The Third Way meets reality, Issue 33

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The Third Way meets reality

The illusion of prosperity
New Labour's reaction
A capitalist ideological defeat
The end of the Tories?
More or less democracy

As Blair continues his Third Way crusade, the world's economic and social storms approach Britain. PETER TAAFFE, Socialist Party general secretary, forecasts bitter class battles ahead as the real world catches up with and exposes New Labour's empty rhetoric.

TROTSKY ONCE WROTE of the British Labour leaders that their thoughts were 'far more backward than the methods of production' of backward British industry. What would he have said about Tony Blair, Britain's present 'Labour' leader? He wishes to return the labour movement back to the ideas of the 19th century via the 'Third Way'. Blair's central idea is to re-establish the Liberal/Labour coalition which preceded the formation of the Labour Party. It must be granted that there is a certain consistency in Blair's method of reasoning, in view of the fact that, "manufacturing employment is expected to fall to its lowest level since the mid-nineteenth century, according to new research by the House of Commons library". (Observer, 11 October 1998) Nineteenth century ideas for 19th century conditions!

Blair wishes to unite "the two great streams of left-of-centre thought - democratic socialism and liberalism - whose divorce this century did so much to weaken progressive policies across the West". (The Third Way: New Politics for the New Century, September 1998)

The great schism between bourgeois liberalism and the British workers did not arise from a 'misunderstanding'. It came from the incapacity of bourgeois liberalism, which rested and rests on capitalism, to satisfy the demands of the working class within the framework of the 'market system'. The undermining of British imperialism in the latter part of the 19th century and the early part of this century meant that it was no longer capable of granting concessions to the working class, particularly to its upper layers, as had been the case in the past. The collapse of liberalism, the embrace of socialism and, with it, the idea of a separate Labour Party, was grounded in the objective reality which confronted the working class.

The failure of world and particularly British capitalism to solve the problems of today's working class is more evident than it was at the time of the birth of the Labour Party. This has even prompted serious capitalist commentators to mock the emptiness of Blair's ideas. Tony Judt, writing in the International Herald Tribune, comments: "Each age has its cliché. Ours is the Third Way". (29 September)

He writes: "Much of this is humbug, of course… (it) is just a new label for an old electoral tactic - 'triangulating' between ideas and voters to maximise short-term advantage. Blair can get away with appearing 'radical' in the first period of office, only because Thatcher… swung the political pendulum so aggressively against compassion and government intervention that for the first time a government of the 'left' could occupy ground somewhere to the right of centre and get credit for radical intentions just by standing still and emoting fuzzily. New Labour's Third Way is opportunism with a human face".

Moreover, even before this bird (the 'Third Way') has been able to take flight one of its wings has been severely clipped. Göran Persson in Sweden was forced to cancel his attendance at the New York love-in on the 'Third Way' between Bill Clinton, Tony Blair and Romano Prodi. Persson's 'Third Way' in Sweden resulted in savage cuts in living standards and, in the recent election, the worst performance of the Social Democrats in modern times. "A nice case of practice trumping theory", comments Judt. A similar fate awaits the Blair government given the even greater problems it confronts.

The illusion of prosperity

DURING ITS 'HONEYMOON period', two factors in the main have sustained the seeming popularity of the Blair government. Up to very recently, Britain's economic bubble had not burst. At the same time, the main opposition party, the Tories, are in a state of disarray bordering on complete demoralisation. Now, however, the world economic crisis has completely shattered Gordon Brown's rosy economic scenario for Britain. Barely two months ago, in an interview in The Guardian, Brown confidently predicted that, "we are breaking away from 40 years of boom and bust... we are on track to avoid recession. We are forecasting a 2% growth this year and 1.75% next year. The economy is performing as we expected it to do". (7 August)

Now Brown has been compelled to beat an ignominious retreat, halving his earlier forecast for growth, blaming this, of course, on the world economic crisis. It is slowly dawning on the more serious bourgeois economists that Europe and the US, hitherto pictured as oases of economic tranquillity, are about to be battered by an economic hurricane which will be far more devastating for ordinary working people than the damage inflicted on Central America and the US recently by Hurricane Georges.

In Britain's 'two-speed economy', Scotland, the North and the Midlands, with their manufacturing base, have been hit first and are already experiencing the first effects of recession with job losses. Manufacturing industry is at its lowest for six years. As a minimum it will drop by 1.5% this year and probably by a lot more next year. Up to 170,000 jobs in the engineering industry are likely to disappear by the end of next year. Moreover, the idea that Britain was insulated from the Asian 'contagion' has now been shattered by the revelation that UK exports to Indonesia and Malaysia have plunged by 50%, South Korea by 55%, and those to Thailand and the Philippines down by 60%.

