Archive for April, 2013

An Alternative Economic Strategy

[Note: this was written in June 2012 for the Labour Left’s Red Book Vol.2. This publication does not appear to have come out and shows no sign of doing so. Figures are slightly out of date now. Please also note that it was written for a particular audience and I’m much less confident about the possibility of a left-wing Labour government than I may appear to be in this piece!]

It must be clear now to all those with some grip on reality that George Osborne’s austerity strategy simply isn’t working. The most recent figures show that the UK economy has slipped back into recession with two consecutive quarters of negative growth (-0.2% in the last quarter of 2011 and -0.3% in the first quarter of 2012). These figures in isolation, furthermore, do not tell the full story about the dire circumstances in which the British economy languishes. As Paul Krugman has pointed out, since the crash of 2008 the UK economy has fared worse than it did even in the 1930s at the time of the Great Depression.[1] It’s not just in Britain, of course, that austerity has clearly failed. The dreadful economic and social consequences this strategy are plain to see in countries like Portugal and Spain – and, at their most extreme, in Greece.

Thankfully an economic and political alternative, spear-headed by the new French President, Francois Hollande, is emerging in Europe. In Britain, however, the Labour leadership still remains wedded to a remarkably timid critique of the government’s austerity programme. It is true that Miliband and Balls insist, like Hollande, on the need for growth, but their criticism of government policy hinges on the idea that the coalition is cutting ‘too far, too fast’ . In other words the Labour leadership do not reject austerity as such – they call, merely, for a less vicious version of the coalition’s programme of cuts.

As I have pointed out elsewhere[2], it is interesting to compare the timidity of Labour Party thinking today with the relative ambition and creativity of party thinking during the last period of economic downturn. During the crisis of the 1970s a collection of figures and groups clustered around the Labour left produced a radical, left-wing programme for economic recovery – ‘the Alternative Economic Strategy’, or AES.  At the heart of the AES was the idea that a well-designed programme of state driven investment could not only stimulate growth and thus provide a solution to the pressing, immediate problem of economic stagnation but could also combine this with a longer-term, fundamental restructuring of the economy in the interests of the vast majority. As I hope to show here, some elements of AES thinking provide useful resources for the construction of a socialist alternative to austerity today.

In what follows I outline the nature of the current economic crisis and explain how it emerged from longer-term trends and developments. I then specify a series of possible measures and policies which could be implemented as part of a programme for recovery and socialist change, drawing especially on the resources provided by the AES.

The Crisis

The Tory-Lib Dem government usually claims that the crisis was caused by ‘profligate’ public spending under Labour (although how exactly spending on schools and hospitals in the UK precipitated a global crisis is never quite explained) – and, closely bound up with this is the idea that the key pre-requisite of economic recovery is slashing of ‘unsustainable’ public debts and deficits.  These claims are nonsense. For one thing, as Reinhart and Rogoff have concluded from a detailed study of 44 countries over 200 years, ‘the relationship between government debt and real GDP growth is weak for debt/GDP ratios below 90% of GDP.’[3] The UK’s gross public debt at the end of 2007 (i.e. before the financial crisis took hold) stood at less than 50% of GDP – which, incidentally, was far lower than the average across the Eurozone and the OECD and 10% lower than Germany’s public debt/GDP ratio.[4]  For another thing, as James Meadway points out, the ‘UK’s most sustained period of economic growth, over the post-war boom, was a period of exceptionally high public debt.’[5] Both the public debt and deficit shot up after the onset of financial crisis and recession, but the direction of causation is immediately obvious here – the coalition’s claim that sharp rises in public debt and deficit precipitated the crisis is, in fact, to get things back to front.

Whatever else they may be, the coalition leadership is not stupid and the political narrative they have settled on in relation to the debt and deficit is certainly not simply a misunderstanding on their part – the claim that the crisis stems from fiscal profligacy and that, therefore, the solution is to roll back public spending is a deliberate falsification designed to smooth way for, and to justify attacks on, the public sector and the welfare system. This is an objective to which, of course, many Tories (and Orange Book Liberals) have long been committed. The Tory-Lib Dem narrative, however far from the truth it may be, has been enormously successful and has now, indeed, attained a sort of hegemony within popular and media discourse, largely framing the terms of mainstream debate in relation to the recession and austerity. Like many such hegemonic ideological strategies, the narrative has an uncomplicated, simple to grasp core message – that the recession was brought on by the last government ‘spending too much’ – which can be propagated with ease through endless repetition in the Tory press and in political sound-bites. The degree to which this simplistic narrative has been successful in shaping popular understanding of the crisis can be appreciated when you look back at how far the terms of mainstream debate have shifted since the onset of the financial crisis. In the initial stages of the crisis, popular anger was directed at the banks and media stories in relation to the financial crisis tended to highlight ‘irresponsible risk taking’, ‘greed’ and so on, on the part of bankers. Then, relatively abruptly, in 2009/2010, the blame shifted from the financial system to public spending – this was the point at which the neoliberal right, which had initially been stunned and disoriented by the crash, started to gather its wits and formulate the ‘fiscal profligacy’ narrative which now dominates political and economic discourse. The apparent ease with which the banking crisis was smoothly and seamlessly transmuted, in the popular imagination, into a crisis of public finances bears witness to perhaps one of the most brilliantly effective ideological manoeuvres in recent political history.

