The Labour Party was socialist, once upon a time. This was Clause IV of its constitution as drafted by the Webbs in 1917:
To secure for the workers by hand or by brain the full fruits of their industry and the most equitable distribution thereof that may be possible upon the basis of the common ownership of the means of production, distribution and exchange, and the best obtainable system of popular administration and control of each industry or service.
This was, in effect, a commitment to the nationalisation of the economy.
Tony Blair was not the first Labour leader to want to reduce this commitment. He succeeded in changing Clause IV to say:
The Labour Party is a democratic socialist party. It believes that by the strength of our common endeavour we achieve more than we achieve alone, so as to create for each of us the means to realise our true potential and for all of us a community in which power, wealth and opportunity are in the hands of the many, not the few, where the rights we enjoy reflect the duties we owe, and where we live together, freely, in a spirit of solidarity, tolerance and respect.
The differences are obvious. However, since few thought we really needed a fully nationalised economy (and I do not, I stress), the reasons for the change are clear, despite which there are still strong social democrat commitments in what this statement says.
On Friday Rachel Reeves told the Financial Times:
“The message for the next election is the risk of five more Conservative years of chaos and instability, not knowing that what you vote for is what you're going to get, or you could have a changed Labour party with stability at its core.”
She added:
“There's no substitute for business investment, business innovation — it's not government that creates jobs in towns and cities across the UK.”
Reeves says Labour has changed. It has. Blair's Clause IV could be related to the Webb's 1917 version. These comments by Reeves and the founding philosophy of Labour cannot be reconciled. There is no point trying: it is simply not possible.
Worse though, the claim that Reeves made is straightforwardly wrong.
Of course the government can create jobs in towns and cities across the UK. It is an insult to all those working in the NHS, education, the police and other emergency services, social care, councils and many other services to suggest that the government cannot create employment when so very obviously it has created those jobs. What is more, we all know is that we need more people engaged in these tasks. And we could have them.
But that is not what Reeves is really saying, of course: she knows her claim is not true at the level at which it was no doubt said, and reported. What she instead means is that government cannot create these jobs without what she thinks to be the value-added created by the private sector.
In saying so, Reeves states a position normally adopted by the likes of the Institute of Economic Affairs. It is the argument of the economic right wing that all value is created by private enterprise. They also argue that all money is created by profit-motivated business. They also suggest that government action is a drain on private sector activity which it crowds out, and that as a result state activity must be limited in scope. All these ideas are obviously implicit in what Reeves had to say. I have no doubt she believes them even though there is not a shred of truth to any of them.
Privatised sewage proves that the private sector does not add value. Nor does it provide investment. And it literally drains the lifeblood out of well-being.
The privatised rail network has done much the same thing: in essence, it has failed, which is why it is now back under state control.
And then there is the energy sector, which has so obviously acted against the best interests of the people of this country, whilst dismally failing to deliver the investment in renewable energy that we need. Indeed, the National Grid appears to have done everything it can to delay the transition to sustainability by denying renewable energy access to markets even if investment takes place.
Meanwhile, schools, hospitals, social care and the justice system are failing for lack of care.
And all this is happening whilst average tax burdens are at record highs - unless, that is, you are very wealthy, when you pay significantly less of your overall increase in financial wellbeing in each year in tax than do those with lower levels of earnings, as the Taxing Wealth Report has shown.
Nor it is the private sector that is creating jobs at present in the UK. That is because smaller businesses are not investing because interest costs make that impossible and their survival doubtful, whilst larger businesses are exploiting the current situation to make excess profits.
It is only the state that can create any significant new jobs at present.
And it has the means to do so. It could tax more, as I have shown. But Reeves has said she will not do that.
And it could borrow more - and people want to save with the government (and remember the so-called national debt is just private wealth saved with the government: there is nothing more to it than that). But Reeves says that she will not allow that.
What is more, if necessary the government could create more money: there is no reason why it should not. And if there is an inflationary risk, it could tax more.
But Reeves denies all this. She says she can do nothing until the markets have generated wealth that she might then spend.
