The new economics of Labour

Tory-supporting media, unchallenged by a supposedly liberal press, portray Corbyn as a Soviet fellow-traveller, while unnoticed the shadow chancellor sets out a vision which breaks with the bureaucratic model of 1945.

John McDonnell Hilary Wainwright
25 February 2018

Shadow Chancellor John McDonnell attending a Labour party conference on alternative models of ownership at the De Vere Grand Connaught Rooms in central London, February 10, 2018. Yui Mok/Press Association. All rights reserved.

The new economics of Labour: introduced by Hilary Wainwright

In this introduction to John McDonnell’s speech in London on February 10 to a Labour party conference on alternative models of ownership, where the party set out its agenda to “take control” of the economy ( see below), the author looks at the new economics of Labour as the basis for a new politics. Her book, 'A New Politics From the Left', was published by Polity Press on February 23, 2018.

Shadow chancellor John McDonnell can usually barely breathe a word about nationalisation without setting off a media frenzy – so it’s strange that his most interesting comments yet on the subject passed with so little comment.

Speaking in London about the Labour Party’s new economics, McDonnell said: ‘We should not try to recreate the nationalised industries of the past… we cannot be nostalgic for a model whose management was often too distant, too bureaucratic.’ Instead, he said, a new kind of public ownership would be based on the principle that ‘nobody knows better how to run these industries than those who spend their lives with them’.

Maybe the media's silence on this profoundly democratic vision of public ownership is not so surprising : for it directly contradicts the attempt to warm up Cold War scares of a secretly pro-Soviet Labour leader whose public ownership plans are the first step towards imposing a Soviet style command economy onto the unsuspecting British people. 

Now that the Czech spy stories have fallen flat – as false – we can discuss Labour's new democratic thinking more productively and maybe some of the media will pay attention; for this new thinking about public ownership opens up a rich seam of new economic thinking: beyond both neoliberalism and the post-war settlement. While neoliberalism says the market knows best, the Fabian-inspired model of the 1945 welfare state – while it has considerable merits – left workers with no role in the management of the newly nationalised industries. Beatrice Webb, a leading Fabian, declared her lack of faith in the ‘average sensual man’ (who can ‘describe his grievances’ but not ‘prescribe his remedies’) and wanted public industries to be run by ‘the professional expert’. In practice, this often meant the same old bosses from the private firms being brought back to run the public version, along with an few ex-generals or two.

Underlying Labour’s New Politics is a new and very different understanding of knowledge – even of what counts as knowledge – in public administration, and hence of whose knowledge matters. For industries to be run by ‘those who spend their lives with them’ means recognising the knowledge drawn from practical experience, which is often tacit rather than codified: an understanding of expertise that opens decision-making to wider popular participation, beyond the private boss or the state bureaucrat. As McDonnell put it, we need to ‘learn from the everyday experiences of those who know how to run railway stations, utilities and postal services, and what’s needed by their users’.

The Preston model

McDonnell’s speech was preceded by an equally innovative conference in Preston, driven by a desire to learn directly from the work of Preston Council and local co-ops and trade unions. John McDonnell's commitment to this politics, like Jeremy Corbyn’s, comes from a lifetime of seeing the mostly untapped wisdom at the base of the labour movement: the extraordinary wealth of knowledge that ordinary trade union members hold about their work, and their ideas about better ways to organise it.

There are echoes here of past struggles like the Lucas Aerospace workers’ plan for socially useful production and its follow up in the London Industrial Strategy of the Greater London Council, just before it was abolished by Margaret Thatcher; there are echoes too of a forgotten phrase in Labour’s old Clause IV, committed not only to common ownership but to ‘the best obtainable system of popular administration and control of each industry or service’. It was a phrase that mostly gathered dust even before the whole clause was scrapped – but now we have a Labour leadership that truly believes in the people’s capacity for ‘popular administration’.

