Hunter Thompson chose the title above for his book relating his eccentric take on the 1972 US presidential election.  In a somewhat different way, it is singularly appropriate to the current campaign for the Labour leadership.  With the outstanding exception of Ed Miliband, the notables of the Blair-Brown era can contain neither their fear nor their loathing of the front-runner, Jeremy Corbyn.  From this collection of “yesterday’s men” the attacks on the MP from North Islington come thick and fast, slings and arrow of the outrageous (á la Hamlet, Act II, scene 1).  Ex-PM Blair advises supporters of Corbyn to consider heart transplants.  Ex-cabinet member (now Lord) Mandelson quakes before the threat of a “lurch to the left” by the Labour Party.  And to these I can add former leader Neil Kinnock, ex-spinner Alastair Campbell and in veiled language ex-PM Gordon Brown.

Equally thick and fast come the attacks on Corbyn’s economic policies, notably in the Financial Times where the insurgent is described as a doing “potential harm to…British public life” for his advocacy of “radical” policies.  An inspection of his policies seems relevant with this and other allegations including from members of the Labour Party that Corbyn inhabits some extreme/hard left territory,

To do this I went to the source, the website for Mr Corbyn’s leadership campaign a virtual visitor can download a statement of his economic policies, The Economy in 2020.

Anti-Austerity

I begin with a Corbyn policy certain to send the neoliberals into anxiety, public ownership (aka nationalization/re-nationalization).  A pledge to take the railroad into the public sector features prominently on the campaign website.  After 35 years spent selling off public assets, this commitment to public ownership comes as a shock.

But, is it radical or hard-left?  A look to the continent suggests otherwise, where the public sector owns the railroads in France, Germany, Italy and Spain.  None of these countries have or had radical governments.  In the United States, very much neoliberal territory, the passenger rail company Amtrak is publicly owned.  Further, in 2013 the citizens of Hamburg voted to bring all public utilities into public ownership.

While public ownership is less common today that in the past, it is sufficiently frequent across the globe not to be unusual or rare.  The same point applies to the Ten Priorities listed in The Economy in 2020, which fall into three categories, opposition to fiscal austerity, taxation and re-structuring of the UK economy.

We find no ambiguity in the candidate’s position on fiscal cuts.  “Austerity is a political choice not an economic necessity”, and Corbyn opposes it, promising “always to protect public services and support the most vulnerable”.  Closely related to opposition to austerity is “a publicly-led expansion and reconstruction of the economy with a big rise in investment levels”.

The commitment to “publicly-led” growth is likely to be more controversial that opposition to austerity, because anti-austerity does not necessity imply more expenditure while an increase in public investment would.  The implicit argument in defence of an increase in public investment is that it would generate faster growth and the taxation induced by the greater output would quickly eliminate the increase in the fiscal deficit required to fund the investment.

Also implicit is the “crowding in” process, that properly targeted public investment would foster private investment to restructure the economy.  Public investment priorities would be implemented through “a multibillion pound programme of infrastructure upgrades” including broadband networks.

Controversy has focused on the mechanism to fund the infrastructure update, “a National Investment Bank”, which some confuse with Corbyn’s references to a “People’s Quantitative Easing”.  The investment bank could fund its project either by sale of bonds to private buyers (“capital markets”), or by selling bonds to the Bank of England (“monetization of the deficit”).  The major difference between the two is that the former leaves the money supply unchanged, while the latter increases it by the amount of the investment.

The possibility of funding through selling bonds to the Bank of England prompted an attack on Corbyn from Labour shadow chancellor Chris Leslie, who alleged that this would be inflationary, and therefore “risks hurting some of the most poor, the most vulnerable, those on the lowest incomes”.

The “hurts those you wish to help” argument suffers from two serious problems.  First, the UK economy now suffers from pressures toward deflation not inflation, so that expansion of the monetary base is the appropriate policy.  Second, much empirical evidence indicates that contrary to Mr Leslie’s allegation very low inflation hurts the poor and benefits the rich.  One of the reasons should be obvious, inflationary pressures are associated with rising employment and wages.  In addition mild inflation devalues household debt and the poor are heavily indebted.

However, the mechanism to fund public investment and whether it would prove inflationary provides no support for the “hard left” accusation by Leslie.  We find national investment banks advocated by solidly mainstream economists (for example, Robert Skidelsky).  Funding of investment by borrowing from central banks is even more common – indeed, in the 1980s Ronald Reagan used this funding technique to cover current expenditure without generating notable inflationary pressures.

Taxation

The revenue generating policies in The Economy in 2020 focus on increasing the progressivity of the overall tax structure.  This has three components: 1) a shift from indirect to direct taxes for households, 2) stronger measures to eliminate personal and corporate tax avoidance, and 3) “large reductions” in corporate tax relief and subsidies.

Economists, even if they prefer indirect taxes (taxes on expenditures) agree that these are regressive;  their share of gross income falls as income rises.  A reduction in VAT and an increase in personal income taxes that leaves total tax take unchanged would reduce income inequality.  A reform of the tax structure that would reduce inequality hardly qualifies as “hard left”.  In a recent FT article the decidedly right of centre Chris Giles cited the negative impact of inequality on economic growth (drawing on a study by the OECD, which confirmed an earlier study by the IMF).

The tax policies proposed by Jeremy Corbyn are not hard left, but they are controversial because they would reverse the inequality-enhancing trend of our public finances over the last thirty years.

The Corbyn Danger

The economic policies proposed by Jeremy Corbyn are certainly a break with the current consensus in the Conservative, Labour and Liberal Democratic Parties (though not so different the anti-austerity Greens, SNP and Plaid Cymru).  This makes them radical only if one has an extremely narrow view of the limits of legitimate debate.

The surprising aspect of Corbyn’s economic policies is not that they are radical and hard left, but that they would be perceived as such, especially by prominent people in the Labour Party which has many MPs committed to social democratic values.

Since the other three candidates for the leadership profess to different degrees concern with inequality, I would have expected criticism to focus on the inadequacy of Corbyn’s policies rather than their radical nature.  For example, his programme could place more emphasis on enforcing a “living wage”, more on legislation to strengthen collective bargaining, plus policies to limit the grotesque inflation of corporate salaries.

It appears that the source of Jeremy Corbyn’s radicalism and the outrage his candidacy provokes in the Labour elite lies not in his policies.  While leader of the Labour Party Ed Miliband introduced fundamental reform in the process by which future party leaders would be chosen.  From a previous system of voting that gave the Parliamentary Party proportionally much greater election strength, the new system is one-member-one-vote, a change that two backbench MP called “disastrous” for which Miliband should apologize.

Therein, we find the profound radicalism of Jeremy Corbyn’s threat to  become Labour Party leader.  Should he win, it will be by a process that does not require the approval of the Labour Party elite.  Corbyn is not the danger that fills them with fear and loathing; it is the spectre of democracy.

Economist John Weeks is a Professor Emeritus of the School of Oriental and African Studies, University of London.