A Social-Democratic look at a troubled world - Then and Now

By David Walsh

Let us look at a troubled world

It seems that international capitalism was on the verge of meltdown.
The collapse of the banking system in recent months sent shock waves through Europe, bringing governments to their knees and thousands out onto the streets of London, Paris and Berlin and Athens.

In the United States, an increasingly careworn president and his congressional critics fought a bitter battle over government spending and tax rises.

And in Britain, with the Labour government broken by the economic crisis, a Conservative-dominated coalition with the Liberals imposed the deepest spending cuts in a generation, slashing benefits in an attempt to restore confidence in the nation’s finances.

With the banks refusing to lend, and millions of people thrown out of work, capitalism itself seemed utterly discredited.

In other countries, many may be tuning to far Right solutions.
And, in Britain, a generation of intellectuals perhaps turned their backs on capitalism and social democracy, placing their faith instead in a form of a far more utopian socialist idealism.

But enough, for the moment, of 1931

For decades afterwards this 80 year old extraordinary historical moment — when capitalism itself appeared to have failed — was forgotten, and looked like the stuff of ancient history.
But in the summer of 2011, with the eurozone in chaos, the British economy stagnant and the U.S. crippled by debt, with social mobility at a standstill and millions of ordinary families squeezed until they can barely breathe, it feels disturbingly familiar.

In the past two months alone, whilst all eyes were on Libya and the riots, stock markets have been in free-fall across the capitalist world.

Take Europe alone.
Greece is now a basket case, and its default is a matter of when, not if.
And with investors manifestly losing confidence in Spain and Italy, two of Europe’s biggest economies, a second devastating world recession cannot be ruled out.
Although the share-price plunge does not yet come close to the infamous Wall Street Crash of 1929, the market mayhem is a chilling reminder of the sheer fragility of the capitalist system.
If the worst happens, if Spain and Italy go down and the euro crumbles, then the world economy really will be in trouble.

The weakness of the US economy will then go under the spotlight again - and potentially with more devastating results.

What a contrast to twenty years ago - 1991
Then, the capitalist West was congratulating itself on victory in the Cold War. The Berlin Wall had come down, the Soviet Empire had broken up, and American intellectuals were even proclaiming the ‘end of history’.

Marxism was dead, we were told, and capitalism triumphant, or so they said. Having lifted millions in the West out of poverty, having showered them with goods and opportunities, the free-market system could do no wrong.
Today, the picture is very different. For although large parts of the Left has still to come to full terms from the fall of the Soviet Union, capitalism has rarely seemed in a more desperate condition.

And with bankers still pocketing gigantic bonuses and Europe swept by a wave of austerity, even the Right are beginning to wonder whether the system is intolerably loaded in favour of rich metropolitan elites.
Only last month, for example, the Tory MP Douglas Carswell suggested that ‘the free market all too often turns out not to be a free market at all, but a corporatist racket for the few’.

Modern Conservatives, he said, should be ‘as suspicious of Big Business and Corporatism as we have been of Big Government’.
On the surface, this may sound odd coming from a Tory. Yet when you dig a little deeper, it is not hard to see why so many people like him have lost faith in the free market.
The entire premise of the capitalist system, after all, is that in a free market, hard work will produce its own reward. For capitalists, the important thing is equality of opportunity. If you put in the effort, then you can be whatever you want to be, regardless of your background.
That what was Margaret Thatcher, and before her, Ted Heath and Harold Macmillan, in different ways perhaps, believed.

But, by 1997, what an outcome we saw, and what a negation of the hopes of Margaret Thatcher and her kind.
It shows that you do not have to be a card-carrying Labour Party member to see why millions of people — not just in Britain but across the world — feel completely cheated.
Booms and busts are inherent in capitalism. It is inherently unstable. It can even destroy its own base if needs be.
Marx saw it as a revolutionary system, and contrasted to what had gone before.
Hunter gatherer societies and later societies based on slavery had lasted for many hundreds of thousands of years.
The first structured states - Rome and Greece - were around for a thousand years and then evolved into more modern but feudal states that had also endured for almost two millennia.

Capitalism then burst on the scene in the mid 1700's and within 60 years or so, had turned the world upside down.

