Capitalists will try every trick to derail a Labour government. Sarah Bates argues it will take mass resistance and strong counter-measures to give them a run for their money
It’s not a paranoid fantasy to argue that parts of the establishment want to derail the left wing Labour leadership’s plans. The prospect of a Jeremy Corbyn-led Labour government seemed like an outside chance earlier this year. It now seems more than possible, with even the bosses’ Economist magazine calling him “The likely lad”.
At The World Transformed festival in Brighton last week, shadow chancellor John McDonnell spoke about a “potential assault” by the ruling class. He said the leadership is doing “war game-type scenario planning” for all possibilities following a Labour victory.
One possibility is that bankers could launch a run on the pound. Britain’s currency—the pound sterling—“floats” on the international market. Its value goes up and down as investors buy and sell sterling. When the pound falls, private investors claim Britain may be unable to pay back state debts. So they rapidly sell their stock of sterling at reduced prices before their profits can take a hit.
Bankers and bosses say they withdraw their investments in sterling because they think the market is in trouble. But they are not just moving money from one account another—it can be a calculated method of political influence. If this mass selling happens, it forces the government to devalue the pound. Because the pound would be valued less favourably against other countries’ currencies, the price of imported goods would go up.
The Tories and mainstream media piled criticism on McDonnell for even discussing a run on the pound. That’s a bit rich of the Tories, who presided over an 11 percent drop in the pound after Brexit. In the immediate aftermath of the vote the pound fell to its lowest level since 1985—and £120 billion was wiped off the value of the FTSE 100 share index.
But this isn’t the first time bosses have threatened a run on the pound. In 1974 Harold Wilson’s Labour government was elected on a wave of anger against the Tories and rising trade union militancy. Its manifesto pledged to “bring about a fundamental and irreversible shift in the balance of wealth and power towards working people”.
The bosses bared their teeth to face down the Labour government. They destabilised the economy through mass selling of sterling, which quickly lost value against the dollar. By 1976 the value of the pound declined by nearly 25 percent in nine months. Terrified of a deepening economic crisis, Labour’s chancellor Denis Healey asked the International Monetary Fund (IMF) for a huge loan. At £2.3 billion, it was the largest amount the IMF had lent at that point. But the money came with strings—the IMF insisted the Labour government impose big public sector cuts.