James Meadway is a former advisor to Shadow Chancellor John McDonnell. Previously, he was the Chief Economist at the New Economics Foundation and he is currently writing a book on left wing economics. In his interview with this website, he outlines the principles of Corbynomics, discusses a Green New Deal and explains why he thinks MMT would be such a misstep for the left.

JOE (JH): As you see them, what are the main underlying principles of Corbynomics?

JAMES (JM): John McDonnell summarised the aim when he said “we want nothing less than an economy that is radically fairer, more democratic, and more sustainable, where the wealth of society is shared by all.” As the Shadow Treasury team has developed that since September 2015, I’d say the principles are:

– A rejection of the neoliberal premises that private ownership and markets will always be the best way to organise society;

– A belief that deep changes are required for our economy to begin to move it in a direction that benefits the great majority, including making it more sustainable;

– The principle that ownership and control of productive resources are the decisive factors determining economic outcomes, and that both should be decentralised, democratic, and collective as far as possible.

I’d guess that roughly that set of principles would now command broad support across the movement.

JH: How radical is it? There currently seems to be two competing instincts: one of downplaying it (i.e. “the 2017 manifesto is just mild European social democracy”) and one of talking it up as radically transformative.

JM: It’s both. The first issue here is the serious peculiarity of Britain, relative to similar economies in Europe. What is taken for granted in Europe – and across the world – for instance in having public ownership of utilities, and significant state involvement in the economy, has (until Corbyn) been seen as wild-eyed radicalism by the political mainstream in the UK. In terms of the relationship between state and economy, Britain made an extraordinarily deep shift into neoliberalism: the Treasury estimated that between 1980 and 1996, Britain privatised 40% of all government assets sold to the private sector in the entire OECD group of developed economies, an exceptional figure. Similarly, for labour markets the shift has been comprehensive: unions still exist, but are shadows of their former selves, with membership down from just about 50% of employees in 1979 to around 23% today. Strike days are at the lowest since official records began in the 1890s. Unions face the most restrictive set of laws on their activities in the EU, whilst the “flexible” labour market has led to an explosion of zero hours contracts, bogus self-employment, and appallingly exploitative forms of agency work – notably since 2010.

I’d argue this shift in production relations – transferring ownership and reasserting the power of capital over labour – is at the core of neoliberalism in practice, but it can sit alongside the continued provision of welfare and other “consumption” provision by the state, in one form or another. No doubt Thatcher and the Tories would like to have disposed of the NHS entirely, but they weren’t able to, and under New Labour public spending increased from 2000 onwards. Neoliberalism can coexist with relatively high levels of public spending, as we see across Europe in particular – the neoliberal right certainly don’t like public spending, but they’ll concentrate their fire elsewhere if they have to. And the neoliberal left can actively seek to increase public spending, as we saw under New Labour, whilst accepting the basic neoliberal ground rules in terms of the rest of the economy. In both cases, provision of some parts of a welfare state has arrived with pretty overt attempts at instilling labour market discipline – take, as a prime example, the tightening up of sanctions and conditionalities on welfare payments under New Labour from 2006 onwards.

So to the extent that the 2017 manifesto aimed to restore spending cuts and improved public service provision, it was essential – the damage done by austerity since 2010 has been both appalling, and entirely unnecessary – but not radically transformative. To the extent the 2017 manifesto went further, and posed the issue of correcting the colossal error of privatisation, it was more radical, because it began the process of reversing forty years of neoliberalism, but it didn’t point at something beyond what is common enough across the developed world. Likewise, [Labour’s] £250bn National Transformation Fund would be a huge increase in public investment for the UK, but would move us to around the average level of investment (relative to GDP) of the developed economy OECD group. To a significant extent, Corbynomics is Make Britain Normal Again.

