[LONG READ] Shades of Red

New Labour was still left wing. Just not Socialist.

Ed Miliband presents Labour with something of a hindsight problem. From the perspective of many Blairites, Ed Miliband’s tenure represents a leftward march to Corbyn and eternal opposition (2017 results notwithstanding).

For many of Mr. Corbyn’s supporters, Ed Miliband represents a timid Labour party that was simply offering more of the same Tory consensus.

Mr Corbyn’s view seems to have a lot of traction among left leaning commentators. One such blogger, Another Angry Voice, asserts:

The Labour party is no longer a party of the left. Embracing the neoclassical economic orthodoxy and positioning themselves ever so slightly to the left of the Tories – as they undeniably have – does not make them a socialist (or even vaguely left-wing) party.

New Labour isn’t socialist. Changes to Clause IV was intended to break ties with Labour’s commitment to state ownership of industry. That’s not a controversial statement. But New Labour still filled a progressive role, and it certainly isn’t delusional to think of the New Labour project as a progressive one.

To understand why, it’s worth understanding the context of how the world that forged left wing, progressive movements in liberal democracies changed. And how New Labour and the third way is one of many attempts to re-align social democratic ideals to the late 20th and early 21st Century worlds they occupied.

Historical roots of Labour
In most peoples minds, Labour was born a socialist party. Except this isn’t true. In 1899, the Trade Union Congress (TUC), originally a pressure group around the interests of workers (labour), voted to set up a separate political party. This would grow into the 1906 Labour Party that’s been around ever since. Labour were originally the junior party to the then dominant Liberals, to avoid splitting the liberal vote. In other words, it wasn’t born out of socialism, but  radical liberalism.
(Thorpe, 2001: A History Of The British Labour Party)

During that period, the Liberal Party introduced sweeping social and constitutional reforms, such as 1906 legislation to provide children with free school meals, establishment of a pensions system in 1908, and the NI Act in 1911 which gave people the right to free medical treatment, and sick pay for 26 weeks. The Act also gave people the right to unemployment pay for 15 weeks in return for NI contributions.

They also brought in the Trades Disputes Act of 1906 (which ruled that unions were not liable for damages because of strikes), the Workers Compensation Act of 1906 (which granted compensation for injury at work), 8 hour work days for miners (1908), school medical inspections (1907), and the Merchant Shipping Act, which improved conditions for sailors.

Many of these reforms were forced through by the working coalition of 42 Labour Party MPs who had been elected following 1910, who had denied the Liberal party a majority.
(See: ‘Whigs, Radicals, and Liberals, 1815–1914’ (Duncan Watts); ‘Foundations of the Welfare State’ (Pat Thane) and ‘Mastering Economic and Social History’ (David Taylor))

The break from radical Liberalism didn’t occur until 1918, when Labour embraced the warm and bountiful breasts of socialism. The party adopted nationalisation, public administration of a free market, and the idea of changing society from capitalist oriented self interest to socialist fellowships.
(Thorpe, 2001: A History Of The British Labour Party)

The Post War World
Fast-forwarding to Post Second World War Britain, Labour got into power and enacted some of the recommendations of the (liberal) Beveridge Report. It’s important to note that the wartime Coalition Government had enacted some of Beveridge’s ideas prior to Attlee. For example, a 1943 ministry to supervise insurance was set up, and in 1945 family allowances were agreed. Temporary homes were built, at state expense, for some of Britain’s homeless. In 1944 a new Education Act was passed which provided free Secondary School education. Even the NHS was dreamt up in 1944 under a Conservative led coalition (although it was closer to the internal markets model of 1990 than 1948).

But when Clement Attlee became Prime Minister in 1945, the Labour party he led used nationalisation as the key way for the Post War Labour government to fight “the five giants of evil on the road to recovery”.

Mr Attlee’s government oversaw large scale nationalisation of industry. The Bank of England and civil aviation were nationalised in 1946. Coal mining, rail, roads, canals, and cable/wireless were nationalised in 1947. Electricity and Gas followed in 1948. The steel industry was nationalised in 1951, by which time around 20% of the economy was in public ownership. This post war period of industrial nationalisation was primarily driven by Fordist thinking – which is identical to Keynesian economics.

Point 1: Fordist Thinking
Post War Fordist ideas consisted of domestic mass production, with a range of institutions and policies supporting mass consumption. This included Keynesian demand management that generates national demand and social stability. It also included class compromise, or social contract such as family-supporting wages, job stability, and internal labour markets leading broadly shared prosperity.