Widespread popular acceptance of the notion that public spending somehow caused the crisis helped to prepare the ground for Osborne’s austerity programme. As a political strategy to provide ideological cover for an assault on the public sector, this has so far proved fairly effective (as the 270,000 public sector workers sacked last year can attest). As a strategy for economic recovery, however, austerity is failing miserably and is, in fact, making the economic situation much worse. As Meadway explains, there ‘is a simple mechanism at work’[6] here:

Cuts in government spending shrink demand in the economy. As demand shrinks, firms sell less. Firms that sell less cut wages and make redundancies. Demand falls still further, and a vicious circle of decline is established. Cutting spending to reduce a deficit leads to bigger deficits as unemployment rises and taxes fall. Austerity is self-defeating.[7]

As Meadway points out, this is the sort of ‘death spiral that helped define the Great Depression’.[8] The austerity mongers of today have simply disregarded one of the biggest lessons of the 1930s which is that governments need to stimulate demand in times of economic crisis, not suffocate it.

The core, defining feature of the recession today is indeed a major crisis of demand and, intimately bound up with this, a serious deterioration in ‘business confidence’ in future growth prospects. Private sector investment has collapsed – investment by firms is down by about £48billion from its 2008 peak[9] – but there is no shortage of liquidity or savings in the economy. Indeed, the Financial Times recently reported that ‘companies globally are awash with cash’ and that UK firms, specifically, are sitting on an estimated £750 billion.[10] As Burke, Irvin and Weeks amongst others have noted, ‘No sustained recovery can take place without breaking this pattern’[11] – and since the private sector is unwilling to invest, the public sector must take over this investment function. The situation calls, in other words, for a classically Keynesian stimulus strategy of state driven investment to boost demand and thus, in turn, to boost ‘business confidence’.

Nevertheless it is important for the left to go beyond calls for a Keynesian type stimulus. Keynesian inspired social democratic analyses of the crisis tend to argue that it was brought on by the inherent weaknesses of the particular model of capitalism that has been dominant for the last thirty or so years – neoliberalism – and the process of ‘financialisation’ that has accompanied it. The call, from these quarters, essentially, is for the reining-in of finance capital and for a return to the much more strongly regulated, mixed-economy, model of capitalism that characterised the pre-1970s post-war order. But this analysis does not take adequate account of the deeper, systemic determinants of the crisis. It is also far too optimistic about the capacity of the planet to absorb for much longer a return to high rates of growth in consumption. We need to develop a better grasp of the longer-term and systemic determinants of this crisis and a better appreciation of the limits to further growth which make any attempt to return to ‘business as usual’ on the part of capitalism hugely problematic.

Delving deeper

The current crisis represents the breaking down of a series of temporary solutions to a major crisis of capitalism that emerged in the 1970s. In effect, the international economy has gone full circle and returned, after a few decades of (largely debt-fuelled) growth based on various temporary fixes, to the relative stagnation in which it languished around forty years ago. In order to understand the crisis today, then, we need to examine the development of the global economy over the past few decades.

Robert Brenner[12] has shown that the advanced capitalist economies entered a crisis of profitability at the end of the 1960s. Indeed, according to Brenner, these economies have suffered from relatively low rates of profit ever since. The reasons for this are disputed – various explanations have been put forward. These are complex and I cannot set them out here. Nevertheless, one determinant is clearly capitalism’s tendency toward overaccumulation of capital.  The logic of capitalism is one of perpetual accumulation – capitalists are forced, under pressure of competition, to recapitalise and reinvest in expansion a proportion of the surplus they produce. The corollary of accumulation at the level of the firm is, at the aggregate level of the economy as a whole, economic growth. The volume of capital flow must constantly increase. If capitalists encounter blockages in this process – if they fail to expand the volume of surplus they produce – the effect must be that they run into severe problems. At the level of the economy as a whole, absence of growth brings recession or depression.  All of this requires, of course, that new profitable outlets for investment are found so that the surplus can be absorbed and accumulation can continue. Overaccumulation of capital – lack of profitable investment opportunities – lies at the root of capitalism’s crisis tendencies. One major reason behind the crisis of profits that emerged in the late 1960s, then, was that firms encountered increasing constraints on opportunities for profitable investment as the post-war boom (founded, amongst other things on the opportunities opened up by the massive destruction of capital in the war and by post-war reconstruction) petered out. The effects of this can be seen in the marked slow-down in rates of growth from the 1970s onwards compared to previous decades (the average rate of annual GDP growth in Western Europe from 1950-73 was 4.79%, while from 1973-03 it averaged 2.19%).

