What Starmer misses: the C-word

One word is notably absent in Sir Keir Starmer’s recent essay – capitalism.

Our most successful politicians have had something to say about this – whether it be Thatcher’s belief that capitalism needed low inflation and weak unions if it were to thrive, or Blair’s belief that governments and people needed to adapt to capitalist forces of globalization. Starmer, however, has no such analysis.

For example, he notes that, “entering the 2020s, Britain faced stagnant wages, vast inequality and the slowest growth in living standards since the second world war.” But he attributes this solely to “Tory failure”. Which is dubious. It omits the fact that slower growth in output and productivity – and the symptom thereof, lower real interest rates – are global phenomena. Larry Summers didn’t (re-) coin the phrase “secular stagnation” to describe bad policy in a single country.

Of course, we can debate the causes of this: falling profit rates, an ageing population, lack of monetizable innovations; depressed animal spirits as a legacy of the financial crisis; and so on. But Starmer seems unaware there’s even a debate. Which leads to this:

Business is a force for good in society, providing jobs, prosperity and wealth. But business has been let down by a Tory government.

But is it less of a force for good than it used to be? Stagnation, job polarization and deprofessionalization all mean that capitalism has become less good at providing jobs and prosperity for many people. To some extent, it is the Tory government that has been let down by business, not just vice versa.

Failing to ask this question leads to this:

A Labour government would provide a level playing field, a skilled workforce and a modern infrastructure, from transport to public services.

This is the politics of Prince: partying like it’s 1999. But capitalism has changed since then. We now need more than just good infrastructure and rules of the game to stimulate growth. Starmer shows no awareness of this possibility.

Which brings us to another omission. Starmer decries the nationalism and other “identity-based politics in the Western world that has done immense damage to the progressive cause.” But he fails to ask: why has such politics gained traction only in recent years? In the 90s and early 00s the Tories’ obsession with Europe led them into electoral oblivion. So why has it become so effective recently?

The answer – as regular readers will be bored of hearing – lies in Ben Friedman’s The Moral Consequences of Economic Growth. He shows that economic stagnation fuels illiberal nationalism, and sometimes worse. Populism is one more consequence of capitalist failure. If you don’t appreciate this, your critique of it is mere narcissistic moralizing: “why can’t people be reasonable like ME?” The cure for populism is economic growth. But if stagnation is due to capitalist failure as well as to Tory failure, this needs some kind of critique of capitalism – which Starmer lacks.

Here we run into another problem. Capitalism sets constraints upon what governments can do. These constraints operate in countless ways: lobbying; ownership of the media; offering ex-ministers well-paid jobs to incentivize them to behave whilst in government; controlling business confidence; emergently creating an ideology (pdf) which supports the existing order; and so on. These mechanisms mean that, as Pablo Torija Jimenez has shown, governments serve the interests of the 1%.

Good policies require much more than the goodwill and intellect of politicians. They require a material base, a particular set of class interests and balance of class power. We had this in the post-war era: a strong union movement and capitalist class that required a mass consumer market made full employment politically feasible. One challenge for social democratic politics is how to recreate such interests. In the absence of an analysis of capitalism, you cannot do this. Without it, though, your politics is just moralizing.

In lacking a critique of capitalism Starmer is actually more backward than capitalists themselves. One thing we’ve seen this year is the acquisition of companies such as Morrisons, Aggreko and Meggitt by private equity firms. This is happening in part because, as Michael Jensen famously pointed out, dispersed equity ownership is inappropriate for many firms – which is why we’ve seen a long-term decline in the numbers listed on stock markets.

But if capitalists themselves can ask the question of who should own assets, why shouldn’t politicians? It is quite possible that some forms of increased worker ownership will increase productivity, and so should be part of that suite of policies necessary to raise wages. This is not a terribly radical claim: it was part of the 1983 SDP manifesto. But it seems beyond Starmer. I fear his refusal to nationalize the big six energy companies is the product not of serious thought about the nature of ownership but rather an unthinking acceptance of the constraints set by capital.

Of course, I might be wrong here. Maybe capitalism is more dynamic than I believe and maybe it is less antagonistic to technocratic social democratic reforms. If you think I am wrong, though, you need to produce evidence and reasons. Which Starmer’s essay does not. It is one thing to be captured by capitalist interests. It is quite another not to even see the bars of your cage.

