Why Labour must move to the Left

The recent general election in the UK can be viewed as a repudiation of ‘New Labour’ after thirteen years at the helm. What it also showed was no significant surge in support for any viable alternatives. The Liberal Democrat share of the vote nationally increased marginally whilst their number of seats in Parliament fell slightly. Support for David Cameron’s ‘modernised’ Conservatives did not materialise in any real way; their increased number of seats in large part being due to Labour’s loss of support rather than any noticeable Tory surge; and this with a friendly media and after a great deal of Lord Ashcroft’s money was thrown at the campaign. The resulting Conservative – Liberal Democrat coalition is the result of an indeterminate election result.

At this point we need to examine two distinct factors; why did Labour’s vote fall to the point that it lost the election, and, why was there no strong enthusiasm for any alternative. In many ways these two factors coalesce over an apparent much talked about loss of confidence in the political process and the so-called political class, due in the main, although not entirely, to the expenses crisis that saw a number of MPs across the House of Commons being implicated in some form of swindling of the public purse. A great deal of the discussion of the expenses crisis generated much more heat than light. In the final analysis a small but significant number of MPs were shown to be in breach of the expenses rules, an even smaller number to be involved in genuine fraud. Associated with this in the public mind were video images of senior MPs involving themselves in a ‘cash for questions’ scandal. What was not publicised to any great extent was the probity and honesty of the majority of MPs. The issue of MPs expenses is a serious one and the rules have since been simplified, although it is far from clear if the new process is actually fair. We need to see exactly how things work out. What cannot be denied, however, is that confidence in Parliamentarians was severely dented, with Labour suffering a little more than the other parties simply because it happened on their watch.

The second issue to affect Labour and to a lesser extent the Conservative Party was the Iraq war. Although this is not the first election since the Iraq war, it was within the last Parliament that the details of the ‘dossier’ and the reasons for going to war have come into the public domain, leaving a public perception of Tony Blair as lying to Parliament and being supported in this lie by other senior members of the Government. Whether Blair lied or not is immaterial; it is the perception of lying that is enough. Why I say the Conservatives were also harmed by the Iraq war is that they were relatively enthusiastic supporters of it from the outset. Even without the infamous dossier and the issue of did Tony Blair lie or not, it is clear that there was a huge fracture between the political will to war and public opinion. Iraq was not and never could have been a ‘popular’ war. These two issues I feel explain much of why support for Labour dwindled and support for the Conservatives failed to increase. It may also go some way towards explaining the slight increase in overall support for the Liberal Democrats, who were not implicated in the expenses issue (at least until after the election) and who, for the most part, consistently opposed the Iraq war. The failure to turn this slight increase in support into seats owed as much to a very poor election campaign by the Liberal Democrats, who were never certain where or who to target, than it did to the much criticised electoral system.

To look at issues specific to the Labour defeat we need look no further than the global financial crisis. The crisis was not of Labour’s making, at least not entirely. This is not the time to examine the minutiae of the financial crises but to summarise it as a crises of deregulation. It began with a crisis in credit emanating from the unregulated and often disguised trading in toxic loans derived from the unethical sales of sub-prime mortgages in the USA, and it culminated in the near meltdown of worldwide banking and financial systems, with almost all the economies of the liberal democracies going into recession. The actions of Gordon Brown in the early phases of the crisis were rightly praised internationally and shoring up the banks and other corporate financial institutions was the only ‘sticking plaster’ in the first aid box. Without it things would have been much, much worse. However, both as Chancellor of the Exchequer and as Prime Minister, Gordon Brown had championed ‘light touch’ regulation in part to prioritise the City of London as a world financial centre, and develop a ‘business friendly’ economic environment. What is slightly unfair is that this approach was enthusiastically supported by all parties.

As the crisis deepened issues of public deficit (the gap between receipts and expenditure for any one year) and of sovereign debt (the money borrowed by governments from banks, pension fund portfolios and other institutions) became the critical issue, with a number of EU countries having their creditworthiness downgraded. Both government deficit and government or sovereign debt are expressed as a percentage of Gross Domestic Product (GDP) as this best expresses the capacity of a country to budget and service its financial obligations.