But there are points in the manifesto, in the policy direction laid out by John and Jeremy, and in the specific policy announcements since 2017 where Corbynism moves decisively beyond neoliberal capitalism. There are two parts to this. The first, which quite correctly the party leadership has been increasingly stressing, is on the environment. Addressing climate change on any meaningful timescale will require an overhaul of existing institutions; the relaxed pace of decarbonisation we have at present will mean comprehensively missing even the pretty relaxed current official targets. A few of our economic institutions, like the Bank of England, have grasped this, and are putting themselves ahead of the curve. Most, including particularly the Treasury, have not. And similarly we will require changes to how our major businesses think and act.

The second, underlying even this, is the transformation of ownership. This is more than only correcting the mistakes of the past by reversing 1980s and 1990s privatisations: it means broadening the scope of collective – not government – ownership across the whole economy, from renewable energy production (which, given the technologies we have, will largely need decentralisation), to worker ownership, to areas that we’ve only just begun to think about, like data. There are huge opportunities here to break out of the zero-sum games that neoliberal capitalism is forcing us into.

Take, for instance, the bulge in the number of baby boomer business owners coming up to retirement. They own viable businesses that they want to see continue; better than a trade sale or some sort of asset-stripping is handing the business over to employees. Some businesspeople are already doing this – Julian Richer at Richer Sounds is the most prominent. But how can we make worker ownership happen more often? Preston Council is already looking into ways to support this on the ground – can we scale this up to the whole country? We could see an enormous expansion of worker ownership and collective ownership of capital on the back of it. Similarly, the Inclusive Ownership Funds, requiring large companies to steadily transfer more of their capital into worker ownership, are a critically important step towards ending neoliberalism in a progressive direction. (There are, as we are seeing, plenty of ways to end neoliberalism – in whole or in part – that are not progressive.)

JH: You have tweeted in the past about how the choice between either UBI or UBS is a false one, what is it that you think each of these policies offer when put forward together?

JM: This is the other radical element of Corbynomics, as it has developed – removing the distribution of goods and services from markets, or “decommodifying” their provision, if you like the jargon. The most dramatic single example of this from 2017 was making Higher Education free: an ideal flagship policy, since it was bold, would be quick to implement, and genuinely transformative – had we won in June, no home undergraduate student would have paid tuition fees in September. The scale and impact of this would have been something to behold. More than this, the policy acted as a synecdoche for the whole Labour programme, in the sense that it was a single policy that could describe what the whole government was going to be like. By posing a bold, clear, transformative policy, it told a story about what the whole government would be like and what approach it would take.

Universal Basic Services builds on this idea by extending still further the range of services that could be made available without the need for a market. The logic here works hard against that of New Labour, which prioritised means testing of limited provision as a supposedly “fairer” way to provide services and (especially) benefits – whilst failing to tackle gross inequalities at the top. At best, the New Labour approach helped restrain the rise in income inequality we’ve seen since the early 1980s, but it certainly didn’t reverse it. At worst, means testing has meant dehumanising sanctions regimes in benefits payments, tightened under New Labour from 2006 but appallingly sharpened under the Tory-Lib Dem Coalition, and then the Tories alone. And, combined with the unwillingness to take on the super-rich – rather than squeezing relatively lower earners harder – it meant disfiguring inequalities continue.

Labour’s approach under Corbyn has been different. Roughly, we’ve prioritised “taxing the rich, and then giving something to everybody”. We think this is fairer – you tackle inequality at or very close to source via taxation, rather than trying to deal with it somewhere else down the line – more efficient, since (for example) you lose the absurd structures needed to make the tuition fees system work, and a better principle (that of universalism) for the left to adopt as a social rule.

I’d go one step further than this, and argue that removing commodities from market distribution is something capitalism itself is increasingly doing. When, for instance, is the last time you paid in cash for Facebook? (“It’s free and it always will be,” as the site says.) They take your data instead – Facebook access is decommodified, your data is commodified. This is the exchange they offer. Even where you do pay for something – say a Netflix subscription – it’s for access, rather than for a specific item like a film or TV series. The political battleground in the future is as likely to be over different mechanisms for the non-market distribution of products as it is to be over the market vs anything else.