Comments

[Blissex]

«One word is notably absent in Sir Keir Starmer’s recent essay – capitalism. [...] “entering the 2020s, Britain faced stagnant wages, vast inequality and the slowest growth in living standards since the second world war.” But he attributes this solely to “Tory failure”.»

Peter Mandelson wrote 20 years that “in the urgent need to remove rigidities and incorporate flexibility in capital, product and labour markets, we are all Thatcherites now”, therefore New Labour and Starmer know well that "There Is No Alternative".

Therefore thatcherism cannot fail, it can only be failed, and if thatcherism did not deliver success that can only be because the Conservatives are incompetent thatcherites, and New Labour and Starmer promise that they will be competent thatcherites.

[Blissex]

«In the 90s and early 00s the Tories’ obsession with Europe led them into electoral oblivion.»

That is the standard claim by right-wing neoliberals that identity rather than class interests drives politics. But it is happens that the major problem in the 1990s was a house price crash, and that in the past 40 years there have been a change in government only after a house price crash...

«The cure for populism is economic growth»

That embodies another two claims by right-wing neoliberals:

* That "populism" is a bad thing to be avoided.

* That "growth" automatically is fair across the classes, because "the markets" deliver it to the most deserving.

[Phil]

"What you've got to remember about these people is, they're not very bright." - Robin Ramsay, circa 1999. Which was unfair to at least some of the New Labour crowd he was referring to, but seems to fit the new generation rather well.

[rsm]

What happened to the Easterlin paradox?

Why does economic growth cause rising suicide rates?

Why does Ben Friedman ignore the 1930s, when low growth led to the production of swing music in the US?

Why ignore 2020 when supposed hysterisis nevertheless resulted in Biden's election?

Is Ben Friedman cherry-picking his data?

[Nanikore]

Interesting essay, thanks. One disappointment though is you quote Summers. Summers was one of the so-called "masters of the universe" and so featured on the front of Time magazine during the heyday of Neo-Liberalism. He has done a lot to marginalise pre-2008 sceptics of uber-globalisation and critics of the economics profession.

If we are going to have genuinely new ideas we need to start tackling this hegemony of thought. These people need to be made accountable.

[Nanikore]

I don't think Starmer has a chance until there is real reform in the economics profession. Until that happens the left will be in an ideas and policy vacuum.

You need people historically highly literate. You need people that understand what economics as a subject really is and how it distorts our understanding of society and capitalism. You need people that can ask questions like why economics looks at the world as a problem of aggregation of individualistic constrained optimisation and how did that come about.

Think of the Theory of Consumer Behaviour. Would that stand up in front of a philosopher or psychologist?

You are probably going to have a truly destructive event before we get any real change. Truly destructive. WWII changed things for a little while, but it did not last long.

[Nanikore]

@Blissex "Therefore thatcherism cannot fail, it can only be failed, and if thatcherism did not deliver success that can only be because the Conservatives are incompetent thatcherites, and New Labour and Starmer promise that they will be competent thatcherites."

Absolutely. The best the neo-classical economics profession can offer is that under a zero-lower bound interest rate you can increase government expenditure.

They can't see that this is not an answer to the fundamental problems in capitalism and just repeats the cycles of things.

[ltr]

I don't think Starmer has a chance until there is real reform in the economics profession....

[ What nonsense. The economics profession is just fine, and as always provides a range of ideas that can be adopted by policy makers including ideas that have been adopted in different setting and shown highly effective.

Keir Starmer is a Tory and supports Tory policy. Starmer has done all that is possible to ruin traditional Labour representatives and has used the most despicable tactics in so doing.

I at least will always oppose the ruinous Labour of Starmer and the like leadership.

[GREGORY BOTT]

Illiberal nationalism will fail as well. In the end its all tied to debt expansion turned into growth. Oh, what a little lie the industrial revolution was. The fact bourgeois states are Bernie Lomaxing capitalism since 2008 explicitly(and frankly since 1932 unexplicity) shows the weakness. The next stage is the bourgeois state dissolving as the depression lingers into famine and death. The market correcting by killing white children and reducing global population down to size. What rises must fall.

[ltr]

You need people historically highly literate. You need people that understand what economics as a subject really is and how it distorts our understanding of society and capitalism. You need people that can ask questions like why economics looks at the world as a problem of aggregation of individualistic constrained optimisation and how did that come about....

[ I have no idea what this actually means. Try reading Thomas Piketty or Joseph Stiglitz or Paul Krugman and on and on... ]