August 24, 2016    6 minute read

Brexit, (Mild) Stagflation And Corbyn As Prime Minister

What The Future Holds    August 24, 2016    6 minute read

Brexit, (Mild) Stagflation And Corbyn As Prime Minister

As most reasonable actors are expecting higher inflation and a lower GDP growth rate for Britain in the short-term at the very least (due to a devalued pound, heightened uncertainty and so on), it is likely that Britain will enter a period of (mild) stagflation. The stagflation is qualified with the potential for it being “mild” because it is impossible (or at least difficult) to accurately predict the magnitude of such an effect. Nevertheless, even lower growth accompanied by a higher inflation rate can reasonably be described – at the very least – as mild stagflation. It would be useful to examine the potential political consequences of this.

What Can History Teach?

Historically, stagflation has led to radical political changes. This is largely due to the fact that a sustained and persistent increase in prices that is unaccompanied by corresponding income growth and employment availability understandably leads to heightened discontent amongst the population and, therefore, an increased appetite for radical change and improved tolerance toward its corresponding risks.

In Britain, it was a period of stagflation that played a significant role in enabling Margaret Thatcher and the Conservatives to seize power. Thatcher’s reign was undoubtedly controversial and many to this day continue to harbour a deep hatred toward her and continue to remain suspicious or even hostile towards the Conservative party as a result of her divisive legacy.

If history is to serve as an indicator, this period of (mild) stagflation will lead to a particularly acute anti-incumbency factor that will play out in the run-up to and particularly express itself in the next general elections and it will play a decisive role in determining its outcome (as it did in the Brexit referendum).

Furthermore, since the Conservative government is only likely to complete Brexit negotiations closer to the end of its time in power, the associated uncertainty and its negative effects (such as the aforementioned stagflation but also heightened credit market uncertainty more broadly) will lead to further. This will, furthermore, be accompanied by an increased appetite for radical change and more tolerance toward the risks associated with it.

Corbyn’s Ever-Increasing Chances Of Becoming PM

Jeremy Corbyn is currently the figure in British politics that embodies the spirit of radical change. He is most likely to remain leader of the Labour party. He comes across as an honest, hard-working, committed and relatable individual and, indeed, many believe he genuinely is. However, leadership challenges from his parliamentary detractors as well as particular factions within the Labour party have made the party seem far more fractured than it actually is.

Corbyn remains far more popular than any other contemporary British politicians, and he is far better-placed to oust Conservative politicians that lack charisma (the Conservative party being, in truth, far more divided than the Labour party currently is). Corbyn’s policies, track record and sincerity have won him the support and even the hearts of many. Indeed, even if Labour were to come short of a parliamentary majority, a resurgence of parties such as the Liberal Democrats (for example) would lend itself to Labour being the primary partner of a coalition government (and, indeed, the first choice for such a coalition).

What Can Labour And/Or Corbyn Do?

In any case, the likelihood of Jeremy Corbyn becoming Prime Minister is ever-increasing. However, what can the Labour party do to appear to be a credible competitor and win the confidence of some undecided voters or those who feel disheartened by the infighting? It is not Corbyn who should go since his formidable democratic mandate continues to speak for itself. However, John McDonnell is the real problem in the Labour Shadow Cabinet and  it is he who actually causes far more divisions in the party than Corbyn ever has or will.

While one supports Corbyn for Prime Minister, one would not feel comfortable at all with John McDonnell potentially being Chancellor of the Exchequer when considering his comments concerning Chairman Mao in the Houses of Parliament and the lack of respect they show for the millions who died under Chairman Mao’s rule and those who still suffer to this day as a result of his actions and the institutions he continues to govern from beyond the grave.

Even if the quote was meant to deride Osborne’s policies, McDonnell has deeply insulted democracy and human rights. Although Corbyn is fit to be Prime Minister, McDonnell is entirely unfit to be Chancellor of the Exchequer – indeed, it is a national security issue to have the latter removed from the Exchequer for obvious reasons. Even certain Labour MPs have complained about John McDonnell’s official conduct (and, bear in mind, it is many Labour MPs that are most disheartened with the current Labour leadership).

However, Corbyn will find it difficult to move McDonnell since he seems to be quite loyal (loyalty being a hard thing to come by in contemporary politics). However, he need not be removed from the Shadow Cabinet entirely – he could just be moved to a different post (almost anything, ideally, but Chancellor of the Exchequer). Indeed, there are plenty of people who could replace John McDonnell or even swap positions with him.

Likely Candidates

For example, Andy Burnham is a loyal, very strong, experienced and credible candidate for the position of Shadow Chancellor (however, he has chosen to run for Mayor of Manchester in May 2017). Indeed, moving McDonnell to another key portfolio (in this case, Shadow Home Secretary) may be an easier sell to him. There is also Diane Abbott who has had a long history in politics and, again, is definitely loyal. McDonnell himself has derided Labour leadership challengers for not fielding women and, in this sense, it is perhaps time that he step aside to let this lady go first. There is also the highly respected MEP Richard Corbett who is likely to be available for some more work at Westminster due to the Brexit vote. Finally, Corbyn’s People’s QE needs a credible implementer and McDonnell simply lacks the same credibility that someone else from Labour might have when implementing it.

Get articles like this straight to your inbox each morning with our Breakfast Briefing. Sign up by clicking here!

Log in with your details

or    

Forgot your details?

Create Account

Send this to friend