These policies gave rise to what is known as “the Golden Age of Capitalism”. From the late 1940s to 1970s, the economies of the industrialised countries enjoyed continuous growth, with wages and profits steadily increasing in parallel. Rising incomes were linked to national productivity, and the Fordist model of growth became dominant in advanced capitalism during postwar reconstruction.

Fordism is credited with facilitating the long postwar boom, particularly with the welfare state, which helped to boost demand in the economy and absorb workers who’d lost their jobs in the wider economy.

Despite what some on the left think, nationalisation did not give workers a say in how industry was run. But it did boost wages, brought about safer working conditions and reduced working hours. Coal especially saw the benefits, such as national safety standards, banning under 16s from working underground, training for newcomers, a 5-day working week, better pay, sick pay and paid holiday for miners.
(See: Ideas and Policies Under Labour, 1945-1951: Building a New Britain (Martin Francis); The Labour Party Since 1945: Old Labour – New Labour (Making Contemporary Britain) (Eric Shaw); Austerity Britain, 1945-1951 (Tales of a New Jerusalem) (David Kynaston))

Nationalisation of industry was expensive. Ditto other welfare programs, and Britain wanted to maintain a large army and air force. When the US suddenly cut off supplies of food, oil, weapons and other aid to the UK via Lend-Lease, Attlee’s government had to secure a $3.75 billion loan from the US which came with austerity strings attached.

As well as austerity, the US loan also demanded making Sterling freely exchangeable to free up money flows and let the US break into previously closed off markets (before, European powers would primarily trade with colonial partners).

Point 2: Attlee’s Austerity Program:
1940s austerity is different to austerity programs implemented in 2010, in that it 1940s austerity restricted consumption to divert resources to investment. Austerity in 2010 aims to reduce the deficit through cutting the state. 1940s investment also centred around using the government, whereas 2010 used the private sector as the means to invest (differences in 1940s and present day austerity are outlined here).

But the goal was the same: rebalance the economy. In the 1940s, this was done by curbing excess demand to focus on exports. Today, excess supply was curbed by taking resources out of public consumption, while boosting consumption in other ways.

Austerity was implemented to secure imports that the UK needed after being near bankrupted in the Second World War.

Post War Golden Era?
Attlee’s post war Britain included wage freezes, measures to restrict welfare and consumption (rationing) to build a strong export economy.

As a result, the welfare state established by Attlee’s Labour was bare bones, and in many ways deliberately restricted. Physical provisions (such as school and hospitals) were also heavily restricted to divert resources to industry – meaning that no new district hospitals were built until the 1960s.
(See: Democratic Socialism and Economic Policy: The Attlee Years 1945-51 (J. Tomlinson); Why so austere? The British welfare state of the 1940s (J. Tomlinson)) .

Taxes were also kept high to suppress inflation of goods. House building was cut back to secure resources of timber and labour for export, and reduce costs to the state in construction projects.
(See: Years of Recovery: British Economic Policy 1945-51 (A. Cairncross))

The then Labour Chancellor, Sir Stafford Cripps, even told a TUC congress

“There is only a certain sized cake. If a lot of people want a larger slice they can only get it by taking it from others.”

Attlee’s nationalisation agenda, which required more systematic economic planning, didn’t get the measures necessary to succeed in the way Labour intended. Government licences for business were required for every enterprise. Labour was divided between market orientated Keynesians, and hard line nationalisers. In the end, Marshall Aid forced the adoption of a systematic planning scheme – emphasising tax and spend policies to indirectly plan the economy (Fordist style) – rather than direct government control. This lead many in industry to engage in supply side dealings – from subsidies to private research and development and expanding technical education (or ‘hands on’ work)
(See: The Marshall Plan: America, Britain and the Reconstruction of Western Europe, 1947-1952 (Michael J. Hogan))

Point 3: Notes from the Golden Age
While Attlee’s government presided over wage increases for the working classes, wages fell for middle incomes. Middle incomes, which were hit by austerity, saw no benefits to the welfare state being constructed and defected en-masse to the Conservatives in 1950. The houses that Bevan promised failed to materialise. 33% had no fixed bath, 18% of homes had a shared toilet, and 15% comprised 3 rooms or less, and were often overcrowded.

Austerity did work in boosting exports, for example car exports rose by 77% between 1947 and 1950. But it also meant that the investment promised to industry by government wasn’t delivered – instead relying on Marshall aid. Housing, welfare, even the NHS, were restricted in provisions to boost exports. And interestingly, the Coalition’s austerity plan echoed that of the 1940s.