The crisis, it is true, has not yet affected all parts of the economy. But the hope that the recession will be limited (to Scotland, the North and the Midlands) has already been undermined in September and October. Before the full effects of a downturn has been felt, job losses have spiralled in the banking and finance sectors of London with the redundancies at Shell and Merrill Lynch, etc. Jobs in the City of London account for one-fifth of all jobs in Britain's finance and banking industry. This is just the beginning, as 50,000 workers in the London area alone are expected to be made redundant.

Also, even before the recession really bites, "consumer confidence is very low. The speed of the downturn has been underestimated" (Pamela Webber, economist at BRC). High-value goods, such as bathrooms and kitchens, which are a key indicator of spending trends, have contracted. And household spending accounts for more than 60% of British gross domestic product. The revised 1% growth rate envisaged by Brown is hugely optimistic. Unemployment will inexorably increase by at least half a million in the next period.

New Labour's reaction

REMORSELESS PRESSURE WILL be exerted on the government which will be caught in the vice of economic contraction. Consequently, government tax revenue will fall as workers' incomes plummet through unemployment. This in turn will mean a big rise in welfare payments and also demands from those, like teachers and nurses, whose living standards have been seriously eroded, for increased wages and living standards. Ruminating on the perils of the world economic situation and its effects in Britain, Philip Stephens, the political commentator of the Financial Times, writes: "Whatever we thought before, it will be worse".

Brown's so-called 'golden rule' on government spending will go out of the window unless savage cuts are inflicted on welfare recipients, the poorest sections of society. He has stipulated that the government will only borrow in order to finance investment and not for current expenditure. This, however, has already been undermined by the cut in the estimated growth rate. He was predicting a £36bn surplus in government finances over the next four years. This would be completely wiped out if the economy merely grew by 1%. Anything less than this and the government would move into deficit. In fact, serious economists are expecting that by the end of the first five years of a Labour government, there will be a minimum deficit of £50bn in the public finances unless savage cuts are undertaken.

Before the onset of this crisis, Blair appointed Alistair Darling with a mission to prepare plans for big cuts in disability and sickness pay. He will also, probably, push forward the demoted Frank Field's shameful proposals for the privatisation of pensions to 'supplement' (read supplant) old age pensions. However, in the light of the world economic turmoil, particularly the drop in share and bond prices (which, in turn, affects annuities for pensions) the Blair government will face difficulties in selling this idea. In the teeth of mounting problems, a Guardian writer wailed: "It is as if Labour governments are cursed. For some unfathomable reason (?) their elevation to office seems to coincide with economic crises".

In the past, Labour governments were propelled into power because capitalism and its traditional parties failed. When would a Labour government ever come to power, except if it 'coincides with economic crises'? However, the character of this government is not like previous Labour governments, which were subject to the pressure of the organised working class through the trade unions. It is an openly pro-capitalist government.

It could confront in the next few years a situation similar to 1931. That government collapsed under the pressure of the economic situation and the demands of the British bourgeoisie for savage cuts in the living standards of the working class, particularly of the poorest section, the unemployed. The resistance of the working class split the government wide open. The desertion of Macdonald and company to a national government, an open bourgeois government, was parallelled by a split of the left from the Labour Party by the 30,000 members of the Independent Labour Party (ILP). The Labour Party itself also shifted towards the left.

However, this 'New' Labour government already has strong elements of a 'national government'. The Liberal Democrats are already in a de facto coalition with Labour (with seats on the cabinet committee on constitutional reform). It is extremely unlikely that, apart from one or two minor ministerial defections, even a programme of cuts in public expenditure would provoke anything like the response of 1931. Nevertheless, even this sanitised 'Labour' Party would not be completely immune from the waves of working class anger that this would provoke. It is possible that a small group of left MPs could detach themselves from the Labour Party. This would not represent a mass left wing, as did the ILP at least potentially in 1931. Nevertheless, a small split-off could find some echo amongst workers repelled by New Labour, the Tories and the Liberal Democrats. There will be a yearning for a fighting mass alternative. Already there is a significant layer of workers and youth, under the impact of the first stages of the crisis, who are looking for a socialist alternative.

