To say that since becoming leader of the Labour Party in July 1994 Tony Blair has taken the party markedly to the right is to utter one of the commonplaces of contemporary British politics. His first initiative forcing through the replacement of the commitment in Clause Four of the party constitution to common ownership of the means of production with an avowal of faith in 'the enterprise of the market and the rigour of competition' proved only to be the beginning. As it became clear that the crisis of John Major's government was terminal and that Labour was entrenched with a substantial lead over the Tories in the opinion polls, so Blair became more daring in the abandonments of past policy that he forced on the party faithful.1
The effect of these policy shifts was, on issue after issue, to diminish the difference between Tory government and Labour opposition to the infinitesimally small. The headline to a Financial Times article on New Labour's approach to the National Heath Service 'Labour Sets Out to Make Similar Look Different' could serve to sum up the party's overall stance.2
Indeed, on some issues, Blair's team took positions which allowed some Tories to posture as standing to their left. Thus in the John Smith Memorial Lecture delivered in April 1996, Gordon Brown, Shadow Chancellor of the Exchequer, announced that Labour was seriously considering scrapping child benefit for the mothers of 16 to 18 year olds. The £700 million estimated saving produced by this cut would be used, he claimed, to help children from poor families stay on in education after the age of 16. The justification for this policy shift was that child benefit, like all universal benefits, goes to well off as well as poor households. According to the Financial Times, 'Mr Blair believes it is invidious that high-income families should receive the benefit...without paying any tax.' Brown attacked child benefit as 'a subsidy for the school fees of the wealthy'.
This move was immediately attacked by Kenneth Clarke, Chancellor of the Exchequer and one of the few surviving representatives of the old Tory left in an increasingly rabidly Thatcherite Conservative Party:
I do find child benefit for 16 to 18 year olds the most extraordinary place to go to raid for money to finance things that are supposed to be helping youth training. Just to take away child benefit for that age, with nothing to replace it, hits the average person with teenage children who decide to stay on in education... Another 560 quid [in child benefit] isn't too bad for someone who's sending their child to Eton. Unfortunately, it's 560 quid for the person on below-average earnings whose child just happens to want to stay on at school or college.3
When Blair chose, for fear of the tabloids' wrath, to trail along sheepishly behind Major's absurd declaration of a 'beef war' with the European Union over the BSE crisis, Financial Times columnist John Plender commented sardonically:
The wisdom of 19th century Whigs on the duty of the opposition could, according to Lord Derby, be summed up cynically and simply: oppose everything and propose nothing. After a week in which Labour has signally failed to offer a clear-cut alternative to the Tories' banana republic diplomacy in Europe, that minimalist view seems to have achieved a new degree of refinement: oppose everything, apart from anything tricky.4
Philip Stephens, another columnist on the same paper, explained Blair's approach in the light of his preparations for actually being in government:
His strategy is simple, drawn from the charge that Tony Benn once laid against Neil Kinnock. Get your betrayals in early. The policy shifts of the past 18 months have been calculated to soothe the anxieties of Middle Britain. But they have a second aim. By the time Mr Blair comes to write his manifesto, there will be precious little to betray. He is not waiting for power before confronting the party with its realities.5
No doubt preparing for power underlay New Labour's policy shifts. But those carried through in 1996 had a larger significance in two respects. First, their logic threatened to deprive the Blairite project of the only substantial socio-political content its intellectual backers had given it the idea of stakeholder capitalism. Secondly, so extreme was the shift to the right that it began to crystallise quite significant opposition to the leadership's drive from within the ranks of Labour itself. I will consider these developments in turn.
To say that 1996 marked Blair's abandonment of stakeholder capitalism may appear paradoxical. After all, the year began with him, in a speech of 8 January in that well known haven of liberty and equality, Singapore, promising to create a 'stakeholder economy' where 'all our citizens are part of one nation and get the chance to succeed'. He said:
It is time that we shift the emphasis in corporate ethos from the company being merely a vehicle for the capital market, to be traded, bought and sold as a commodity towards a vision of the company as a community or partnership in which each employee has a stake and where a company's responsibilities are more clearly delineated.6
To understand the idea of a stakeholder economy, and the gap between it and Blair's actual commitments, we must engage in a little intellectual history.7 Right wing social democracy based itself after the Second World War essentially on the economics of Maynard Keynes. The two classic works of post-war 'revisionism', Anthony Crosland's The Future of Socialism and (in a more qualified way) John Strachey's Contemporary Capitalism , argued that Keynesian demand management made it possible for the state to secure economic growth, full employment and rising living standards without there being any need to expropriate capital. From the fruits of growth would come the resources needed to eliminate absolute poverty and to reduce social inequality. The revisionists claimed still to be socialists, in the sense that they were committed to the objective of social equality, but they renounced the traditional methods of the left class struggle and nationalisation as means for attaining this goal.
Keynesian social democracy flourished during the long boom of the 1950s and 1960s. The faltering and then collapse of that boom in the late 1960s and early 1970s, and a return to class confrontation not just in Britain but throughout the advanced capitalist world, threw the social democratic right into crisis. British politics briefly polarised between the revived classical liberalism of Margaret Thatcher and the hard Labour left under Tony Benn.8 The Tory electoral triumphs and the defeats suffered by the miners and other groups of workers during the 1980s helped to drive Labour back to the right. But intellectually traditional social democracy was in tatters. Given the apparent failure of Keynesian economics, what plausible strategic vision could Labour now offer?
