The Strange Death of New Labour

October 4, 2010

Vast reams of paper and oceans of ink have already been spilled over the interplay of personalities during the New Labour years, and the conflicts and mutual loathings within the government of the period have already been well-chronicled. However, there’s another interesting story to tell, and that’s the intellectual journey Labour took over the period. I can only hope to briefly sketch it in the space of a single blog post, but the outlines themselves are interesting and have implications for the future of the party as a whole.

New Labour is intimately identified with the Third Way, the ideology espoused by Blair and Brown. Broadly, the thinking behind the Third Way is that the State can be a force for good, and is to be empowered to achieve moral goals, and is enabled to do so by the dynamism of the private sector, both in service provision and in the taxation of private enterprise. More bluntly, the social goals of the Labour Party are to be achieved by allowing the private sector to flourish and using its profits to fund the achievement of those goals. The moral justification for New Labour’s adherence to capitalism was given by the social goals it funded; the markets are moral inasmuch as they can be used to achieve the good.

It’s immediately clear that the ‘third way’ was not as much of a compromise between liberal capitalism and socialism as may otherwise have been perceived; rather, its focus was always on putting private enterprise at the service of the state. This results in something of a bizarre moral doublethink: “We will give you freedom to produce in order that we might enslave your product”.

The financial crisis has revealed this doublethink in harsh relief, and given a new edge to Gordon Brown’s claim to have ended boom and bust. This should not be interpreted as an ironic stupidity, as is often the case, but rather as a moral requirement for the New Labour project. If markets are moral inasmuch as they provide the wherewithal to achieve social goals, then if they fail to provide that wherewithal they cease to be moral. This explains the very emotive and moralistic language used by many on the left about the banks – they must be ‘made to pay’ for their mistakes, which impacted on their moral duty to produce profits. The problem is that this language fails to understand the real nature of the doublethink involved in the Third Way – while profits were acquired to achieve social goals, those social goals themselves were as a consequence enslaved to the markets. When they failed, so did the chance of achieving the moral ends at which the Third Way aimed. This is why the key intellectual conceit of New Labour was that the State could prevent boom and bust, that State intervention could halt the business cycle.

This was never going to be the case. There are multiple theories of the business cycle; I would advocate an approach which says that capital is plunged into new inventions and new fields until the potential profit from that invention is exhausted – but owing to poor information that limit is not identified by the people plunging in capital. In this sense, cheap credit is the ‘product’ that was overextended. However, none of those theories suggests that State intervention can make a difference – given the freedom to do so, people will continue to invest in exciting products regardless of the information available on expected rate of return. Economic freedom means that someone will always lose money. Putting the good of the most vulnerable in our society in hock to this process means that eventually they were always going to lose out too.

The problem for the left is that the exposure of New Labour’s intellectual failure leaves them with little room for intellectual manoeuvre. We can chart the progression of more and more limited aspiration; from the Marxist notion of direct ownership of the means of production by the workers, through the state socialism and ownership of key industries by Labour in the 70s, and the socialisation of the products of the market by New Labour. With each step, the domain of conflated economic and moral values grows smaller and more limited, and the scope for achieving social goals decreases. This is the steady impact of economic reality on the socialist project, which was always about trying to achieve moral ends through economic means.

This is why the Labour Party were right to reject David Milliband; the heir to Blair could only ever espouse an ideology that had already failed. Ed Milliband may yet herald the final division of Labour between the special interest groups of the unions and the state-backed moralism of the Fabians; the creed of the latter has few other places to go than towards a liberalism viewed from above rather than below. It was always the economic means of achieving their moral goals that the unions represented to the Fabians; and the likelihood is that the unions will overplay their hand over the next few years. A reconfiguration of Labour away from a broad moral consensus into a more narrowly focused political arm of the trade union movement seems likely, as the only intellectual space left open to the left is to accept the vagaries of the business cycle and to aim to achieve social goals regardless. At this point, their interests and those of the unions begin to diverge – even more so than under New Labour. I would not be entirely surprised to see a new centre-left party forming as a consequence, to accommodate disaffected Liberal Democrats and ex-Labourites turned off by the militancy of the trade union movement.

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