In a twist of irony, the Conservatives secured electoral victory in 1951 by campaigning against rationing, controls and austerity. It wasn’t until then that greater social mobility, equality of opportunity, economic growth, housing and opportunities arose.
(See: Austerity Britain, 1945-1951 (Tales of a New Jerusalem) (David Kynaston); A Century of Change: 1837–Today (1963) (R.J. Unstead))

Attlee’s governments – and the successive governments of the 1950s and 60s – continued with the Fordist thinking solidified with the Marshall Plan. Attlee’s government aside, this post war period of Fordist economic policy oversaw massive levels of unemployment as low as 1.6%. People were happier, and the economy grew consistently. Unhinged from the austerity of the 1940s, Britain has become a consumerist economy. Consumer spending had risen by 20% in the 1950s.

Everyone in the Post War Period benefited from Keynesian demand management. By 1963, 82% of all private households had a television, 72% a vacuum cleaner, 45% a washing machine, and 30% a refrigerator.

In 1950 1% owned television sets; by 1965 75% did. Wages rose by 40% between 1950 and 1965, In 1951, 61% of manual labourers were entitled to two weeks’ holiday with pay. By 1955, it was 96%.
(See: here)

As noted by Martin Pugh:

“Keynesian economic management enabled British workers to enjoy a golden age of full employment which, combined with a more relaxed attitude towards working mothers, led to the spread of the two-income family. Inflation was around 4 per cent, money wages rose from an average of £8 a week in 1951 to £15 a week by 1961, home-ownership spread from 35 per cent in 1939 to 47 per cent by 1966, and the relaxation of credit controls boosted the demand for consumer goods.”
(See: Speak for Britain! A New History of the Labour Party (Martin Pugh))

Trade Unions, by and large, were fans of Fordist models of production and Keynesian policies. Keynesian macroeconomic policy, which focuses on the demand side, is used to justify state intervention, and following the principles of economist John Maynard Keynes, the government could use tax money to keep an industry afloat – even if it faced economic difficulties. In short, the state combined accumulation supporting investments with re-distributional welfare.

Point 4: Was the Post War Period truly socialist?
It should be worth remembering: Keynesian =/= socialism.

From a semantic perspective, all the the things done during the “golden age” of the 1950s and 1960s weren’t socialist, but Fordist. Fordism is the compromise to socialism, where labour conflicts were contained through negotiations between state and Unions, and capital and states, rather than workers directly running and negotiating with government. Keynesian policies created an important (but precarious) relationship with the state and private capital. But  industry has always been inherently suspicious of further nationalisation.

Trade unions often blocked Labour party commitments to further nationalisation. Most notably in 1953, where Arthur Deakin of the TUC cast a block vote of 835,000 votes from his Union against the motion of further nationalisation programs. Further nationalisation efforts under Wilson in the late 1960s to make unions accept pay restraints as a response to the inability of Fordist/Keynesian thinking to fix economic woes were also vetoed by the TUC

In fact, this break in trust for Fordist thinking was what ultimately birthed New Labour.

Economic Malaise of the 70s
In the early-1970s, this rate of growth went into decline. In part, slowdowns in the economy were caused by the revolt of the New Left against the disciplines of the assembly-line. At the same time, a rapid rise in the price of oil and other raw materials substantially increased the costs of production for most businesses.

But unlike earlier recessions, the Fordist strategy for fixing the economy didn’t work. Instead, the world economy entered a period of persistent inflation, currency instability and unemployment (stagflation).

During the 1970s, some underlying crisis tendencies of Keynes became more evident. The growth potential of mass production was gradually exhausted, and there was intensified working-class resistance to its alienating working conditions. The market for mass consumer goods became saturated; a declining profit rate coincided with stagflation; and clients began to reject standardised, bureaucratic treatment in the welfare state.
(See: Capitalism 4.0)

This failure in economic policy was caused mainly by the globalisation of production. Internationalisation made state economic management less effective, and Western economic dominance was threatened by East Asian expansion. For over thirty years, American, European and Japanese companies had been slowly expanding to obtain economies of scale on an international level (in other words, they’d gone overseas to make production cheaper and their products more competitive). Outside the control of any one national government, global trading system created by these multinationals was regulated by the world financial markets. Following the collapse of fixed exchange rates after Nixon dropped the Gold Standard, international competition between different currencies increasingly determined the internal economic policies of the industrialised countries.

Once the governments of the industrialised countries lost control over their own national economies, the virtuous circle of rising production and consumption was broken. Instead of steadily increasing wages and welfare benefits, workers now faced cuts in social benefits, stagnant money wages and mass unemployment.
(See: Global Shift – Mapping the changing contours of the global economy (P. Dicken))

These phenomena prompted a wide-ranging search for solutions to the crisis of Fordism, either by restoring its typical growth dynamics to produce a neo-Fordist regime, or by developing a post-Fordist accumulation regime and mode of regulation. Neoliberalism was the shift from fordism to post-fordism in advanced industrialised economies in response to the loss (or lack) of competitiveness.

