Blairism vs the left

The difference between Blairites and the left isn't merely one of policy prescriptions. It's also about the diagnosis of capitalism. John Rentoul's response to my post yesterday alerts me to this fact.

Here's what I mean. To a large extent, New Labour's thinking was founded in large part upon a belief in the dynamism of capitalism. It thought that capitalism would increase investment and productivity if only governments could provide (pdf) the right policy framework, such as the macroeconomic stability required to give firms the confidence to invest. It thought capitalism could create good jobs; Blair's talk of "education, education, education" arose from the idea that skill-biased technical change would increase the demand for skill labour. And it thought it could improve the efficiency of public services by importing management practices from the more dynamic private sector.

However, many of us now doubt this premise. Investment has declined as a share of GDP as firms prefer to build up cash. Productivity growth has slumped. And job polarization, the degradation of erstwhile "middle class jobs" and migration of workers to insecure and poorly-paid self-employment all suggest that capitalism is no longer providing satisfying work.

Quite why all this has happened is a separate story. But you don't need to be a Marxist to believe it: those economists who are most vocal in discussing secular stagnation are leftist social democrats rather than Marxists.

This raises the question: how can Blairites deny the facts which seem to me to speak of a loss of capitalist dynamism?

There are low-level quibbles one can have with the data; maybe some business investment is counted now as consumer spending, such as spending on laptops. Maybe innovations have raised consumer surplus rather than measured output; the fact that books, music and journalism are now available for free does nothing for GDP. But I doubt these explain away all of the facts suggestive of stagnation.

It's also possible that what we're seeing is just a temporary malaise. Maybe a revival of animal spirits will raise investment and productivity. However, the fact that the future is unknowable means we shouldn't put much weight upon this possibility.

There is, though, a more promising way of denying that capitalism has lost its oomph. It could be that all the symptoms of a loss of dynamism are in fact the result not of a secular crisis of capitalism but of weak aggregate demand. Such weakness has depressed productivity (via Verdoorn's law), interest rates, employment and capital spending. If we had more expansionary fiscal policy - not just in the UK but around the world - what looks like secular stagnation would disappear.

This, though, leads me to a paradox. If this is the case - and I don't know whether it is or not - then it is Blairites who should be most hostile to austerity. They should be complaining not only that austerity is destroying jobs but that it is also undermining faith in capitalism by leading folk like me to mistakenly attribute to capitalism what are in fact the results of bad policy. By contrast, we lefties should be slightly less hostile to austerity. Sure, we agree that it is bad for workers. But we suspect that even if we had sensible macroeconomic policy, many of capitalism's faults would remain.

But of course, this is exactly not what we're seeing. The million mask march was not dominated by Blairites. In fact, it is they who have actually been accommodating of austerity, even to the extent to failing to oppose Osborne's imbecilic fiscal charter.

What explains this paradox? The most obvious possibility lies in a difference of priorities. I want to try to understand the economy whereas Blairism is essentially about trying to win elections - and these are two different and perhaps even irreconcilable objectives.

* That spike in my second chart in 2005 was because of a reclassification of investment in the nuclear power industry, which uglifies the chart but doesn't change the story.

Comments

[Metatone]

To be complete, Rentoul is neither interested in understanding why the economy (or anything) is the way it is, nor is he interested in winning elections. He's simply interested in defining positions from which he can declare himself to be correct and others to be wrong.

[THD Young]

Call me a "toul" but please have only one "large" in the second sentence of the second para.

I think Blairites are also suspect at a micro level which speaks to the unknown future (on which we depend).

Policy should foster as much small scale business so we're prepared for the future.

Fiscal policy as a macro lever to get things going today might imply calling the future hence investment in green tech. Or even "a Manhattan project for solar power".

Might. But won't. It'll be housing, motorways and the like. A wasted crisis.

Fiscal policy could be decisive but not if it resembles the Spanish or Chinese construction booms.

[Luis Enrique]

There is an alternative possibility, which I imagine you recognise, that there is some sort of structural story behind what we are seeing, it's not a failure of capitalsim in any sense (I.e. because it could be optimal given structural problem) and any other ism would run aground on same problem and in particular any attempt at demand stimulus would fail.

I don't see any particular reason to believe this, but in what way do the data suggest a failure as opposed to simply a change (maybe demographics, technology, preferences, I don't know what)?

[Marko]

Blairites are just like Clintonites - they're doing quite well for themselves , thank you very much , and would like to keep it that way. So , "education" , "training" , "upward mobility" , and " positive thinking " , but forget about restraining predatory finance , or taxing the oligarchs. That stuff ain't gonna happen'.

And , deep down , they think Maggie and Ronnie were just super.

[Dave Timoney]

It's worth remembering that neoliberalism (of which Blairism is clearly a flavour) owes much to Marxism in its theory, if not its praxis, notably the teleological belief in progress and the idea that capitalism is the wellspring of modernity.

Where it diverges is in its ahistoricity (which is the product of post-modernism rather than Austrian economics), which leads to both its annihilation of the past and its inability to envisage a future other than an endless present. This is why its apologists are not speaking the same language as social democrats such as Krugman.

Basically, the Blairites are stuck, hence their increasing bewilderment. Contrary to the propaganda, most lefties are cynics (in the original Greek sense of the word) rather than dreamers. Blairites in contrast believe in fairy stories. WMD wasn't the half of it.

[Dipper]

A2E is right that the Blairites are stuck.

There was a period in the 90's and into the 00's when it seemed that Free Market Capitalism could finally deliver high living standards for the mass of the people. The Blair government was about managing the markets to give the best results for the people.

The banking crash revealed that much of the prosperity was built on a pyramid scheme of selling property to each other for higher and higher values. The crash came about because there was no-one left to lend to. The collapse was only stopped by the people at large standing behind the banking system.

The Blairites seem to want to continue from where we were before the crash, but its a different world in all sorts of ways. The people at large seem to be asking what price they should be required to pay for supporting banking and the rest of the businesses that require banking to function. The Blairites do not seem to want to answer that question.

[Peter K.]

It's political economy. The Blairites policy of "letting capitalism loose" has led to a redistribution upwards and worsening of political economy. The worsened political economy then forces austerity on the economy despite the economic facts.

The worsened political economy blocks sufficient fiscal or monetary policy so that wages remain stagnant and inequality increases.

[Albrecht Zumbrunn]

It is not unimportant to keep in mind that the Blairites are TRYING to win elections; so far they are far from actually winning them.

[leslie48]

The number one problem most inward looking Leftists especially Corbynites have is their re-writing of history. So all New Labour becomes problematic to them. However those who lived through the 'four' consecutive Tory governments welcomed New Labour as their saviour and to win back the power New Labour had to 'win back' the voters. We welcomed it because it removed the social injustice, neo-liberal economics and class oppression of 18 yrs. So life chances, schooling, universities, health care, children, low paid, women, pensioners, regional investments , technology, life sciences, infrastructure, human capital was all re-invigorated and the economics generally improved. The Tory years see again rising inequality, crises in health and schooling/universities, insufficient investment infrastructure , life chances by post code lottery, public services crises and so on.

The need for a centre left alternative with broad appeal similar to New Labour remains as was classically illustrated in the News Night/IPOS ex-Labour marginal voter panels who dismissive of Corbyn yearned for the Blair years and a similar centrist figure who could unite centre voters.