Under Blair we have seen the acceleration of two ideological trends already under way before he became leader. First, and negatively, there is the definitive abandonment of the belief central to Keynesian social democracy that the nation state can manage and regulate capitalism so as to avoid significant market fluctuations. The following declaration by Gordon Brown may stand for many other such pronouncements:
World capital markets have eliminated any notion that economic policy can remain a matter solely for national governments... Countries which attempt to run national go-it-alone macro-economic policies based on tax, spend, borrow policies to boost demand, without looking at the ability of the supply side of the economy, are bound these days to be punished by the markets in the form of stiflingly high interest rates and collapsing currencies.9
Globalisation, as it has become fashionable to call it, has thus killed off national economic management. But where does this leave any party committed to reforming capitalism, however modestly? It is here that we come to the second ideological development. The concept of stakeholder capitalism has been used to provide Labour with the strategic vision so desperately needed after the collapse of Keynesian social democracy.10
One important source for the concept is provided by the French economist and businessman Michel Albert. His book Capitalism Against Capitalism (1991) is to some extent a response to Francis Fukuyama's famous thesis that the collapse of Stalinism marked the end of history in the sense that liberal capitalism no longer faced any rivals capable of offering it a systemic challenge. Fukuyama is wrong, Albert contends, because history will continue as the conflict, no longer between rival social systems, but between different models of capitalism:
With the collapse of communism, it is as if a veil has been suddenly lifted from our eyes. Capitalism, we can now see, has two faces, two personalities. The neo-American model is based on individual success and short-term financial gain; the Rhine model, of German pedigree but with strong Japanese connections, emphasises collective success, consensus and long-term concerns. In the last decade or so, it is this Rhine model unheralded, unsung and lacking even nominal identity papers that has shown itself to be the more efficient of the two, as well as the more equitable.11
The contrast Albert drew between two versions of capitalism free market, individualistic Anglo-American capitalism versus regulated, consensual Rhine capitalism was seized on by intellectuals associated with the Labour right. Of these probably the most important were the journalist Will Hutton, columnist on the Guardian and now editor of the Observer, and the academic David Marquand, ex-Labour MP and founder of the breakaway Social Democratic Party, but welcomed back into the fold under Blair.12 It provided them with both the basis of a critique of Tory Britain and an alternative to Thatcher's and Major's policies.
The classic instance of both is provided by Hutton's celebrated bestseller, The State We're In (1995). Here he damns Tory policies for reinforcing the long term tendency of British capitalism, under the domination of the City, to pursue short term speculative investment. Any reform of the British economy and state must be in the direction of 'stakeholder, social capitalism', taking as its model the possession by continental European, Japanese and even American societies of 'strong institutions that allow their firms to enjoy some of the gains from co-operation as well as from competition' and which 'are created and legitimised by some broad notion of public or national purpose'. The organised working class, shunned and excluded under the Tories, would find their place in these institutions as, like their German counterparts, 'social partners in the management of capitalism'.13
Hutton's call for 'a less degenerate capitalism' is hardly a ringing mobilising slogan.14 Nevertheless, what Albert claims to be one of the lessons of Rhine capitalism, that 'top economic performance can be wedded to social solidarity through the social market economy', has obvious attractions to social democrats eager to offer reforms without confronting capitalism.15 Thus, in their 'Dos and Don'ts for Social Democrats', James Cornford and Patricia Hewitt tell their readers:
Decide what kind of capitalist you are... Social democrats have to do more than recognise market failure when they see it: they have to advance an alternative conception of how market economies should work... The left must construct markets which work by raising standards, not by driving them downwards.16
Here, then, was a programme that would allow right wing social democrats to claim that they had a programme with some content, and indeed could offer an alternative to Tory policies. What Gordon Brown calls 'supply side socialism' could square the circle by building a form of capitalism which both achieved a greater degree of social justice and (through investment in 'human capital' education and training) enhanced the competitiveness of the British economy.
There are three major problems with the idea of stakeholder capitalism. The first is that it seems to be in contradiction to the other ideological shift under Blair the rejection of any Keynesian strategy of using the power of the nation state to manage the economy. Actually existing stakeholder capitalisms such as Germany and Japan have relied on a high level of state intervention in the economy. Yet consider what Tony Blair said in his 1995 Mais lecture:
We must recognise that the UK is situated in the middle of an active global market for capital a market which is less subject to regulation today than for several decades.
An expansionary fiscal or monetary policy that is at odds with other economies in Europe will not be sustained for very long. To that extent the room for manoeuvre of any government in Britain is already heavily circumscribed.17
In that lecture Blair committed Labour to 'the control of inflation through a tough macro-economic policy framework' in other words, he accepted the Thatcherite argument that the priority of government policy is to reduce inflation to a minimum crucially by controlling public spending. UBS chief economist Bill Martin comments: 'Brown, Blair and his economic adviser Derek Scott have chewed, swallowed and digested the central-bankerly proposition that stability is the key to improved economic performance; so much so that Labour's growth strategy comprises little else.'18
In their book The Blair Revolution, probably the most important single source for understanding real New Labour thinking, as opposed to sympathetic intellectuals' wishful thinking, arch spin doctor Peter Mandelson and Roger Liddle (another SDP renegade welcomed back into the fold) suggest that a Labour government should seek to achieve a stable rate 'for the growth of the value of gross domestic product at current prices so called nominal GDP'.19 This policy, justified as a more realistic substitute for the narrow targets for growth in the money supply which the Tories consistently failed to meet in the 1980s, has long been advocated by Financial Times columnist Samuel Brittan, one of the chief propagandists for monetarism in Britain.20
What Brittan calls 'broad monetarism' doesn't sit well with the interventionism implied by the idea of stakeholder capitalism. It is interesting that Hutton, whose most important intellectual contribution has been to revive Keynes's stress on the pervasive uncertainty endemic in capitalist economies, should have criticised Blair's Mais lecture for its 'underlying assumption that capitalism works best if left to its own devices'.21 Hutton has also vigorously attacked the closely related 'myth of globalisation' the idea, in other words, heavily relied on by Blair and Brown, that the internationalisation of capital makes national reforms impossible.22
The second difficulty with stakeholder capitalism is really a concrete example of the contradiction just discussed. Quite simply, actually existing stakeholder capitalism is in a lot of trouble. Japan is just beginning to recover from its worst slump since the 1930s, brought on by a frenzy of rather Anglo-Saxon speculation in securities and real estate in the late 1980s, the so called 'bubble economy'. Nor is this merely a matter of past errors which Japanese capitalism has now left behind it. The Sumitomo scandal which became public in June 1996 is a case in point. The huge Japanese trading company announced that it was sacking the head of its copper futures department, Yasuo Hamanaka, for illegal trading that had cost it an estimated $4 billion. The Financial Times described Hamanaka's efforts to control international trade in copper in order successfully to anticipate the movement of copper futures not the price of the actual commodity but of the 'derivatives' of that price traded on the London Metal Exchange as part of...