In other countries, it was simply called economic restructuring (such as SAPs in Latin America and Africa, or the Washington Consensus). It should be worth pointing out: neoliberalism was not a conspiracy to overthrow any sort of political or economic doctrine, as is sometimes implied. It was a response to a crisis which Keynesian thinking couldn’t effectively address, such as oil shocks. Oil shocks in the 2000s were less acute due to more flexible labour markets and better monetary policy.
(See: Global Shift: Mapping the Changing Contours in the World Economy (Peter Dickens))

Point 5a: Shifting Sands of Economics:
It’s easy to build a narrative of social democracy throughout during the economic malaise of the 1970s before the winters of discontent lead Margaret Thatcher into power and the adoption of Neoliberalism as the main economic thinking, which was wildly different from the Tory statism involving economic control and the condition of the people – look no further than the 1960s expansion of social benefits in line with Labour under the watchful eye of Harold Macmillan.

This narrative is too simple.

When the Post-War consensus failed to fix economic problems affecting the nation, the neoliberal ideas of  Friedman and Hayek pushed by Enoch Powell, who resigned from Macmillan’s party after worries about excessive spending and mixed economies, gained influence with one Sir Keith Joseph, who later became a mentor of Mrs Thatcher.

The $4 billion 1976 bailouts by the IMF (under Callaghan’s Labour government) resulted in surrendering of policy autonomy and state control to international pressures, most notably in the form of spending cuts (although not on the NHS, social benefits or education) and the beginnings of deregulation, to allow the City to maintain international standing – 3 years before Thatcher.
(See: “Good-bye Great Britain”: 1976 IMF Crisis, (Burk)). 

Rather than being far right fringe, it garnered support in academic and political rings as a solution to the economic change.

Ideas such as the Phillips Curve, where trade offs exist between inflation and unemployment in the short term, were undermined by stagflation, which discredited the idea of using government muscle to kill the business cycle.

Policies to address the malaise of the 1970s introduced by Jimmy Carter in the US (a Democrat) were neoliberal in flavour. Carter cut spending, deregulated industries and rose interest rates to combat high inflation. Same with Callaghan’s IMF conditions. Deregulation and the cutting of public spending began before Mrs Thatcher.

Full blown neoliberalism wasn’t enacted in the US until Reagan was sworn in 1981. Or Thatcher in 1979. However neoliberal-esque policies were implemented before either rose to power. And by left wing politicians.


Point 5b: Shifts in Politics:
It’s worth highlighting the importance of this shift by the Conservatives from Paternal, ‘One Nation’ Toryism (which justified government intervention to secure full employment, welfare etc.) to neoliberal economics.

Usually, when people say there isn’t a cigarette paper between New Labour and the Conservatives, they usually refer to Labour’s shift to it’s embrace of the free market, over Fordist policies.

But no one ever points to the continued Fordism of the Conservatives in the 1950s and 60s as there being no difference between Labour and the Conservatives. No one says the Conservatives Prime Minister Harold Macmillan was usurped by Keynesian adherents. It was the economic consensus of the time.

The Wilderness Years
After Mrs Thatcher won in 1979, Labour was split between the left wing lead by Tony Benn, and centrists lead by Denis Healey.

Tony Benn’s camp didn’t like what they saw as a betrayal by Callaghan with his acceptance of IMF conditions of a bailout, and restraining pay rises of 5%. They wanted widespread nationalisation of industry, nuclear disarmament, the removal of the UK from the common market (among other trade restrictions) while pushing to deselect MPs who were allies of Callaghan.

Healey’s camp, which had implemented the IMF austerity in exchange for the bail out, was more New Labour in flavour. Labour chose the left wing compromise candidate Michael Foot, and selected Denis Healey as Deputy leader in 1980 and 1981  thanks to the Transport and General Workers Union and the abstaining of 20 MPs from the Tribune Group. Michael Foot attempted this compromise to pull together Labour’s left wing grassroots lead by Tony Benn, and the more right wing Healey. (See: “Good-bye Great Britain”: 1976 IMF Crisis, (Burk)).

It didn’t work. Labour split, with more centrist “moderates” (The Big Four) forming their own party; The Social Democratic Party (SDP) centered around social equality rather than economic equality. They emphasised a middle way between the Labour’s move to greater socialism and Thatcher’s neoliberalism, arguing for “the fostering of a strong public sector and a strong private sector without frequent frontier changes”. 29 Labour MPs defected to the party, which would one day evolve into the Liberal Democrats.

