Labour faith in central planning is fundamentally flawed
25 September 2017
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Brexit
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Economic Theory
25 June 2024
Reaction to Shadow Chancellor's conference speech
Commenting on John McDonnell’s speech to Labour Party Conference, Mark Littlewood, Director General at the Institute of Economic Affairs, said:
“Shadow Chancellor John McDonnell’s speech today shows little understanding of how markets work, let alone how they can help to solve economic and social problems.
“Reducing the incentive for responsible lenders to supply credit could well push more people towards loan sharks. It is economic illiteracy to ‘tackle debt’ by pretending the debt doesn’t exist via an interest payment cap. Banks will either increase other charges, or restrict the availability of credit or only offer enormous rather than small loans.
“Similarly, further state intervention in the labour market, which would restrict the choices available to businesses and workers alike, will hold back the ‘possibilities of technological change’ rather than embrace them.
“John McDonnell is also heroically ambitious if he believes politicians are in a position to accurately predict the market value of commodities such as water and energy once nationalised. History has taught us that nationalised industries are costly and inefficient, place a massive burden on taxpayers as they will require a huge amount of state support and typically provide terrible services. The key to bringing down costs for consumers is to deregulate and reduce government intervention in the market, not put them in the driver’s seat. Labour’s agenda of tighter regulation, renationalisation and higher taxes will discourage investment and job creation, rather than promote them.”
Notes to editors:
For media enquiries please contact Stephanie Lis, Director of Communications: slis@iea.org.uk or 0207 799 8909 or 07766 221 268.
For more on the flaws of nationalisation, see IEA research here.
For more on state intervention in the labour market, see IEA research here.
Further IEA Reading: 1. The Road to Serfdom with the Intellectuals and Socialism
2. Taxation, Government Spending and Economic Growth
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems and seeks to provide analysis in order to improve the public understanding of economics.
The IEA is a registered educational charity and independent of all political parties.
“Shadow Chancellor John McDonnell’s speech today shows little understanding of how markets work, let alone how they can help to solve economic and social problems.
“Reducing the incentive for responsible lenders to supply credit could well push more people towards loan sharks. It is economic illiteracy to ‘tackle debt’ by pretending the debt doesn’t exist via an interest payment cap. Banks will either increase other charges, or restrict the availability of credit or only offer enormous rather than small loans.
“Similarly, further state intervention in the labour market, which would restrict the choices available to businesses and workers alike, will hold back the ‘possibilities of technological change’ rather than embrace them.
“John McDonnell is also heroically ambitious if he believes politicians are in a position to accurately predict the market value of commodities such as water and energy once nationalised. History has taught us that nationalised industries are costly and inefficient, place a massive burden on taxpayers as they will require a huge amount of state support and typically provide terrible services. The key to bringing down costs for consumers is to deregulate and reduce government intervention in the market, not put them in the driver’s seat. Labour’s agenda of tighter regulation, renationalisation and higher taxes will discourage investment and job creation, rather than promote them.”
Notes to editors:
For media enquiries please contact Stephanie Lis, Director of Communications: slis@iea.org.uk or 0207 799 8909 or 07766 221 268.
For more on the flaws of nationalisation, see IEA research here.
For more on state intervention in the labour market, see IEA research here.
Further IEA Reading: 1. The Road to Serfdom with the Intellectuals and Socialism
2. Taxation, Government Spending and Economic Growth
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems and seeks to provide analysis in order to improve the public understanding of economics.
The IEA is a registered educational charity and independent of all political parties.
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