertions are, of course, embedded in Blair's personal ideology, one for which nationalisation and stronger unions are in and of themselves "bad" because they are not "modern." Blair has never seen fit to elaborate on what his conception of modernity denotes, but no doubt for him it means shiny glass buildings and serious men in sharp suits and board rooms. The sleek, slimline, ultimately anonymous corporate capitalism of 1990s fantasy. Trade unions and big government are a priori bad for such a vision.

If there is some substance buried deep within Blair's claims about Corbynism, it comes from the soft left discovery in the mid-1980s that a left government needs capitalism - especially financial capital - on side or it will be crushed. The conclusion of Blairism about the nature of capitalism was developed out of the soft left's belief that social-democratic reforms could indeed be won if the left built a broad hegemony across society, not challenging capital directly but winning it over.

The simple proposition - that the left needed financial markets to function properly under its watch, perhaps more than the right did because of the reflexive cultural and ideological preferences of capital itself - gave some basic rationality to the Blairite project. And behind it in turn was a long, imagined history of left governments who came triumphantly to power on a mandate to challenge vested interests, only to be squashed by the powers that be. There is something of the Wilson and Callahan and even Mitterrand years in this vision, but also at least as much of Chris Mullins' hard left Harry Perkins in the fictional A Very British Coup. It is ultimately an ideological synthesis, a thick texture of operative assumptions about how the world works - the Sitten of the soft left - that proscribes a priori an outwardly radical left government which sets itself up in direct opposition to the power of capital. That road, this wisdom says, can only end in ruin.

So it's faintly surprising that Blair should include Brexit as a factor in his assessment. Surely Corbynism is doomed or it's not - regardless of Brexit. But if we are to follow the implicit argument of those like Blair - and beyond - who are now saying Brexit will scupper Corbynism to its logical conclusion, then it seems clear there must be circumstances in which Corbynism could succeed. In which a parliamentary socialist government in direct conflict with capital - especially finance - is not crushed.

To understand how Brexit could do for Corbynism, as Blair says it will, we need to define the circumstances in which Corbynism would not fail. But first, what is Corbynism? In short, it is an attempt to rebuild the productive capacities of the British economy, against the power of finance, along broadly left-wing lines. That means a democratisation of industry, greater powers for workers, more redistribution of wealth, and humane immigration and defence policies. But in terms of raw economics, it means a huge increase in state activity in the private and public sphere, a massive injection of targeted investment in industry in the hope of boosting productivity, kick starting growth, and creating new, better and better-protected jobs. 

If finance capital broadly benefits from an economy where industrial productivity is low and liquidity preference is high, such an industrial strategy represents a classic Keynesian challenge to the power of finance. The ability of such a government to implement its programme depends not only on its ability to avoid what is known as an "investment strike" (when capital refuses to invest because of high taxes), but also to sidestep the massive institutional power of finance capital in particular. The classical Keynesian programme can only be implemented where there is space for an alliance between so-called productive capitalists and the labour force against the "rentier."

Yet even here things are not as simple as they seem. Finance cannot be easily isolated from the "real" economy - especially in a context where much industry has itself been financialised (operating in markets without need of banks, financing themselves through own capital and generating much of its profit through financial transactions rather than through production itself). Corbynism's success would depend on its ability to attract rather than repulse existing financial markets, offering them a range of buy-offs in the form of a growth in different types of sovereign debt instruments with varied yields. Next, it would need to incentivise private investment through access to cheap but controlled credit. The biggest risk would not come from movements against the pound directly, which the government could weather, but sabotage and corruption in the state. Capital can be coaxed into investment; it will be harder to get it to abide by the government's terms.

The risks also intensify over the medium term. Corbyn is promising a basically Keynesian investment strategy, but as the economist Michal Kalecki observed, economics is not merely a technical art but a matter of conflicting political interests. If a government pursues a full employment model, redistributing wealth to the people, capital will oppose it not simply because it is objectively either "good" or "bad" economics, but because full employment is a de facto threat to capitalist power. Capital broadly understands full employment as leading to higher wages as labour shortages increase and the power of organised capital grows. Full employment and an active industrial policy reduce people's reliance on credit and act as a disincentive to finance. Low interest rates mean less cost for investment and inflation erodes the overall value of debt - both bad for finance. This is why moves by a Labour government to rebuild the productive sector - even if they don't tamper directly with the power of finance - will still be challenged by the financial sector. Whether or not Corbynism can work through these challenges depends not on the technical limits of the art of economics, but on politics. Will people be willing to fight the power of capital in the name - as Corbyn says - of "the many not the few?"

So to Brexit. It is taken as gospel by some on the centre-left that hard Brexit makes a radical left economic programme harder to achieve, at least in the short-term. But this is only true if hard Brexit is taken to mean exit in conditions close to - or identical to - WTO terms - or the famous "no deal." If the government is saddled with a huge Brexit bill whilst the pound is weakening against the euro, the government's power to borrow for investment will be significantly curtailed. The yield on British sovereign debt (gilts) is already increasing because of concern about Brexit, making it more expensive for the government to borrow to finance public spending. This could actually combine with asset sell-offs as the pound weakens, meaning both public and private assets see their values fall simultaneously in the context of Brexit. Once again, however, the greatest risk to an embattled government of the left would not actually come from a weakening currency or from capital movements or the increasing cost of public expenditure. All of these are admittedly objective strains, but bearable ones for a properly sovereign government (with power over its own currency). The point, however, is that under capitalism a government's sovereignty is always contested - between democratic, popular sovereignty and the sovereignty of markets. There are forces within and beyond the state that would place enormous political pressure on the government to relent on its programme and implement spending cuts.