Of course, devising new forms of participatory public ownership will not be easy – ones for example capable of drawing not only on worker know-how in any given industry but on the knowledge of users, customers and surrounding communities (think mines, railways, resevoirs, sewage works  ..) as well. But the Labour Party is now throwing open the doors to those who would like to put forward their own ideas about public ownership that is very much not in the old style, but a redefinition of what ‘the public’ means: trade unions, local authorities and social movements of different kinds are being invited to bring forward all their creative intelligence to this end. The Preston model is just one example of this.

The failures of privatisation and the intensity of social need, together with issues such as the urgency of climate change, have led a new generation to devise new strategies and find allies: not only to protest, but to collaborate on real alternatives that can exist here and now. While the trade unions are generally weaker than in the past, Momentum groups and Labour branches can go some way to filling the gap by developing practical alternatives at local level.

Cooperating for transformation

The co-operative movement, for example, is undergoing a new lease of life as private enterprise fails to meet social and environmental needs, and unemployed people – especially young people – see collaboration as the only way ethically to make a living. They are finding that the very technologies that have been used by big tech firms to fragment work can be redesigned as tools of social collaboration.

These experiments, born of necessity, can be the basis of a transformative force that could both help Labour to win the next election and be the basis of a new democratic economic order when Labour takes office.

This recognition of workers as not simply an interest to be defended but as knowledgeable, creative allies in the process of production of social wealth, considerably strengthens Labour's claim to be the party with whom voters can entrust the economy.

It enables today's Labour Party to break from the implicit pact that private enterprise should be allowed to run production, while the state could look after redistribution, the one supposedly efficient, the other supposedly fair. This foundation stone of the post-war consensus had effectively left Labour one-handed and vulnerable to attack as the party of spending and not of wealth creation. And as questions of the organisation of production were left to the capitalist, it undermined Labour's strong claim, as the party of labour, to be the real party of wealth creation. After all, money (capital) without labour is unproductive. Labour however can be productive without private capital, through co-labouring (i.e cooperation) and through public funds and co-ordination. 

When the Tories next come knocking to ask whether Labour can be ‘trusted with the economy’, this new-economics has an answer: Labour is not another set of experts to be trusted, the commissars of a central plan or the champion of a special interest, but rather it rests on the active support of, and trust in, those on whom the wealth and social well-being of society depends. For the many by the many. And the party of business can no longer claim to have a monopoly of wisdom on the creation of social wealth, nor can it credibly dismiss Corbyn's Labour as simply the revival of old style state socialism.

This really is 'New Labour.' This however is too polluted a brand for the present leadership's vision of a radically democratic government sharing power with knowledgeable and productive supporters. Rather it opens up the possibility of developing a 'new socialism' based on self-government rather than rule from above. Now that, surely, is a story for a media genuinely curious about where a Corbyn-led government will lead. 

Hilary Wainwright's latest book 'A New Politics From the Left' was published by Polity Press this February. 

John McDonnell speaks to Labour party members in the New Economics conference, February 10, 2018


John McDonnell addresses the Labour Alternative Models of Ownership conference, London, February 10, 2018. Yui Mok/Press Association. All rights reserved.

" What an extraordinary year it’s been.

Thanks to you – and the many other Labour members and supporters across the country who delivered our electoral giant leap last year – our movement has placed the central questions of economic ownership and control back on the political agenda for the first time in a generation.

Questions like “who owns our economy?”, “in whose interests is it run?” and “how can we improve it by working collectively?”

Of course, our manifesto pledged to reverse the Tories’ cuts to schools funding.

We pledged more money for healthcare too, and more spending for Further and Higher Education, welfare, social care, childcare and the emergency services.

We pledged to deliver this by asking the richest 5%, and the corporations who have seen their tax bills slashed by the Conservatives, to put more back into the society from which they make their money.

We delivered a fully costed manifesto, while the only numbers in the Conservatives’ were the page numbers.