So, her logic is that we need more pollution so that we can afford sustainability.
And that we need more processed foods before we can tackle health care issues.
There are many other examples.
The logic is so bizarre it is truly unreal.
It is also disastrous.
Not only is this a recipe for more of the same as the Tories have delivered - which even they now realise has failed, even if they have no idea how to deal with it - it also indicates adherence to utterly failed economic ideology that is totally alien to Labour.
I have never thought myself to be a socialist. It is too materialist for me. I also see a serious role for private enterprise in any economy - so long as it sees itself as a part of and not superior to the role of society itself. But what I do not buy is the idea of the supplicant state implicit in Reeves' thinking, where government is reduced to asking business owners if they might fulfil government wishes and maybe, if they really would not mind, pay a little tax as well.
Reeves is proving herself a cowardly politician: one who believes that whatever the issue is the market can deliver better than the state meaning she should do nothing.
So too, incidentally, is Sunak. For example, Sunak has said HS2 will reach London if the private sector pays for it. Labour is saying there will be 300,000 social houses a year - but only if the private sector pays for them.
This is not a Labour Party that has changed for the better. I do not demand socialism. I do want a commitment to a mixed economy. I do think business has a role. But if that role is alongside a feeble state then business has no chance of delivering and we all lose. And that is the promise that Reeves is making.
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Demonstrating how far to the right Labour has moved, Money Saving Expert Martin Lewis has tweeted that:
“Shocked to have just been messaged that as I write, the London regional party at #LabourPartyConference is sponsored by a Buy Now Pay Later firm. And the founder was given platform to speak against regulation.”
Then we have MPs, including Labour, receiving donations from private healthcare companies. Does anyone think they will all be impartial with the NHS?
Sources:
Martin Lewis tweet: https://twitter.com/MartinSLewis/status/1710741563138089057
This is how much Labour and Tory MPs get from private health firms
https://www.thenational.scot/news/uk-news/23568478.much-labour-tory-mps-get-private-health-firms/
Thanks
“I also see a serious role for private enterprise in any economy – so long as it sees itself as a part of and not superior to the role of society itself.”
But what do the Tories and the current Labour Party do other than perpetuate the human propensity for division!
Here’s a story about how this is overcome and the moral being we must make it easier in this country to identify with all groups that serve the greater well-being of all:-
https://www.simplypsychology.org/robbers-cave.html
Thanks for the link to Robbers Cave. My immediate reaction was to wonder what the result would have been if girls had been subjected to the same experiment, but I can find no evidence there has been a replication.
While your conclusions about overcoming divisions are above reproach, I’m not convinced the Robbers Cave experiment is the best way to support them. Some now describe the experiment as “controversial”, others dismiss it on a par with the discredited Milgram experiment.
https://www.integratedsociopsychology.net/society/prejudice-discrimination/robbers-cave/
“Population validity could be criticised as the sample did not represent the wider population. Extending this point, Sherif et al’s study can be accused of gender bias – as only boys were involved. Some would argue that, while growing up, girls are rewarded for co-operation while boys are rewarded for competitiveness and that 2 groups of girls might have produced quite different results”
Professor Stephen Reicher, principally a social psychologist, and a determined, informed critic of the British Government’s approach to public health (and to pretending Covid was no longer a risk by 2022); too whom the broadcast media often turned through the Covid crisis, is very good on the critical response to Milgram: “Working Toward the Experimenter Reconceptualizing Obedience Within the Milgram Paradigm as Identification-Based Followership”; ‘Perspectives on Psychological Science’, 7,4, (2012); pp.315 –324.
Yes I’m aware of the criticisms but I think the ways disparate groups in the UK had to band together to fight the Second World War demonstrates my point.
As I understand it – as far as I am aware the backsliding has not reached this area yet – the Labour Party is planning a significant investment in the NHS and significant recruitment of NHS workers. Those are jobs created by the government in towns and cities across the UK, right there. And all of those public sector workers will pay taxes, and buy goods and services which bear tax, so the net cost will be significantly less than the headline number. And many of the people who are treated and get better will do likewise, and we know the multiple for healthcare spending significantly greater than one so that again is stimulating economic activity, or if you like “growth”, which again returns much of the cost to the government in increased taxes. And so a virtuous wheel turns.
