Corbyniste Compromise

‘Can some synthesis between the idealism of the Corbyn camp and the pragmatism of Labour’s moderate wing produce a winning combination?’

Guest Speaker

Last summer saw two outcomes which were almost entirely unexpected. One was the election of a majority Conservative government in May and the second was the overwhelming Labour leadership victory achieved by Jeremy Corbyn. Both have a huge impact on what we can reasonably expect to happen between now and the next general election in 2020.

The initial Conservative reaction to these two events has been to assume that this means that they will have a clear run in 2020 and probably beyond. Perhaps they will, but five years is a very long time in politics and the situation could look very different by the end of this decade, especially if Labour regroups. How could this come about?

The Corbyn victory has undoubtedly tilted Labour well to the left of where it has been for several decades. There are, however, already signs among Corbynistas of compromise with political realities. On the Right of the party, shock at the outcome of the leadership election is giving way to realisation that the “austerity-lite” policies, which were the hallmark of Labour’s offering running up to the general election, are leading it into oblivion.

The crucial question then is whether some synthesis between the idealism of the Corbyn camp and the pragmatism of the more moderate wing of the party could produce a winning combination, perhaps in time for the next general election. As always, much will turn on economic policy. At the moment the Conservatives appear to be in relatively smooth waters, but there are good reasons for thinking that their economic record could look a lot less lustrous by 2020 than it does now.

The UK economy is extremely unbalanced. Investment as a proportion of GDP is critically low. We have deindustrialised to a point where we cannot pay our way in the world. We have an alarming balance of payments problem. We are living beyond our means and running up debts at both a government and household level. What growth we have is largely consumer-driven, based on ultra-low interest rates and asset inflation. And these are just the problems the UK faces before considering external threats.

It is against this background that the Corbyn anti-austerity policies may, by 2020, have a good deal more traction and appeal than Conservative austerity, especially if the present strategy for reducing the government deficit fails to work. This is very likely to happen, because, rather than being caused by government overspending, the government deficit is in practice more or less the mirror image of the foreign payments deficit, which is going up and not down. In these circumstances, trying to get the government deficit down by cutting expenditure and increasing taxation may well lead to the economy tanking while the deficit stays stubbornly high, producing little or no gain in exchange for a large amount of economic pain.

Were this to happen, a Labour platform based on using low interest rates to finance a big boost to infrastructure projects might look a lot more attractive. Borrowing may go up but total government interest charges are currently no higher than about 3 per cent of GDP and they could certainly be considerably higher than this before the UK government were to have any problem financing its debt. Government debt charges amounted to an average of around 8 per cent of GDP between the wars.

It is also wrong to think that many of Corbyn’s policies that have rubbed the establishment up the wrong way are necessarily unpopular with the electorate. A recent poll, for example, showed that about 60 per cent of the population thought that the UK railway system should be brought back into public ownership and there are respectable military experts who believe that the quarter of the defence budget spent on Trident might be better deployed on conventional forces.

What could go wrong? Plenty. Corbynomics at the moment does not appear to have any coherent plan to rebalancing the economy and there is clearly a substantial risk that expansionist policies could risk our balance of payments problem spiralling out of control. There is still a major economic credibility problem to be overcome.

Labour policies are, of course, also not all about the economy and there are major disagreements within the party, especially on the EU, Polaris and Nato, as well as on taxation and nationalisation. Differences of opinion over key issues such as these may mean energy is spent on political infighting rather than on devising workable and electorally appealing policies. Those with the talent to occupy leadership positions in the party may become disillusioned and decamp. It could take more than five years for Labour to pull itself into electable form, even if the Conservative government runs into major problems in the meantime.

But as long as we continue with our first-past-the-post electoral system, the pressure for there to be reasonably coherent large  political parties on both the Left and the Right will remain strong. This makes splits in the party unlikely.

And there is still a danger that disillusionment with Westminster and politicians generally, fuelled by lacklustre economic performance over the next few years, may cause further political fragmentation. We could then drift into fractious coalition governments with no one in full control.

It may be, therefore, that it will take longer than five years before we have another coherent Labour — or at least Labour-led — government. Many decades of British history, however, strongly suggest that Labour will regroup and be back in power again, if not in 2020, then quite possibly by 2025.