In other words, the logic of Blairism dictates that Brexit will only hasten the inevitable failure of Corbynism. However narrowly ideological, Blairism points to real difficulties - both political and economic - for a left government. 

As Richard Seymour has argued elsewhere, Labour would lean towards a softer Brexit than the Tories not only because of its ideological reflexes, but because a worse deal would make implementing the Corbynite programme harder. As Seymour correctly argues, this is not simply a technical matter - about what markets will allow governments to do in given conditions - but a political matter related to what capital will let social democracy get away with. But Seymour doesn't articulate something crucial: a softer Brexit will form a central plank on Labour's pitch to finance. If there is another election, if Labour wins, if Labour negotiates Brexit, if there is a successful deal struck with Europe, and if the government can then survive long enough to implement at least some of its radical programme, it will be to some extent because Labour has successfully placated the financial sector by promising it the minimum possible change to its current status - a status built on the regulatory "efficiencies" built into British finance's integration into the EU.

But that's a lot of ifs. After all, finance capital could buy into Tory plans for a low-tax Britain. Indeed, if finance alone dictated political outcomes, that would be its preference. The point is Labour has to combine its democratic mandate with enough continuity to please just enough of the financial sector. 

How can it do this? If Keynes is right, then government policy which lowers real (not just central bank) interest rates while boosting investment opportunities will encourage investment as entrepreneurial spirits are excited and expectations about the future are improved. Investment demand will increase and the government will be in a position to coordinate it. The government's activities have a multiplier effect: as investment and consumer confidence rise, opportunities for further expansion open up in a virtuous circle. If Kalecki is right we are in a more complex world in which the struggle is not simply between economic rationality and ideological darkness, but between competing political interests. In Kalecki's world the government will have to fight bitterly to implement its programme against the will of global capitalist finance.

The image, peddled by Britain's right-wing press, of a monstrous European bureaucracy bent on scuppering the Chances of the plucky Brits, is clearly driven by dark fantasy, and yet illusions about an "honourable deal" (as Syriza used to call it) are problematic too. Labour should not kid itself that goodwill and openness can get round the German imperative to protect the EU in its current form at all costs. The British government will have to foot a huge bill, and a Labour government, determined to cause the minimum institutional dislocation, will be pilloried by the right if it maintains either single market access or membership (and with it freedom of movement). The costs for a Labour government are the worst of all possible worlds and the compensation only the slim promise of maybe implementing their social-democratic programme in unfavourable economic circumstances.

A few things can be done while Labour is still in opposition in terms of readying people for the battle ahead. First, activists in the wider movements should make the case for keeping some form of freedom of movement from the EU. The more we argue that FoM is "over" because of Brexit, the harder arguments about immigration will become. Labour may need to maintain FoM in any event in order to maintain single market access. Labour should argue - more strongly than it is - that a good Brexit deal won't prioritise immigration, but jobs. That means a deal which secures the British government the right to provide state aid to ailing industries, and to undertake nationalisation and other forms of public ownership currently made very difficult by the European treaties. It should argue for our sovereign right to take democratic control in areas of high economic priority for the public. It should also argue that only a good deal can prevent the strangulation of the British economy and the government by the power of capital. 

Finally, a word on why Labour should - contra ardent remainers who want to turn the tables on Brexit altogether - embrace our exit from the EU. First, there is the issue of the referendum. The democratic vote to leave was made and there is little public support for a reversal. Another referendum would see another victory for leave. Any attempt to reverse the decision would entrench public disillusionment with politics. Second, there is the not insignificant matter of the EU itself. If the British left has taken a pragmatic path regarding the EU in recent history, it is not because we have been converted to that organisation's virtues but only because the alternative was worse. Isolationism and protectionism are the answers of the far right, not the left. In the referendum many leftists - myself included - opted for pragmatic opposition to neoliberalism inside the EU rather than the phantasm of "left exit." In an ideal world that would still be my choice. But since that option has been foreclosed we have, in my opinion, no choice but to opt for international arrangements which resemble much of what we had as members whilst softening the EU's most neoliberal impositions on national government through our exit deal. While we should keep the basic requirements of the single market (and FoM), we should demand the right for a new role for government and democracy in the economy. The left argument for sovereignty - that global capital and its institutions should not ride roughshod over democracy - will be central to our vision for Britain outside of the EU.

If Brexit is unavoidable, then it is crucial we on the left think about the country we want outside of the EU. We do not wish to reverse globalisation or integration because of the inevitable economic chaos that would ensue, but nor do we wish to give a cartelised, neoliberal bureaucracy carte blanche over what industrial policy can be in the twenty-first century. Our Brexit deal will begin a real renewal of popular sovereignty, allowing social-democratic governments the right to implement radical reforms in the name of the people. It will take decades to gradually unwind the institutional architecture that sustains the gross inequalities of a global financial muses capitalism. Nor do we have a straight substitution for it in the form of a return to the postwar nation-state system. A left government in the UK won't be able to rewrite the rules of the global financial order over night. The first thing that needs to be done is to implement urgent social-democratic reforms to the domestic, productive economy whilst placating finance and the EU. While we cannot undo globalisation, we can reshape our relationship with it on a more egalitarian and ultimately democratic basis. 

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