Turned upside down too, were human relations.
Fixed sets of relations based on rank or land holding were shattered and shattered utterly.
In their place was a new meritocracy based on technical knowledge and learning.
And that meritocracy too, fused with mercantile interest in turn to both allow capitalism to develop and expand across the world, a growth also facilitated by the state's adoption of the capitalist mode of production.
A state / capital partnership came into being, firstly to the rest of Europe, then the Americas and finally, via the process of imperialism, to the rest of the globe.

It bought fabulous wealth to a few, but misery and degradation for many millions. And despite the 20th century taming of raw capitalism by, largely social democratic states or by state intervention as practised by Roosevelt's New Deal programmes and proto-Keynesian economics in the US, that inherent unfairness remains.

When most of us contemplate the results of the bankers’ greed, for example, talk of ‘fair incentives and rewards’ seems a sick joke.
In every corner of the US and Europe now, ordinary families, through absolutely no fault of their own, are paying an intolerable price for the outrageous avarice of the financial elite.
Recent figures for the UK show that City bonuses came to a staggering £14 billion last year, with one executive, Barclays boss Bob Diamond, pocketing an incredible £6.5 million — and that’s on top of his £8 million-plus annual pay package.
Yet at the same time, banks are refusing to lend to ordinary families and small businesses.

Indeed, in August the banks actually took in as deposits £3 billion more than they lent, which goes a long way to explaining why growth is virtually non-existent.

‘No wonder economic growth is barely visible to the naked eye,’ remarked the Coalition’s former Treasury spokesman, Lord Oakeshott, ‘when the banks keep sucking billions out of the economy.’
These are, incidentally, the same banks, such as RBS and HBOS, that British taxpayers had to save from the consequences of their own reckless gluttony - a behaviour trait well documented by Alistair Darling in his new book..
Three years ago, the Government spent £500 billion to bail out the collapsing banking system. And now, while the bankers toast themselves with vintage champagne or good single malts (no Cameron's Strongarm for them, despite its newly apposite name)), the rest of us are picking up the bills.
But the bankers’ greed is only one symptom of a wider malaise. The stark truth is that millions of ordinary families feel the system gives them no chance of success.

The facts are simply unanswerable. A child born in 1971 has less chance of moving up the social ladder than one born in 1951.
On top of that, the gap between rich and poor has grown steadily since the 1970s - and we have to remember, indeed never forget, that much of this had, by definition, come about during the 13-year New Labour regime.
Half a century ago, during the Fifties and Sixties, increased educational opportunity, burgeoning job opportunities in manufacturing and the death of deference in both daily life and popular culture meant that working-class children and young adults (like me - an 11 plus failure which I had worked hard to achieve) simply felt a more democratic (and wealthier) future was both obviously pre-destined and inevitable.

And in their different ways, state-school educated Labour prime ministers such as Harold Wilson and Jim Callaghan and many of their ministers who came from the shop floor, train shed or the pit gave the impression that anybody could make it, regardless of their background.
Actually, in the Labour tradition, this was not all that new.

Even in 1931, during the last great crisis of capitalism I spoke of, Britain was run by a prime minister, Ramsay MacDonald, who was the illegitimate son of a Scottish labourer and a poor housemaid, and who grew up in abject poverty like his mentor, Kier Hardie.

At a time when it would have been easy to imagine that power belonged exclusively to the rich, MacDonald was a shining example of social mobility.
True, unlike Hardie who seemed incorruptible, MacDonald sucked up the rich in a way even more embarrassing to what we may have seen from more recent party leaders. His dalliances with Lady Londonderry, the wife of a coalowner and a notorious right wing Tory would have scandalised the nation - if it had ever been revealed. Times never change, it seems.

Can we possibly look at our leaders and draw the same conclusion today ?
From Cameron, Clegg and Osborne — respectively the son of a millionaire stockbroker, a banker and the heir to a baronetcy — to Ed Miliband and Ed Balls, one the son of a North London intellectual, the other the privately educated son of a professor, British politics does seem to have become the plaything of a tiny self-regarding elite, totally out of touch with ordinary families.
The old joke about the inevitable descent from the leafy heights of North London on to any unlucky working class labour constituency who have an MP standing down is a standing joke - but it is more a tragedy than a joke.

