Anti-market menace John McDonnell and the desperate need to defend profit

You think there’s some secret plan among those around Jeremy Corbyn to get rid of private property and to establish an exclusively socialist economy and society? That is a question I get quite a bit, usually from nice or naive lefties, rather than the skull-cracking true believers, who think that the anti-Corbyn thing is overdone and Corbynism is just about everyone being a bit nicer. Sometimes the pro-Corbyn person asking the question laughs, or has an incredulous look on their face, when I respond that the far left are people who have believed their entire lives in a desperately dangerous creed that has caused carnage and misery on an epic scale everywhere it has been tried.

And it’s not even a secret plan. They are not hiding it when asked. Just take the senior Corbynistas at their own word. Examine the writings of Andrew Murray, the Communist who advises Corbyn. Shadow Chancellor John McDonnell admits his great influences are Marx, Lenin and Trotsky.

Now, McDonnell – who wants to be Chancellor of the Exchequer – has reaffirmed his commitment to the destruction of the capitalist, or market, system. If you are a person in the City or corporate life who thinks the clever or sophisticated thing to do is engage, or thinks there is common ground to be found over a cup of tea, or more importantly a voter wondering what to make of it, can I politely suggest that you switch your brain on and consider the lessons of history?

On the Marr show on Sunday, hosted by Emma Barnett, McDonnell (to his credit considering how mad the answer is) answered the question when it was put to him.

Asked if his job as Chancellor would be the overthrow of capitalism, he said: “Yes it is. It’s transforming the economy.”

But is there a difference between transforming the economy and destroying capitalism? McDonnell responded that no there isn’t. “I don’t think there is . . . I want a socialist society.”

Then to the disingenuous part, with some waffle about France and employee share ownership.

“We’d follow France’s example: they legislate for profit sharing. We’d expect companies to profit share as well as ensure they have a decent wage policy… Employees get a stake in the company and in that way I think they feel they’re making a contribution, not just to themselves but to the wider benefit of employees.”

Profit sharing? The destruction of capitalism rests at root on the elimination of profit.  Marxists think of profit as the surplus left over once the workers have been exploited on slave wages and what is left goes to the rich owners to fund their rich lifestyles, and nothing else, which is another key miscalculation.

What will happen instead? Under McDonnell’s Marxist socialism, the state – or some magic fairy dust collective which somehow emerges, but never does, to decide what should be produced and at what volume and cost – allocates the resources. All surplus is handled collectively. What could possibly go wrong? A lot.

As Adam Smith taught us, private profit is essential to the productive process: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest,” as he famously wrote.

Something we want or need is provided by someone who is incentivised to provide it. The incentive is profit, which enables them to keep providing the product or service. Yes, some of the surplus or profit is used to fund the owner’s lifestyle. So what?

But the mistake is to think that it all goes on lifestyle. Profit is recycled in numerous useful ways that are essential to driving prosperity and innovation. Some of it is invested – in future ventures, or the expansion of existing ventures, or in other people’s ventures, or in employing more people, or buying services or goods from suppliers also engaged in their own way in seeking to make a living and a profit.

This is not “trickle down” economics – an abusive term never in my experience used by free market types – but a giant, virtuous wheel of regeneration, consumption, investment and innovation. The core of it is profit. Forget all that rubbish about “people before profit.” If you want to put people first, or do anything for people, you need… profit.

Although the system is not perfect, because it involves imperfect human beings who cause crashes and busts from time to time, the market constrained within a system of laws is one of the wonders of human existence.

Marx was a clever man and an interesting writer, but he got this wrong. He screwed up on his central calculation about incentives and what profit is for, and somewhere between 60m and 90m people have paid with their lives for that mistake which provided the foundations on which his followers built.

Social reformers and those in the mainstream – liberals, Tories and moderate social democrats – had a different approach. They either embraced the market or accepted the need for it. A portion of private profits could be taxed, to pay for services. And through the creation of a welfare safety net and worker protections to guard against exploitation the worst effects of the excesses of those who seek to abuse their fellow citizens can be diminished or ameliorated. The Marxists and McDonnell think that is a sell out, a con. That is why they want to abolish the entire market mechanism that creates profit.

As a colleague of mine put it the other day, the moment you start to consider the practical implications of this goal it becomes obvious to anyone – bar a believer in quasi-religious Marxism – that it cannot work. It is bananas. It is nuts.

Who and by what process, as my friend put it, will it be decided how many vacuum cleaners and of what design are needed. The private company seeking a profit – paying dividends to investors large and small, and employing staff – has a clear incentive to get this right and to make the best possible product at a price it can make a profit. If they fail they go out of business. What’s the sanction in a Marxist system? Orders and coercion.

When tried, that core weakness in Marxism becomes apparent, quickly. That’s where the tyranny, the skull-cracking, comes in, because those who want to sell for profit or make their own decisions have to be forced to shut up and comply.

Such tyranny could never happen here, it is said. British institutions and business are said to be too strong – I hope they are – and the most likely outcome if the Corbynistas do win would be a brief, shambolic government defined by high taxes and capital flight, with Labour backbenchers rebelling, and McDonnell and Corbyn using executive edict (via which a lot can be done). And that is the best case scenario. Even it sounds worth avoiding.

But complacency about the scale of the threat seems daft when McDonnell keeps on warning us in his own words. Anyone who believes in liberty should pay attention.