But this is just the start.

We know that to address the fundamental problems our country faces, as well as properly funded public services, we need root and branch radical change right across our economy.

That is why Rebecca Long-Bailey and I commissioned the report you have here, on ‘Alternative Models of Ownership’.

I want to thank the people who worked on writing it, some of whom you will hear from later today.

We have known for decades how leaving the economy in the hands of the market can deliver mass unemployment, rising inequality, regional neglect and financial insecurity. We have known for decades how leaving the economy in the hands of the market can deliver mass unemployment, rising inequality, regional neglect and financial insecurity. 

In recent years we have seen the financial crisis lead to an unprecedented fall in real wages, growth in zero hours contracts and rising numbers dependent on credit just to get by.

But it’s not just in recessions that the current economic system holds society back from what it could achieve.

Productivity growth in developed economies has slowed. And what growth there is has not been delivering rising living standards. That exploitation of the environment and natural resources now threatens overwhelming costs.

Communities and families are being pulled apart by the extraordinary pressures of precarious work, low pay, and, too often, rising debt.

And, for the first time in decades, there is a widespread belief that the young, and future generations, will be worse off than their parents.

If we are going to deal with the root causes of these problems, we need fresh, challenging thinking not just by the authors of this report, but by our whole movement.

Ideas for how we can take back real control over our lives and the economic decisions which are central to them.


One way of putting that power in the hands of people is through supporting the growth of the co-operative sector.

As the report notes, co-ops can bring stable employment rates, as well as productivity and efficiency gains.

Two years ago, I spoke at the Co-operative Ways Forward conference about the radical history of decentralised socialism in this country: from the Rochdale Pioneers to GDH Cole and the guild socialists.

In the same speech I pledged that the next Labour government would introduce a ‘Right to Own’: offering employees first refusal on firms which are changing hands.

Our manifesto last year pledged to deliver this as part of our aim for a co-operative sector double the size of what it is presently, supported by our National Investment Bank and network of regional development banks.

But as the report notes, creating more co-ops is only the start.

Existing co-operatives face a number of challenges, including their ability to attract capital, and potential vulnerability to buy-outs by private companies.

As part of our programme of deepening and developing our manifesto commitments, we need to investigate the legislative changes which will be needed to clear away these hurdles and allow the co-operative sector to flourish.

The next Labour government will arrive in office with detailed implementation plans to transform our economy and dramatically grow a thriving co-operative sector.

Working with the Co-operative Party, we look forward to seeing an independent report which has been commissioned from the NEF think tank and is expected to be published in the spring.

Working with the Co-operative Party, we will also convene an expert group of activists and co-operators to form an implementation group which will engage with the co-operative movement, road test our ideas and provide me feedback on what are the great things already happening across the co-operative movement and what support from a Labour Government will best enable them to rapidly develop.


Co-operatives have played a big role in the exciting economic policies being piloted in Preston by Councillor Matthew Brown and his colleagues.

Matthew contributed to this report, and I’m pleased to say he is here today and will be speaking in a workshop this afternoon.

I was in Preston on Thursday, with our Shadow Communities and Local Government Secretary Andrew Gwynne, to share discussions about how we can learn from what is being achieved there.

A major private investment in the town centre, the “Tithebarn” shopping mall, fell through in the wake of the financial crisis. The city council had to radically rethink its economic plans.

Following the example set by Cleveland, Ohio, and others in the US, the local council is now starting to turn the local economy round by ensuring money spent by the public sector stays local rather than flying off to distant shareholders.

By redirecting procurement spending to local suppliers, the council has delivered a £75m boost to Preston’s economy, and £200m across Lancashire as a whole. This extra spending helping support over 1,600 jobs in Preston alone.

To build on this success, the Labour party are setting up a Community Wealth Building Unit to give Labour councils knowledge, advice, and practical support in adopting creative methods to secure and provide vital services for communities in the face of austerity.