It beggars a belief that that message from the Labour Party appears to be “elect us with a majority so we can do nothing much with it”. Is that meant to be better than the disruption of the last four, eight, thirteen years? Where is their attractive vision of the future? How will they make life better in 2029 for the many not the few?
I wish I could answer that
Andrew says “ the Labour Party is planning a significant investment in the NHS and significant recruitment of NHS workers.”
I wish I could be sure of that. What I read is a pledge to drastically cut the waiting times. The cynic in me presumes it is more likely that they will delegate more work to the private health firms who are providing them with donations.
So, we are to be being given ‘capitalism with a human face’ like the moderates in the soviet ‘communist’ regime wanted to do ‘socialism with a human face’.
There are strange parallels between modern North American capitalism and old soviet ‘communism’.
Namely that both are totalitarian in nature. There is no real tolerance of other ideas in either – the Soviets banged up dissenters, the U.S. had McCarthy and liquidated (or planned to) left leaning leaders in countries all around the world.
And fascism got away with murder and its science lives on in all supposedly democratic countries from what I can see.
The other thing that occurs to me is that party political funding is now simply an open corruptive part of the democratic system – I mean in plain sight – bending policy to the will of markets. It’s obvious and we should not let up telling people what is going on.
I’m reading Larry Tye’s ‘Bobby Kennedy: The Making of a Liberal Icon’ – (2016) – it’s like a Damascene road trip, how a hot blooded anti-communist and all-American tamed his ardour and began to see the failings of the system in his own back yard, leading to what looked liked a promising politician.
There is a lovely quote on page 312 that sounds to me like a REAL political objective particularly at this moment in time (the younger Kennedy was quoting they think from a Greek playwright called Aeschylus as he spoke to a government department he was visiting):
‘Their task, he told them was “to tame the savageness of man and make gentle the life of the world”.’
If only!!
We cannot have a state that simply sanctions the exploitation of its people as much as we cannot have a state that essentially imprisons its people and curtails its freedoms. After all, what is the difference? I don’t see any.
“I have never thought myself to be a socialist. It is too materialist for me. I also see a serious role for private enterprise in any economy – so long as it sees itself as a part of and not superior to the role of society itself. But what I do not buy is the idea of the supplicant state implicit in Reeves’ thinking, where government is reduced to asking business owners if they might fulfil government wishes and maybe, if they really would not mind, pay a little tax as well”.
The ‘supplicant state’ thesis that Reeves has swallowed whole is what Neoliberalism wants people to believe; but even Neoliberalism knows better. The private sector does not provide leadership, and innovation is rarely first instituted by major corporations; their instincts are protectionist of what they have built, and is essentially monopolist. They cloak it in the language ‘markets’, as the totemic representation of competition; but competition is the last thing they want. The only market they are interested in is their own share price.
What the ‘supplicant state’ thesis really means is that public resources are transferred to selected private hands solely to enhance or protect established, monolithic monopolies; and wherever there is an industry sector that can only function with stability as a ‘natural monopoly’ (domestic energy, rail transport); for the state to scam the public by creating illusory, fake ‘markets’, and transfer the rights to monopoly profits to the private sector.
Only a non-supplicant state can stop it happening. The modern, digital age is notable for creating global monopolies in a scale never before seen. The US Government appear to be making some efforts to use anti-trust legislation; but far, far too late. Will Britain tackle monopoly? No.
Britain’s ‘supplicant state’ means we are now reverting to a new form of post-industrial, digital mercantilism.
A lot to agree with
I’ve never thought about socialism as being materialistic. It’s about sharing, not just material things but ideas, health, education, etc.
What’s materialistic about wanting everyone to have enough to eat or somewhere to live, enough money to buy clothes?
As once defined it was all about control of the means of production whilst it bought the growth in consumption idea, in my opinion. There is more to the organisation of society than that.
I see a difference between common ownership and control.