Capitalism responded to this crisis in several ways. It sought to ‘go global’ in order to seek out cheaper pools of labour and to open up new investment opportunities abroad. Under Thatcher and Reagan especially, it launched an assault on trade unions and pushed up unemployment in order to weaken organised labour and drive down wage costs at home. Finance was also, increasingly, deregulated in order to soak up excess capital looking for profitable outlets. Some of the initial solutions, however, soon created further problems for capital. Repression of wages, of course, drove down workers’ spending power and thus reduced the rate of effective demand. Capital’s solution to this problem was to extend the credit system and to ramp up debt-fuelled consumer spending. This strategy intertwined with wider moves to deregulate finance and with the rapid acceleration of ‘financialisation’. Credit-fuelled consumption, together with asset price inflation drove growth for a while. However, this solution, in turn, eventually became the source of serious problems for capitalism because it ‘ultimately led to working-class over-indebtedness relative to income that in turn led to a crisis of confidence in the quality of debt instruments’.[13] The crisis that emerged in the US ‘sub-prime’ market brought into full view the extent to which major financial institutions had become perilously overextended and, indeed, the extent to which growth had been reliant on ballooning of debt.

What we saw, then, from the 1970s onwards was a series of temporary fixes to a deeper structural problem in which each fix raised further problems that had, in turn, to be temporarily solved with further fixes. Indeed Capitalism, as David Harvey points out,[14] never really resolves its crisis tendencies – they are merely shifted around, postponed and held off. Capitalism finds a way of overcoming one crisis only to discover, sooner or later, that the terms of this solution, in turn, throw up new problems which develop into a new crisis. As all of this suggests, crisis is inherent to capitalism. Crises are not anomalous events, deviations from the ‘natural’ or normal functioning efficiency of capitalism. They are part and parcel of the logic of the system. They stem from capitalism’s systemic imperative – perpetual accumulation (for accumulation’s sake) under the pressure of competition.

Further, Harvey suggests that capitalism may well find it particularly difficult to find its way out of this crisis and get back to adequate rates of long-term growth.  Capitalism, he suggests, is running into serious constraints in relation to the ‘capital surplus absorption problem’ and this, indeed, is a key problem underlying the current crisis. It is generally agreed, as Harvey points out, that a ‘healthy’ capitalist economy must expand at a rate of about 3 per cent per annum. This means, of course, that more and more capital surplus must be absorbed – more and more profitable investment outlets for this growing surplus must be found every year.  In 1950 global capitalism needed to absorb $0.15 trillion in surplus capital, in 1973 it needed to find new outlets for $0.42 trillion and, if we are to return to 3 per cent compound growth today, $1.6 trillion in surplus capital would need to be profitably invested. If sustained growth returns the world economy will need to absorb some $3 trillion in surplus capital by 2030.[15] This, Harvey remarks, is ‘a very tall order’.[16] The depth of the current crisis may well be a reflection of this problem.

It is worth noting that ‘financialisation’ represented a response to very real pressures on profitable accumulation – it was a way of soaking up excess capital given the weakness of profitability in the productive sector. The deregulation of the financial markets and the concomitant extension of credit and debt did not simply represent, as social democratic and Keynesian theorists tend to suggest, an ideologically driven, bad policy choice on the part of neoliberals. A solution to the problems we face then, cannot be as simple, as some sort of return to the post-war ‘Keynesian consensus’ in which financial regulation is tightened up and the financial markets put back in the box from which they escaped after the 1970s. The real structural pressures to which ‘financialisation’ was a response are still there and remain unsolved.

One of the biggest problems humanity currently faces is, of course, the looming ecological crisis. There is an overwhelming consensus amongst climate scientists that the planet cannot absorb the huge amounts of CO2 currently being pumped out into the atmosphere for very much longer without triggering irreversible climate change. Furthermore, human activity since industrialisation has had a hugely damaging effect on the Earth’s biosphere as a result of demand for ever increasing amounts of food, water, mineral resources, fossil fuels, timber and so on – and this destruction is continually accelerating. Massive deforestation, pollution, destruction of entire ecosystems and species extinction are some of the effects. This ecological crisis is largely driven by capitalism’s insatiable need for expansion. The logic of perpetual accumulation for accumulation’s sake compels capitalism to plunder more and more of the planet’s resources, burn greater and greater quantities of fossil fuels and fill the atmosphere with more and more CO2. It is surely clear, however, that infinite growth on a planet with finite resources is a logical absurdity. We are approaching the point at which the planet can no longer support ever increasing rates of consumption – and thus we are approaching the point at which the economic system becomes wholly incompatible with ecological sustainability.