A capitalist ideological defeat

IT IS PRECISELY at this juncture, however, that Tony Blair on a visit to China declares that "fundamentalist ideology has gone. Instead, what all countries are trying to do is to find a way of combining a dynamic market economy with a strong sense of social provision and national unity and purpose". This merely echoes, at the end of the decade, the claim Francis Fukiyama made at the beginning of the 1990s that we face 'the end of history' and the death of ideology. The latter could at least point to the collapse of the economies of the Soviet Union and Eastern Europe. This provided the basis for a colossal ideological campaign in favour of the market and against socialism. Since then, however, we have had one recession at the beginning of the 1990s and are now experiencing the first stages of a world slump which has already begun to polarise the classes.

Blair's 'Third Way' is a desperate attempt to straddle the growing chasm between the classes reflected in the extreme polarisation of wealth and poverty which will be accompanied by the re-emergence of a ferocious class struggle throughout the world and in Britain. It is not just Blair who will be confounded in the next period by the march of events but those, like Eric Hobsbawm, who consider themselves to the 'left' of the Blairistas. In response to Blair's assertion that 'ideology has gone', he declared: "This is unquestionably true… the battle between hundred percent state planning and hundred percent free market society is over because neither proved true". In fact, there was never 100% state ownership in the former Soviet Union, but the nationalisation of the 'commanding heights' of the economy allowed the planning of the economy and society.

But in one phrase, Hobsbawm, a 'Marxist' and past leading luminary of the 'Communist' Party, dismisses the Russian revolution and the planning of the productive forces which it ushered in. It is true that Stalin usurped power from the working class and established a one-party totalitarian regime. Nevertheless, the planned economy of the Soviet Union, despite the massive burdens of a privileged, autocratic, ruling, bureaucratic elite, demonstrated the advantages of the nationalisation of industry and an economic plan. It developed Russia from the India of Europe into an advanced industrialised society.

Mismanagement and waste is not indigenous to planning but was in Russia and Eastern Europe a product of bureaucratic and autocratic Stalinist rule. Tony Blair, with his ideological and historical impoverishment, would not recognise this. After all, he thinks that the electric guitar is the greatest achievement of the 20th century! But Hobsbawm, an alleged Marxist? Alice Nutter, of the pop group Chumbawumba, was more correct in declaring recently that "we have got the most extreme form of capitalism since the end of the second world war… we will always have some form of extreme opposition to it".

The economic crisis has already compelled the bourgeoisie to consider greater state intervention to ameliorate its effects. The nationalisation of Japanese banks has been advocated by the Financial Times! Even Yeltsin, the fountainhead of capitalist social counter-revolution in the former Soviet Union, nationalised eight banks in August. These are not socialist measures but are designed to protect capitalism. Historically, the capitalist state has intervened to rescue failing industries. Then we had the madness of Thatcherite/Reaganite mass privatisations. There is now a recoil taking place. However, recent nationalisations are state capitalist in character, are viewed as purely temporary, and are meant to avert industrial collapse. The industries will be renovated at the expense of the tax-payer (the working class and middle class), and then returned at knock-down prices to the 'private sector'.

But even this represents a massive ideological defeat for the bourgeoisie and their philosophy of an untrammelled 'free market'. It has put back on the agenda nationalisation and public ownership, particularly of failing industries. The very actions of the bourgeoisie in Britain and elsewhere, in spite of the vain attempts of Blair's 'non-ideological' campaign, put to the fore the issue of planning of the resources of society and of socialism.

The end of the Tories?

IT IS IN the light of this changing situation that Blair has hesitated over committing himself and his government to proportional representation (PR). Both for the bourgeoisie and also for Marxists, this is not an issue of principle as many, even on the left, imagine. The bourgeoisie has switched from different electoral systems, from first-past-the-post to PR and vice versa, depending on what best strengthens their rule. Conversely, socialists and Marxists observe a simple principle: in the electoral field, what best furthers the struggle of the working class and socialism, at each stage, and is also democratic, is justified.

When it appeared that a British left Labour government, led by somebody like Tony Benn, might use the first-past-the-post system to tread in the footsteps of Allende in Chile, then the bourgeoisie in Britain seriously considered switching to PR. This, they believed, could establish an anti-left Labour coalition which would prevent a possible Chilean scenario.

