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Boris Johnson’s fake New Deal is an opportunity for Labour – but it must move more swiftly

Rather than simply scrutinising the government, and repairing Labour’s damaged reputation, Keir Starmer must offer a vision.

By Paul Mason

To make a speech at a time of crisis should be considered a luxury. With around 100 people a day still dying from Covid-19, and with scores of companies perilously close to insolvency, there has to be a good reason to crank up the autocue and start pontificating. 

In the past week we’ve had two set-piece orations: from Michael Gove at Ditchley Park and now Boris Johnson in Dudley. Johnson’s speech was the icing, Gove’s the cake. The flavour common to both of them was an attempt to rebrand Conservatism as a form of benign state interventionism, rectifying the damage done by a decade of austerity, which just coincidentally happened under governments including Gove and Johnson.

In response to the coronavirus, said the Prime Minister, there will be no austerity but a “New Deal”. Taxes might rise but in any case the government is prepared to borrow and invest, he added.

Gove dwelled at length on Franklin D Roosevelt, animator of the original New Deal, which from 1933 until the outbreak of war in 1939, rebuilt the US through dramatic state intervention, social mobilisation and the reorganisation of government. On Friday, yet another speech will be delivered, with Rishi Sunak expected to put some figures on Johnson’s promise to “build, build, build”. 

If real – and with Gove and Johnson you always have to count the spoons – this is a turning point. Faced with a collapsing economy, the Conservatives have already had to act outside all the parameters of their traditional thinking: paying people not to work, borrowing to lend to stricken companies, using the Bank of England to directly finance government spending, requisitioning private hospitals. Now they are formally repudiating the economic principles upon which they have trashed growth and increased inequality since 2010. 

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The government, already forced to borrow massively to keep the economy afloat, is committed to the principle of borrowing to invest its way out of a crisis. Implicit in Gove’s speech was the admission that free-market tinkering with the education system has had a zero-to-negative effect on the problems of inequality and underachievement. 

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And Gove – channeling Gramsci – even admitted that the free-market economic model is bust and that FDR-style intervention is required. In the future, Gove promised, the government would, as Roosevelt said, put faith in “the forgotten man at the bottom of the economic pyramid”.

See also: Stephen Bush on the far-reaching economic decision not making the headlines

But don’t start celebrating yet. This is going to be a New Deal for the rich, and Johnson shamelessly signalled it. 

“I am not a communist,” he said, in a nod to the whey-faced Tories businessmen of the West Midlands, who see all government spending as a form of theft. We should not only clap for nurses, Johnson said, but for “our innovators, our wealth creators, our capitalists and financiers”.

Actually, once Sunak turns the spending taps on, it is the capitalists and financiers who will be clapping, because the meat of Johnson’s new programme is as follows. He will rip up building regulations to speed up brownfield property developments. He will abolish the planning laws that force builders to mitigate environmental damage, noise and air pollution (what he called “newt-counting”). And he will shovel money into the pockets of building contractors to refurbish schools and colleges.

This is an investment programme to boost the incomes of capitalists, not the skills and life chances and, above all, the real wages of people. It’s not a Green New Deal – it’s a Sleaze New Deal.

For the Labour Party this offers an opportunity: to make the case for a different economic model. So far Keir Starmer’s Labour has differentiated itself by correctly calling for a swift and thorough lockdown, by calling out the government’s incompetence and lies, and by successfully pushing Sunak to maintain the furlough scheme.

The challenge now, as in the early 1930s, is to make the moral case for a different mix of market and state, in which the state directs, funds and in some cases actually owns key sectors of the economy, and in which wealth is proactively redistributed downwards.

To make that happen you have to do a lot more than hand your mates in the civil engineering sector some lucrative contracts. Far from “clapping the capitalists and the financiers”, you have to declare war on them.

That’s what Roosevelt actually did. He raised the price of food, saving the farming industry by limiting its supply. He increased the minimum wage, enforced it and banned attempts by individual firms to compete by cutting wages. He forced entire sectors into bargaining agreements with their workforce.

Through the 1935 National Labor Relations Act he gave workers cast-iron employment rights and, within a year of its passing, a rash of strikes and occupations in iconic plants owned by Ford and General Motors ensured that the “forgotten man” could no longer be pushed around on the factory floor.

See also: Paul Mason on how the Labour left needs to change if the party is to win

Roosevelt spent vast amounts of borrowed money, not just on bridges and dams but on human capital. Forty-thousand actors, stage managers and producers were hired to create one of the most thrilling cultural projects ever conceived: the free theatre project that, among many triumphs, staged an all-black performance of Macbeth in Harlem.  

Above all, Roosevelt attacked the power of organised finance. Through the Glass-Steagall Act he placed limits on investment banking, suppressing financial profits and forcing people with money to take productive risks, rather than simply collecting the economic rent due from their ownership of capital.

Once you translate that into its modern equivalents, it is obvious that Johnson can do none of it, because the entire premise of his administration is to deregulate the economy to fill the pockets of a financial elite.

There are four major policies that you would need to enact if you wanted to construct a new, more equitable form of capitalism in Britain. They are: 

·      Downsize and deglobalise the finance sector; 

·      Boost the wage share of GDP (which means shrinking the profit share); 

·      Rebalance the private sector towards high-productivity business models; 

·      And, as Keynes once put it, enact a “euthanasia of the rentier” – outlawing the business models of Amazon, Uber, the oil giants and the property speculators. 

You would need vast public borrowing and spending – to decarbonise the energy system, to re-equip health and social care systems to meet the threat of future pandemics, and to support sectors such as hospitality and entertainment whose business models are imperilled until a Covid-19 vaccine is found. 

And as Roosevelt understood, none of this can be done from the top down only. A Real New Deal for the UK would empower trade unions and end the bogus self-employment of millions of people, restoring statutory councils that would set and enforce pay rates in sectors such as hairdressing, minicab driving and construction work. Mobilisation from below was crucial for Roosevelt and would be crucial in the reconfiguration of capitalism today.

The only political party with the vision for a New Deal in today’s conditions is Labour. But it needs to get a move on. Starmer’s agenda has, so far, been dominated by reputational damage limitation and the loyal badgering of the government over its pandemic failures.

In the case of economic policy, there is a justifiable wariness about offering to throw money at the post-Covid-19 slump: meeting every billion-pound sum pledged by Johnson with the demand to put an extra nought on the figure will leave the public cold  and won’t on its own solve the problem.

What we need is a vision. In the 1929-31 crisis, the only Labour politician with a vision beyond crisis management was – unfortunately for history – the future fascist Oswald Mosley. As a result of rejecting Mosley’s famous 1930 memorandum – which was a putative version of Keynesian economics – Labour fell from office and it was left to the Tories to enact an early version of state intervention.

Soon, I want to see Starmer outline a clear alternative to Johnson’s fake New Deal, based not simply on borrowing and spending more, but on the principles of empowerment, redistribution, rising well-being and net zero carbon with which he fought the Labour leadership election.

The mood music emanating from Labour in the Commons recently has been earnest quibbling over detail and moral frustration at scandals such as the Jenrick affair. It’s time to go on the offensive for the big ideas we came into politics to achieve.

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