...the fashion among Japanese companies for zaitech, which was meant to be the use of surplus cash to generate income in the securities markets. What the word came to mean was speculation on a grand scale, incomprehensible to outsiders who characterised corporate Japan as conservative and risk-averse.23
Germany meanwhile has experienced extreme cyclical instability over the past few years the unification boom at the beginning of the 1990s, slump in 1993-4, a brief recovery in 1995 and then back to recession this year. These problems have helped provoke intense debate, in which large sections of German capital have begun to press for drastic reductions in welfare spending, and in the other benefits workers enjoy, in order to enhance competitiveness and profitability.24
If the proposed restructuring of 'Rhine capitalism' is successful, the result will be an economy in certain respects closer to the Anglo-American model than it has been in the past. Thus, at the very time when, as we shall see below, Blairite defenders of the Rhine model are proposing changes to British company law to bring it closer into line with that prevailing on the continent, the conservative government of Helmut Kohl is drawing up legislation to allow publicly quoted companies to buy back up to 10 percent of their capital and reward executives with stock options moves which the Financial Times claims 'will help promote the idea of shareholder value in Germany', and thus introduce more of precisely the kind of Anglo-American 'short termism' derided by Hutton and Marquand.25
Both the difficulties outlined above point to the same fundamental reality. Stakeholder capitalism in Germany and Japan is just as much a variant of the capitalist mode of production as its Anglo-American counterpart. It is based on the same social and economic inequalities reflecting the exploitation of the working class, and is subject to the same tendencies towards crisis that arise from the nature of capitalism as a system driven by competitive accumulation. The trends described above for German and Japanese capitalism, under the pressures of international competition, to take on some of the characteristics of the more speculative Anglo-American model indicate that the present crisis is one of capitalism as a system rather than of one particular version of that system.26
These two problems the contradiction between state intervention and 'globalisation' and the problems facing the German and Japanese economies concern the general question of whether or not stakeholding capitalism really is an attractive objective for the working class movement. The third, however, pertains rather to its attractions to Blair and his co-thinkers. As envisaged by Hutton and Marquand at least, the shift to stakeholder capitalism would require considerable institutional changes. These would be of two kinds.
First of all, constitutional reform. Hutton and Marquand subscribe to the interpretation of British history perhaps most influentially developed by Perry Anderson and Tom Nairn, according to which Britain has never achieved a modern capitalist state: the relative decline of British capitalism is, in large part, a consequence of its political domination by a patrician oligarchy closely integrated with the City of London, itself a set of financial institutions characterised by their lack of involvement in industrial investment.27 Thus Hutton argues that 'the semi-modern nature of the British state is a fundamental cause of Britain's economic and social problems.' Reforming British capitalism therefore requires reforming what Hutton calls 'the semi-feudal state' which presides over it, through the kind of measures advocated by Charter 88 the introduction of a written constitution, proportional representation, and the like.28
Secondly, achieving stakeholding capitalism means overhauling British company law. As Marquand explains:
If the stakeholder concept means anything at all, it means a radical break with the traditions, institutions, and assumptions of Britain's shareholder capitalism. All the manifold varieties of the simple stakeholder model embody the simple proposition that property owners have, and must discharge, obligations to other interests, which also have obligations to them; that the decisions of a capitalist firm must reflect a subtle web of reciprocal obligations, involving its employees, its suppliers and the localities in which it operates, as well as its shareholders. That proposition provides the basis for the sharing of decision rights which are seen as the essence of Rhenish capitalism... Either through law, or through the pressure of social convention, the power-sharing arrangements which lie at the heart of all stakeholder models are obligatory and enforceable. They have to be: otherwise there is no protection against free-riders.29
Similarly Hutton argues for 'initiatives in corporate governance' to 'break the self perpetuating oligarchy of most British firms... This could be negotiated initially as a voluntary code, but ultimately it would have to [be] backed by legislation'.30 A TUC report on stakeholding calls for extensive changes in company law to combat 'boardroom greed'.31
Introducing proportional representation and reforming 'corporate governance' are hardly the stuff of revolution. It soon became clear, however, that even these measures would go much too far for Blair and his cronies. Thus Blair himself hasn't concealed his opposition to proportional representation, though he still promises to hold a referendum on electoral reform.32 Mandelson and Liddle declare: 'We do not believe that constitutional reform offers the panacea that is sometimes claimed.' They go on to argue: 'The reform agenda must spring from the voters' concerns and not follow the master plan of constitutional theorists or be dictated by the interests of the chattering classes.'33
In other words, a Labour government should go in for constitutional reform only if it proves to be electorally popular. So much for all the New Labour talk of 'principle' and 'leadership'. Such remarks signal Blair's intention to weasel out of the various commitments concerning constitutional reform made by his predecessor, John Smith. Against this background his retreat in June 1996 from what had seemed to be the most important of these commitments devolution for Scotland and Wales should come as no surprise. (Rather pathetically, Hutton reacted to the hullaballoo caused by this reversal with a lengthy piece devoted to demonstrating the political and economic importance of constitutional change, but concluded by endorsing Blair's decision to make devolution conditional on the outcome of referendums in Scotland and Wales without even mentioning the most direct concession to the Tories the commitment to hold a second referendum in Scotland on the proposal to give the new parliament tax raising powers.)34
Though much less publicised, Blair's retreat on stakeholding itself is more significant because it indicates how little is likely to change under his premiership. However much it is based on a questionable interpretation of British history and fails to identify the real source of our problems, the Hutton-Marquand vision of stakeholding capitalism requires for its implementation a confrontation with entrenched capitalist interests in the shape of the City and its allies in the Treasury and company boardrooms. But no sooner had Blair pronounced the phrase 'stakeholder economy' in Singapore in January 1996 than he and his spin doctors sought to disavow any radical implications it might have. They were particularly eager to dissociate Blair's conception from the detailed proposals for institutional change which Hutton had spelt out in his book. As Noel Thompson writes:
