Labour’s Industrial Strategy Beyond Brexit

Labour’s Industrial Strategy Beyond Brexit

Theresa May’s attempt to formulate a Brexit compromise between the two wings of her party at Chequers on July 6 collapsed within 48 hours. It has given rise to the most vocal calls yet for a new referendum.

The unfolding revelations that vote leave broke election law, has been fined and referred to the police, and Theresa May’s humiliation at the hands of Donald Trump last weekend all point to the inherent weakness of the Tory government’s Brexit strategy. Moreover, given that it does not command a majority in the house of commons, May’s government finds itself in a spectacularly weak position as it negotiates Brexit with the EU.

As yet there is no indication whether there will be another referendum, or a general election. It is, however, becoming increasingly clear that the Labour party is beginning to, and will need to step up its efforts at formulating and communicating, a coherent alternative to a Tory Brexit.

A key part of this alternative will take the form of a genuinely progressive industrial strategy demonstrating that it can achieve a combination of three seemingly impossible objectives. These are to raise workers’ wages and living standards, to raise investment and productivity rates across the British economy, and to generate support for Labour amongst sections of the business community.

This combination might be referred to as an impossible trinity, because whilst it is possible to aim for and achieve two of these objectives, given the antipathy between workers and bosses, it is extremely difficult to achieve all three simultaneously. This is particularly the case under contemporary neoliberalism where many business organisations are inherently hostile to rising wage costs and Labour’s plans for re-shaping the economy.

However, given the negative impacts of austerity on workers’ livelihoods and upon much of the business sector, and given the economic fall-out of a bad deal or no deal Brexit, it is possible to imagine a situation where Labour is able, for a while, to unite organisations of labour and capital behind a progressive industrial strategy. Since 2010 workers in the UK have experienced the biggest wage squeeze since Napoleonic times. This has been caused, by deliberate Tory government imposed wage repression in the public sector, by private companies following suit, and by the proliferation of extremely precarious contracts.

At the same time, however, productivity across the UK economy has flat-lined. By 2014 output per worker per hour in the UK was 18 percentage points below the average for the other six members of the G7 group of industrial nations. Low productivity damages business, making it more difficult to compete globally and can impact negatively only wages. At the end of last year the Institute for Fiscal Studies recently reported that:

In 2008, the median worker in the UK (i.e. the person for whom half of workers earn more and half earn less) working full time had an annual salary of £24,500 in today’s prices. Today, a decade later, the median worker working full-time earns £23,000, still £1,500 below the pre-crisis level.

The Labour party has historically been, and still is, a party that aims to manage British capitalism whilst providing meaningful benefits for its working class base. Under Jeremy Corbyn’s leadership it is committed to providing more benefits to workers than any Labour party since the mid 1970s.

So, given this unique conjuncture – historically low wages, long term productivity stagnation, a looming Tory-led Brexit disaster – what can labour do to convince workers and business across the UK that it can effectively solve the impossible trinity?

There are some hints in a recent article by Chi Onwurah, Labour’s shadow minister for industrial strategy, science and innovation. In it she notes how frictionless trade with EU-based firms is essential to continued production and economic growth across UK manufacturing and agricultural sectors. She argues, in the same vein as shadow chancellor John McDonnell, that Labour will push the Bank of England to direct finance towards productivity enhancing activities in the real economy, as opposed to towards the short-term profit orientated financial sector. This policy would be complemented by the investment of £250bn over 10 years through a National Transformation Fund and a National Investment Bank. Such investments would be designed to achieve several objectives including, generating a green economy, reducing regional inequalities by establishing new high productivity industries in regions that have suffered from long-terms de-industrialisation, and generating high quality and well paying jobs.

Such measures – state directed finance, national investment banks, targeted industrial strategy designed to establish new, cutting-edge industries – are part and parcel of developmental state’s industrialisation strategies. It is, indeed, an indication of the UK’s industrial decline that such basic strategies need to be dusted off and re-applied in the 21st Century.

However, Onwurah’s article needs to be interpreted against a broader political economic canvas than simply UK industrial decline. Under Jeremy Corbyn’s leadership the Labour party is committed to shifting the balance of power away from big business and towards workers and their communities.

The above-mentioned industrial strategies have sometimes been used as part of a viciously anti-working class model of development, where state involvement in industry went hand in hand with harsh labour repression, as in post war Japan and South Korea.

So what other aspects of Labour’s industrial strategy might contribute to a progressive political outcome and achieving of the impossible trinity? A minimum wage of £10 per hour is just the start. Repealing the anti-trade union laws introduced under the Thatcher and Cameron governments would be another step.

More radically, however, last year the Labour Party published an Alternative Models of Ownership document which outlined a series of measures designed to shift the balance of economic power away from business and towards worker’s and their communities. These include the establishment of producer-consumer cooperatives, where decisions on what is to be produced, and how, are taken; Municipal, local-level ownership ranging from community shops to social enterprises, where profits are reinvested for community needs; and large scale nationalisation – of industries such as rail, the utilities and the postal service. All of these would be backed up by finance provided by the state, the Bank of England, other banks and the private sector.

Labour’s industrial strategy is based on the assumption that sections of the business community will support it. Contemporary circumstances provide it with a unique opportunity to offer the business community a quid pro quo. On the one hand Labour could aim to stop Brexit altogether, or if it does support it, to implement one that is least damaging to the economy. It also offers a coherent strategy to generate a productivity-boosting industrial transformation, from which much profit-making opportunities will arise for the business community. On the other hand, the price for this for business will be the handing over of some power and wealth to workers.

Whether or not Labour can achieve this depends on its mastery of the political moment, its ability to mobilise its base, and its capacity to convince sections of the business community that it can manage the British economy better than the Tories. That senior members of the Tory party have proclaimed a ‘fuck business’ approach underlines the uniqueness of this political moment.


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