While Ed Miliband’s Labour Party conference speech indicated that he appears to want to return to some form of social democracy, seen by some as a decisive break with the recent Blairite past, there is little criticism by him or others in the Labour leadership of the system that created the current crisis. The implication is that, with a few adjustments, things can carry on as before. Well they can’t.
What needs to be spelt out is that the notion of the permanent ascendancy of liberal democratic, free market capitalism, dubbed by Francis Fukuyama in 1992 as the ‘End of History’, is over, killed by the world economic crisis that began in 2008 and showing no signs of abating. Although the notion was powerful for most of the 90s and well into the noughties it is clear in hindsight that it lacked justification.
The adoption of monetarism and free market economics in the 1970s as an antidote to the perceived failure of mixed economy Keynesianism was never valid. The inflation of the 70s was caused primarily by the USA printing dollars to pay for the war in Vietnam and Arab oil producers punishing the West and enriching themselves by raising the price of oil. Support grew for the new doctrines, while at the same time Labour moved to the left, particularly following their defeat in 1979, promoting for the first, and last, time a semi socialist manifesto prior to the 1983 general election. That this coincided with Labour’s worst post war defeat was not a complete coincidence, as the SDP defection had created a new focus for the more right wing Labour voters, but the Falklands War and Michael Foot were equally potent factors. It was in the UK and the USA that neoliberalism was at its strongest, under the governments of Thatcher and Reagan. Elsewhere in Europe there was less enthusiasm, but all countries were affected. The collapse of communism in the USSR and Eastern Europe in 1989-91seemed to herald the final triumph of capitalism.
Yet right from that moment, not just in the last three years, there were problems for capitalism. The first was in Japan, the miracle economy of the 60s and 70s, which in 1991 suffered a banking collapse followed by a prolonged recession from which it has never recovered. There were major crises in Mexico in 1995 and most of South East Asia in 1997. Western economies slumped after the collapse of the Dotcom boom in 2001. Moreover, the results were not particularly impressive. Economic growth in the advanced countries had been more rapid in the period following the second world war than from the 1970s onwards. However, for one particular group, the very affluent, there was a huge increase in their income, reflected in growing inequality. In class terms the capitalist fightback of the 70s against what was perceived as a drift towards a Keynesian type mixed economy socialism has been very successful for its beneficiaries, the affluent minority. Most others have done less well, particularly those at the bottom, especially in the US, those in Europe being more protected by welfare systems. But inequality has grown everywhere.
Despite this, it is perhaps understandable that New Labour developed as it did in the mid 90s. The powerful legacy of Thatcherism and the apparent triumph of capitalism, combined with a desperate desire by Labour to regain office after four successive defeats, allowed those who later came to be known as the ‘Blairites’ to take control after the untimely death of John Smith in 1994. Central to their beliefs was the primacy of the free market, which was to fund better services and more for the less well off. To some extent these goals were achieved. Health and education did improve, the minimum wage, tax and pension credits did help the least well off. But inequality remained as it had been under the Conservatives, and an unsustainable housing bubble, partly reflecting growing housing shortage, including social housing, threatened the dire economic consequences that eventually came to pass.
The crisis of the last three years is the latest and most severe of the crises of the last thirty years. It signifies that capitalism, at least in the form it has taken during that time, has failed, and there needs to be a return, at the very least, to a society and economy based on much more regulation and control, as was typical from the 40s to the 70s.
Socialists will urge much more, although there is precious little agreement on what socialism means and how we might arrive there, and much more discussion is required here. However, in Europe there are a number of countries where socialist parties have a substantial vote and commensurate representation, often alongside equally substantial Green parties. The most important of these, and with the biggest vote, is Germany, where the Left and the Greens gained a combined vote of 23% in 2009, but this is also the case for the most recent major elections in Finland (15%), Portugal (13%), Greece (14%) the Netherlands (16%) and Sweden (13%). None of these parties has yet played a major role in government, but that could change if left wing coalitions come to the fore. In the UK the first-past-the-post electoral system for Westminster means that it is not possible for this to happen. Smaller parties are discriminated against and find it difficult to get elected. That is why parties to the left of Labour are tiny, lacking in influence and almost completely without representation, and why PR is essential, so that Labour can become a proper socialist party or a new party of the left can be formed that would have significant support. That is not possible pre PR and calls for such a party are impotent nonsense.
This does not mean that Labour needs to continue as a free market party. The current crisis indicates that there could well be majority support for a return to traditional social democracy, with greater subordination of the economy to state regulation, substantial state ownership and a much greater degree of equality. It lasted in the UK until 1979, before it succumbed to the ravages of Thatcherism from which it has never recovered. Moving in this direction will require a sea change in our thinking, most importantly to characterise the Conservative Party as the defender of vested interests and privilege, to ensure that big business in all its forms, but particularly finance, is subject to scrutiny, and to determine whether its operations are in accord, in the widest sense, with the public interest. We must also seek to reject and reverse the levels of inequality that are so repugnant and socially harmful, and see public provision as the key to progress.