When [TUC general secretary] John Monks suggested trade unions as the representative institutions through which working people could claim a stake in the management of enterprises and the national economy, the Labour leadership was quick to distance itself from his remarks. Similarly, when John Edmonds of the GMB saw stakeholderism as entailing new legal rights of job security, the response was equally cool. Those, like Will Hutton and David Marquand, who sought to give radical content to the idea...also received a Blairite brush-off. Thus Hutton was categorised dismissively as 'a well-liked, useful, free-thinker, but not a great influence', while Blair himself was quick to rule out the kind of corporate legislation which might give substance to a new vision of corporate responsibilities and behaviour.35
Blair told David Frost that the 'stakeholder economy' was 'a unifying theme or slogan'.36 Mandelson and Liddle argue that it 'addresses the needs and aspirations of individuals, not interest groups acting for them'.37 But this is to deprive the concept of stakeholding of any content, since its advocates are concerned precisely to combat what they describe as the 'economic individualism' of the New Right by providing for the representation of interests wider than the shareholders and managers of the company in question in economic decision making.38
Mandelson and Liddle nevertheless do argue that a Blair government 'must do whatever it can to promote a stakeholder culture in industry and the City'. They consider the idea of legislation to make company directors 'take into account the full range of interests of those with a stake in a company', but object that:
The danger in any such step is that it would weaken the external discipline that the threat of takeover puts on companies to be efficient and profitable. In other words, it could protect the sleepy at the expense of the thrusting and go-ahead.39
Six months after Blair's Singapore speech the Financial Times reported, under the headline 'Labour Softens on Stakeholding', that a Labour draft industrial policy document 'fails to live up to the pre-publicity' since it contained 'few specific reforms'. Alasdair Darling, Labour's City spokesperson, told the paper:
There is a limit to how many of Britain's corporate ills can be resolved by legislation. What you are trying to do is change people's behaviour and attitudes.40
The Financial Times, hardly a stronghold of 'Old Labour' thinking, seemed taken aback by the extent of this retreat:
Perhaps most damning is the way that Conservative Party officials admit to being surprised by Labour's decision to try to neutralise the stakeholder issue. They had been concerned that Labour would portray City fund managers as the 'union barons of the 1990s' and attack the government for failing to stop their excesses...
Labour insiders do not deny that it wants to neutralise the stakeholder debate rather than make a virtue of it. The decision stems from the Conservative Party's effective campaign representing stakeholding as a return to the corporatism of the 1970s.
'They are clearly scared rigid of the Tory line and as a result they have bottled what could be an imaginative set of policies,' one Labour official said.41
At much the same time David Marquand was sadly drawing much the same conclusion. If Britain is to become a stakeholder economy, he wrote:
...the nettles of institutional design, change and resistance will have to be grasped.
As yet, there is little evidence that New Labour is prepared to do this. It seems to be stuck in the traditional British rut of piecemeal voluntary incrementalism, buttressed by a traditional British unwillingness to learn from continental Europe. If it stays there, its noble vision of a stakeholder society, in which all are included, will be nothing but a utopian dream; social inclusion combined with economic exclusion is a contradiction in terms. There is still time for it to climb out. But not much.42
In early July 1996, amidst a slick media extravaganza, Blair launched his most detailed policy document yet, the Road to the Manifesto. The extreme conservatism of this document its main economic commitment was the impeccably Thatcherite assertion that the 'priority must be stable, low-inflation conditions for long-term growth' seems to have goaded the intellectual architects of stakeholder capitalism into taking something of a stand. Hutton and Marquand joined three other supposed Blairite 'gurus' (the increasingly right wing Christian MP Frank Field, the economist John Kay, and the sometime academic admirer of Mrs Thatcher John Gray) in publishing an article calling for reform of both 'the way the stock market, ownership structures and corporate governance interlock' and 'the institutions of the British state'. This was supposedly in order 'to construct a more dynamic capitalism as well as a more cohesive society'. They concluded:
Mr Blair and the Labour Party say they should not be interpreted as either New Right or Old Left, and advocate stakeholding. We agree that this is the right course. But the programme so far championed falls far short of what is required. The risk is not in doing too much. Rather it lies in doing too little.43
But it is too simple to see the failure bemoaned by Marquand and Hutton as simply a consequence of timidity and caution, though these were undoubtedly factors at work in the retreat from stakeholder capitalism. It was also a matter of the positive preferences of Blair and his closest allies. Thus Blair on a number of occasions for example, during a visit to New York in April 1996 went out of his way to reassure business audiences that his promise to sign up to the Social Chapter of the Maastricht Treaty (from which John Major secured an exemption for Britain) would not threaten Britain's 'flexible' labour markets or raise social costs. In July 1996 he wrote to 10,000 business executives to assure them that a Labour government would 'insist that any measures adopted under the Social Chapter promote fairness, not inflexibility. It will not be used to import foreign social security systems or ways of organising the boardroom'.44
This move represented the effective abandonment of the principal basis on which the British labour movement had come overwhelmingly to support the European Community in the late 1980s the belief that Brussels could act as a bastion to help protect British workers from the Tory drive to increase 'flexibility' and cut welfare spending. The fact that this belief was mistaken does not alter the significance of its implicit rejection by Blair.
As so often it was left to Peter Mandelson to make explicit the grounds on which Blair took this stance the more or less unqualified endorsement of market capitalism and of the inequalities that unavoidably accompany it. Writing with Roger Liddle, Mandelson declares:
New Labour's belief in the dynamic market economy involves recognition that substantial personal incentives and rewards are necessary in order to encourage risk-taking and entrepreneurialism. Profit is not a dirty word profits are accepted as the motor of private enterprise.
Differences in income and personal spending power are the inevitable consequence of the existence of markets.45
Mandelson was even more explicit in a newspaper article he wrote in April 1996, after completing a tour of the Far East paid for by Barclays Bank in order that he might 'meet many of its Asian corporate customers to talk about trade and investment under a Labour government'. The piece is an extraordinarily crude and unqualified celebration of private enterprise and profit making. Thus Mandelson defends the East Asian boom economies from the charge that they are 'based on sweatshop labour producing cheap, bargain-basement goods, with huge profits and vast wealth for a few being earned through exploitation of the many'.
