(Bloomberg Opinion) -- In an extraordinary few days of political news on both sides of the Atlantic, a quiet revolution was easy to miss. The Labour Party conference, convened in the British seaside town of Brighton earlier this week, endorsed one of the most radical economic agendas anywhere in the democratic world — running from a 32-hour working week and a cap on private rents to the setting up of a state-owned pharmaceutical company and employment legislation to protect menopausal women.
It’s certainly possible to find some worthy ideas in there, but overall Labour’s agenda prompts two immediate fears and one pressing question: How would such unabashedly socialist policies be paid for and how much damage would they inflict on the broader economy? And perhaps more important, given that past experiments with state command and control have been failures, what would make this different?
Labour conferences, unlike the yearly gatherings of its rivals parties, aren’t just about rallying the activists. Delegates (half of whom are trade union representatives) debate and vote on the policies the party will carry into the next election. Attendees tend to be from the far left of the Labour spectrum and not all the motions agreed will make it unadulterated into an election manifesto. Still, the leadership’s endorsement says much about where it thinks the coming election will be won and lost. Many scoffed at Labour’s radical manifesto during the last national U.K. vote, which included lots of re-nationalizations and taxes on the rich, but it won them 40% of the country’s support.
If the party is correct to push things even further this time, and if it can overcome the plummeting popularity of its hard-left leader Jeremy Corbyn, this would of course have big implications for Brexit too: Labour’s official policy is for a second referendum. We’re still a long way from this outcome given that the party still trails behind Boris Johnson’s ruling Conservatives (despite that organization’s daily implosions). But British politics is in a state of flux and polls are temporary things. Who knows where we might be when an election takes place, possibly later this year, or early next?
A Labour government wouldn’t just revolutionize Britain’s political and economic landscape; it would be seen as a left-wing model for massive state redistribution and control in other democracies.
Even before this week, Corbyn and his influential economics spokesman, Shadow Chancellor John McDonnell, had announced plans to hand 10% of the shares in U.K. companies to workers, the largest state expropriation of assets any Western country has seen. They want to nationalize rail companies, water systems, mail delivery and energy supply companies, with shareholders compensated by unspecified bonds using pricing agreed by Parliament.
That 2017 manifesto included pledges to increase the effective tax rates of those earning more than 80,000 pounds ($98,816) and to increase the headline tax rate to 50% for those earning more than 123,000 pounds. The next manifesto will probably need to be even more aggressive on tax to pay for the enormous expansion of government.
Here’s a quick run-down of some of the other stuff announced in Brighton:
- The “integration of private schools” into the state system;
- A Green New Deal that sets a target of 2030 for “net zero” carbon emissions. (A Labour government would nationalize the country’s big energy firms, ban fracking, and take public transport into state ownership);
- The restoration of “full trade union rights and workplace rights,” rolling out collective wage bargaining;
- A 10 pound ($12.36) hourly minimum wage;
- A 50,000 pound lump-sum payment to veterans of British nuclear tests for help with medical problems;
- A scrappage scheme for polluting vehicles and 2.5 million interest free loans for the purchase of electronic vehicles. The construction, with private investors, of three large battery “gigafactories,”
It’s hard to argue with policies to increase the number of trainee doctors, redress the vast inequities in the judicial system, improve the situation of asylum-seekers and accelerate the move to electric vehicles. Overall, though, this package goes much further than anything proposed by Bernie Sanders in the U.S. or Jean-Luc Melenchon in France.
That it’s been received without too much fuss shows how deeply radicalism is taking root in Britain’s two main parties. It’s also due in part to the deftness of one of the policy platform’s chief architects, McDonnell, a longtime ally and friend of Corbyn’s, but someone more able to serve up Marxist policies with an air of affability and reasonableness. (And someone who could provide continuity to the hard-left project should Corbyn stand down).
Still, it’s one thing to want to help the poor and ease inequality, it’s quite another to see wealth as an evil. How is it possible to abate poverty and improve productivity without private sector investment and trust? That’s an age-old argument against socialist economic policies, but Corbynism (or McDonnellism) sound both fresh and promising to the under-40s who are sick of not being able to afford housing or find secure work and who have little memory of the way statism failed in the past.
The danger is not simply that, together, these policies risk hobbling one of the world’s most vibrant economies; the bigger tragedy is that they would worsen the very problems Labour members want to address.
Take pharmaceuticals. The impulse to make new drugs widely available and affordable is a good one; some 78% of drugs associated with new patents are not new drugs, according to research by law professor Robin Feldman. Companies game the patent system. But sinking billions of taxpayer pounds into a state-run drugmaker risks becoming a major boondoggle. And the compulsory licensing of new research would devalue intellectual property and discourage innovation; it would also drive investment from Britain.
And that 2030 target for carbon emissions may sound gung-ho (the government is committed currently to 2050), but almost no serious expert considers it feasible. Even Labour had doubts about the employment impact: The GMB, the union representing fossil fuel industry workers, refused to back the target.
As for a 32-hour week, look at France and its 35-hour version. The French adopted an ideologically based limit on hours and then spent years chipping away at it because of its effect on employment and business startups.
Meanwhile, Clifford Chance has estimated that the Labour plan to give employees an ownership stake would cost investors more than 300 billion pounds and many of them would be be British pension holders. As for the benefit to employees, while the government would take 9.4 billion pounds by the end of the first decade, staff would get only 1.3 billion pounds in dividends.
Labour rebuts these counter-arguments, but it only really offers measures to alleviate the negative impact of its own radical policies.
Do we even need to treat these grand plans seriously? Boris Johnson’s party is still leading in the polls, though it’s not straightforward to translate that into constituency seats. On other recent evidence, the two big parties are about equal. It’s not clear either would get the 326 votes needed to win an outright majority. It’s certainly possible that Labour would win enough seats to form a government with one or more of the smaller parties.
The one clear trend in Britain is polarization. Just as Johnson doubled-down on his do-or-die Brexit message, so Corbyn’s Labour Party has gone full bore on (parliamentary) revolution. Its bet is that ideology is back. An election is coming and there’s a lot more at stake than Brexit.
To contact the editor responsible for this story: James Boxell at jboxell@bloomberg.net
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Therese Raphael writes editorials on European politics and economics for Bloomberg Opinion. She was editorial page editor of the Wall Street Journal Europe.
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