There are a number of things that in my view need spelling out:
a)The most urgent problem is the danger of renewed world recession; to challenge this,
international agreement is necessary to stabilise the world economy and restore growth. The
emphasis here should be on measures to stimulate growth and employment and regulate banking
and capital flows.
b)There can be no future for the UK outside the EU. However, the EU should move away from the
free market model enshrined in the Lisbon treaty and towards a more regulatory framework, more
accountability and a common fiscal framework. In the long run we should look forward to a federal
c)We should adopt a form of PR for elections to Westminster, local government and a reformed
second chamber, thus completing the changeover to PR for all elected bodies.
b) and c) are immediate problems. There is majority opposition to both, including among Labour voters,
and much, if not most, of the left. In my view, however, they remain the essential prerequisites of any
move forward. Notwithstanding that, what then might a Labour programme look like?
1) To keep control of the banks that are currently majority state owned, (RBS, Lloyds, Northern Rock) with the aim of making them fully state owned. RBS to become a state investment bank, the other two to continue with their current (general retail and mortgage) functions.(This is consistent with the widely accepted ‘too big to fail’ notion. Vickers is inadequate. Banks must be broken up, which would happen to Barclays and HSBC, or be state owned.)
2) To take back into public ownership the rest of rail ( Railtrack is effectively nationalised) and, when finances permit, Water, Gas and Electricity. Oil and the defence industries to be subject to a special taxation regime, with the eventual aim of these also becoming state owned. (The regulation of these monopolies has not worked, while huge oil profits reflect OPEC policy and are unjustified.)
3) An end to the right to buy. A massive programme of housebuilding in both the public and private sectors with the aim of reducing waiting lists and lowering house prices. Possible nationalisation of one of the big building companies to facilitate this. The market has completely failed here. Large numbers of people, particularly the poorer and younger, have suffered. It was New labour’s biggest single failing and caused a massive loss of votes.
4) An end to student fees. A graduate tax, for ALL graduates, to help finance the cost of higher education.
5) Free personal care for the elderly. Free prescriptions. Free optical and dental care. Thus creating a truly free health service.
6) Ending Council Tax; create a new Land Value tax. This would tax market gain.
7) Creating new higher tax bands and a wealth tax. Raising corporation tax significantly. Ending tax haven status in all British colonies and dependencies. A drive to reduce tax evasion and avoidance. Seeking a worldwide ’Tobin’ tax. High taxes for the rich and wealthy are central to halting the growth of inequality and the rise of a new class of the super rich.
8) Extra powers for trade unions in line with norms in Europe. The encouragement of trade unionism in the private sector. This is the best way of ending poverty for the low paid and reducing the bill for child and working tax credits.
9) The promotion of a proper regional policy aimed at reducing unemployment and relieving congestion in the south-east. The creation of regional government in England.
10) The encouragement and promotion of co-operatives and ESOPs (Employee Share Ownership Plans)
11) Raising the current state pension to the current Pension Credit level but restricting age related concessions.
12) An end to Academies and ‘Free’ schools. Abolishing the remaining selective schools. Comprehensive tertiary colleges to replace sixth forms.
13) An end to market simulated provision and private practice within the NHS.
14) No new nuclear missiles, sale of the two aircraft carriers now being built, support for a European wide defence force.
15) Withdraw all British troops from Afghanistan, seek a regional settlement. Support for a viable Palestinian state, and a nuclear free Middle East. Support for a new ‘Marshall Plan’ type initiative for Africa.
16) Abolition of the House of Lords. Creation of an elected second chamber. Ending of monarch’s prerogative. A full written constitution.
17) A limit to the size of media companies. This means breaking up the Murdoch empire.
18) A reassessment of the benefit system, with better childcare provision.
This is an indication of some of the main measures that Labour should be contemplating, although it cannot really begin doing so until the centre left social democrats have asserted themselves over the Blairite wing of the party That is far from the case at the moment. The adoption of some of the measures outlined above by the TUC and some of the big unions is one of the most promising recent developments, and should be supported.
As well as moving back towards social democracy Labour’s strategy should change.There must be a much greater emphasis on the interests of the working class (defined as routine non manual as well as manual workers), rather than those of ‘Middle Britain’ as under New Labour, which in practice tended to be the more affluent middle class. Yes, many of these people did stick with New Labour, but at the expense of the huge numbers of working class voters who deserted Labour, many for the Tories, some for Lib-Dems, or even the BNP, but most to the huge group who just gave up voting.
Labour must win back these votes, even if it is at the expense of some middle class votes. The policies outlined above will help to do that and also attract public sector professionals, the large numbers of committed left wing voters who gave up on Labour after Iraq and have not returned, students, the elderly, and those seeking affordable homes to buy or rent.
Labour must also reach out to the Greens, and seek pacts with them where appropriate, and to the more progressive Lib-Dems, where increasing numbers are deeply disturbed at support for the coalition.
If Labour can make this turn there is some hope. If it continues on a Blairite course it is difficult to see how it will be able to sufficiently distinguish itself from the ConDems to have an alternative electoral appeal in 2015 or, if the coalition falls then or earlier, to have the policies to restore economic health. Either way there is a lot at stake.
Peter Rowlands is a Labour Party member in Swansea and a member of Welsh Labour Grassroots.
This article also appears in The Chartist. http://www.chartist.org.uk