Under the early days of Thatcher the Tory government pursued a strong line against inflation, which had driven up unemployment and sent Britain into recession, pushing Labour ahead in opinion polls. Opinion polls showed a double-digit lead for Labour. Yet this swung back to Mrs Thatcher in 1983, leading to a massive Tory landslide.

In part, this was due to victory in the Falklands War. But Labour support leaked to the SDP, due to it’s 1983 manifesto. 

The New Hope for Britain called for unilateral nuclear disarmament, withdrawal from the European Economic Community, abolition of the House of Lords, and the re-nationalisation of recently de-nationalised industries like British Telecom, British Aerospace, and the British Shipbuilding Corporation. This helped to divide “the left” even more between the centre left SDP and Labour. In 1983’s election, the SDP secured 25% of the vote, compared to 28% for Labour. Because of the nature of First Past the Post, they only secured 23 MPs.

Labour passed to Neil Kinnock, and then John Smith. Both tried to push Labour closer to the centre following disappointing election results. Both caused tensions to appear again between those on the party’s left, and those identified as “modernisers”. The left wanted a return to socialism, and the modernisers wanted an approach like that of the SDP. At the 1993 conference, Smith successfully changed the party rules and lessened the influence of the trade unions on the selection of candidates to stand for Parliament, and allowed for Labour’s “modernising” wing to truly begin to shape Labour’s future – long  before Blair’s Premiership.
(See: Thorpe, 2001 ‘A History Of The British Labour Party’)

New Labour
Following the death of John Smith, Tony Blair rallied the support of MPs to back him in his leadership bid, and a gentlemen’s agreements with Gordon Brown to not run against him helped to secure Tony the leadership. Come 1997, Labour was swept back into power, with Blair declaring:

Division among radicals almost one hundred years ago resulted in a 20th century dominated by Conservatives. I want the 21st century to be the century of the radicals.

New Labour under Mr Blair’s stewardship moved from socialism towards “communitarian liberalism” – people are equal, and the state is the guarantor (but not necessarily the provider) of opportunity for all.

Point 6: The Philosophy of New Labour:
This philosophy is embodied in the Third Way. In broad terms, the third way is “left” social policies, with “right” economic policies. Although this analysis is not exactly fair. The Economist, for instance, lamented New Labour for being “sound” on macroeconomics but, “go astray” on microeconomics policies.

The Economist was highly cricital of minimum wage laws, windfall taxes on utilities, and signing up to the EUs social charter. It summised this as:

“…[Labour] retains a belief in regulation and in the desirability of government direction of private behaviour.

This “meddling” is far from the Thatherite consensus. In fact, New Labour was inspired by Jo Grimmond, liberal party leader of the 1950s who proposed a third way position which was anti-collectivist, but communitarian.

The SDP’s constitution, and that adopted by New Labour, were heavily influenced by Jo Grimmond. In both The Liberal Future (1953) and The Common Welfare (1978), there are concerns about organised capital and industry, which put inflationary pressures on the UK economy. But The Common Welfare commits to the free market and rejects the idea of nationalised and planned industries. At the same time, it argues that not only should there be “public goods” (such as the military and infrastructure projects) but that the state should work for the common good (welfare and so on) – including tinkering in the economy.

In other words, competitive markets should not be in conflict with the idea of national community, and state support.

The broad policy framework of 1997 New Labour followed 3 principles:
1) The state should be the guarantor, but not necessarily the provider, of opportunities.
This differs from the social democratic viewpoint which is that the state is both obliged to provide access to these services, and guarantee that everyone can access them. Instead, New Labour said while the state has to guarantee this access to provisions like education and healthcare, it doesn’t necessarily need to provide it to people. Just give them the means to.

For example, Citizen Funds to gain minimum standards in education and training (see “Individual Learning Accounts“) – the state doesn’t have to provide people with the education – just the means of accessing it. This includes “quasi markets” where the state buys services from market services to do certain social tasks (see PFIs, even if they didn’t work that well).

This involves things like “legal welfarism” – where the state builds a legal framework around guaranteeing citizens accessing social services. For example, Universal Second Pensions, where people would save a portion of their incomes in funded pension schemes subsidised by private workers and low earners have state subsidies. Others include minimum wage legislation (provided through private enterprise) and child support legislation (where absent parents need to pay child support).

The state also has a role in funding these goods, even if the private sector plays a bigger role, funded via taxes such as environmental taxing, tor the “Windfall Tax”, AKA “topsy turvy nationalisation” – where the state gradually acquires shares of productive assets, placing them in special funds and using the return on them to finance education and welfare.

