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The two kinds of social democracy

NICK WRIGHT looks at the problems Labour governments face

LABOUR’s chancellor of the exchequer Denis Healey is rightly regarded as a heavyweight among post-war politicians. An ardent communist at Oxford before the second world war, Healey was among the brightest of his generation — schooled in Marxist dialectics and the anti-fascist political culture of that era, trained by the Communist Party in a period when intellectuals were drawn to a party whose main cadres were factory workers and miners and whose heroes fought in the International Brigades.

His communism did not survive the war which saw him promoted through the ranks. He was demobbed as a major and, still in uniform, told delegates to the 1945 Labour Party conference: “the upper classes in every country are selfish, depraved, dissolute and decadent.”

The Cold War saw him as top functionary of the Labour Party’s international department at a time when this body marched in lockstep with British and US intelligence services as these organisations collaborated with the operatives of the Gehlen nazi intelligence apparatus in a futile effort to stem the advance of socialism in the countries that had been liberated by the Red Army. A not subsidiary function was to advise on the management of Britain’s colonies.

In the expansive decades that followed the war Healey was a prudent but energetic proponent of mainstream social democratic policies which saw rising employment, a massive council house building programme, the expansion of education opportunities for working class children, the creation of the NHS and the welfare state.

This was alongside a series of rearguard colonial conflicts which pitched British military personnel in alliance with French, Dutch and US armies against liberation forces and which, on Britain’s own account, took place in many of our remaining colonial possessions.

We can categorise Healey as an intelligent and competent social democrat of that era with a nice rhetorical style – “squeeze property developers till the pips squeak” – which nevertheless obscured a relentlessly orthodox economic policy.

Neither his undoubted abilities nor his political and economic convictions were much help when, as chancellor of the exchequer in the Callaghan Labour government, he was compelled yet again to seek an International Monetary Fund loan and submit to IMF conditions in the conduct of the country’s affairs.

The Labour government of 1974 to 1979 brought real benefits to Britain’s working people with improved housing and employment rights, security of tenure, better disability and social care entitlements, enhanced pensions, protection from sex discrimination and improved child benefits all set against a background of an active and interventionist style of government.

However, the underlying features of a severe crisis proved too complex and deep for a Labour government whose political horizons were limited to a better managed capitalism.

Unemployment was rising, inflation was increasing and the rising tempo of working-class action was leading to sharp conflict with the Labour government. Healey’s classically social democratic approach — matching wage controls to targeted tax rises for the better off — was insufficient to deal with the deepening structural problems of the economy or meet the expectations of working people.

The encounter of a Labour government with the harsh realities of Britain’s long standing structural crisis has a special relevance for today when Labour again faces the real prospect of office.

Britain came out of the second world war as one of the victorious powers, with a seat in the UN security council, an increasingly fragile hold on a substantial empire and a massive pile of debt.

Its economy then, as now, was held hostage to the City of London and to an economic model based on maintaining sterling as a leading currency. Its domestic politics were always shaped by the necessity, as seen by the ruling class, of maintaining the essentials of imperial rule even if the form was to be modified and this entailed a expensive entanglement with a network of military alliances and never ending conflicts.

The fixed exchange rate system that emerged after the war was particularly unforgiving for a country with a poor balance of payments and a currency under speculative pressure. Britain was compelled to support its currency at the level agreed or to devalue. This is the one thing the City was extremely reluctant to accept.

The challenge to economic orthodoxy within Labour came from the left wing associated with Tony Benn and was expressed as a planned economic strategy grounded in control over the export of capital, corresponding controls on imports, raising government spending to maintain employment levels and a package of measures including public ownership of utilities, banks and major firms and cuts in arms spending.

The whole project was to rely on boosting consumption by raising wages with increased rights for workers and their unions.

Leaving the Common Market was seen as essential to allow government the necessary freedom to introduce this Alternative Economic Strategy.

Crunch time came when the direction of Labour’s economic policy was up before delegates to the 1976 Labour conference. Healey had been bumped off the party’s national executive committee and was compelled to defend the decision to go cap in hand to the IMF from the floor and to an audience that remained unconvinced by his arguments and offended by the austerity measures which followed.