The figures for 2009, the last full year for which there are figures shows the UK with a budget deficit of 11.4% GDP (£159.2billion) and a debt of 68.1% GDP (£950.4 billion). To put it into perspective, this compares favourably with Greece, for example, which had a budget deficit of 12.5% GDP and a debt of 113% GDP. Further, the UK debt, despite a rise in 2008 and 2009 is still much lower than it was in the 1950s and 1960s, when it averaged around 100% GDP.

However, the world in 2010 is very different to that in 1955; new geo-political entities have come into being and there have been periodic crises in both financial and economic systems since that time.

Two key issues were overlooked then and remain overlooked now, and much is revealed in the language of crisis. According to received economic wisdom recession is dirty word, and a healthy economy will be achieving (or seeking to achieve) an annual growth rate of 3%. This was all pretty hunky dory way back in say, 1750, when the individual capitalist took one days profit and then invested them in production for the next day. This is all well and good as long as there is somewhere for the profits to flow. When European countries became fully capitalist and the process of capital-labour we now understand had fully come into being, they began to look for other places to invest, and other ways to bring down costs; the result was colonisation in its various forms, opening up new markets for goods and sourcing cheaper labour for production. This has continued in various forms to this day, to the point that worldwide markets are more or less saturated and there is little left in terms of a reserve pool of labour.

As capitalism developed especially in terms of technological change, it become apparent that the educational levels of the labour force needed to be enhanced, leading to the educational reforms across the developed world that form our modern educational systems. An unintended consequence of education, however, is the development of the power to critique and question. Thus a number of labour rights and elements of welfare-statism developed independently in various countries.

This creates a serious problem for capital. If markets are already saturated where does capital go if it cannot go back into production? In recent years two things have happened. Surplus profits have not been reinvested in production but in gambling schemes such as derivatives and in property (sub-prime mortgages) and serious problems have ensued.

The other, more long-lasting solution has been privatisation of existing publically funded entities. This forms the core of the neo-liberal solution. For capital to have somewhere to go it has to go into new areas such as health and education. Hence in the UK we have had a variety private finance initiatives, ranging from the privatisation of the public utilities in the 1980s right through to proposals to partially privatise schools from the current government. However, such solutions can at best only be temporary; where does capital go when all publically funded entities have been privatised and there are no more markets left to penetrate? The answer is catastrophe!

We are at a very serious juncture in world history. It will solve little to simply blame the banks and seek tighter national and international regulation. Little will be achieved by a new ‘Bretton Woods’ agreement on financial systems and processes. All these things can ever do is buy a little time before almighty meltdown. The entire process needs to be overhauled and economic processes rescued from the fetishism of finances. The Labour Party can play a significant part in this process

Firstly, the Labour Party needs to develop a systematic economic policy that looks at a serious permanent reduction in the level of private financial activity, and a wholesale growth of the public sector. This needs to also inform foreign policy that will work towards enhancing the worldwide development of public financial structures as opposed to private ones. Secondly, the concept of growth as an absolute necessity needs to be dropped. It is not growth that is required but stability. A fruitful by-product of an enhanced public sector would be greater democratic control of the economy through the ballot box rather then via the corporate financial institutions, and the level of governmental control would enhance all governments’ capacities to deal more effectively with climate change.

Much of what is required will not be achieved quickly, but, in the first instance it is absolutely crucial that a British government takes complete control of those elements of the banking and financial services sector that are located in the UK. If that means banks and others upping and jumping ship so be it; other countries will follow the example and then they will have nowhere to go. In the 1970s we used to idealistically talk about nationalising the ‘commanding heights of the economy’. Then it was a preference; now it is a necessity. If the Labour Party has any meaning at all, it is to fulfil its historic destiny. Now is the time, for all our sakes.