This idea which was floated around by New Labour, as well as the Democrats under Clinton. Which is partly why rail wasn’t nationalised, despite a manifesto pledge to do so.
(See: ‘Freedom with Responsibility: Can We Unshackle Public Enterprise?’ (Holtham))

This also includes the introduction of paternity leave of ~2 weeks, free Nursery for 3 and 4 year olds, Sure Starts, Gift Aid (although it started in 1990, it was expanded in 2000) and New Labours “New Deal” programs which put some 1.8 million people into work (although it lagged results, and it’s effectiveness was disputed).

It also included increased pay and workers rights, as well as expanding the education budget and access to technology. 

2) Employment-centred social policy
This is the idea that most people could access better living standards through employment, which relates back to this idea of the state being a guarantor but not the provider of these services.

This includes things like child credits or increased access to education and training because an increasingly technology dependent and knowledge based economy requires new skills to achieve higher standards of living (although because this takes time to trickle through the wider economy many argue it mandated the government stepping in to increase demand for unskilled labour). These policies also encouraged things like work incentives and the minimum wage.

3) Asset based egalitarianism
This, again, ties to the liberal idea of the state as the guarantor. Income distribution shouldn’t be the soul means of wage policy and redistributive taxes, but also peoples access to opportunity (such as skill acquisition) which can be brought to the market.

This is shown in universal second pensions, and encouraging savings among asset poor people. It includes asset based redistribution like providing money to pursue education or open new businesses, making National museums and art galleries free (so underpriviledged backgrounds can access educational resources) and 24 paid days of holiday for workers.

Other things include decentralising power (see Devolution), Human Development commitments (see writing debt off for 18 HICs (Heavily Indebted Countries)) and Environmental Protection and legislation (see Kyoto and renewable energy expansion (which despite what the Lib Dems in Coalition say, were already approved under the last Labour government)).

Point 7: The Context of New Labour
Now it’s undoubted that when Labour got to power in 1997, they failed to reverse Thatcherite policies of curbing trade union powers, privatisation of industry, and attempts to reduce the size of the state. This earned New Labour followers the nickname “Red Tories”. Evidence of neoliberal-lite economic policy is pretty clear.

This is, somewhat, by design. New Labour’s whole angle was the economy mechanic: tinkering and improving. Not trying to re-invent the wheel.

But to claim this was a usurping of Labour by a right wing movement doesn’t fit the historical context. Rather, neoliberalism was a response to the failures of Keynes to fix the economic crises of the 1970s.

To quote from the book New Labour: Politics after Thatcherism

Keynesian demand management to maintain full employment has been replaced by tough anti-inflammatory fiscal and monetary policy. On the supply side, nationalisation and government planning have given way to flexible labour markets; welfare to work and “education, education, education”

The perception that we live in a globalised world is the key to New Labour‘s loss of faith in Keynesian macro-economics

This belief – that social democracies had to accept the maket – lead to a new focus on welfare and social policy. And it’s here we find the left-wing progressivism of New Labour.

New Labour Legacy:
During New Labours time in office, overall living standards rose over that period. (See also: here). Unemployment was consistently ~5% between 1997 – 2008, and inflation was also low. Absolute poverty also fell, material deprivation fell among lone parents, and child and family well being also improved.

In this regard, welfarism (like minimum wage laws and employment based social policy) worked. But many argue they didn’t go far enough, and allowed governments to basically subsidise poverty pay. The state still played a large role in the allocation of welfare, even if it didn’t need to be the provider of welfare. New Labour’s welfare was not the top down social insurance systems observed in Europe, even if it moved towards greater means testing and less comprehensive cover.

In fact, a big aspect of Labour’s welfare policy was just how fiscally active it was.

Under New Labour there were record levels of investment in education and the NHS. The NHS saw investment equivalent to ~6% of GDP a year under New Labour. An audit by The Kings Fund found that the NHS saw large scale investment, waiting times fall, more hospital beds, more staff, more equipment to detect cancers, fewer suicides, and lower mortality from cancers and heart disease.

Child poverty fell from 3.4 million in 1998/99 to 2.8 million in 2008/09 according to the IFS and Child Poverty Action Group. Labour put more resources into education than the previous Conservative administrations, and according to a Durham University study, New Labour policies increased participation in post-compulsory (16–18) education, and narrowed inequalities in achievement at the end of compulsory schooling

The New Labour New Deal (more in line with FDR than Attlee) was a key part of the welfare to work idea with Working tax Credits. This isn’t capitulation to neoliberalism; but the enactment of employment based social policy focused on getting marginalised groups into work, and a more general pragmatism towards welfare.

