Some Thoughts on Jeremy Corbyn

It has been the convention of libertarians to disparage Corbyn as a socialist zealot who hasn’t grown out of the debates of the 70s and 80s. Certainly there are areas of economics where he falls flat on his face, particular his love of the state and its capability to redistribute wealth. However, libertarians shouldn’t just dismiss him out of hand. His ideas on People’s QE, nationalised energy and rail markets and foreign policy are both interesting and admirable. At the very least, they provide something of a debate on these issues which have been pushed to the wayside since the days of Thatcher and the beginning of neoliberal capitalism. It creates questions where there was once consensus which can only be a good thing.

People’s QE is certainly not something I subscribe to. In effect its taking the control of the money supply out of the hands of technocrats and private banks and putting it into the hands of politicians. This just seems regressive and does nothing to address the actual issue of credit creation and capital misallocation that helped create the previous crisis. But it does raise questions, and helps to move away from the consensus on monetary matters which has seen central bank independence with control over interest rates. It also shows the stupidity of actual QE, which has simply recapitalised banks and their balance sheets rather than productively moving capital and investment into new areas. One of the main questions it has raised is over the nature and role of money in society. At the moment money is a pure commodity, and the ability to control is left to private banks with minimal control from the central bank who simply manoeuvre interest rates. This in particular has caused large problems, as interest rates aren’t able to follow market signals, and are thus held too low encouraging overinvestment and misallocation. Bank regulations also encourage this, as with the Basel Accords suggesting investment in property is more financially productive than business investment. You have a conflict of profit with wider societal need. Entry barriers compound this by making smaller banks completely unviable due to artificially high capital costs and reserve requirements.

By raising questions, Corbyn has started to unsettle this consensus. But to be truly viable, I think a better route would be a denationalisation of money, as recommended by Hayek. Removing entry barriers and legal tender laws, which allows for the creation of multiple different forms of banks and banking systems that serve a wide array of purposes. Within this People’s QE could be decentralised toward local investment banks with specific remits decided by businessman and the wider community that the bank is placed in. A natural, overarching rate of interest flows from the wide range of economic activity and investment opportunities afforded by this new system that doesn’t necessarily prize profit over other considerations or values. Combined with general deregulation of the economy, you would see multiple different market and institutional settings created, a large variability of economies of scale and an unlocking of capital formation, all of which would fit nicely with locally-controlled investment banks.

On energy and railway nationalisation, again Corbyn falls into the trap of relying too much on the beneficence and capability of the state. Pure nationalisation creates far too many knowledge problems, which leads to investment misallocation and a generally poor service as consumers have no real voice. However, in the case of railways, the current public-private system isn’t much better, with many delays and high fare hikes which put consumers on the back foot. Where Corbyn has some interesting answers on this is with decentralised control via trade unions, train operators and consumer advocacy groups in a nationalised framework. However the need for nationalisation becomes questionable. Rather I think it would be better for existing track to be bid on by different groups of firms or groups. Thus some track becomes privately owned and some is publicly owned, as is the case with rail franchises currently. This allows consumer groups and/or worker-based organisations to take control of track as well as franchises. It also allows for forms of vertical integration where necessary, in the case of large-scale freight movement where private companies can integrate distribution chains and not rely on the transport subsidies provided by government controlled track (which would potentially lead to more localised distribution chains and production facilities, re-homing manufacture). Equally, with local commuting networks we could see forms of negotiated coordination over ticket prices and timings. With the involvement of business groups in this negotiation, we’d also see staggered hours for workers, spacing out commuting times and ending rush-hour capacity issues. Again this links into varied economies of scale which benefits new, innovative forms of economic activity and capital movement due to the elimination of transportation subsidies given to large distributors who use rail (created by their not having to pay for improvements or deal with capacity issues).

With energy markets the same thing can be said. As Rifkin has noted, there are already moves toward decentralised energy grids and the development of energy creating buildings and homes. All Corbyn would need to do is remove large-scale green regulations and the subsidies given to fossil fuels and the subsequent costs would quickly destroy any benefits from continued oil drilling or fracking. Removing planning laws would also entail this, as fossil fuel companies would have to negotiate with local residents rather than simply relying on being awarded planning permission by politicians who are easily bribed or lobbied. The need for nationalisation would be redundant. New energy markets and firms would quickly come in and exploit the green technology that already exists, being able to outcompete larger energy companies reliant on subsidised energy and fuel inputs.

Finally on foreign policy Corbyn is extremely libertarian. The unfortunate thing is his party MPs are not. Instead they have the rather pathetic and laughable belief that intervention works, even though Libya, Iraq, Afghanistan and Syria are really testament to the fact it isn’t. Corbyn’s beliefs have history and logic on their side, while his MPs only have hackneyed arguments that are less and less convincing. Fortunately, it seems the public are coming more into line with Corbyn’s general views. However on certain specifics, such as continually pushing the crimes of government onto the general populace, and thus defending terrorist acts despite the fact the general public obviously had no role in the crimes committed by Western powers in the Middle East, Corbyn does damage his own position.

The main issue with Corbyn is the same with any socialist, that of fetishising the state and ignoring the role of freed markets and the ability of individuals and communities to create common solutions to modern problems. He doesn’t recognise the inherent knowledge and calculation problems created by state planning, which lead to dispersed costs and concentrated benefits. His economic ideas that I’ve identified have the benefit of opening up questions that challenge the current consensus. While they are far from perfect, they give the opportunity for libertarians and anarchists to provide radical answers that make the state socialist arguments of Corbyn redundant, as they bring into the fold his ideas but without the need for coercive state enforcement. Corbyn is certainly no libertarian, but libertarians should not dismiss him out of hand.

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