Looking at our political class, you begin to suspect that modern capitalism is loaded in favour of those who already enjoy wealth and power.
And that it has become a closed system, impossible to penetrate unless you are incredibly lucky.

Other facts tell a similar story.
As the Tory minister David Willetts showed in a provocative book last year, 'The Pinch' Britain’s youngsters are being cut adrift.
Thanks partly to ferocious competition from overseas manufacturers, and the squeeze that this puts on UK firms, workers in their 20s today earn far less than their parents did at the same age.
And with house prices having soared and banks refusing to lend, they find it impossible to get onto the property ladder. As a result, the old Conservative dream of a ‘property-owning democracy’ is increasingly reserved for the silver-haired who managed to do well out of the past property boom, or for those lucky enough to be able to inherit estate from their parents.
Most social observers argue that home-ownership is one of the keys to a stable, prosperous, hard-working society — yet since 1997, home ownership among people in their 20s has steadily fallen.
Of course there was a time when education offered a leg-up: but those days are becoming a fading memory. Thanks to the abolition of the EMA and the cash squeeze on our unis, the chances of scaling the educational ladder from a comprehensive to high table is now simply unattainable to all but the privileged few
In a country that claims to value competition, it is nothing less than a disgrace that just four expensive private schools — Eton, Westminster, St Paul’s, St Paul’s Girls — send as many students to Oxford and Cambridge as 2,000 state schools put together.
Meanwhile, the Government’s education reforms mean that working-class children face the prospect of paying back £9,000 a year in tuition fees if they choose to go to university.
And this, despite the squeals from University bosses, this comes at a time when fat-cat vice chancellors, already rewarded with grace-and-favour residences and boundless expense accounts, are being paid an average of more than £220,000 each.
We have been here before.

Next time he is on holiday in Tuscany — something well beyond most British families — perhaps David Cameron should spend an afternoon with his great Tory predecessor Benjamin Disraeli’s book, Sybil.
In this work, first published in 1845, the greatest Tory statesman of the Victorian era warned in the words he put into the mouth of the books hero, that Britain had become

‘two nations … who are as ignorant of each other’s habits, thoughts, and feelings as if they were dwellers in different zones, or inhabitants of different planets; who are formed by a different breeding, are fed by a different food, are ordered by different manners, and are not governed by the same laws: I speak of the rich and the poor’.

Disraeli was, of course, no socialist. But as an outsider himself, born into a Jewish family, he recognised that capitalism could only take root in ordinary people’s hearts and minds if it gave them a stake of their own.
But left to its own devices, it won't.
At bottom, capitalism depends on constant change, and what us called 'creative destruction'.

Mergers and acquisitions, mega takeovers, and the steady growth of corporations spanning the globe, mean that things like long familiar branded products have an even shorter shelf life - and a shorter and more insecure working life for the workers in these companies.

As Marx foresaw, it's not just brands that are constantly changing. Companies and industries are created and destroyed in an incessant stream of innovation, while human relationships are dissolved and reinvented in novel forms.
With constant change, the accumulation of wealth and innovation becoming the norm, and with no moral imperative to look after the weak, capitalism merely degenerates into cronyism and self-interest.
At its best, the free market can be a tremendous liberating force. During the Fifties and Sixties, it gave millions of people opportunities their parents could barely have imagined: happy childhoods, good schools, well-paid jobs and contented retirements.
But, as Marx said, this cannot be a normal state of affairs. Creative destruction and the underlying cycle of long wave boom and bust is in the DNA and bloodstream of capitalism.

In Marx's word 'everything that is solid melts into air'
That is what happened in 1871, and then 1931.
Eighty years on, capitalism has once again lost its way. With millions betrayed by their under-performing schools, locked out of the job market, forgotten by the banks and abandoned by their politicians, Britain is in danger of becoming two nations again.
So, Marx is back in fashion.
In this cycle of creative destruction, ladders of mobility have been kicked away, and even formerly middle class people find themselves facing penury, with eroded pensions, eroded savings, indebted children and no prospect of things getting better for the foreseeable future.

