THE BLOG

Jeremy Corbyn's Common Sense Policies Challenge Britain's Unjust Economic Model

16/04/2017 11:25 BST | Updated 16/04/2017 11:26 BST

The rampant inequality that pervades British society is often defended on the basis of absurd myths about how our economy actually functions. This week, Jeremy Corbyn opened up a full frontal attack on three of these myths by unveiling common-sense, yet also radical policies to modernise and rebalance Britain's economy in favour of the majority.

One of the biggest myths is the idea that the private sector is the number one wealth creator, and the public sector just extracts wealth through taxation. Nowhere is this myth revealed at its most absurd than the massive contribution the government makes to the wealth of the private sector through its public procurement. The government spends some £200billion in the private sector each year despite the failure of many companies to provide decent, secure jobs or to provide adequate training. Many of these companies do not pay their fair share in tax or pay their suppliers on time, often putting small firms out of business. Given that the government such a huge contribution, it is truly astounding that the current government has made no effort to use this power for the benefit of the majority.

This is why Jeremy Corbyn has declared that a future Labour government would use this basic, but powerful instrument to ensure that all companies benefiting from government procurement comply with the highest environmental standards and workers' rights, and pay their fair share of tax. Like most of Corbyn's policies, this isn't a complicated policy requiring a PhD in economics or social policy to understand - it's just common sense.

A second key myth which is popular amongst Britain's elite is the idea that the private sector is necessarily efficient, and that open competition leads to a socially useful distribution of goods and services. By declaring war on late payments by large companies to their suppliers, Jeremy Corbyn obliterated this myth, drawing attention to the scandal of large corporations causing thousands of small businesses to go bust each year, effectively allowing larger firms to acquire interest free loans by refusing to pay on time. In doing so, he challenged the assumption that small companies necessarily have shared interests with larger ones, opening up a new line of attack on the Conservative Party by challenging their claim to represent the interests of small businesses.

The third key myth challenged by Corbyn was the belief that markets deliver outcomes which are fair, and which reward people for their contributions to society. In reality, most of the richest people in our society owe their wealth less to their talent and effort and more to unearned wealth gained through inheritance, asset accumulation, speculative activities and rent-seeking. Put simply, most rich people get paid a lot because they can.  Do CEOs really deserve to earn more in the first 2 and a half days of the year, by 3rd January, than the average UK worker will earn in that entire year?

Not even the guru of free markets, FA Hayek, actually believed that markets would reward people according to their actual talents or efforts. Unfortunately, Britain's political elite from the 1980s onwards didn't get the memo, leading to a generation of politicians willing to tolerate an economic model which has allowed the wealthiest individuals to double their wealth in the last decade, while at the same time Britain's workforce have faced the biggest drop in wages of all OECD countries, apart from Greece.

Last year it was estimated that 22% of British workers are paid below the Living Wage, a number which has been rising since the Conservatives came to power in 2010. To address this, Jeremy Corbyn has pledged Labour to supporting a real Living Wage for all at £10 per hour. This is not just a socially just policy, it is also one that would drive the modernisation of Britain's economy: as Winston Churchill understood but most contemporary analysts have forgotten, low wages end up subsidising unproductive firms. Not only that, forcing wages up would increase the purchasing power of the losers from Britain's economic model, driving up demand in the real economy, rather than maintaining its unhealthy dependence on speculative activities in the financial sector.

In one week, therefore, Jeremy Corbyn, so often ridiculed by much of the British media, unveiled clear-cut, common-sense policies which are not only fair, but also necessary to equip Britain's economy for the 21st century. In doing so, he demolished three of the most pernicious myths used to justify Britain's absurd hierarchies of wealth and power, and reinforced one of the most fundamental values of the majority of people in society: that people's rewards should reflect their contributions.