We have seen, then, that the current crisis is the latest (and most serious) of a series of crises that have plagued capitalism since the petering out of the long post-war boom and stems from a major underlying structural difficulty – chronic overaccumulation of capital. We have also seen that financialisation and neoliberalism represented responses to real pressures on profits on the part of capital – these processes were not simply ideologically determined choices on the part of political leaders. Given all of this it is difficult to see how a stable, long-term solution to the current crisis can be found within the confines of the current system except through massive destruction and devaluation of overaccumulated capital (letting unprofitable firms and banks go bust) to restore the rate of profit – but this would be a dangerous strategy which would almost certainly involve a prolonged serious slump. Further, we have also seen that the planet is, anyway, unable to support for much longer any return to perpetually accelerating growth in consumption – capitalism is simply incompatible with ecological sustainability. So while, in the short term, a public spending stimulus is needed to drag the economy out of the immediate crisis of stagnation and to get people back to work we also need to develop plans for massive structural reform of the economy so that we can begin to shift society towards a new economic model which is ecologically sustainable and governed by the priority of satisfying democratically determined human needs rather than by the insatiable and destructive drive for profit.

Back to the AES

The AES was formulated in broadly similar economic circumstances to the ones we are in currently. The basic thinking behind the strategy centred on the notion that the crisis then could be ‘resolved’ in one of two general ways – in the interests of big business and the wealthy or in the interests of ordinary people. The first kind of ‘resolution’ would involve an attack on wages, the labour movement, the public sector and the institutions of the post-war consensus (and this, indeed, was the way things worked out with the coming to power of Thatcher). The second, alternative route, however, would involve a ‘resolution’ of the crisis in such a way that would produce a much more egalitarian and democratic society. For more radical variants of the AES, this second route would entail the beginnings of a transition to socialism rather than to a beefed-up version of the post-war mixed economy system. Most variants of the AES shared all or most of the following key elements in common:[17]

  • A major policy of expansion to stimulate growth and reduce unemployment based primarily on increases in public spending
  • A democratically determined national economic plan which would identify national macroeconomic priorities and coordinate these with planning at the level of the firm
  • Nationalisation of major financial institutions
  • Stringent controls on international capital movements
  • A National Investment Bank to channel financial resources in line with strategic national economic priorities
  • An industrial strategy based on extended public ownership of key firms and statutory planning agreements with large private firms
  • Powers to control prices and imports
  • The democratisation of the economy through the involvement of trade unions in the planning process and through introduction of industrial democracy in nationalised industries
  • The radical redistribution of income and wealth through for example a steeply progressive tax system

At the core of the AES, then, was a plan for the massive reflation of the economy, which it was hoped would pull the economy out of recession and increase employment – but this public spending stimulus would be harnessed in such a way that would lead to major restructuring of the economy and to radical social transformation. In particular, power would be shifted away from big business and big banks and a strong measure of democratic control would be asserted over the economy. This was a serious response to the crisis of the 1970s which sought to find a radical, socialist resolution of the problems it was clear that the social democratic form of Keynesian demand management that had characterised the ‘post-war consensus’ could not deal with – and which was spurred on by the realisation that if a left-wing route out of crisis was not found, the free market right were waiting in the wings to unleash their own brutal form of resolution.

In some ways we find ourselves in a similar situation today. We are in a deep crisis and it is clear that the policies of economic management that have characterised the past few years – (tacitly) based on credit fuelled growth and asset price inflation – are simply not viable anymore. We face a free market right insistent on austerity which, as it becomes clear to them that their current policies are not working, is likely to turn to even more vicious measures. Beecroft’s recent proposals on labour market ‘flexibility’ are an early indication of the sort of route they are likely to go down – attempts to dilute or remove important workers’ rights and force down wages. We desperately need to assert a left alternative and it seems to me that the AES provides some useful resources for thinking about the kind of programme that might be needed. Of course, I am not going to suggest that the AES could be transplanted wholesale into current circumstances. Clearly it was formulated in a specific conjuncture and there are parts of it that would not be appropriate or relevant today.  Nevertheless there are elements of AES thinking that we can draw on.

An Alternative Economic Strategy for Today

As we have seen, the only way to break out of the current spiral of decline is to end austerity and to boost growth through raising demand. A socialist economic strategy would begin with a massive stimulus package financed through public borrowing. Such a programme should more than pay for itself (and, further, help to reduce the accumulated debt) through the kick-starting of economic growth and thus the generation of increasing tax revenues and the lowering of unemployment benefit payment costs. Furthermore, restructuring of the tax system – stamping out tax avoidance, implementing a robustly progressive income tax regime in which the wealthy and the super-rich are required to pay their fair share and the implementation of a land value tax together with a ‘Robin Hood tax’ on the banks and perhaps a ‘Tobin tax’ on international currency transactions (though the latter would require international coordination) – would raise enormous funds to cover government investment.