Elsewhere in the public sector, we are looking at what is needed to fix the increasingly obvious failures of the privatisation era.

In his role of preparing Labour for government, Jon Trickett and his Cabinet Office team are leading a review of civil service capacity and skills across Whitehall. As a result of the recent Carillion and Capita scandals, Labour is committed to bringing services back in-house where possible.

After decades of dogmatic outsourcing, the civil service and indeed wider public sector has been hollowed out of the skills and expertise it once had.

To ensure a smooth transition away from outsourcing, Jon will lead a review into the capacity and capability of the civil service to carry out in house services.

We do not want to build a top down bureaucratic state of old: we want to look at new ways to administer services in the wake of the collapsing belief in the power and efficiency of big business.

Ways which don’t rely on the kind of companies that raise their dividend payouts while their pension deficit grows.

That’s the kind of thing that shareholders can get away when services are handed over without accountability to workers or the public that rely on them.

The collapse of Carillion was a reminder of the dangers of believing – as many politicians did for too long – that the solution to improving public services lay in expanding the spread of the market.

We can see today the damage that the privatisation agenda has wreaked.

We will hear from Andrew Cumbers and Cat Hobbs shortly about the failures of privatisation.

Private water monopolies paying out more in dividends than they make in profits.

Rail fares rising faster than wages, while passengers endure overcrowding and British Rail-era rolling stock.

Participatory public ownership

Public ownership is not just a political decision, it’s an economic necessity. Public ownership is not just a political decision, it’s an economic necessity.

We’ll move away from the failed privatisation model of the past, joining other countries, regions and cities across the world in taking control of our essential services.

Britain is now seriously out of step, failing to keep up with the times under the Tories.

The Transnational Institute lists 835 examples of municipalisation worldwide in recent years, including 284 cases in the German energy industry alone.

In France, with the longest history of water privatisation, over a hundred authorities have brought their water in-house.

Guided by our belief that the fruits of our collective endeavour should be shared and enjoyed by all and not a select few, Labour will put these industries in the hands of the people.

And, by the way, it won’t cost the fantasy figures put around in thinktank reports, funded by water companies whose shareholders are terrified of losing control of their money-making racket.

But we need to do better than re-invent the past.

Let me be clear about this. We should not try to recreate the nationalised industries of the past.

The Thatcher government and her media mouthpieces often misrepresented those nationalised industries, and ignored what they had achieved compared with the failed private companies they replaced.

But we cannot be nostalgic for a model whose management was often too distant, too bureaucratic and too removed from the reality of those at the forefront of delivering services.

Taking essential industries away from the whims of the market is an opportunity to move away from profit as the driver of investment and hiring decisions.

But just as importantly it’s an opportunity for us to put those industries in the hands of those who run and use them.

To learn from the everyday experiences of those who know how to run railway stations, utilities and postal services, and what’s needed by their users.

Our socialism has never been about public ownership for the sake of it, but because we believe that nobody knows better how to run these industries than those who spend their lives with them.

We will hear later from Hilary Wainwright, who has written about how publicly owned industries can use the knowledge inherent in their workforces to be more efficient in every sense.

As Mike Cooley of the Lucas Aerospace Combine put it: “the workers are the experts”.

The next Labour government will put democratically owned and managed public services irreversibly in the hands of those workers, and of those who rely on their work. The next Labour government will put democratically owned and managed public services irreversibly in the hands of those workers, and of those who rely on their work.

We will do this not only because it’s right, not only because it’s the most efficient way of running them, but also because the most important protection of our public services for the long term is for everyone to have and feel ownership of them.

We aren’t going to take control of these industries in order to put them into the hands of a remote bureaucracy, but into the hands of all of you, so that they can never again be taken away.

And it’s not just in the sectors which were privatised by the Tories which we need to consider new democratic forms of ownership.

