Moving beyond ‘Old Labour’

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Chris Walsh argues that the Left today cannot be duped by a feign nostalgia for 'Old Labour'. He analyses the Attlee and Callaghan Labour governments to show that the Labour Party has always been willing to acquiesce with global capitalism.

There is a collective amnesia which blights a layer of the British working class, causing them to believe that the problems of the Labour Party’s unwillingness to represent their interests were born ex nihilo with the ascension of Tony Blair to the leadership. Party history before this event, particularly the good points, is viewed through rose-tinted spectacles. We hear all too often that all we need is for ‘Labour to be Labour again’ or that if the Labour Party would only return to ‘traditional Labour values’ then all would be well. A very brief look at two key moments in the history of the Party will hopefully offer a vantage point of partial clarity through the haze of nostalgia.

The Zenith of Reformism

The Marxist cultural theorist Stuart Hall suggests that historically, social democracy has existed to “neutralize socialism”; let us consider the pinnacle of social democracy in Britain, the Attlee government of 1945-51 as evidence to support this claim. Following the war, the British working class was stronger and more confident than it had been for decades. After the depression of the 1930s and war-time austerity, people were no longer willing to accept conditions as they had been. The mass progressive reforms implemented by the Labour party were enough to satiate the class and prevent a popular uprising. The Conservative Quintin Hogg famously warned that “If you do not give the people social reforms they are going to give you social revolution.” His warning was not base-less; and thus well-heeded.

The threat of workers taking from the ruling classes rather than receiving from the state was very real. This is one factor in the post-war welfare settlement. The other is that the system could concede this much without too painful an effect upon the ruling class. The boom years had begun and Britain as a nation was enjoying historically unprecedented prosperity.

The allowances that were made to the working class were no great act of philanthropy on the part of Attlee et al; but necessary concessions made by the ruling elite in order to ensure their continued dominance. We cannot know for certain that a Conservative government elected in 1945 would not have made the same or similar token allowances. In fact, if we consider the Conservative government that succeeded Attlee; we see that in terms of policy, there was very little between them. When the Conservatives were re-elected in 1951 they retained office until 1964 because life under a Tory government in the 50s and 60s was largely indistinguishable to one under Labour. In their time in office:

Real wages of workers rose by over 25 per cent in those thirteen years. Social provisions were not slashed. For example, house building ran at over 300,000 a year, as against some 200,000 when Labour left office. (Cliff and Gluckstein; The Labour Party: A Marxist History; 257)

The Labour Party has taken the credit for welfare provision and the establishment of the post-war consensus right up until today. Its tribal support base prop it up on these achievements; but they were as much a result of the period as of the Party. In fact, the ‘Old Labour’ that was champion of the workers’ struggle and held ‘real socialist values’ never really existed outside of popular mythology. Another point worth raising is that the Attlee administration deployed the military to quash strikes more than any other UK government in the 20th century. Seldom, if ever, will Labourites admit this fact. It doesn’t fit too well with the socialist image of Clement Attlee that they like to portray.

“The Day International Capitalism Destroyed the Labour Party”

Another key moment which requires some examination is the time of the last Labour leader in power before Thatcher’s reign and the Party’s many years in the political wilderness; the Callaghan years. Andrew Pearmain, in an interesting study on the phenomenon of New Labour suggests that,

In a certain crucial sense, Thatcherism was predicated on the decline of Labourism, and actually continued much of the economic strategy adopted by the failing Labour government.” (Pearmain, Andrew; The Politics of New Labour: A Gramscian Analysis 64-65)

Although this is factually accurate, it understates the effect that the policies of Labour’s Callaghan administration had upon the terrain of British politics and does not address the international economic conditions which led to such radical revision of policy.

A run on sterling in March 1976 coupled with rapidly rising inflation forced the Prime Minister to formally abandon Keynesianism and embrace the economic principles of monetarism. No longer would the primary task of the Labour party in government be to hold down unemployment, but instead to halt inflation. The markets’ lack of confidence in the British state was exacerbated by the leading ideological organs of the ruling class such as The Economist and The Wall Street Journal creating a culture of panic within international capitalism. They insisted that Britain was on the road to economic ruin and that the Labour government was prepared to seize all assets within the country. The former was a monumental exaggeration; the latter, an unfortunate fantasy.