'Of course,' he declares, 'profits are very substantial and there are some very rich entrepreneurs, but what's wrong with that?' Mandelson pays lip service to the idea of stakeholder capitalism when, for example, he praises the 'conscious attempt by governments such as those in Japan, Korea and Singapore to give their workforce a stake in the country's economic success'. But at the same time he highlights among the 'lessons of Asia-Pacific...an unambiguous commitment to backing entrepreneurial flair and its rewards and rejecting the corporatist notion that, by sitting around a table with an agenda of business problems, national representatives of "both sides" of industry can somehow find the solutions'.46
Social bargaining between government, big business, and trade union leaders is, of course, a central feature of the Rhine model championed by Hutton and Marquand. Mandelson underlines his rejection of this model by sympathetically quoting a Korean boss's complaint about 'the high costs of the social security system in Germany'. He continues: 'Tony Blair was right in his recent New York speech to rule out the introduction of similar German costs for Britain, an issue, it should be noted, which is quite separate from the social chapter.' In effect Mandelson selects for praise in the East Asian variant of stakeholder capitalism not those aspects stressed by Hutton the alleged importance of social co-operation in achieving economic efficiency but rather the unbridled pursuit of profit.
No wonder, then, that one Labour frontbench spokesman on industry, Kim Howells, should appeal to the party: 'Brothers and sisters, embrace competition!' Howells, a former member of the Communist Party, had, as a full time official of the National Union of Mineworkers, played a critical part in engineering the defeat of the 1984-1985 strike. Now he denounced the idea of state intervention in the economy 'Forget the prospect of recreating huge ministries designed to second-guess the markets by favouring one particular sector against another' and proclaimed the cult of entrepreneurs like the billionaire founder of Microsoft: 'The success of Bill Gates and the crises at IBM and Apple were not determined by Washington's efforts at second-guessing trends in the personal computer markets'.47 New Labour thinking, at least when practised by the likes of Howells, increasingly resembled such unabashed celebrations of Victorian laissez faire as Samuel Smiles's Self Help.
'Decide what kind of capitalist you are,' James Cornford and Patricia Hewitt advise social democrats. Tony Blair, Peter Mandelson, and their followers have decided: in the support they have given to more or less unrestrained market capitalism they have opted for what looks suspiciously like the bad old Anglo-American free enterprise model championed by Thatcher and Reagan.
Blair's effective gutting of the idea of stakeholder capitalism provides a clear indication of just how conservative his government is likely to be. There are, of course, many others. The former Financial Times journalist John Lloyd, an apologist for free market shock therapy in the ex-Stalinist countries, wrote a glowing profile of Gordon Brown in which he attributed to the shadow chancellor 'a political philosophy of vast scope', an attempt at nothing less than 'to redefine socialism'. Under close inspection this 'audacious vision of socialism' turned out to consist of nothing but the replacement of the objective of 'equality of outcome' defended by traditional Croslandite social democrats such as Roy Hattersley with a new goal 'equality of opportunity'.48
The only thing audacious about this was the effrontery with which old liberal ideas were being dressed up in New Labour clothes. Hattersley was simply repeating the traditional socialist critique of the essentially bourgeois slogan of equality of opportunity when he pointed out that such equality is meaningless without 'a more equal distribution of power and wealth... A common start to a hurdle race does not provide an equal opportunity of winning if some of the runners are lame'.49
To economic conservatism was matched an increasingly ugly tone of social authoritarianism. Blair had first made a public impact when, as shadow home secretary, he effectively took over the new right's case on law and order. Thus, in the aftermath of Jamie Bulger's murder, he said:
I have no doubt that the breakdown of law and order is intimately linked to the breakup of a strong sense of community. And the breakup of community in turn is, to a crucial degree, consequent on the breakdown in family life. If we want anything more than a superficial discussion on crime and its causes, we cannot ignore the importance of the family.50
'Family values' have indeed become a dominant theme of New Labour propaganda. Images of vacuously grinning (and all white) families shine from the party's publicity material. The few specific proposals Blair and his cronies are prepared to make are often directed at families. Thus Mandelson and Liddle suggest 'the provision of medium term, deferred repayment, interest free loans to young couples without access to capital of their own in effect a form of public dowry, available just once in a lifetime'.51 And, should families prove to be dysfunctional, then Blair's shadow home secretary, Jack Straw, is there on cue to invoke the power of the state to coerce and punish, as with his call at the beginning of June 1996 for the police to enforce a curfew on youngsters. One of the five specific promises made in Labour's policy document the Road to the Manifesto released a month later was 'fast-track punishment for persistent young offenders'.
Straw's outburst helped prompt The Observer to protest:
Under the guise of left/right arguments having little meaning, New Labour has swerved so sharply to the right that it is in danger of crashing through the central reservation. The presentational spin is that policy should be tough and hard choices made; but the direction of the toughness seems always to involve a concession to the right.52
A few weeks later the same paper listed the systematic retreat Blair had led away from Labour's policy pledges since May 1992. Among the chief abandoned promises were:
Resentment against the Blairites was also seething on the Labour back benches. Blair's U-turn over devolution provoked the hitherto ultra-loyal Welsh Labour MP Paul Flynn into denouncing his leadership as 'autocratic' and his policies as 'anaemic'. Flynn described the reaction from Labour activists and MPs:
I am dealing with hundreds of letters from people who have been in the party for 30 years or more who say: 'We have lost the party.' There is a lot of pain out there; it is almost like a bereavement for some... I have never had so many handshakes from colleagues in the ten years I have been here. And a senior whip came into the smoking room, looked round to make sure no one could see, and gave me a bear-hug. I am far from being alone.58
The extent of discontent in the Parliamentary Labour Party led the Blair cabal seriously to canvass the idea of cancelling the 1996 shadow cabinet elections. The 1995 elections had been a disappointment for the Blairites; moreover, Harriet Harman, one of Blair's favourites, was in serious danger of losing her place after the row over her son's schooling. But after over 100 Labour MPs made it known that they were opposed to scrapping the elections, Blair was forced to hold them earlier than normal, in late July. Even the New Statesman, reduced under its freshly installed editor Ian Hargreaves to the status of official toady to the Labour leadership, was forced to acknowledge the limits that the affair had revealed to Blair's power:
In handling the shadow cabinet elections, Blair has behaved in a Major-like way, not because he wanted to, but because he had to. First, there was the compromise: the elections will be held, but next week rather than in the autumn. Then there were the behind-the-scenes machinations to ensure the best possible result, including the instruction to those knocking on the shadow cabinet door not to stand this time.
