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Reshaping Labour

Patrick Diamond on putting ownership back at the heart of Labour's programme.

The question facing Labour is what, fundamentally, should the party's mission be in an era of austerity and capitalist crisis? The answer won't be found by sifting through opinion polls, or resuscitating tried and tested remedies from the past. Labour needs to recover its sense of doctrinal identity and ideological purpose. This article defines the contours of a modern socialist agenda for the party in the wake of the global financial crash, swiftly followed by one of the gravest electoral defeats since the inauguration of universal suffrage. The core of the argument is that Labour must frame a new politics of ownership, overcoming the current recession, but also producing a lasting recovery.

However, our starting-point is to situate the political crisis facing the party within a broader historical perspective. Labour's programmatic approach has been characterised by three phases of ideological development since the early 20th century. After 1918, the party enshrined the commitment to common ownership of the means of production, distribution and exchange in Clause IV of its constitution. This was augmented in the 1940s by the establishment of the National Health Service, as part of the implementation of the Beveridge report installing a comprehensive system of social security and welfare assistance, and the nationalisation of the economy's ‘commanding heights'.

After 1964, in the light of the increasingly bitter doctrinal disputes of the 1950s, the party adapted its focus towards the creation of an egalitarian welfare state that would substantially eradicate the wealth and income inequalities continuing to mark Britain's class-ridden society. The revisionist and Bevanite bête noire, Anthony Crosland, insisted that capitalism was evolving in a more benign direction, shifting attention from the politics of nationalisation towards investing the proceeds of growth in welfare and public services.

After 1997, having revised Clause IV out of existence, 'New' Labour embarked on a modernist state project. This sought to reshape the institutions of the state and civil society, equipping the United Kingdom and its citizens for an era of intensifying global competition. The purpose was for Britain to emerge as a ‘dynamic, knowledge-based economy' at the helm of US global hegemony – the decision to join the American invasion of Iraq fitting squarely within that state strategy. Of course, there were inter-linkages and continuities over time; but these phases broadly constituted the shifts in Labour's ideological development as a governing party.

There is, inevitably, much to be said about what is a variegated and diverse ideological tradition. If one point stands out it is that ‘New' Labour's rewriting of Clause IV socialism was an essentially negative process. It was predicated on the assumption that ownership of the means of production was not the primary determinant of the good society: nationalisation was but a means of achieving eternal socialist objectives. However, what the new Clause IV did not say was what form of ownership the party now believed in. More tellingly, in a world of lost ideological certainties in which the socialist goal of common ownership had been relegated out of existence, ‘New' Labour had little to say about what were its founding ideals and ideological commitments that gave meaning to political activity and engagement. Turn to the 2008-9 global financial crisis, and the significance of Labour's retreat becomes apparent.

It is something of a truism that the crisis called into question the fundamental tenets of neo-liberal capitalism. What the global meltdown underlined was the impact of volatility in financial markets and an under-regulated financial sector, alongside a crisis of production in western capitalism, accelerating the shift in comparative advantage towards the East. Yet the economic crisis in the UK has been profoundly concerned with the politics of ownership: who owns productive and financial assets, how legitimate are the profits generated by such assets, and who takes responsibility when trading in financial derivatives destabilises the entire economic system? What is important is that having given up its distinctive position on the relationship between ownership and a productive economy, Labour deprived itself of a vital element in its armoury. In the wake of the crisis, despite decisive interventions to stabilise the banking system, the Brown government appeared rudderless and lethargic. The 2010 election was fought on a manifesto more radical in intent than has been fully appreciated (including the commitment to a living wage and investing 1% of the proceeds of the banks bailout in local community investment funds that would free poorer citizens from usurious rates of lending). Tragically, the party was unable to decide whether its aim was to radicalise or reassure voters in 2010.

Nonetheless, it is telling that the politics of ownership firmly predated the financial crisis - as the state of the UK housing market, growing concerns about the management of Britain's privatised utilities, and rising inequalities between those who owned wealth, and those who did not, each underlined. Astonishingly, these issues received little attention in party debates involving Labour ministers. This not only related to the revision of Clause IV in 1995, but to ‘New' Labour's rejection of the ‘stakeholder economy'. Whereas Will Hutton, the progenitor of ‘stakeholding', was fundamentally concerned with the relationships that delivered a more productive British capitalism, ‘New' Labour focused more narrowly on equipping the workforce with the tools to participate in a market economy. The strategic judgement of the leadership was that the Labour party's approach ought to go with the grain of the liberal capitalist economy. As a result, questions of ownership – the ownership of the firm, the ownership of wealth, the ownership of housing, the ownership of public assets such as the railways – were never on the party's agenda.

So in the wake of the crisis and Labour's thirteen years in power, what would a new politics of ownership look like today?

It ought to start with economic fundamentals by conceiving of a new model of the firm. Under neo-liberalism, firms are treated as profit-maximising entities where sovereign authority lies in the hands of capital, principally shareholders. The limits of that approach are self-evident given increasing financial risk fuelled by excessive corporate remuneration, and the crisis of competitiveness and productivity in the UK economy. There is growing interest in how to democratise firms through greater employee participation, employee share ownership, and company boards encompassing each of a firm's stakeholders. Where appropriate, mutualisation of companies might have a role to play. The onus is not on legislating for a single model of the firm, but how best to pluralise ownership structures in the British economy.

Another theme relates to inheritance and capital taxation. The left has long been concerned with questions of wealth and inheritance, a theme taken up by the Oxford political theorist, Stuart White. The unequal distribution of wealth contributes significantly towards inequality of opportunity, while there is a compelling moral case that it is better to tax inheritances and capital gains as undeserved wealth than taxing incomes earned through individual effort. Indeed, there is a strong argument that inheritance tax ought to shift from estates to capital receipts, funding a universal capital grant securing wealth entitlements for future generations – a vital political issue given the disproportionate impact of the austerity burden on the younger generation.

The question of wealth distribution is closely related to the issue of housing and the ownership of assets. ‘Right to buy' has led to a huge depletion of council housing stock, and social housing in England is in crisis. In 1950, the public sector built 168,000 homes a year in the UK. By 1980 it had fallen to 88,530, and then to 17,710 (1990), 280 (2000), and just 1320 in 2010 at the end of thirteen years of Labour government. This profoundly damaging trend must be reversed, not only contributing towards fiscal stimulus given the contraction in the British economy since 2010, but addressing Britain's chronic affordable housing shortage. While a national house-building programme has much to commend it, the priority ought to be easing restrictions on local authority borrowing, allowing councils to issue bonds while creating a new generation of council housing tenancies.

Finally, the ownership structure of public assets such as the railways should no longer be placed in the ‘too difficult' box by Labour. Recent proposals advocate effective renationalisation, ending rail franchises by integrating rail operators and infrastructure, while giving a democratic role to passengers and the workforce. Over £1 billion is wasted on a fragmented privatised railway infrastructure in the UK each year. This has to end. What the new politics of ownership addresses is the purpose of a modern left of centre governing programme – pluralising the capitalist structures of production, ownership and exchange in the interests of every citizen, rather than the wealthiest few.