Direct government spending is not the only way to deliver an economic stimulus. As we’ve seen one of the AES policies was for the utilisation of a National Investment Bank. Indeed such an institution has been proposed by several commentators today as a means for addressing the current crisis. Burke, Irvin and Weeks, for example, propose that a National Investment Bank could draw directly on the financial resources of the part-nationalised banks (the government still owns 83% of RBS and  41% of Lloyds-TSB) to invest in sectors of the economy prioritised by the government.[18] Such an institution, further, would be able to raise large funds from private capital markets.

This spending would be carefully and strategically targeted – investment would be designed to kick-start more sustainable growth, create jobs and to reorient the economy away from its excessive reliance on the financial sector and debt-fuelled consumption toward more productive economic activity. Priority areas for investment should include investment in green, low-carbon infrastructure – particularly in transport and in energy. The UK has long suffered from low rates of investment in public infrastructure and a major investment push to bring it up to international standards would generate jobs and growth. One of the major areas for investment should be renewable energy based on wind, wave and solar power which would radically reduce carbon emissions and also create jobs in manufacturing, construction and engineering. A major scheme to make existing homes and businesses more energy efficient would also generate considerable employment and help to reduce the national carbon footprint still further. In addition, a publically funded project to build new, affordable and energy efficient houses would create still more jobs.

In addition, government policy should include a strategy for the managed downsizing of the financial sector. The authors of the ‘Green New Deal’ have put forward some useful ideas in this respect.[19] They suggest, for example, that tighter controls on lending and credit creation are introduced. This might include the reintroduction of stringent ‘fractional reserve requirements’ on private banks. They propose the forced demerger of large banking and financial groups and (bound up with this) the separation of retail from investment banks. They suggest that all derivative products and other exotic financial instruments should be subjected to strict regulation – only products approved by government would be allowed to be traded. Further, they argue for the imposition of robust capital controls to allow the state to exert control over the national inflow and outflow of capital and thus restore some measure of ‘policy autonomy to democratic government’[20] in the face of otherwise destabilising international  financial movements. Coupled with the channelling of investment – perhaps via the National Investment Bank – into manufacturing production and research and development, measures like these would help to rebalance and restructure the economy away from over-reliance on the financial sector.

The sort of programme outlined above incorporates, or at least echoes, some of the policies that went to make up the AES of the 1970s and early 1980s. Though the AES was associated with the left of Labour there is no reason why the programme I have just described could not be implemented by a ‘moderate’ left-of centre party committed to mildly social democratic objectives – there is no reason, given the seriousness of the current crisis, why the current leadership of the Labour Party could not commit itself to a similar set of policies without too much trauma. If we on the left, however, want to go beyond a sort of green ‘muscular Keynesianism’ toward a programme for the far-reaching democratisation of the economy and for a transition toward an economic logic based primarily on production for need rather than for profit – as, indeed, I suggested is necessary given the scale of the ecological crisis we face, given capitalism’s inherent tendency towards crisis and given the deep structural crisis of capitalism currently which is likely to place severe limits on growth over the long-term (though growth via stimulus is certainly possible, we are unlikely to repeat the experience of the decades long post-war boom before slump sets in again) – we will need to push, in addition, for measures resembling the more radical components of the AES.

A more radical programme would include, in addition to the above, nationalisation of major banks and financial institutions under democratic control and the bringing into public ownership under democratic control, too, of a string of industrial firms. Taking a large proportion of the financial sector into public ownership would allow financial resources to be allocated according to social, ethical and environmental criteria. Similarly, the nationalisation of industrial firms would allow their activities to be oriented increasingly towards socially useful and environmentally sustainable production. Furthermore the bringing into public ownership of much of the heavy manufacturing and engineering sector would help to facilitate the major, coordinated industrial restructuring and research and development investment that would be necessary for the design and construction of a green national energy infrastructure. As advocated by the architects of the AES, our socialist strategy could include the development of compulsory planning agreements between the government and large private firms. These planning agreements would allow the government to secure major firms’ compliance with national strategic economic objectives. The planning agreements system would also be designed to allow access to information on major private firms’ investment plans, product development, import requirements and so on which would help with the identification and modification of national planning objectives.