This should tell us something about why the UBS/UBI dichotomy is an unnecessary distraction. You do both, because both are forms of decommodification: UBI more radically so, since it begins to allow the removal of the most fundamental commodity under capitalism – labour – from the market. Step-by-step, an increasing UBI gradually allows the liberation of a person’s time from the labour market. This is a privilege previously only enjoyed by the wealthy or the otherwise fortunate.

JH: On the panel at Bristol Transformed, you spoke about your preference for the terminology of a Green Industrial Revolution vs a Green New Deal, are you able to explain this?

JM: I think either is fine, but my suspicion is that talking about an “industrial revolution” here in the UK has a more immediate resonance than a “New Deal”. In the US, the New Deal is part of the landscape: since the 1930s, everyone more-or-less knows what it means: big government interventions to the benefit of working people, that shaped the country people live in even today. In the UK, aside from amongst politicos – whether Blair-era (Brown had his own “New Deal” for the young unemployed, in 1997) or Corbyn-era (we’re all huge AOC fans, obviously), I’m not sure the phrase carries the same social weight. (Although, in a further twist, the original Green New Deal proposals were made back in 2009 by a group of UK economists in response to the financial crisis – the labelling was later taken up in the US.) So I think “green industrial revolution” might mean a bit more for people, but that can change and what GND has come to mean over here is a big, bold programme to deal with climate change that goes beyond existing government targets.

There is, potentially, a more subtle – and less comms-focused – point to be made. Often we end up talking about a Green New Deal as a very centrally-directed plan: if government just spends enough, we can deal with climate change. Now, massively increasing government investment is essential – it will literally be impossible to get anywhere close to the necessary reductions in carbon emissions without that. And we’ll need strict central targets on decarbonisation. But in terms of meeting those targets, it’ll have to also be something delivered from below. We’ll need to change how we work (and how often we work!), how we travel, how we heat our houses – and how we build them. Only parts of this will work as something delivered from the centre; some of it will have to be delivered “from below”.

This is another point at which the question of ownership becomes central: for instance, the cheapest and quickest way to decarbonise the electricity system is to use onshore wind. But this is of necessity dispersed generation, impacting on many people; if we want onshore wind to be built and installed quickly, giving people ownership over the installations is the fastest way to do it. This is a large part of how Denmark rapidly installed wind technology – with 150,000 families in Denmark members of “wind cooperatives”, sharing ownership (and therefore the benefits) of installations, covering 75% of all wind energy capacity installed. Wind today accounts for over 43% of Denmark’s energy generation. Similarly, local council energy companies can do something similar on the ground. Looking ahead, if we move to the widespread use of smart grids, perhaps combined with the Internet of Things, there are huge issues about the use, control, ownership and management of the data this generates. Put all this together – the need to work from below, as well as from above; the shifts in ownership and control of productive assets – and “Green Industrial Revolution” sounds more like where we end up. Ultimately, I’m easy either way, however.

JH: On that panel, you spoke about the need to have a good answer to those facing job losses in carbon intensive industries. What do you think that answer looks like?

JM: This is a difficult one. It’s perfectly reasonable for those with jobs currently in carbon-intensive occupations to insist on viable alternatives – and for their unions to do the same. People (including me) have memories of what happened the last time deindustrialisation occurred in Britain – it meant whole communities getting hammered as good jobs disappeared. So we have to present an alternative.

Although it’s been promoted by some as essential, I don’t buy a blanket “Job Guarantee” (JG) as the solution to this problem, for a number of reasons. First, at the most basic level we should start with the problems we want to solve, and then work out how to solve them. (The WW2 analogy often gets used in relation to climate change and creating full employment, but we didn’t fight WW2 to create full employment, we fought it to defeat fascism. We don’t want to combat climate change to create full employment, we want to combat climate change because it threatens the existence of human civilisation as we know it. Sights have to be raised a little here.)