Common ownership is like cooperatives. Control is top down.
Although you just have to look at China’s highspeed rail and our HS2 to see that control can be useful sometimes.
What is Starmer’s true mindset? It would appear to be to view the role of the people’s democratically elected governments as that of a beggar state. Begging big business to distribute its largesse to continue allowing the state to play a role in the country’s society. Truly an inferior supplicant position lacking in self-respect and all based on Thatcherite monetary illiteracy!
“What is Starmer’s true mindset?”
It’s Thatcherite. He believes all the old myths:
❌Government finances are like a household budget.
❌Taxes pay for spending.
❌The private sector alone is responsible for investment
This is archaic thinking, unless he’s been bought:
❌Labour has received donations from private healthcare companies.
❌The London regional party at the Labour Party Conference is sponsored by a Buy Now Pay Later firm.
I too believe in a mixed economy and the essential role of the state to support this. The U.K. is a failing state and the next government (Labour?) will push it further over the cliff moving decision making away from parliament into the private sector. We live in a planned economy, the planning being done in the boardrooms of large corporations.
It could be so different for the majority of the population.
Your book, ‘The Courageous State’ and Bernie Sanders “It’s OK To Be Angry About Capitalism:’ are a beacon in a world where the lights of democracy, integrity and honesty are slowly being dimmed,
Thanks
22% of attendees at the labour conference are party members; 28% are businesses.
Starver’s party is not socialist either.
What are the other 50%?
https://i0.wp.com/skwawkbox.org/wp-content/uploads/2023/10/businesses-more-than-members.png?w=897&ssl=1
Thanks
On the ‘plus’ side, business are now taking the prospect of a Labour government seriously and are abandoning the Tories.
Maybe….
Alternatively,they just think this Labour leadership can be bought
Then its for Labour to have the courage to demand an appropriate ‘price’ and not kowtow.
Indeed
How many people would want Starmer and Reeves to negotiate an important personal/business deal in which they had a significant interest?
Rachel Reeves and Labour are not alone in holding these views – Kate Forbes, former Scottish Government Finance Minister and the SNP leadership (as well as a lot of SNP members) hold similar views. KF had an article in The National at the beginning of August arguing that we need to grow the economy so that we can achieve net zero. I felt compelled to respond with a letter to the editor the following day (which was published). Here is an extract from my letter:
“We simply do not have to “grow the economy” in order to find the money to pay for the transition to net zero. We will grow the economy by reallocating the resources we have available (labour, natural resources, technology etc) to the achievement of decarbonisation of the economy and our way of life. We cannot rely on private enterprise to lead the way. The private sector will play a vital role but only if the state fulfils its function of leadership in deciding how real resources should be allocated, including directing public spending towards investments in essential training, R&D/innovation and new infrastructure”
Agreed
Kate Forbes, along with Fergus Ewing is a well known Tartan Tory, and would be very happy with the Reeves agenda.
Mariana Mazzucato makes the point repeatedly in ‘The Entrepreneurial State” and “The Value of Everything” that public investment triggers and supports private sector innovation and development – and such as the i phone would not exist without the blue sky research the US government made into GPS, touch screen tech. etc.,
You don’t even have to resurrect Johnson’s support of Keynes’ justifying the overspend on the London Olympics through the multiplier effect.
The point is that in a mixed economy these partnerships exist.
Nor is there evidence that the ‘invisible hand’ ever allocates scarce and/or non-renewable resources efficiently. As for externalities.. forget it… The English water companies are a current case in point.
This is where state and supranational regulation and the leadership role comes into play.
Does anyone actually believe that the climate crisis might be averted, solved or ameliorated by private enterprise alone ? Has anyone even tried to make that argument ?
Another aspect of privatisation of national infrastructure is that it tends to create huge monolithic businesses (despite half-hearted attempts to introduce competition). Acting in their own self-interest, they can stifle innovation. This is the very opposite of healthy capitalism.
As an example, I was involved with a business which both relied on BT’s broadband infrastructure and was developing a higher-level product which was in direct competition with a planned future BT product. BT did everything possible to delay the roll-out of that competing product, including making promises about broadband roll-out which it then broke. This significantly slowed the growth of advanced Internet services in UK.