With the move to the right of the Labour Party, this was no longer on the agenda. Blair's 'project' is to establish a virtual permanent anti-Tory Lib-Lab alliance which would mean him being in power for at least two terms. He is looking to the report of the Jenkins Commission to further this aim. And the Tory Party are doing everything at the moment to help him. Their October conference was, in the words of Hugo Young, 'the bleakest in the recent history of the Conservative Party'. Poll after poll has demonstrated the irrelevance of the Tory Party. The colossal underlying radicalisation of British society under the whip of Thatcher and Major has completely marginalised them. Only 5% of the electorate see themselves as right wing, at a time when the Tories are moving further towards the right. Sixty-three percent of voters described the Conservative Party as to the right of them, as against 21% who say the party's position is 'the same as me'. Even more significant is the fact that 55% of the population consider themselves as 'working class'.

The hapless and ineffective Tory leader, Hague, was assailed from all sides at the recent Tory Party conference. The Sun, which claims to be 'Britain's most popular paper' and, in the past, the loyal prop of Thatcher, declared that the party was 'dead'. In order to retain its readership, The Sun could not 'be associated with failure', as signified by the Tory Party. Almost one in five people believe that William Pitt is a member of the shadow cabinet! And it has now been revealed that something like three to three and a half million voters did not stay at home at the last general election as had been first believed, but actually 'detached' themselves from the Tories to vote Labour or Liberal Democrat.

So ineffective was Hague that one Tory commentator argued for 'the prompt replacement of Mr Hague with Ann Widdecombe'! (The Guardian) And this, it seems, was made 'before midnight'! Portillo was seen as a 'big beast', setting up Hague for his recent TV programme on the windswept Yorkshire moors where the latter appeared as a 'little boy'. Portillo, as Heseltine has pointed out, is the right-wing's leader-in-waiting, ready to step into a safe Tory seat on the way to assuming the leadership of the party.

The Tory Party, like most of the traditional bourgeois parties in Europe, is temporarily redundant, no matter who its leader is (the exception being the right-wing government of Aznar in Spain). This does not mean that it is completely 'dead', or can never make a come-back. It is possible that it could split, particularly if PR is introduced. The poll conducted by the pro-European Tory MEPs showed that a pro-Europe Tory split led by Clarke or Heseltine would get 15% of the vote.

But this is not the music of the future, as Blair claims. The Blair government in Britain is the best for the British bourgeoisie at this moment in time. Modern social democracy represents no danger for capitalism. It is true that there have been rumblings of opposition from the capitalists in Germany to the mild 'Keynesian' measures of increased taxes muted by the newly-elected SPD/Green coalition. But Keynesianism, neither in Europe or the US, will have any decisive effect, as Japan demonstrates, in significantly avoiding the consequences of the coming slump.

More or less democracy

THE BLAIR GOVERNMENT, a reliable prop of capitalism, will come into conflict with an aroused and angry working class. It is even possible that the Tory Party could make a significant come-back even before the next election as discontent with the Labour government inevitably grows. New Labour, in leaked internal secret reports, are expecting a loss of at least 1,000 seats in the 1999 local government elections.

One of the major considerations in Blair's approach towards PR is to prevent parliamentary and local government representation for the emerging socialist forces which will develop in this period. The Alternative Vote-plus (AV-plus) that is likely to be proposed by the Jenkins Commission is not a proportional system in the real sense of the term. For the majority of seats it will mean the first-past-the-post system with an estimated 50 seats elected proportionately from a party list. Its purpose will be to ensure greater support for the Liberals as a step towards a coalition government with New Labour. The fairest existing PR system is the Israeli: 1% of the vote for a party guarantees an MP. Blair will avoid like the plague any system which could give parties like the Socialist Party parliamentary representation and, thereby, a platform to argue for socialist change.

A split from the Labour Party, which initially would be small, could, if it moved in a socialist direction and linked up with forces such as the Socialist Party, find an echo under a proper PR system. It is for this reason that Blair hesitates to introduce the same system for Westminster elections as will be employed for the Scottish Parliament and Welsh Assembly. If he decides to opt for any system, it will be AV-plus.

However, irrespective of what parliamentary manoeuvres are employed by Blair, his government is going to be assailed by mass opposition from working people who will be called upon to pay a terrible price for the devastating crisis of capitalism which looms. One thing is certain, the Third Way will very quickly be seen as a dead end. Socialism will be back on the agenda and with it will come the growth of those forces like the Socialist Party which stood against the wave of pro-capitalist and anti-socialist propaganda in the 1990s. We stubbornly defended the programme of socialism and Marxism which offers the only way out of the impasse which capitalism means for working people everywhere.