Again, Marx saw this.
When he argued that capitalism would plunge the middle classes into something like the precarious existence of the hard-pressed workers of his time, Marx anticipated a change in the way we live that we're only now struggling to cope with.
It seems that 160 years on from the publication of the Communist Manifesto, we are back in the world that Marx and Engels lived in.
But we have to remember that in that slim book, its authors wrote a hymn of praise to the wonders of the technical innovation that propelled capitalism. They sang of the new abundance that could be gained from the factory system, and the scientific advance of the age.

But it was the human price paid for this that they condemned, and their solution was a simple one of seeing the newly created working classes taking control of the state, and through this, taking over these new forces of production and re-modelling them in the interests of the many and not the few.
In that sense, Marx's statist socialism is not all that different from what we are here for in today's Labour Party.

Now, Labour, despite the pleading of some on the left, is not going to abolish capitalism.
It's tempting for us to join in the rejoicing of seeing a whole social and economic system in crisis. I do it all the time. We all do.
But as social democrats - and it is time we reclaim that name from the Ownenite and Toy Jenkins fan club usurpers - we must remember the sobering fact that any new Labour government will be taking power in a capitalist nation and having to make the changes needed to see that capitalism can deliver for the masses as well as the millionaires.
We must be, therefore, arguing for a reform of a capitalist state that goes beyond anything ever attempted before - and given the severity of the crisis we are living through, this is something that is cutting with the grain of informed public opinion, I believe.
Modern capitalism is not beyond redemption. But it badly needs imposed reform to insert a moral dimension, something missing amid the scramble to protect the privileges of a narrow metropolitan elite.
It is time that our politicians cracked down on non-domiciled billionaires, and time they made sure the rich elite paid their fair share of our national tax bill.
If Ed Balls really wants to rekindle the British people’s faith in our economic system, then he should go further. He should be drawing up legislation which could mean the next Labour government forcing the banks to lend more money to individuals and small businesses, and in this way, getting our economy moving again.
Labour should restore a culture of investment in excellence for our state schools, giving working-class children a genuine sense that they can climb the ladder. And we should make it a priority to encourage real jobs in real businesses, reinvigorating a manufacturing sector that has been abandoned for far too long.
We should not shirk from seeing if the utilities that are a key to good quality of life for all if us, and which power the productive economy - water, gas, electricity - can be bought back into public control.

The stakes could not be higher. Unless capitalism is reformed in this fashion, then an entire generation will conclude that it is no more than a fig leaf for the super-rich.
That would be a tragedy. For despite all capitalism’s weakness and evils — despite the flaws, inequalities and hypocrisies that are an inevitable part of any human endeavour — it remains the system that the world lives within.
Other systems have been tried, and they have collapsed in bloodstained ruins.
Only the pure concept of capitalism — the free exchange of goods, skills, services and ideas — has so far proved itself capable of survival and of offering a quality of life that most would aspire to.
As we said, that is not what it is offering at the moment - either for us here in a mature capitalist state, or more brutally, for those living and labouring in the slums of the emerging world, or in the vast electronic goods sweatshops of Guangdong province, the mines of Brazil, the shipyards and car plants of South Korea and Jarkata.
So the crusade to reform capitalism cannot be successful if it is to be only tried in one country.
That has huge implications for us as Labour Party members.
We have again to stress that we are internationalists.
And that in our own part of the world, we are Europeans, living in and building, the EU as an instrument for social democracy with our sister parties in Western and Eastern Europe.

That is something that I, as a guy who as a confirmed European in the 1970's and 80's when it was simply unfashionable in Labour circles, still adhere to.

And we have to go further.

By, in turn, fighting to see that the EU has a global reach - beginning with the acceptance of Turkey as the first Islamic nation to join the EU.
Only policies of this scale can succeed in the face of this crisis

For if they fail, then the results could be too dreadful to contemplate.
A popular phrase of the 1960's was 'Socialism or Barbarism'.

The socialists of the 1950's and 60's could, in many cases, remember how the crisis of 1931 paved a road that ended outside the gates of Treblinka and Buchenwald.
That potential danger is still there

We have, as democratic socialists, a duty to see this does not take root afresh.