Corbynomics reflects a conviction that the austerity policies of the last six years have largely been a political choice, rather than an economic necessity; that Conservatives have deliberately prioritised deficit reduction in order to further shrink the welfare state and the public sector, and thereby complete the neo-liberal project started by the Thatcher Governments in the 1980s.
Corbynomics – or, rather, (John) McDonnellomics – does not deny the need to eradicate the fiscal deficit, but insists that this should be achieved through other policies than simply cutting public expenditure, freezing public sector pay and reducing welfare provision. Corbynomics argues that, as well as causing hardship to many of the most vulnerable or poorest people in Britain, these cuts are counterproductive and exacerbate the weakness of the economy, because the purchasing power of millions of people is reduced. If people spend less due to belt-tightening, then firms sell less, profits decline, more workers are laid-off, aggregate welfare spending increases, tax revenues fall, and so further cuts are imposed, resulting in a race to the bottom – which also then widens the gap between the top 1% and the rest.
Corbynomics therefore recommends a major programme of public investment, particularly on infrastructure projects, including housing. Initially, this would rely heavily on borrowing, but with interest rates currently at rock-bottom levels, Corbynomics holds that this would be economically viable. Funding for investment would also be accrued from a National Investment Bank, a major clampdown on corporate tax avoidance, and a form of ‘People’s Quantitative Easing (QE)’ via the Bank or England, which would also generate funds to be spent on specified public or socially useful projects. The expectation is that such measures would generate economic growth and employment, both of which would simultaneously reduce the welfare bill and generate higher tax revenues for the Treasury. This could then be used to reduce the deficit and repay the monies borrowed.
Although Corbynomics is viewed by its many critics as dangerously left-wing, and economically reckless (‘Has Labour learnt nothing from 2008?’ they ask, perplexed) as well as heralding a major expansion in the role of the State, its supporters argue that there are major historical precedents for such programmes, most notably Keynesianism in Britain after the Second World War, and Roosevelt’s New Deal in the USA in the 1930s. If Corbynomics seems radically Left-wing, these supporters claim, this merely reflects just how far the ‘centre ground’ has shifted to the right since the 1980s – and how deeply entrenched neo-liberalism has become, intellectually and electorally.