Second, a practical implementation of a Job Guarantee under capitalist conditions strongly implies a great deal of labour discipline – that if you refuse the job “guaranteed” to you, you’ll be on the breadline. Advocates of a JG like Randall Wray have noted it would be a decent way to restrain wage growth – public sector guaranteed jobs would need to exert a downwards pull on wages in the private sector for the JG promise to work. Bill Mitchell, a prominent MMT advocate, has said a JG would allow the removal of all other unemployment benefits. This is very disciplinarian. Relatedly, at a time when most people in poverty in Britain are in work – whilst unemployment is at forty-year lows – a JG looks like an odd cause to pursue.

Third, I think we need to be honest with the people we want to support us about what kinds of work people might expect to have, including the skills and conditions they might expect, and tie this into what sort of communities and world people will live in as we decarbonise. A Job Guarantee doesn’t open that (harder) conversation up as effectively as a broader vision would.

Fourth, I think describing that vision has to also look beyond simply what is the economic norm today – it’s clear, for instance, that reductions in working time are strongly associated with reductions in environmental damage. We need to think far more radically and creatively about how decarbonisation is going to happen, and how this can be part of a vision for a better society for everyone.

That starts, I think, with opening up discussions about industrial strategy, which will include a heavy focus on government spending and investment, and on delivering for the different regions – alongside a discussion about ownership. For example, if we are looking to adapt some of the principles of the circular economy – reducing waste and encouraging reuse – we will also be looking to create large numbers of jobs in repair, reconstruction and reprogramming. This can be small-scale, localised production and manufacture. Likewise, if we want a mass programme of loft insulation, as in the Labour manifesto, it’ll create tens of thousands of jobs not only for those installing the insulation, but also down the supply chain in the batch production of moulded insulation for specific houses. And new manufacturing technologies like 3d printing, meanwhile, offer the prospect of more efficient, more specialised production at a smaller scale. All of this can (and should) be done with decentralised forms of ownership – that as in places like Preston we should be looking to create forms of worker and co-operative ownership to deliver this.

JH: You’ve been fiercely critical of MMT. Why do you think this would be such a wrong turn for the left?

JM: I had a go a writing this out in a recent issue of Tribune, but, briefly, I argued there that (at the level of theory) where MMT is correct it is a fairly mundane repetition of some basic Keynesian (or post-Keynesian) points. I’m very happy to see the sectoral balance equation being used (and managed to write an entire PhD largely about an application of it), but it’s nothing new. Where MMT offers something new and distinctive is in its restatement of the “chartalist” theory of money, but this is exactly the point where it becomes pretty useless as a description of the economy and leads to some fairly impractical policy ideas around using taxes to control inflation and whatnot.

Much more interesting is its political economy – meaning its account of the distribution of power in the economy, which is rarely stated explicitly but clear from its account of monetary sovereignty. Here I think it moves from a fairly harmless eccentricity to something more dangerous. If we take MMT’s claims at face value, it’s a hopeless barrier to implementing an actually left-wing programme in Britain, which will require redistribution and the creation of new institutions. The more you need to do these two things, the less appropriate MMT becomes, especially for a country like Britain where a massively overexposed financial system is dependent on the Federal Reserve (ie, the US government) acting as its effective lender of last resort in the event of a crisis – this is what happened in the Great Financial Crisis, when the Fed provided “swap lines” (access to cheap dollars) to keep UK institutions from folding. (UK-based banks needed dollars urgently, the Bank of England couldn’t supply enough, so the Fed stepped in, is the story – Adam Tooze’s magisterial Crashed goes into the details.)

