It is only the second week of Jeremy Corbyn’s leadership and we do not have more than a few scraps of information about his economic strategy. His successful leadership campaign focused upon anti-austerity and his desire for a more equal society, and we can assume that will be the central tenet of Corbynomics.On securing the Labour leadership, Corbyn indicated his intent by appointing the veteran left-winger John McDonnell as shadow chancellor, much to the horror of Labour moderates. McDonnell, who famously declared his hobby in Who’s Who as “fermenting the overthrow of capitalism”, says he supports a 60 per cent tax rate on high earners. His numerous proclamations favouring higher public spending give a good indication of the direction of Corbynomics.
But what of actual policies? During Corbyn’s campaign he announced a controversial plan for people’s quantitative easing. The unorthodox scheme would involve the Bank of England printing large sums of money to invest in infrastructure and housing developments. Corbyn argues, as many economists have, that Britain’s infrastructure needs urgent investment. He believes that this scheme will help develop Britain’s infrastructure for the future, outweighing the initial costs.
However, his scheme has some major issues. Corbyn’s plan to order the Bank of England to print vast sums of money is almost certain to lead to higher inflation resulting in increased prices for everyone. History has tended to show that printing more money also has the effect of damaging business confidence and decreasing the value of national currencies. Weimar Germany is a superlative example. Corbyn’s attempt to rebrand quantitative easing into a permanent state-led investment programme seems likely to be denounced by most analysts. Corbyn is obviously aware of this and he faces an uphill struggle to assure the public and businesses that his scheme will not damage economic confidence and drive up inflation.
The second policy is arguably much safer territory for the veteran left wing MP: the re-nationalisation of Britain’s railways. With support for rail re-nationalisation at 66 per cent overall, Corbyn is firmly on the right side of public opinion. Corbyn’s plan is to renationalise line by line when the current privatised franchises run out. This would be the cheapest and most sensible option for the exchequer negating the need for costly buy-outs.
For the paying public, there is no guarantee of a better service or cheaper fares but a single network is likely to streamline the current disjointed system of different operators with the hope of leading to efficiency. Unsurprisingly but ironically, this policy has been attacked by David Cameron as an “ideological joyride”. Cameron’s government pressed ahead with the privatisation of the successful publicly owned East Coast mainline, despite huge opposition. He may well struggle to counter Corbyn’s attractive and popular policy. The commitment to rail re-nationalisation seems a sensible economic move as it balances the public demand for change with a desire for a more integrated, efficient system.
These two policies are by no means the full picture of Corbynomics, as the full picture is only likely to emerge in the next year.One thing is certain – the narrative of austerity is now firmly being challenged in a way that Ed Miliband couldn’t. Instead of agreeing in principle with Cameron’s economic agenda, like many Labour moderates, Corbyn has rallied the centre left with his call for more public spending, a protected welfare state and a fairer society.