The IMF provided a rescue package for Britain to the tune of almost $4 billion, with the conditions that it would have to be paid back by December of that year and that massive public spending cuts would have to be implemented. The cabinet were no longer in charge of the country’s economic policy; it was being dictated by the IMF.

Callaghan’s famous speech to the Labour Party Conference in September 1976 most vividly illustrates the sea-change in policy:

The cosy world we were told would go on for ever, where full employment would be guaranteed by a stroke of the Chancellor’s pen, cutting taxes, deficit spending – that cosy world is gone…what is the cause of unemployment? Quite simply and unequivocally it is caused by paying ourselves more than the value of what we produce. There are no scapegoats…We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting Government spending. I tell you in all candour that that option no longer exists. (Callaghan, James; cited in Sassoon, Donald; One Hundred Years of Socialism: The West European Left in the Twentieth Century; 500)

The Labour party was now hamstrung into the acceptance that full employment was no longer possible and for many of those most convinced by the monetarism of Milton Friedman, no longer desirable. The Parliamentary Labour Party were now convinced that in order to maintain a sound economy, inflation would have to be kept down at all costs and that unemployment was necessary, provided that it remained at the ‘natural’ level (whatever that might be).

The economic turn of the Callaghan administration actually amounted to a kind of proto-Thatcherism. One of Callaghan’s chief advisors, Bernard Donoughue, admits as much.

The broad policies which are now characterized as ‘Thatcherism’, together with the now familiar language, were in fact launched in a primitive form at Mr. Callaghan in 1976 from the Treasury, from the Bank, and, above all from the IMF and sections of the US Treasury.” (Donoughue, Bernard [chief advisor to Callaghan]; cited in (Sassoon, Donald; One Hundred Years of Socialism: The West European Left in the Twentieth Century; 500)

He is right to say that the policies were “launched…at” Callaghan rather than that the Prime Minister made the choice of his own volition. In fact, the British government was unable to exercise much control at all over the nation’s purse. The global economic situation meant that the prospect of social democratic parties to simply carry on as before was fantasy. Other than withdrawing from the EEC and managing an almost certainly un-workable (and certainly un-electable in the next general election) siege economy, the Labour leadership had little option but to acquiesce to the demands of international capital. The crisis was not just one of the Labour Party; but a general crisis of Keynesianism and the mixed economy. Les Trente Glorieuses were well and truly over; and with it sounded the death knell of Social Democracy tout court.

We cannot understand the convulsions of the Labour Party in this period without understanding the wider, global economic situation. The boom years after the Second World War allowed for welfare provision and an economically interventionist state without causing any harm to Europe’s ruling classes. When these conditions no longer existed and capitalism entered a period of profound crisis; the post-war social democratic consensus (Britain’s “Butskellism”) was irreparably broken. Increasing competition from Eastern nations, the global reverberations of the Yom Kippur war and a huge hike in oil prices (in part orchestrated by the US in order to undermine competitiveness in Europe and Japan) sent many Western states into economic crisis and disarray. Inflation soared across Europe, but particularly in Britain.

Keynesian economics were not abandoned by the British Labour Party because the party leadership were abstractly more attracted to the economics of Milton Friedman; the Keynesian model was simply no longer fit for purpose and Labour’s leaders blindly scrambled for any solution which might repair the damaged economy. Callaghan’s Chancellor of the Exchequer, Denis Healy (who admits abandoning Keynesianism in 1975), explains in his autobiography:

[Keynesianism] ignored the outside world…In my time exports represented over thirty per cent of our gross domestic product…Changes in the value of sterling fed through quickly into our prices and into our trading performance. For example, by the end of 1974, the increase in oil prices which took place just before I took over had added £2.5 billion to our current account deficit, increased the cost of living by nearly ten per cent and reduced our Gross Domestic Product (the total value of the goods and services produced in Britain) by five per cent…Wrestling with such problems, which were generated by foreigners over whom I could have no control, consumed an increasing share of my time at the Treasury, and Keynes had little help to offer me. (Healy, Dennis; The Time of my Life; 379)

In the years of the post-war boom when the UK enjoyed a healthy trade relationship with foreign states, Keynesian economics broadly fit the Labour Party’s purposes. However, in the period of the downturn, stagnation led to sharpened inter-state competition as national states fought viciously among one another to try and maintain their own stability.