Radical forms of collective democratic management and workers’ control could be explored within nationalised firms. Furthermore, as proponents of the AES suggested, trade unions and worker delegates could be involved in the formulation of planning agreements alongside government representatives and employers in order to democratise, to some extent, planning in private firms. Democratic planning at the level of the firm would be integrated into a wider, national system of planning. Broad, strategic macro-economic parameters would be decided at the national level – perhaps on the basis of a series of alternative plans drawn up by planning experts which could then be voted on by the population as a whole or by democratically elected national representatives. Within these established overall guidelines the details of the national plan could then be progressively filled out on a decentralised basis – at a regional and local level, and also at an industrial sector and production unit level – on the basis of democratic deliberation, negotiation and majority voting. Workers’ councils within nationalised industries under democratic control, for example, would be responsible for the day to day running of their firm but would manage productive activity within the planning framework elaborated democratically at, for example, sector, local, regional and national levels. Of course, democratic planning and control should not be confined to the narrowly ‘economic’ sector. The entirety of the public sector – the education system, welfare system, NHS and so on – should be opened up to collective, democratic and participatory forms of management.

The basic aim of such a radical strategy would be to introduce a socialist logic to the functioning of the economy (and society more widely) that would help us begin to break with the logic of capitalism. As ordinary people, through experience of democratic planning, became more confident in their capacity to make investment decisions and organise production and so on collectively, this logic could be progressively extended to encompass the entirety of the economy.[21] Of course, different kinds of socialists will have different views in relation to whether and to what extent such a process of socialist transition could be a smooth and gradual one. Many would argue that, sooner or later, such a process of transformation would encounter intense (and structurally embedded) forms of resistance from capital that would necessitate a choice between retreat and complete reversal of socialist reforms or, alternatively, a swift and radical break with capitalism. But socialists of many persuasions could agree on something like the package of reforms described above as at least a way of starting a process of socialist transition – whatever shape we think such transformation must take eventually. It is also worth pointing out that such a strategy would depend for its success on the existence of friends and allies implementing similar processes of transformation abroad. Certainly a country attempting to go it alone with such a strategy would – at least beyond a certain point – find itself hopelessly isolated in the face of hugely powerful international economic and political forces. But socialists have long known that socialism must be international if it is to exist at all.

Of course it might be objected that it is very difficult to see how a radical strategy such as the one described above could ever even come on to the political agenda, let alone be implemented, in the UK. Making this objection, however, would be to underestimate the depths of the current crisis and the potential for a further very drastic worsening of the international economic situation. At the time of writing, the Eurozone is teetering on the edge of collapse – which threatens to plunge us into another acute financial crisis at least as serious as the one that hit in 2008 and, perhaps, an extremely serious global slump. Even if this nightmare scenario is avoided, the international economy looks set for years of stagnation or low growth – especially if the architects of austerity continue to have their way. This means years of growing unemployment and increasing hardship for many. It’s in these conditions that socialist ideas are likely to gain more and more traction – but only if the left is prepared to think big and articulate clear and ambitious solutions appropriate for the enormity of the problems we face.  I’ve suggested, here, that some of the ideas developed amongst the British left during the last major economic downturn – the ideas that went to make up the AES – provide valuable resources to help us in relation to this task.

[10] Lex, ‘UK corporate tax: a missed opportunity’, Financial Times, 12 March 2012

[12] Brenner, Robert (2005) The Economics of Global Turbulence (London, Verso)

[13] Harvey, David (2010) The Enigma of Capital: And the Crises of Capitalism (London, Profile Books), p. 117

[14] Ibid. p. 117

[15] Ibid, pp. 26-27, p. 216

[16] Ibid, p. 27

[17] This summary of the AES’s key features follows quite closely, but is not identical with, the summary provided in Conference of Socialist Economists London Working Group (1980) The Alternative Economic Strategy: A Response by the Labour Movement to the Economic Crisis (London, CSE Books), p. 6.

[20] Ibid, p. 24

[21] A detailed model of a democratically planned economy is set out in Devine, Pat (1988) Democracy and Economic Planning: the Political Economy of a Self-Governing Society (Cambridge, Polity).


The Current Conjuncture in Britain on the Left: Toward Left Unity

First published on Left Unity March 25 2013

For the first time in a long period the conditions for the emergence of a broad left coalition of forces in the UK capable of attracting large-scale support seem ripe. These conditions have been generated and shaped, in my view, by four major interconnected political and economic developments. These developments themselves comprise a series of intertwining factors, some of which are best conceptualised as ‘structural’ and some of which pertain to a more subjective sense of possibility among people on the left.