The pooling of resources to meet costs linked to parenting and career choices is a part of this. It reaffirms the states role in distributing assets, such as skills and labour, as well as the building of assets with a social policy centred around employment.

Minimum income guarantees for pension systems, childcare tax credits, legal rights to paid leave, the expansion of in work benefits, the New Deal, Educational Maintenance Allowance, Sure Starts for infants, Individual Learning Accounts and Individual Savings Accounts/ Credit Unions – especially the expansion of health and education budgets since 2000 under New Labour (as oppose to income tax cuts) are all signs of genuine progressivism for more disadvantaged groups.

Information from the IFS about New Labour reforms show gains from tax benefits were concentrated on lower income groups (seeing ~9% increases in weekly incomes while upper classes saw slight reductions).

Under New Labour, the economy grew and was in much better shape than under any other Labour Prime Minister, and it wasn’t accompanied with sharp rises in inequality seen under Thatcher. In fact, Labour was very redistributive over their time in office. Between 1997-2008, Labour changed the tax and benefit system to make poor people better off, and rich people worse off. But then the Gini coefficient shows that the gap between rich and poor rose under New Labour, despite the welfare changes.

While Thatcher definitely had an influence over New Labour, it’s unfair to say it’s a continuation of the Thatcher experiment or neoliberalism lite. By definition, the Third Way is neither top-down socialism or neoliberalism. In this light, arguably what made Labour the party that it was wasn’t in the commitment to socialism, but the social democratic policies it pursued. In this way, New Labour was never a continuation of the Thatcherite experiment. Because Labour was never about socialism.
(See: Coates’ Models of Capitalism: Growth and Stagnation in the Modern Era).

Tinker or Transform?
This Grimmond-style communitarian liberalism is often criticised by social democrats as a betrayal of left wing values. But that’s not to say they AREN’T progressive; just because it doesn’t emphasise state solutions, like demand management. Just that it’s NOT the same Fordist thinking of the 1960’s and 70’s.

It’s  more friendly to the workings of the market. But it’s not exactly true, or fair, to see this as giving into the force of the market. Safety nets still exist, the market is still regulated, and the state still works in some major capacity in people’s lives. In fact, New Labour oversaw much greater government activity in sectors such as education, public health, and policing.

Part 8: The Watermelon-Mango Divide:
Part of the issues of the Third Way, like a lot of debates on the left, is that it is ultimately divided amongst liberals and leftists (see the green party Watermelons vs. Mangoes, socialist leaners vs more centrist liberals – except the one with Labour is less delicious).

Should policy ultimately be based on meritocracy, where the best people get the best jobs, and the access to opportunity to better yourself should be equal and the same for all? Or should it be egalitarian? Does meritocracy leave scope for unjust inequality based on “brute luck” differences? And if it does, should the state seek to mitigate these “accidents of birth”?

What about civic responsibility? Is the individual or the collective important? Should the state encourage the traditional nuclear family in communities through tax breaks and divorce laws (as Fordist societies tended towards)? Or is it the position of liberals that this unfairly biases society and peoples ability to make meaningful choices? Does the state encouraging couples and marriages restrict personal freedoms? Communitarians would view drug policy as bad because it undermines and damages the community, and so drugs should be restricted and banned (evidence based drug policy not withstanding here). Is there a difference between punishing people for how they behave in the community and punishing them for having these substances regardless of how they behave? Is the freedom of the individual more important than the potential damage to the community? Is it the states job to encourage good behaviour? And does good behaviour change as societies progress, or is there always some sort of moral absolute?

Was Ed Miliband’s pledge to get compulsory, LGBT inclusive sex education into primary schools and to stamp out LGBT discrimination one which stops the parent and individual educating their child about sex? Or is it a necessary state intervention to make a more tolerant and better minded society because parents can’t be trusted to teach their kids what a clitoris is? Is anti discrimination law allowing gays to get married restricting religious freedoms? Or is it a stupid notion to be tolerant of other people’s bigotry?

Is it the Government’s job to make you get your kids vaccinated as a public health issue to protect the population the same as the law which requires you to wear your seatbelt so you don’t die in a car accident? What about the smoking ban? That’s protecting public health. Is that an erosion of civil liberties by stopping people from deciding what they can and can’t do with their bodies? What about the obesity epidemic facing the NHS? Should we tax foods more heavily which are unhealthy? Does that just make an inequality that wasn’t there before? Should we actively discourage people from eating them if it’d make them healthier?

Can you be free if you live in poverty? Or if you don’t have access to education? Or protection from environmental degradation? Are these things government control over society, or securing the freedoms of the population?