Is this a foretaste of more regular conflict between Labour MPs and their leader in government?...enough Labour MPs, including some on the front bench, have told me that they are keeping quiet until after the [general] election, but will be speaking out more forcefully afterwards. I suspect many Labour back-benchers would have insisted on these [shadow cabinet] elections even if the Harman factor had not erupted in January. It is not just a fluke of a bizarre electoral system that those on the left, from Robin Cook to Michael Meacher, are always re-elected. They represent a point of view that will be strong in the PLP after the general election, as it is now.59
In the event, Harman kept her place in the shadow cabinet. She only squeaked in, however, at the very bottom of those elected. Equally significant, at the top of the poll were three women, Margaret Beckett, Ann Taylor, and Clare Short, all of whom the Guardian had reported a few days earlier were 'detested' by Blair. Gordon Brown dropped from third to fourteenth place, while Michael Meacher, described as 'utterly detested', climbed from fifteenth to tenth place.60 Labour backbenchers had thus grudgingly gone along with Blair's appeal (backed up by unprecedented bullying tactics by the whips) to return his existing shadow cabinet team, but had at the same time registered their protest.
Blair subsequently reshuffled the shadow cabinet in a manner calculated to flaunt his contempt of the poll, notably by demoting Short. Nevertheless, even Philip Stephens, a journalist very close to the New Labour clique, who had denounced the affair a week earlier as 'A Phoney Election', had to concede that 'the return of the same old faces to the shadow cabinet table was hardly a triumph', and warned: 'The parliamentary party is becoming fractious'.61 Blair might be getting his betrayals in early, but the effect was to fuel, at every level of the movement, the kind of anger usually reserved for a Labour leadership that is actually in office.
Some of the most highly publicised opposition came from unexpected quarters. Roy Hattersley, for example, played a leading role in attacking the party leadership's retreat from one of the historic achievements of the old revisionist Labour right the introduction of comprehensive education in state schools. Loyal to his hero Crosland, he has also bitterly opposed the more general intellectual shift to the right, for example, dismissing Mandelson's and Liddle's The Blair Revolution as 'banal, pretentious and risibly inadequate'.62
Hattersley's transformation from gamekeeper into poacher is an indication of how far this shift had gone. The very attention his criticisms received is also an indication of how muted other voices were. In large part, this reflected the desperate fear that too much internal controversy might deliver the Tories a fifth election victory. Hattersley himself made the point very well:
Large-scale revolt has been avoided up to now because the Labour Party wants to win. A party leader is like a bank robber who stands in front of the safe displaying the sticks of dynamite that are strapped to his chest. 'Shoot in my direction, and you may cause an explosion that destroys us all.' That tactic can work for a time.63
Beneath the surface, however, there are much greater stirrings of discontent. And these affect not just rank and file Labour supporters or even ordinary backbenchers but an important wing of the shadow cabinet. An aspect of Tony Blair's ascent that is strangely ignored by his boosters is his dependence on the Labour's centre left, a group whose members may long ago have shed their links with what was once the Bennite hard left, but which still has important links with the union leaders. The support of his deputy, John Prescott, was, for example, crucial to Blair's easy victory over Clause Four. Prescott's very presence at the top of the party is a reassuring symbol to worried activists of what Labour has not deserted in the rush rightwards. Among the other centre left members of the shadow cabinet is Robin Cook, far and away the ablest figure on Labour's front bench.
There have been a number of tell tale signs that all is not well in the shadow cabinet. Prescott was among a number of members infuriated by Harman's decision to send her son to a highly selective school. Shadow social security secretary Chris Smith led strong opposition to Gordon Brown's proposal to scrap child benefit for 16 and 17 year olds (and so was replaced by Harriet Harman after the 1996 shadow cabinet elections). And Cook carefully worked the trade union circuit, sending out not too subtle signals of his reservations over the Blairite agenda.
Thus a week after Blair had assured New York business leaders that Labour was now a party of the centre, Cook told the Scottish TUC that 'Labour must speak for the poor.' He argued that the 'relationship between the Labour Party and the unions is not a marriage of convenience. It is a recognition of our common commitment to collective action.' Labour and the unions shared two 'core values', community and equality. Though Cook's aides claimed the speech 'entirely accords with what Tony has been saying for a long time', the Financial Times suggested that it would be 'welcomed by the left as a challenge' to Blair.64 At the CWU conference he made what Socialist Worker called 'a funny and effective speech' with 'an unspoken but clear message "You may not trust Tony Blair or Jack Straw but you can rely on people like me and Margaret Beckett".'65
Industrial action by workers at London Underground indeed brought the divisions in the shadow cabinet a little more into the open. The Tory government and its press allies sought to use the series of one day tube strikes during the summer of 1996 to embarrass Blair. The London Evening Standard carried a full page article demanding that he condemn the strikes. On cue Blair and his shadow education and employment secretary, David Blunkett, reacted by calling for the underground unions to submit their claim to compulsory arbitration. Questioned on BBC Radio 4's Today programme on 18 July, Cook pointedly declined the interviewer's invitation to endorse Blair's stand, and merely said that he was bound by the collective responsibility of the shadow cabinet.
These developments are significant because they provide evidence of the fault lines running through the current Labour leadership. When Blair and his team are confronted with the tests of office, over tough and controversial issues such as British participation in a single European currency, these hairline cracks can widen into chasms.