The first and most obvious of these is economic crisis and austerity. This has posed in very immediate terms the question of how best to defend jobs, living conditions and the reforms and concessions in relation to healthcare, education and welfare won in struggle decades ago and which are now being stripped back in a determined assault. But it has also posed the question, again in immediate terms, of whether or not our current economic system is, in fact, compatible, over any prolonged and sustained period, with decent welfare provision and conditions of life and work for the majority – whether or not recession and government attempts to roll back social reforms won in previous phases are predictable, cyclical features of capitalism. However you answer this second question you are forced to confront further questions: how best to push back capital’s war of attrition against welfare (which has been a feature of international capitalism for the last 35 years or so – austerity is simply the intensification under conditions of acute crisis of longer term tendencies) and impose some sort of renewed post-war social democratic settlement, or how best to go beyond capitalism itself and build a more democratic, humane and sustainable alternative.  The crisis and austerity that is, confronts us with fundamental and pressing questions in relation to organisation and strategy. It is in this context that the idea of the construction of a new organisation of the left has been put firmly on the political agenda.

The second development is closely meshed with the first and is that it has become painfully apparent to many of the Labour Party’s erstwhile supporters and activists that Labour is not an effective political vehicle for the organisation of resistance to austerity (let alone for the implementation of a counter-offensive against capital). Of course, many socialists will never have had much faith in Labour’s capacity for seriously and radically advancing the interests of working people – especially in the context of economic crisis when capital’s demands for wage repression and ‘labour discipline’ for example become much more pressing on states – but recent developments have shaken the faith of many more people who previously were prepared to give Labour the benefit of the doubt, or to hope that it might be reformed and won to a more left-wing perspective from within. Ed Miliband’s rapid dash to the right on issues like immigration after his victory in the Labour leadership election of 2010 as the putative candidate of the left (those horrified ‘Red Ed’ references in the tabloid press seem absurd, indeed, quaint now in retrospect) was a big disappointment to many of the party’s activists and supporters. More recently, we’ve seen and heard Ed Balls say that Labour would be ‘ruthless’ in power about cutting public spending and Jon Cruddas claim on Newsnight that ‘food banks are here to stay’ even under a Labour government – indeed that the emergence of food banks across the country is a ‘positive development’. Add to this the grotesque spectacle in the past few days of the Labour front bench refusing to oppose government proposals for removing the right to strike for Home Office employees and, further, party leaders putting pressure on Labour MPs to abstain in a vote on a crucial ‘workfare’ bill and it must be obvious to all but the most blind that Labour is just a lost cause for the left. There has, I think, over the last few weeks and months been a pronounced acceleration of a longer term process of disillusionment on the part of Labour’s core supporters and activist base and, correspondingly, a growing willingness among many of them to countenance the prospect of leaving Labour to join a new organisation – in particular, the Left Unity initiative.

The third major factor shaping this new political conjuncture in the UK is an external one – the international influence and prestige of Syriza (and perhaps, to a lesser extent, the Front de Gauche). The Syriza phenomenon has demonstrated that it is possible for a coalition of fairly disparate left forces to win mass support with a clear anti-austerity agenda and to win such support very rapidly. More than this Syriza have shown that it is possible, not just to build up and organise a mass movement of resistance to austerity, but also to challenge seriously for power.  Of course the specific economic and political conditions of Britain and Greece are very different – most obviously the crisis is much more acute in the latter – and so we cannot think that Syriza provides a ready-made organisational/strategic model which we can somehow transplant wholesale into the UK. Nevertheless it does provide us with useful lessons and guidelines. Perhaps the most important dimension of the Syriza phenomenon, however, is its morale-raising effect. Socialists across Europe are looking at Syriza and, for the first time in a very long time, are thinking, ‘My God, we really can challenge for power and we really can win!’ The psychological impact of this should not be underestimated.

The Syriza effect interacts with and strengthens the second development mentioned above – the loosening of Labour’s political hegemony – further contributing to the sense among many of its erstwhile supporters and activists that that it is possible to build an effective political force to the left of Labour. It has also contributed a renewed sense of possibility among more radical left groupings. Not least Syriza has convinced many radicals used to working in small, relatively isolated groups that in fact the reformist and revolutionary left can work together effectively in a common organisation which is characterised by democracy, pluralism and a culture in which it is accepted that not all political differences can, will or need to be resolved into a common ‘line’ in order for the coalition to operate successfully:  the kind of organisational structure/culture that Simon Hardy has described in terms of ‘dynamic tension’.  The Syriza effect, then, has encouraged a broad range of people on the left to start thinking seriously and with confidence about building new alliances, and, moreover, to act on this sense of possibility.

There is a fourth development which closely interacts with the third. This is the recent partial implosion of the SWP. Whatever you think of recent events in that party (and I’m in no position to comment knowledgeably on them, so I won’t try) the SWP bust-up has clearly shaken up the political landscape on the radical left, loosened the SWP’s erstwhile hegemony over that terrain and thus put things substantially in flux. I would certainly be against taking a sectarian or hostile approach to SWP members (and there is, I think, some danger of this at the moment) but I also think it’s true that the recent splitting and weakening of the SWP has had at least one positive effect in that it has opened up a new space for realignment among radical left forces and the left more widely. In the context of, and in interaction with, the Syriza effect discussed above this has created a very promising and exciting situation for building a new, broad coalition.