Can you be free if the government goes to great, secretive lengths to read your text messages in secret courts? What about if it’s in the interest of national security? Is David Cameron wanting to review privacy laws in light of Charlie Hebdo an attack on the right to privacy, as Nick Clegg argues, or is it genuinely to protect the nation at large?

Can you be free if the government censors the Internet or media? What about if it’s censoring child porn? Or stopping libel censorship? What about if I post your credit card information to the web? Is my freedom of speech greater than a right to privacy by you?

Social liberalism isn’t a betrayal of egalitarian values (see Asset-based egalitarianism) as a trade off in liberal free markets (see universal capital endownments). But is more market friendly views a way to shifting values away from egalitarianism to meritocracy, and away from the Left to the Right? Can you have both egalitarianism and meritocracy? How? Can the state intervene in other ways that aren’t the state managing industry, like the planned economies ok Keynes?

Is poverty an economic or social ill? Should it be focused on getting to work through opportunity or providing a safety net with work for all? Is unemployment caused by the market and macroeconomic problems? Or is it caused by lack of skill or opportunity to people? Which way do you solve unemployment? Giving people the skills to find work or propping up failing industries?

Isn’t legal welfarism, like the minimum wage, the state intervening in private industry? What about womens shortlists and diversity quotas, they aren’t meritocratic, they’re egalitarian. Companies have to follow those rules. Is this state intervention needed to overcome systemic sexism and racism in our society? Can those be considered abandoning left wing ideas, if a definition of being left wing is a commitment to social justice?
(See: Women and New Labour: Engendering Politics and Policy? (Claire Annesley))

These are all blurry lines, where there is no easy answer. This is why 2-D political spectrums are by and large useless as you could agree with the first part but not this or the next bit or whatever.

Case in point: Attlee’s government gave us nuclear weapons and helped to found NATO. Does that negate his left wing credentials because Benn et al. called for Britain’s nuclear disarmament? It doesn’t really provide any meaningful dimensions for discussion.

If New Labour privatising bodies is the only evidence of them no longer being left wing – if the only definition used for left wing is public ownership –  that definition is too narrow to encompass all political thought.

Arguably the bigger failing of New Labour was its tinkering attitude. Their policies were modest. Following the austerity of the Tories, you’d be forgiven for thinking the New Labour era never happened.

New Labour was hardly consistent with an overarching liberal philosophy, either. See Freedom of Information and the Trial by Jury changes. Arguably, this lack of any clear cut philosophy makes it hard to galvanise support among core voters who grew up on Fordist, social democratic Labour, even if a 1997 MORI poll found Blair was almost universally electable.

The fallout of 2008
In wake of the 2008 Financial Crisis, progressive movements in liberal democracies need to reconcile income inequality with lack of labour participation (because it’s hard to make more equitable workplaces which are also competitive and flexible in a globalising world).
(See: Policy Convergence in the UK and Germany: Beyond the Third Way? (Green and Turner))

Following 2008, the fault didn’t lie with “maxing out the nations credit card” – but failing to regulate the financial sector. Something New Labour failed to do. And the Tories economic policies have hurt many people in this country.

What Ed Miliband failed to do was galvanise young and disillusioned voters. According to Ipsos-Mori’s 2015 data, Labour lost the old vote. It did better among young voters. But this group didn’t turn out to vote. Only 43% of 18-24 year olds voted in 2015. Ed also lagged behind David Cameron in who would make a better Prime Minister. Many in Labour were scared of Mr Corbyn. not necessarily because of his ideas, but because past evidence that a left-tracking Labour party fails to win elections was pervasive. The argument put forward was that, in ordinary times, when Labour tracks left: rather than finding out what voters want, and trying to convince them Labour is best qualified to deliver – the left wants to change what voters want, to persuade them that an anti-austerity party is in their best interests. Indeed, much information – from opinion polls to the TUC – suggested this was what was happening.

But these aren’t ordinary times. During the 2015 Labour leadership contest, he was the only contender saying anything at all. Corbyn understood that there was an appetite for something new in politics after 7 years of austerity, and at a time when the UK has never been so disillusioned with politics. His appeal in the leadership contest crossed all groups.

Labour’s social media footprint is impressively big. He galvanised the youth vote to turn out (in 2017, the number of 18-24 year olds who voted rose to 57% according to YouGov) and Labour’s appeal crossed class boundaries.

In a reverse of the themes that ended the social democratic consensus of the 1970s with the rise of the New Right – eventually producing New Labour as the left’s response (see: “New Labour: The Progressive Future?) – under Mr Corbyn, many of the disillusioned with a belief of a real alternative have found a home in a response to years of rising inequality and austerity.

New Labour was the future once. Mr Corbyn is the future now.


One thought on “[LONG READ] Shades of Red

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