The economy being built in the next few decades will look radically different even to today’s, let alone to the economy of the 1970s.

The challenge of automation

One of the most important sections of this report is on the prospect of automation, and the challenges which it poses.

In the hands of a few, automation can lead to more monopoly power, increased power for capital owners, falling living standards and more insecurity for the many.

As Jeremy Corbyn said in his speech to the Co-operative Party conference last year: too often, so-called new business models depend not on technological advantage, but on establishing an effective monopoly in their market and using it to drive wages and conditions through the floor.

The report’s authors point out: more democratic ownership can ensure that the many benefits of technological progress are shared across society, for the many not the few.

Imagine, as Jeremy put it, an Uber run co-operatively by their drivers, collectively controlling their futures, agreeing their own pay and conditions, with profits shared or re-invested. Imagine, as Jeremy put it, an Uber run co-operatively by their drivers, collectively controlling their futures, agreeing their own pay and conditions, with profits shared or re-invested.

Universal Basic Services

At the national level, the possibility of widespread automation has led to a resurgence of interest in the idea of a Universal Basic Income.

UBI recognises the importance of making sure that everyone can live well, even in a society where the relationship between work and income has become less straightforward.

The fundamentals of human existence should be available to all, regardless.

That’s why last year I asked our Shadow City Minister Jonathan Reynolds to lead a working group which is looking into the possibility and practicality of UBI.

Meanwhile, last autumn, the Social Prosperity Network at University College London released a report on Universal Basic Services.

They recommended that the principles of a Basic Income should be used to provide Universal Basic Services.

They asked: why should we have healthcare and education provided free at the point of use, but not other essentials of life?

The NHS – and its principle that healthcare is a foundational right afforded to all whatever their circumstance – is a cornerstone of our civilised society.

So why shouldn’t society extend the principles of the NHS to other basic needs of life?

We committed in our manifesto to the building of a National Care Service and a National Education Service, free at the point of use.

Why shouldn’t we extend this principle of universalism further?

Radical questions, of course, but important ones which we as a society will have to ask ourselves sooner or later.

That’s why I can tell you today that I have asked Jonathan Reynolds to extend the remit of his working group to Universal Basic Services: to the principle and practicality of collectively paid-for and provided basic services.

That working group will report back before Conference this autumn with a set of interim proposals for the next Labour government to transform the provision of essential services, to create a society that is radically more free, more equal, and more democratic.

As radical as Thatcher, together here and now

We aren’t here today because we have all of the answers to these radical questions already.

When Margaret Thatcher came to power, determined to reverse all the gains the labour movement had won over the previous half century, she did so armed with decades of work in thinktanks, lobbyists, and with laissez-faire economics in the ascendancy across the western world.

We need to be as radical, in a socialist way, as her governments were.

We know that the right doesn’t have the answers for the times we live in.

The Conservatives are now totally intellectually bankrupt: caught between clinging onto the failing dogmas of the past and offering a pale imitation of the radical change which Jeremy Corbyn’s Labour Party now offers.

But just because the old order is dying, doesn’t give the left an automatic right to determine what follows it.

We don’t have the luxury of billionaire-funded research units or newspaper barons to help us.

We need to do this together: here and now.

The cultural critic Raymond Williams wrote about how nationalised industries suffer when our institutions are limited to their narrow spheres:

“The co-operatives … simply trading organisations, the trade unions simply industrial organisations with no other interests … and the Labour Party simply an alternative government in the present system”

To avoid the pitfalls of the past, our transformation of society will need all of us, working together, until we have a Labour Government and indeed after that day.

Only by doing so can we build the new society we want: a society that is radically transformed, radically fairer, more equal and more democratic. Only by working together can we build the new society we want: a society that is radically transformed, radically fairer, more equal and more democratic.

A society which is based upon a prosperous economy, but an economy that’s economically and environmentally sustainable, and where that prosperity is shared by all.

Enjoy the rest of the conference."

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