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A New Deal for rentiers: whose side is Boris Johnson really on?

Whereas Franklin D. Roosevelt opposed financiers and speculators, the Prime Minister is one of their biggest cheerleaders.

Christine Berry
1 July 2020, 12.48pm
Paul Ellis/PA Wire/PA Images

There’s a long list of reasons to ridicule Boris Johnson’s claim to be the new Roosevelt. First there’s the pathetic inadequacy of the programme he’s announced: £5 billion of mostly repackaged investment plans, or 0.2% of UK GDP – 200 times smaller than Roosevelt’s New Deal, which amounted to 40% of US GDP at the time.

But there is a deeper structural problem with Johnson’s approach to economic recovery – one that goes far beyond the numbers. Where Roosevelt positioned himself squarely in opposition to rentier capital – the financiers and speculators that had crashed the economy in 1929 – Johnson is positioning himself squarely as its backer.

In his first inaugural address, on 4 March 1933, Roosevelt declared that the cause of unemployment and economic distress was not scarcity. Rather, “the rulers of the exchange of mankind's goods have failed, through their own stubbornness and their own incompetence ... Practices of the unscrupulous money changers stand indicted in the court of public opinion”. He lacerated high finance: “they know only the rules of a generation of self-seekers”. Unveiling the second half of the New Deal, he was crystal clear on who his political enemies were: “business and financial monopoly, speculation, reckless banking.” He decried the pre-crash situation as “government by organized money”, noting that these interests “are unanimous in their hate for me—and I welcome their hatred.”

And he backed this up with policy. The New Deal was not just about investing to create jobs. It was also about rebalancing power away from rentier capital and towards working people. One of Roosevelt’s first acts in 1933 was Glass Steagall, which broke up the big banks by enforcing separation of retail from investment banking. It endured until 1999. This was accompanied by a raft of legislative measures on workplace rights and social security.

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The New Deal was not just about investing to create jobs. It was also about rebalancing power away from rentier capital and towards working people.

The contrast with Johnson’s speech this week could hardly be starker. He was keen to stress that “levelling up” regions outside London did not mean “launching some punitive raid on the wealth creators”. Later, he added: “Yes, of course we clap for our NHS, but under this government we also applaud those who make our NHS possible: our innovators, our wealth creators, our capitalists and financiers; because in the end it is their willingness to take risks with their own money that will be crucial for our future success”. Where Roosevelt dismissed high finance as the enemy of sustained economic recovery, Johnson continues to peddle the myth that it will be its engine.

And this, too, is backed up with policy. The promise of a bonfire of planning rules rests on what Roosevelt might have deemed an “outworn tradition”: the notion that bureaucracy (or, in Johnson’s parlance, “newt counting”) is what’s holding back productive investment in this country. In reality, the problem can be traced to precisely the interests he so vociferously defends. The UK is a rentier economy: overwhelmingly its big winners are those who extract wealth from assets, most notably land and property – aided and abetted by a bloated banking system. The incentive to focus on acquiring existing assets and pushing up their value, rather than on stimulating new socially useful activity, is overwhelming. It’s less ‘build build build’, more ‘grab grab grab’.

All this lends a hollow ring to Johnson’s promises to “do things differently”, to “address the problems in our country that we have failed to tackle for decades”. He won’t. Of course he won’t. But what’s crucial for the left is to understand why he won’t. It’s not just that he won’t spend enough money, or that he’ll spend it on the wrong things – although both of those are true. It’s that the problems with our economy are structural, and tackling those structural problems requires taking on the power of those who benefit from them. It requires democratising ownership of common resources like land and energy. It requires rebalancing power between landlords and tenants, utility firms and customers, lenders and borrowers. It requires limiting the ability of rentiers to extract wealth from the assets they own – through things like rent controls – creating incentives instead for capital to be invested productively.

We can be confident the Conservatives will not do any of these things, because – as the Robert Jenrick scandal so vividly demonstrates – rentier capitalists are their people. Their biggest donors deal in property, finance and fossil fuels. It is no accident that, as I and others recently showed in a report for IPPR, these interests have been the big winners from the crisis so far. While private renters have taken significant pain – with income shortfalls pushing many into debt – landlords have been entirely shielded. While tenants’ lost income will not be recovered, any rent arrears built up during the crisis must still be repaid in full.

Stripping back planning laws to allow the Richard Desmonds of the world to build more luxury flats might generate large amounts of profit for small numbers of people. It will do nothing for the underpaid essential workers who have got us through this crisis – in other words, for those who are finally being recognised as the true wealth creators. And it will do nothing to address the deep-seated malaise of the UK economy. It’s this, and not just the empty promises of big investment, that the left must challenge.

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