A government of the left in the UK has to do everything possible to limit that dependency; following MMT’s prescriptions – particularly in running whatever government deficit is deemed desirable – is doing the exact opposite and therefore an all-but guaranteed recipe for failure. This is why Labour’s Fiscal Credibility Rule, which is the framework Labour’s macroeconomic policy sits in, matters so much – it provides the stable point from which it is possible to both end austerity and enact transformative economic policies. It’s a different story in the US, since for as long as the dollar retains its pre-eminence as the world reserve currency, the rest of the world can be relied on to fund US deficits in public or private sectors. MMT, in other words, is a story about dollar dominance: either in the form that the US should run whatever deficit it likes, or governments attempting to run whatever deficit they want should accept subordination to the US. (Note, by the way, that the problem isn’t international capital markets and “bond vigilantes” attacking the government: frankly, with interest rates so low, it’s really not the main issue. The issue is the stability of domestic private financial institutions and their vulnerability to decisions taken by another government. The picture since 2008 has been that of government or at least public authority interventions provoking domestic institutional instability – as in February 2015 when the European Central Bank effectively crashed Greece’s banking system to bring the Syriza government to heel.)

There will be variants on the degree of actual monetary sovereignty countries can enjoy at particular points in time. A government of the right, with no commitments to redistribute or build new institutions, and accepting dollar domination, may find it has more leeway. Boris Johnson may have more space to make wild spending commitments because of this. Trump, like Ronald Reagan and George W Bush before him, can exploit dollar domination to run huge deficits.

There’s something I didn’t cover in Tribune, but the underlying politics of MMT are worth spending some time on. The core MMT policy agenda has strikingly little to do with the left: support for dollar dominance; indifference (at best) to redistribution from the rich through taxation (usually argued as taxing the rich being “unnecessary”); and labour market authoritarianism via the so-called “Job Guarantee”. There’s not much in here that is recognisably of the left, if we think the left is basically about freedom and equality – there’s quite a different political tradition at work.

This comes through in many different ways. For instance, Bill Mitchell and Thomas Fazi described it (in Reclaiming the State, p.10) as “tragic” that the left adopted the causes of anti-racism, women’s rights, and LGBT rights in the late 1970s. Worse, they claim this is as “equally tragic” as the acceptance of neoliberalism by parts of the left over the same time period. Now this is reactionary garbage, however you look at it, and should be firmly rejected – but it’s an important indicator as to where MMT is coming from.

MMT is not an authentic programme of the left; it’s a programme for economic nationalism that, currently, is trying to attach itself to the left. Historically, economic nationalism has arrived in left or right variants, and there has been slippage from one side to the other. So at different times MMT’s proponents have used different arguments to gain a hearing – claiming in the 1990s that a “Job Guarantee” would help drive down wages, for instance, whereas now they claim the Job Guarantee is a good way to deal with climate change. MMT advocates are reportedly advising Matteo Salvini in Italy, and Bill Mitchell thinks his government should “lead” other European countries. Mitchell and Fazi approvingly cite the monetary policy of Nazi Germany before the war in their book. I could generously call all this a bit slippery. There are ways to end neoliberalism globally that are not progressive, and this will (increasingly) be the terrain the left is fighting on.

JH: Do you see potential in, for example, New Zealand’s Wellbeing budget where we are seeing a shift away from maximising GDP growth as the main goal of government policy?

JM: Yes, absolutely! The GDP problem is in three parts. First, that the promise of GDP has collapsed for most people: GDP has risen (a bit) since 2010, but wages have fallen and are still lower than then. The GDP-material wellbeing link has broken down. Second, GDP is becoming less use as an indicator of economic activity since more and more activity is taking place outside of markets – and GDP is an estimate of transactions. Third, and relatedly, GDP takes no account of environmental destruction but in the most elementary way we now need to consider this.

GDP still has a use and will still have a role to play, but it needs supplementing and we need a bigger story about what government economic policy should be aiming for. Both NEF and IPPR have presented good alternative sets of indicators and I’ve written a report for Common Wealth on Greening the Treasury that cites New Zealand as one to watch. Former Cabinet Secretary Gus O’Donnell has an interesting 2014 report on introducing wellbeing as a target for government here – it’s worth a read for how even mainstream thinking is shifting on this.