Penultimate line, change “change” to “chance”.
I think what you seek, is what I have always sought, and that is for the Government (the People) to control the COMMANDING HEIGHTS OF THE ECONOMY rather than the heights of the economy controlling the Government, as we have now, and will sadly have going forward with a Starmer Labour Government.
Have a nice Sunday..
Thanks
Just a typo – In your last para of an excellent piece: “business has no change” should read: business has no chance.
Thanks
Jeremy Corbyn was demanding socialism, and within a few % he nearly pulled it off when Labour leader in 2017. It’s a popular ideology.
Fair play to Reeves, she’s at least risking losing votes to express her beliefs, and this is a good indication that we can use what she has said to assess her.
Contrast that to politicians who say what’s popular – there’s no way of knowing if they’re speaking their own truth as they would say these things anyway to garner votes.
I do not follow your logic
Reeves is tacking right as she assumes she already has all available votes on the left
This ply is cyncial. Althouygh she may also believe what she says: she did work for the Bank of England, after all
Reeves shows every sign of being a product of her (orthodox) economics education combined with her time at the orthodox ‘madrassa’ that is the BofE. With no sign of recognising how that has failed over the last 30-40 years, leading to the multiple problems we face today.
One orthodox mantra that has not been mentioned is the idea that state investment ‘crowds out’ private sector investment. The private sector can and will invest in ways that create jobs but where significant scale is involved, they much prefer to see the state take the lead. It’s what Biden is doing in the the US and it’s a a big factor in what led to the growth in renewables in the U.K. (Happy to be corrected by Mike Parr…) State investment can ‘crowd in’ private sector funding. Though not in the add hoc bungs approach of the Tories.
Add to that the disinterest in todays City in genuine investment – preferring speculation and rentierism. Ask most SMEs about the struggles they have getting support from banks.
“In saying so, Reeves states a position normally adopted by the likes of the Institute of Economic Affairs. It is the argument of the economic right wing that all value is created by private enterprise. They also argue that all money is created by profit-motivated business. They also suggest that government action is a drain on private sector activity which it crowds out, and that as a result state activity must be limited in scope. All these ideas are obviously implicit in what Reeves had to say. I have no doubt she believes them even though there is not a shred of truth to any of them.”
One false idea that high government spending economies have lower growth (Growth in a Time of Debt by Reinhart & Rogoff refuted by Thomas Hendon ). Took their time getting to the point though by the “Uncharted with Hannah Fry” program on BBC radio 4 on Friday
https://www.bbc.co.uk/programmes/m001r1s4
Thanks
“The logic is so bizarre it is truly unreal.”
Exactly- Reeves forgets that an economy is what you get *after* you do things, not before.
I like to think of it as going on a quiz show, but refusing to answer any questions because you don’t have any points yet. But then I remember that if there’s one group of people uniquely skilled at not answering questions, it’s politicians.
Very good….
https://lowdownnhs.info/funding/problem-for-both-parties-as-nhs-cash-crisis-heading-from-bad-to-worse/
This is one of the first things the party should promise to do, to save the NHS. I am aware that a good few of them don’t want to as they are paid more by private healthcare companies than their MPs pay, but it’s time for the rest to stand up for the NHS.
Superb Richard!!! And very dissappointing.
undoubtedly such thinkers are stuck in the loanable funds myth.
“In the traditional loanable funds theory — as presented in mainstream macroeconomics textbooks — the amount of loans and credit available for financing investment is constrained by how much saving is available. Saving is the supply of loanable funds, investment is the demand for loanable funds and assumed to be negatively related to the interest rate.”
https://larspsyll.wordpress.com/2019/04/27/banks-are-not-intermediaries-of-loanable-funds/
The removal of clause 4 was like tearing the heart from the Labour Party, a bit like taking the 10 Commandments out if the Bible.
Hi Richard,
I wholeheartedly endorse this message, so thank you for putting it so succinctly.
