By Alex Callinicos
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Groundhog day as Labour backs cuts

This article is over 10 years, 11 months old
Issue 2357

One might say that the historical role of Labour leaders is to disappoint their supporters. The fundamental contradiction of Labourism lies between its promise to make the world a better place and its commitment in government to managing capitalism efficiently. 

Because capitalism is a system based on exploitation and liable to crises, the contradiction can’t be squared. The historic pattern was for Labour to promise much in opposition and then dump it all in office.

But since Neil Kinnock became Labour leader 30 years ago this cycle has speeded up. Already in opposition Labour leaders warn supporters not to expect much. 

Last week Ed Miliband became the latest to follow this path. He said a future Labour government would impose a three-year cap on welfare spending that would not be affected by the ups and downs of the economic cycle. 

He was preceded by shadow chancellor Ed Balls promising “iron discipline” in public spending.

The media response was largely to treat this as a grudging acknowledgement of a reality that Labour under Miliband had previously ignored. 

Andrew Rawnsley wrote in last Sunday’s Observer, “In the past few days, Labour has started to make the painful adjustment to living in the world more as it actually is. This is a world in which the party has an underwhelming poll lead that looks vulnerable. This a world in which, for all the failings of the government to deliver either deficit reduction or economic recovery to the timetable it promised, pollsters report that more of the public trust George Osborne as a steward of the nation’s finances than they do Ed Balls.” 

This is certainly the “world” as it is perceived in the Westminster bubble. I suspect the two Eds also had in mind a move made by the man they both used to advise, Gordon Brown, when Labour was last in opposition.

As shadow chancellor to Tony Blair, Brown made an announcement in January 1997, a few months before Labour’s landslide election victory. He said that in office he would respect the spending limits imposed by the Tories and not raise the top rate of income tax. 

A “colleague of Brown”, probably Balls, told the journalist Robert Peston, “Our reading of history is that Labour governments went wrong by losing credibility on the economy and public spending in the first two years.”


Miliband and Balls are now playing the same game of winning “credibility”. But they should reflect on why things went so wrong for Brown. After all, the Tories regularly taunt Balls for his association with Brown.

Brown didn’t project himself as a “prudent” chancellor as an end in itself. His strategy was summed up by Peston in the title of a chapter of his book on Brown’s and Ball’s management of the Treasury, “How Brown won the confidence of the financial markets so that he could be a real socialist.”

Brown believed that if he kept the financial markets happy they would generate the economic growth from which he could extract resources to expand welfare benefits and introduce tax credits aimed especially at working families. 

This was what social democracy had come down to—not the socialism promised by earlier generations of Labour leaders, but neoliberal capitalism tempered by a reformed welfare state.

We all know what happened. The financial markets Brown boasted of deregulating blew themselves up and nearly took the world economy with them. 

The resulting political backlash destroyed Brown and brought to office the present coalition, which is busily dismantling his welfare reforms in the hope this will reboot neoliberal capitalism.

Where does this leave Miliband? He preaches the need for “responsible capitalism”, though this is tarnished by the revelation of Labour helping a donor avoid taxes. 

Now he seems to be following in Brown’s path of currying favour with the markets. What the other side of the deal is going to be when the Institute of Fiscal Studies predicts that austerity will continue till 2020 is beyond comprehension. 

But an inability to learn from Labour’s history is probably a necessary qualification for its leaders.

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