Blair and his immediate coterie are aware that they may not have anything like as easy a ride in office as they have had in opposition. This no doubt is one factor involved in the proposals by Labour general secretary Tom Sawyer to tighten up party discipline, weed out 'below standard or disloyal' backbenchers, and encourage constituency parties to select candidates from a nationally vetted list.66 After the shadow cabinet elections in July 1996 Blair announced plans to give the whips greater powers to enforce a 'code of conduct' on MPs.67 These moves are symptomatic of an authoritarian style of party management that goes well beyond anything attempted by Hugh Gaitskell in the 1950s or Neil Kinnock in the 1980s. The influx of new members into the party encouraged Blair to adopt a plebiscitary approach to leadership, in which U-turns are announced without consultation and then ratified by an atomised membership through postal ballots.
Blair's leadership style caused even the generally sympathetic Financial Times to write: 'A leader who appears to relish the sobriquets of Lenin and Stalin has bludgeoned those critics who have spoken out against him.'68 Nevertheless, the extent of the discontent revealed by the shadow cabinet elections led Blair to change tack somewhat and appeal specifically to 'critics on the left', pledging his commitment to 'greater equality' and asking them to 'have faith'.69
There is little doubt that, in the longer term, Blair would like to break the link between Labour and the unions. Nic Cohen has written of 'a visceral dislike of trade unionists and, in the words of one member of the shadow cabinet, a "positive hostility" towards union leaders which no electoral calculation can explain.'70 The introduction of state funding of political parties has been canvassed in New Labour circles as a device for reducing the party's massive dependence on the unions' financial support and thus for making a break feasible. But there is an air of unreality about such plans. They would have to gain acceptance, not just from Blair's own clique, but from the parliamentary leadership as a whole, including the centre left with their close connections with the unions. Only an immensely successful government could hope even to consider undertaking such a difficult and costly enterprise.
But there is not the slightest reason to believe that a Blair government will enjoy anything that remotely resembles the necessary degree of success. Bill Martin, City economist of UBS, predicts in an analysis of such a government's economic prospects that 'Labour would inherit a large, potentially explosive structural budget deficit' of around 4 to 5 percent of gross domestic product, way above the 3 percent target laid down by the convergence criteria of the Maastricht Treaty, which Labour accepts. Reducing this deficit would require 'tax increases or spending cuts on the scale delivered in the twin [Tory] budgets of 1993: perhaps equivalent to 7p on income tax rates'. Martin also questions the impact of the monetary stability promised by New Labour on economic growth: 'From a policy-maker's perspective, the safe assumption is that the promotion of low inflation and a stable cycle would neither impede nor promote the trend rate of advance'.71 On the basis of this analysis Martin suggests that a Blair government was likely to pursue austerity policies:
Chancellor Clarke, despite his protesting his innocent commitment to stability, is not about to wreck the consumer rave now upping the tempo of recovery. Faced with an inheritance of more than a year's excess monetary growth, Gordon Brown would have little choice but to raise interest rates. Indeed, he might press rate rises to the point of overkill in order to demonstrate Labour's commitment to economic stability. He would want rapidly to acquire the reputation of an Iron Chancellor.72
In other words, a New Labour government may find itself confronting much the same situation as its Old Labour predecessors when they took office in 1964 and 1974. Faced with the inflationary consequences of unpopular Tory governments' efforts to hang on to office (the Maudling 'dash for growth' of 1962-1964 and the 'Barber boom' of 1972-1973), these governments sought to demonstrate their orthodoxy to the financial markets by demanding 'sacrifices' from their working class supporters pay restraint and spending cuts little different from what they had experienced under the Tories. Martin is predicting, entirely plausibly, that Tony Blair and Gordon Brown will react in exactly the same way.
In these circumstances, confrontations between groups of workers and the government are inevitable. The experience of the last Labour administration, which took office in March 1974, and had to face a workers' movement at the peak of its strength, which had just tipped the Tory prime minister, Ted Heath, out of office, is probably not as good a guide to what may happen as events under the Wilson government of 1964-1970. The seafarers' strike of May and June 1966 when a group of workers who dared to defy Labour's incomes policy failed to receive solid support from the rest of the trade union movement and was viciously red baited by the government with the support of the media (especially pro-Labour papers like the Mirror and Guardian) probably provides a foretaste of how the Blair government will react to any challenges from below.73
Workers' opposition to such a government is most likely to succeed where it is steeled by socialist politics. The more the underlying discontent with Labour's dramatic shift to the right under Blair is translated into an organised socialist response, the harder it will be for a Blair government to get its way. Therefore the months that may separate us from such a government must be spent in active preparation, in the strengthening of socialist organisation independent of both Labour and Labourism.
1 For more background on and analysis of the Labour Party under Tony Blair, see A Callinicos, New Labour or Socialism? (London, 1996) and C Leys, 'The British Labour Party's Transition from Socialism to Capitalism' in L Panitch (ed) The Socialist Register 1996 (London, 1996).
2 Financial Times, 21 May 1996.
3 Observer, 12 May 1996.
4 Financial Times, 1 June 1996.
5 Financial Times, 23 April 1996.
6 Financial Times, 9 January and 26 June 1996.
7 See C Harman, 'From Bernstein to Blair', International Socialism 67 (1995).
8 For an analysis of this process from a revisionist standpoint, see D Marquand, The Unprincipled Society (London, 1988), chs 1-3.
9 Quoted in C Harman, op cit, p28.
10 See, for a useful critical survey, N Thompson, 'Supply-Side Socialism: The Political Economy of New Labour', New Left Review 216 (1996).
11 M Albert, Capitalism Against Capitalism (London, 1993), pp18-19.
12 The intellectual climate on the new Labour right is well conveyed in the papers (including contributions by Hutton and Marquand) collected together in D Miliband (ed), Reinventing the Left (Cambridge, 1994). Hutton calls Marquand's The Unprincipled Society 'one of the inspirations behind the concept' of stakeholder capitalism ('Raising the Stakes', Guardian, 17 January 1996). Though Marquand does not in this book explicitly distinguish between different capitalist models in the way that Albert does, he makes substantially the same point, arguing that Britain, unlike other major capitalisms, has lacked what Robert Dore calls a 'developmental state': see The Unprincipled Society, ch 4.