The Labour Party and its leaders have always favoured a ‘think on your feet’ pragmatic approach to policy above any ideological consistency or loyalty. We mustn’t forget that the embrace of Keynesianism and the mixed economy was greeted by many on the Labour Left as an abandonment of the founding principles of the party. Of course, it was. Abandoning the goal of fully nationalized industry in favour of only partial nationalization within a mixed economy meant the betrayal of the cause of ending capitalism in favour of socialism; for the more modest aim of managing the capitalist system more progressively. Healy accepts the charges, claiming that as Chancellor he “became an eclectic pragmatist. Karl Popper played a far more important role in my thinking than Karl Marx – or Maynard Keynes, or Milton Friedman.” (Healy, Dennis; The Time of my Life; 383)

The so-called ‘Day international capitalism destroyed the Labour Party’, was also the day that the seeds of neoliberalism were planted in British soil. No sensible person would thus argue that Callaghan was a neo-liberal, but we can argue that the policies of Callaghan’s government were a reflection of a wider progression and mutation of international capitalist relations. Callaghan was by no means the only self-professed socialist to play the neoliberal hand; we have only to look across Europe a decade or so later to encounter many more examples of the same phenomenon. The long downturn changed the policy context within which bourgeois parties operated – but not just as a result of external pressure, given that it also re-modulated internal class relations.

Structural unemployment amplified the disciplinary power of the industrial reserve labour army and weakened the power of organised labour, while problematic profitability made capital desperate and combative. What had been a tense mutuality of interest between capital and sections of organised labour became a vicious battle (thanks to Gregor Clunie for elucidating this point). Perry Anderson notes that:

Neo-liberalism has in general been less a principled conviction than a pragmatic tacking to regime change, whose practitioners have mostly been professed socialists – Thatcher’s government was the exception in openly proclaiming the virtues of capitalism.” (Anderson, Perry; The New Old World; 94)

Although Callaghan and Thatcher both took inspiration from (and were both admired by) Milton Friedman, it would be foolish to argue that the two are of the same ilk. Callaghan’s famous 1976 speech embracing monetarism (reportedly, Friedman’s favourite political speech) was aimed more at the international community than his Labour colleagues, with the express view of restoring confidence in the markets. His massive public spending cuts were forced by the IMF rather than any personal preference. Thatcher’s politics were designed to fundamentally transform society and the balance of class forces there-in. She promoted the politics of un-restrained trade and privatization with gusto and won huge swathes of civil society to her project.

The point of outlining the economic policy of the Labour party in the late 1970s is to demonstrate that a Thatcherite Passive Revolution in Britain, beginning towards the end of her first period in office and continuing to the present, only offers one detail of a grander picture. The return (and renewal) of market fundamentalism was already in motion across the globe. The economics of Hayek and Friedman that were widely considered as quackery not so long ago began to have purchase with influential statesmen internationally; precisely because the Keynesian mixed economy could no longer deliver the social and economic stability that it had since the war.

The popular idea that Thatcher brought neoliberalism to Britain and that Blair retained it is not wrong per se, but certainly incomplete. We have to recognise the broader global and historical forces at work and avoid such reductive analyses. We only have to consider Callaghan’s shift in ’76 and to look across Europe today to be able to say that it seems fairly probable that any government in Britain in the late 1990s would have followed a direction similar to that of Blair and New Labour, even if Thatcher had never existed. The most obvious example is Mitterrand in France, a left of centre candidate who had no Thatcherite predecessor but wound up on a similar trajectory nonetheless. From as early as the late seventies, the wheels of the global monetarist hegemonic project were already in motion. As powerful and persuasive as Thatcher’s project was; by the late eighties the politics of individualism and free market fundamentalism would probably have attained ‘common sense’ status anyway.

In sum, ‘real social democracy’ is not an option for today. The economic conditions no longer allow for it and the reality of the experience is that it wasn’t as socialist as some people like to think.  A left electoral project in Britain (or indeed in an independent Scotland) must aim to occupy the space created by the disappearance of a real social-democratic party, but we must be more ambitious than to attempt to merely replicate its political ideas and, most importantly, its political practise. We want to create a society which is inclusive, creative, democratic, and fair. A society that fulfils the needs of the many and puts an end to the excesses of the few. The Labour Party may have preached such a vision but it never practised it, or at least it’s willingness to practise it has always been dependent on the limits set by international capitalism. The Left today needs to go beyond ‘Old Labour’, and project a vision and political practise that stands for the needs of working people and does so directly against the global system.

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