In the present day we can say that austerity has become a hegemonic tool used by international organisations (the IMF) in lending funds to sovereigns facing a financial crisis and/or as a common fiscal-policy tool in a monetary union (the eurozone).

Lest anyone suggest that describing the IMF (the EU and the European Central Bank) in such unforgiving terms is dogmatically Stalinist, these are the words used by an impeccably social democratic adviser to the Greek Ministry of Economics who was seeking to defend Syriza’s capitulation to the “troika” as a skilful attempt to redefine austerity and explain the critical difference between a neoliberal and a socialist austerity.

Labour’s peculiar constitutional set-up — which vests policy making functions in a conference made up of constituency delegates, trade union affiliates and a variety of “socialist” societies but reserves for the parliamentary party the privilege of deciding what to actually do about policy — meant that the Alternative Economic Strategy died of neglect.

Callaghan’s government soon gave way to Margaret Thatcher’s administration and the decades in which the working-class movement — despite heroic actions and mass movements against unemployment, the poll tax, anti-union laws, racism and privatisation — suffered defeat after defeat.

Thatcherite economic policies entailed City deregulation and began the spiral of financialisation which saw industry reduced to its present-day subordinate status in the British economy.

The left/right battle in Labour continued with the party in opposition and Michael Foot as leader. But the transitional “soft left” leadership of Neil Kinnock gave way to the Blair years in which Labour’s parliamentary party modified Keynesian economic policy to accommodate privatisation and PFI while relying on taxation on financial transactions to fund such social policies as were deemed necessary to consolidate its electoral base.

This is a necessarily condensed account of a critical period in which Labour responded to powerful global developments — the US bid to internationalise the costs of its Vietnam war and the OPEC oil price rises were just two of them — by abandoning the remnants of social democratic orthodoxy in favour of a value system shared with Margaret Thatcher. So much so that when asked what she regarded as her greatest achievement, she replied: “New Labour.”

The political rout of New Labour is so complete that its many adherents in the Parliamentary Labour Party speak only in code while its tail-end-Charlie — Chris Leslie MP who was briefly shadow chancellor before John McDonnell replaced him — languishes in self-pitying exile and utter irrelevancy in the rump Change UK.

Labour has a reasonable chance of forming the next government providing it can negotiate the Brexit impasse without losing touch with its core class constituency.

It will come to office with extremely high expectations. We have to accept, for the moment, that radical though its policies are compared to what has gone before, its prospectus is extremely modest in the face of the deep problems Britain endures.

And that unless an unprecedentedly powerful extra-parliamentary movement is built, even a limited assault on the power and wealth of the rich will be met with a full spectrum of measures to break its resolve.

This raises the question: what is the objective of such a government? For millions of working people this can be summed up as an end to austerity, full employment, decent prospects for our children, a secure welfare state and an end to Britain’s involvement in endless wars.

For hundreds of thousands of trade unionists, peace campaigners, Labour Party members and socialists of various kinds, for class-conscious environmentalists and for equality activists there is a real hunger for a realistic programme of political change which would lay the basis for a fundamental transformation of our society.

Yet there exists a sense of hard-headed realism which takes account of the fact that there are extremely powerful interests for whom a left-led Labour government represents a powerful threat to their wealth and power.

It is not that our ruling class are not able compromise. Employers will take a hit on their profits if it means they retain ownership. Our ruling class will tolerate radical or revolutionary views but not if their control over the instruments of state power is threatened. And accept any amount of talk about peace and solidarity, human rights and global justice so long as the main elements of foreign policy remain inviolate and our military alliances intact.

When Healey told Labour’s delegates that “the upper classes in every country are selfish, depraved, dissolute and decadent” he was only half-right.

They are also well organised and internationally co-ordinated, intelligently led for the most part, and confident in their command of most instruments of real power, of the media and the state.

As a Labour government overcomes the first barriers to its programme the resistance will intensify, diversify and appear in hitherto unfamiliar guises.

Our guarantee that such a government will not be blown off course lies not in a parliamentary majority, important though that is, but in a popular majority, active and mobilised, alert and enlightened.

What happens then decides whether the path to socialism opens up or not.

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