13 W Hutton, The State We're In (London, 1995), pp316, 258, 297.
14 Ibid, p298.
15 M Albert, op cit, p 211.
16 J Cornford and P Hewitt, 'Dos and Don'ts for Social Democrats', in Miliband (ed) op cit, p252.
17 Financial Times, 23 May 1995.
18 B Martin, 'So Steady They're Standing Still', New Statesman, 19 July 1996.
19 P Mandelson and R Liddle, The Blair Revolution (London, 1996), p79.
20 See, for example, S Brittan, How to End the 'Monetarist' Controversy (London, 1982).
21 W Hutton, 'By George, This is Not What Labour Needs', Guardian, 29 May 1995.
22 W Hutton, 'Myth That Sets The World to Right', Guardian, 12 June 1995. A more systematic critique, also from from a reformist point of view, is provided by P Hirst and J Thompson, Globalisation in Question (Cambridge, 1996); see C Harman's review of the latter, 'No Place Like Home', Socialist Review, May 1996.
23 Financial Times, 28 June 1996.
24 See A Callinicos, 'Crisis and Class Struggle in Europe Today', International Socialism 63 (1994).
25 Financial Times, 16 July 1996.
26 See also C Harman, 'Where Is Capitalism Going?' part I, International Socialism 58 (1993), and Economics of the Madhouse (London, 1995), pp94-99.
27 See P Anderson, 'Origins of the Present Crisis' and 'The Figures of Descent', both reprinted in English Questions (London, 1992). Among the many criticisms of this interpretation of British history, see A Callinicos, 'Exception or Symptom? The British Crisis and the World System', New Left Review 169 (1988), and C Barker and D Nicholls (eds), The Development of British Capitalist Society (Manchester, 1988).
28 W Hutton, The State We're In, ppxi-xii, 323. Hutton's interpretation of British history is scattered throughout his book, but see chs 5 and 11. Marquand offers a more systematic historical account: see D Marquand, op cit, chs 5-7.
29 D Marquand, 'Elusive Visions', Guardian, 24 June 1996.
30 W Hutton, 'Time for Labour to Put Some Spine into its Stakeholding Idea', Guardian, 22 January 1996.
31 Financial Times, 25 July 1996.
32 T Blair interview, New Statesman, 5 July 1996. Compare Hutton's explicit call for proportional representation in The State We're In, p290.
33 P Mandelson and R Liddle, op cit, pp209, 210.
34 W Hutton, 'It is Broke and It Needs Fixing', Observer, 30 June 1996.
35 N Thompson, 'Supply-Side Socialism', op cit, p38.
36 Quoted ibid, p38.
37 P Mandelson and R Liddle, op cit, p25.
38 See, for example, W Hutton et al, 'Tony and the Tories', Observer, 7 July 1996. One of the main themes of Marquand's The Unprincipled Society is a critique of the individualism he claims is deeply embedded in English culture.
39 P Mandelson and R Liddle, op cit, pp87-8.
40 Financial Times, 26 June 1996.
41 Ibid, 26 June 1996.
42 D Marquand, 'Elusive Visions', Guardian, 24 June 1996.
43 W Hutton et al, 'Tony and the Tories', op cit, 7 July 1996. Though the next day, with characteristic consistency, Gray was praising the draft manifesto as 'the beginnings of a programme for the modernisation of social democracy' by 'cultivating a new form of capitalism', 'Revival of Reforms', Guardian, 8 July 1996.
44 Financial Times, 16 July 1996. In a slightly earlier speech Blair also promised that in government he would oppose any extension of majority voting in the EU Council of Ministers to cover Social Chapter employment issues where unanimity is currently required. These include social security, the protection of sacked workers and conditions of employment of third-country nationals.
45 P Mandelson and R Liddle, op cit, p22.
46 Times, 23 April 1996.
47 K Howells, 'Industrial Policy', New Statesman, 7 June 1996.
48 J Lloyd, 'Iron Will, Steely Intellect', New Statesman, 24 May 1996. This piece seems to have been part of a little campaign in the pro-Labour press to raise Brown's profile, which had been a bit blurred both by rumours of his bad relations with Mandelson and by the innuendos directed at his sexual preferences by Sue Lawley in a BBC Radio 4 Desert Island Discs interview. Brian Reade, after interviewing Brown, wrote reassuringly, 'You can see how he's a bit of a woman's man. Apart from the brain, he possesses dark, menacing features, a hulking frame and a deep Sean Connery drawl', Daily Mirror, 4 June 1996.
49 R Hattersley, 'Bubble 'n' Squeak', Guardian, 27 February 1996. See also Hattersley's defence of 'equality of outcome', 'Balance of Power', Guardian, 25 July 1996, and Gordon Brown's reply, 'In the Real World', ibid, 2 August, 1996.
50 Quoted in P Mandelson and R Liddle, op cit, p48.
51 Ibid, pp127-128.
52 Observer, 2 June 1996. The obscure syntax of the opening sentence suggests the editorial was written by Hutton.
53 Ibid, 30 June 1996.
54 For a discussion of Scargill's move, see A Callinicos, New Labour or Socialism?, (London, 1996), pp34-36.
55 Socialist Worker, 25 May 1996.
56 Ibid, 15 June 1996.
57 Ibid, 22 June 1996.
58 Independent on Sunday, 7 July 1996.
59 S Richards, 'Politics', New Statesman, 19 July 1996.
60 Guardian, 20 and 25 July 1996.
61 Financial Times, 19 and 26 July.
62 R Hattersley, op cit.
63 Guardian, 2 July 1996.
64 Financial Times, 18 April 1996.
65 Socialist Worker, 15 June 1996.
66 Observer, 30 June 1996; Guardian, 2 July 1996.
67 Financial Times, 25 July 1996.
68 Financial Times, 1 August 1996.
69 T Blair, 'My Message to the Left: Have Faith', Independent on Sunday, 28 July 1996.
70 Observer, 28 July 1996. See especially Philip Stephens's piece, clearly based on discussions either with Blair himself or with someone very close to him, in the Financial Times, 21 July 1995 (quoted at length in A Callinicos, New Labour or Socialism?, p26).
71 Observer, 19 May 1996.
72 B Martin, op cit.
73 P Foot, 'The Seamen's Struggle', in R Blackburn and A Cockburn (eds), The Incompatibles (Harmondsworth, 1967).