These then are, in my view, the main developments that, in intersection and interaction, constitute a new conjuncture on the UK left – one in which a significant and lasting realignment of forces has become a definite and realistic possibility. The conjuncture poses big questions for us all. The main one, of course, is the question of the organisational form that a new coordination of forces should take. This question can only be resolved finally in practice and part of the very process of realignment will be to experiment with forms of organisation and coordination – a settled structure can’t be imposed at the outset, but must be allowed to emerge more or less organically.

Nevertheless, three broad models so far seem to have emerged, at least in embryonic form. These are by no means entirely mutually exclusive models – but they do have important differences of emphasis which would take the emerging movement off on divergent trajectories of development should any of them become dominant.

The first of these is what we might call the ‘Owen Jones model’. In a recent article Owen made the entirely welcome and valuable call for a new ‘networked movement of the Left’ which would encompass activists from both within and outside the Labour Party. Owen is quite clear however that he does not favour the establishment of ‘yet another party of the Left’ and argues that the main task of the networked movement would be to put pressure on the Labour Party in order to force it to the left. While I believe that the general strategy of building a mass movement in order to push sympathetic political representatives in parliament and government to the left and in order to hold them to their promises is right (or that at least it should form part of a wider strategy on the part of the radical left) I do not believe that it’s at all feasible to centre such a strategy on the Labour Party. It should be entirely clear to all observers by now that the central core of Labour is thoroughly impervious to socialist ideas – and in fact that it always has been. The Labour right has a permanent stranglehold on the party and indeed, more than this, the party is structurally embedded in the capitalist status quo. The idea that the party can be won or forced very far to the left – let alone to the extent that it might seriously challenge core capitalist interests – is simply wishful thinking. Sadly many talented socialist activists over the years have thrown themselves into a war of position within the party seeking to win it to the left only to be lost forever within the party’s labyrinthine bureaucratic committee structures never to be seen again (and this is indeed what these structures are designed to do – contain, exhaust, demoralise and absorb the Labour left).

The second model is the ‘People’s Assembly’ currently supported by a range of left figures such as Mark Steel and Tony Benn, and in which the driving force seems to be a previous splinter group from the SWP – Counterfire. While, again, this is a very welcome development and there is no reason not to support it wholeheartedly, I am slightly sceptical about this project and would not want to see this approach form the centrepiece, as it were, of a new organisational model. The main problem here is that I think we need a firmer structure – we need a party form (like that of Syriza). If we are serious about changing society for the better then we need to be serious about taking power too – and for this we need to be organised into a party structure. There is no reason, as I’ll argue below, why this party should not (like Syriza) take a relatively decentralised, pluralistic form – but we do need some sort of central coordination in order to be effective.

The third model – and the one I think is most promising – is the Left Unity model. Left Unity (there’s a statement its rationale here and some ideas about basic principles here) sees itself as the embryonic form of a new broad church party of the left. It models itself in relation to Syriza and to other successful groupings like the Front de Gauche. It seeks to provide a unifying, coordinating structure within which relative disparate groups and elements on the left can work together and pool their resources. It is precisely the sort of thing that we need. Already the most open and outward looking radical socialist groups such as Socialist Resistance and the ACI, together with the new International Socialist Network – all of these groups themselves relatively pluralistic works in progress – have pledged their support. But, more than this, the most encouraging thing about Left Unity is that, with the help of Ken Loach’s recent appeal, it seems to be pulling in traditional Labour supporters alienated by the party’s inexorable drift to the right. Winning over a sizeable chunk of Labour’s constituency of activists and supporters has long been the Holy Grail of the radical left and Left Unity seems, so far, to be pulling this off – there is a long way to go here, but it’s certainly made a promising start.

Of course, an alliance of revolutionaries, reformists and ‘left reformists’ within a federal type party structure raises all sorts of organisational and strategic dilemmas and potential problems – but what possible sort organisation doesn’t raise its own difficulties? Not the least of these is that it will have to confront the classic (and in my view inevitable) dilemma of socialist strategy – the reform/revolution problem. Certainly a party which aims to transform society fundamentally and which also commits itself to a political strategy that would involve, if it was successful, actually taking part in, or even forming, a government faces the problem of whether it is possible to use state power to help effect a transition to socialism or whether such an approach would, inevitably, saddle it with the responsibility of managing capitalism in capitalism’s interests.

Of course this is not an immediate problem in the UK – though it certainly is for Syriza in Greece. Nevertheless if Left Unity continues to develop we will need to give some serious thought to big strategic matters. I hope to contribute some thoughts in relation to the big strategic picture in a later article on this site.

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