Why has McDonnell ruled out capital controls?

By Martin Thomas

“I want to make it absolutely explicit that capital controls would not happen under a Labour government”, Shadow Chancellor John McDonnell told the Financial Times on 23 January. That, he said, is the answer he gives to reassure City plutocrats in a series of meetings now underway.

In the faster-moving global financial markets which have developed since the early 80s, even mildly reformist governments can suffer capital flights like the one which in 1983 switched the Mitterrand administration in France from its initial policies (nationalisations, shorter working week by law, increased social benefits, etc) to an “austerity turn”. Without controls on capital, movements governments cannot stop that blackmail.

Lexiters often argue that, inside the EU, international (EU) constraints would hobble a Corbyn government. But McDonnell was making his promise of “no capital controls” on the basis of expecting Brexit. And capital controls are possible within the EU: Greece has had them since 2015.

As should be clear from the above, there is nothing particularly socialist about capital controls. But to exclude the possibility of them is to hobble a left Labour government and to hobble ourselves in the struggle. To rule out capital controls is to rule out any policies which disturb high finance.

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