I’m curious as to what you meant by the National Grid having prevented renewable energy? I must have missed that. I do have a friend who works for the National Grid though and they tell me that they are pulling their hair out because they’re being forced to deliver the commitments to renewable energy by 2030 etc only they’re not being allowed to build the necessary infrastructure to deliver it. Mostly, this is pylons, pylons, pylons and understandably no local authorities want them.
I’m not an economist, I’m a TV producer, but since I graduated into the financial crisis I’ve tried to read as much as possible to try and understand things better – this of course led me to you. It also led me to Mariana Mazzucato, who seems to advocate a very similar mixed economy approach to yourself. I loved Mission Economy. It strikes me that the National Grid problem is precisely because they are privately owned and so they can measure the costs of building pylons everywhere and want to keep doing it. But if the government was behind it, they could and more likely would be investing in finding an answer to the problem. How do we build this infrastructure without building pylons or digging up the entire of Britain for cables? What are the answers to these problems that we don’t already know?
And so this more of the same thinking from Labour is depressing me. I’m not sure I can vote, especially for my MP, Wes Streeting who is a twerp.
Keep up the good work!
Thanks
Re the National Grid the issue is simpoly conncting new supply: that can now take a decade. I do not believe they are doing all that is required.
Spot on. Reeves’s view is very similar to the pernicious idea that the public sector does not produce wealth, as if things like education and a healthy population were not forms of wealth! That in turn leads to the view, implicit in Reeves worldview, that the public sector is parasitic on the private sector, and that wealth can only take the form of money – or rather profit. Economic wealth at base is useful goods and services, whether provided by the public or private sectors.
“the public sector does not produce wealth … the public sector is parasitic on the private sector”
It’s the other way around. Private banks can only issue loans that must be paid back with interest. Money is redistributed upwards.
Only government can spend new money into the economy which becomes new wealth for someone. Government complains when this is public sector salaries and service, but private sector handouts are considered entitlements.
I live in Sweden although a Brit and have followed the development of Social Democrats here for many years. Social Democracy here believed that there was a tripartite coalition between private sector, labour and government. The role of government was to ensure that there was labour (educated, well-fed, happy, coming on time to with with pubic transport) for the private sector and the private sector would provide the good jobs, the role of labour was to organise to ensure the standards of workers were kept and that there was stability on the labour market.
Democratic Socialism – the far left – had the idea that private firms are not democratic and that the role of the private firm would be heavily curtailed to ensure that democratic and equitable distribution would prevail.
Now. Capital played dirty tricks on the Social Democrats. They murdered the Prime Minister (OK, conjecture on my part), lobbied for money creation to be the domain of banks and removed restrictions for the same, they ran and are still running a negative campaign against all things socialist via right wing, employer funded think tanks.
Capital pulled out of the tripartite agreement and the inequality of wealth and wages trend ensued so that Sweden is only next to Russia in the top-heavy number of oligarchs per citizen.
IMHO Capital cannot be trusted. Capital will always do what Capital does. It will water down Social Democracy to a point where the Social and the Democracy are mere shadows and run at Capital’s behest. The Swedish experience shows there is no negotiation.
Capital needs to be, like Pandora’s, put in its box and not allowed out. It needs an extremely hard zookeeper.
This is a shame as the power of the private enterprise to innovate and deliver is prodigious.
So I am not surprised that Labour is where it is. It is the product of info-fare and infiltration by capital.
However there is a good thing about it. Capital shows its face. When ordinary people see it enough they will reject it. Like a serial killer wanting to be caught, it will carry on abusing until it is stopped.
The privileges afforded by law to Limited companies, including the travesty we call share ownership and the ability to create money and have wage earners bid for houses many times more expensive than news replacement must be curtailed. The private firm owned by engaged individuals, the cooperative, can remain but the system that allows capital accumulation and limited liability must be dismantled.
God. Sorry for the rant.
A rant Steve, but a fair one.
And apologies – I read your name as Steve Hilton, he of Cameron notoriety, made more famous by the Stewart Pearson character in In the Thick of It. For an instant I thought that Hilton had made a rather dramatic switch in his politics!