Labour conference: John McDonnell is returning to Milibandism

When John McDonnell, the Shadow Chancellor of the Exchequer, addressed the Labour Party Conference today in Brighton, his aim was to wrest the economic narrative from the Conservatives' grip. In a short efficient speech not notable for its gloss, McDonnell, the MP for Hayes and Harlington, aimed to shut down once and for all the notion that Labour was the party of deficit deniers.

“We accept that there is a deficit,” he said, adding that “Labour will always ensure that the country lives within its means.” But, “unlike them,” he said, meaning the Tories, “we will not tackle the deficit… by attacking the poorest in our country.” He abhorred, he said, the idea that “the very richest would be protected and it would not be those who caused the economic crisis who would pay for it.”

All reasonable stuff. It has been one of the great political sleights of hand that the Conservative government, and the Coalition before it, saddled Labour with blame for the economic crisis. A corrective would be welcome.

He received a chuckle and round of applause for his plan to review the Treasury's operations. “I thought that would go down well,” he said. It's a good idea. Whitehall's most powerful department has for too long evaded examination, due in part to the prickliness of its inhabitants. Less convincing, however, was his suggestion that the Bank of England's mandate should be changed to include wages and growth. This would be to turn it from monetary watchdog into government department, a change that would rightly bring howls of protest.

And then it came—the kernel of the Labour argument on which all others will be based from now on. There must be, said McDonnell, “a radical departure not just from neoliberalism but from the way past administrations tried to run the economy.”

“Why?” he asked. “Well we just don’t think the current model can deliver.”

This is the core of it—the guts of what Jeremy Corbyn, the Labour leader, and his Shadow Chancellor believe: that the neoliberal consensus has failed. Markets in goods and services can not simply be left to get on with it. What Britain needs is a stiff dose of Socialism. “As socialists,” said McDonnell, “we will display our competence with our compassion.”

“Idealists, yes,” he continued, “but ours is a pragmatic idealism to get things done, to transform our society.”

Transform how? McDonnell proposed a programme of nationalisation, starting with the railways. The department for Business, Innovation and Skills, he said, would be transformed into some sort of economic planning organisation (details were vague). There would be “fairer more progressive taxation,” (presumably higher taxation), a “real” living wage, aggressive tax-avoidance action against Google, Starbucks and other companies that he alleged do not pay their share, and the restoration of trade union rights.

As he concluded, the crowd applauded more from duty than ecstatic delight. McDonnell waved. Unusually, from certain angles, he bears a striking resemblance to Peter Mandelson, a comparison at which both men would presumably balk.

In his speech, McDonnell presented himself as a radical. He may well be that. But his economic arguments are not new. They are a re-run of Ed Miliband's ideas which, like McDonnell and Corbyn's prescription, were founded on the idea that the crash of 2008 revealed fundamental flaws in the British economy. Certainly there has been a return to low unemployment since then, and sure there has been a return to economic growth and low inflation. But, the argument goes, look at productivity. Look at inequality. Look at the failure of markets. Ed tried this line of attack. McDonnell is trying it again. And he will encounter the very same problem as Ed which is that his argument is based on abstractions, and economic abstractions, at that. As last year's election made boomingly clear, elections, and the electorate, are not really very much affected by abstractions.

This lesson also applies to the list of economic heavyweights on McDonnell's new economic advisory panel. These include Thomas Piketty, the superstar economist and author, whose book Capital in the Twenty-First Century was a smash hit best-seller, its opening 50 pages read by millions of people across the globe. Also on that list is Joseph Stiglitz, the US economist and Nobel prizewinner, and Danny Blanchflower, the former member of the Bank of England's monetary policy committee. In the run-up to the General Election, all three of these senior and highly-respected economists, as well as others named on the list, set out at great length ideas that supported Keynesian-style spending programmes and rejected austerity. None of what they had to say affected the British electorate's decision. Given the choice, people went for austerity.

Which suggests strongly that at the very core of the McDonnell argument is an idea with which the majority of the electorate disagrees, presented in terms they will instinctively reject.

It is strongly suggestive of the world in which McDonnell lives that he should deploy abstruse economic jargon in his inaugural conference speech. It is also instructive that he should suggest that the Government's reform of the benefits system is causing disabled people to kill themselves. What links the two is that both are indicative of a mind operating in isolation, exposed only to the crudest characterisation of his opponent's views. This is not an attractive characteristic.

McDonnell set out some innovative ideas in his speech today. He made clear that he is a Socialist and an idealist. History has shown that Britain doesn't vote for idealists. On this showing, Labour must prepare itself to learn this lesson for a second time.