By Daniel Rahman
Neoliberalism is the popular economic model of choice for British governments. A Labour government under Jeremy Corbyn would change that.
For over 38 years neoliberalism has been the economic model of choice for British governments. A Labour government under Jeremy Corbyn would change that. Corbyn is set to destroy Thatcher’s economic model that caused the Global Financial Crisis in 2008 and has seen income inequality rise to unprecedented levels. Labour’s focus needs to be on removing these ideas from the political sphere and transforming public perception on how to best run the economy.
Neoliberalism originated from Adam Smith’s liberal economics. He saw the “the invisible hand” in the economy and believed that state intervention in markets only disrupted the natural equilibrium. Smith introduced the idea that competition would drive down prices and therefore private companies provide the best outcome for consumers and producers. However, Adam Smith did not forsee the monopolies we have today that abandon the principles of competition in order to maximise their profit.
Thatcher resurrected Smith’s ideas of low regulation, low taxation and free-market economics in the form of neoliberalism. This ideology still dominates Conservative party policy with Theresa May claiming the free market is the “greatest agent of collective human progress ever created”. Even Labour under Tony Blair accepted the free market due to explosion of the financial sector in the 1990s and 2000s. It was this same explosion that blew up in all our faces causing the global financial crisis. Following the worst recession in decades, it seems reasonable to expect the economic thought that brought this problem would be abandoned. Unfortunately, this did not happen. The crisis was wrongly blamed on wreckless government spending resulting in neoliberalism continuing in the form of austerity; the systematic cutting of public spending to reduce the national deficit and restore business confidence.
Until the 2017 general election, no major party firmly opposed this economic principle. Labour’s Manifesto did just that. Jeremy Corbyn brought shockwaves when he promised to spend more than £45 billion more annually to abolish tuition fees, nationalise key industries and introduce a £10/hour living wage. It was these same shockwaves that led to Labour’s largest increase in vote share since 1945 and a “youthquake” in British politics.
Now some Blairite factions still are hesitant to fully commit to Corbyn’s new economic outlook of increased regulation and greater state intervention believing that it cannot win them an election. It is this hesitancy that could cost Labour at the next General Election. To keep Labour’s surging momentum (pun intended) going, the party has to unanimously reject the neoliberal order to further their appeal to ordinary British citizens. Austerity has brought us a fall in living standards,no real wage growth in the UK economy and the concentration of wealth in the top 1%. Labour needs to wholeheartedly reject these outcomes and champion a new solution of demand-side economics.
Labour’s current policies aim to do that; the £10 an hour real living wage would increase consumer expenditure and therefore raise aggregate demand. This would in turn restore economic growth to the economy while redistributing the wealth more proportionally to those who need it. This is the exact opposite of the Tory’s proposed austerity. It is the working classes that rely on public expenditure so cutting this directly hurts the poorest and most vulnerable in our society. This idea has to be hammered home into the electorate to ensure a Labour victory at the next election.
Jeremy Corbyn looks set to be the first truly left-wing prime minister in decades and has to leave a legacy of ending neoliberal economics. Such a widespread belief can never be truly eliminated but Labour should look to move it out of the political mainstream and replace it with more fair political consensus based around equality and wealth distribution.
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