New Labour, new capitalist managers

Keir Starmer’s Labour is seeking to “curry favour with big business”, was the response of the Unite general secretary Sharon Graham to the recent leak to the Financial Times of the party’s latest policy proposals on workers’ rights. These were policies signed off at the Labour Party’s National Policy Forum (NPF) meeting in July which, by mid-August, had still not been officially published by the party nor made available in full to affiliated organisations such as Unite.

The Labour Party’s attitude to big business was spelt out earlier this year in the New Business Model for Britain document, published in May by the shadow chancellor Rachel Reeves. Presented as a long-term strategy for the establishment of a high-growth British capitalism, capable of competing with other world capitalist classes and powers, it really does deserve the epithet of being an attempt to ‘curry favour with big business’.

After years of economic and political instability at the hands of an increasingly unpredictable and unreliable ruling Tory party, it is an appeal to the British ruling class to place their trust in an incoming Labour government to ensure the long-term strategic interests of British capitalism.

The New Business Model for Britain sums up the stage which the Labour leadership are now passing through. Projected to win the next general election against the crumbling Tory party, it sets out to refine Labour’s policies for government to best represent the interests of British capitalism as a whole.

It is for this reason that, to a degree, the document provides an honest assessment of the several structural weaknesses of British capitalism, as well as the key strategic challenges facing it on the world stage. These include problems relating to Britain’s trade deficit and exposure to global economic shocks, climate change, new technological advances, and demographic changes.

Starmer’s revived ‘New Labour’ party is set to take power against the backdrop of British capitalism in a historic crisis. Despite once being a topflight world capitalist power, today British capitalism is rotten to the core.

“Thirteen years of Conservative government has left Britain weaker”, writes Reeves. “Austerity starved the economy of the investment it needs to grow. Productivity stalled and has never picked up. Wages stagnated and left millions poorer. Even judged by its own aims – reducing the national debt – austerity failed: our public finances have got worse, with debt as a share of GDP now at the highest it has been in over half a century”. All of which is true.

The most significant factor underlying all this malaise is the collapse of productivity growth in the British economy. Britain places fifteenth out of the 38 OECD countries in terms of productivity levels. Between 2007 and 2016, labour productivity grew by just 0.09% a year. Reeves herself cites a report by economic historians Nicholas Crafts and Terence Mills which demonstrates the slowdown in productivity in Britain in the decade leading up to 2018 has been the worst slowdown in 250 years – since the industrial revolution!

Reeves correctly identifies at the root of Britain’s productivity slowdown doggedly low capital investment, central to ensuring the development of new technology and further increases in productivity. “By 2019, private investment as a share of GDP had fallen below every other country in the G7. [Private investment] has sat below the G7 average for over thirty years”.

Reeves’ proposed solutions to the multiple challenges and crises facing British capitalism rest in her words on “the role of the modern state in making and shaping markets” and “modern supply side economics”. Reeves argues that the trends underpinning the historical decline of British capitalism can be definitively turned around with a clear shift of economic policy from above. But what economic wiggle room exists today for the policies Reeves advocates for?

The centrepiece of Labour’s New Business Model for Britain is the ‘Green Prosperity Plan’, intended to “catalyse the investment required to equip Britain’s workers to make and do more”.

“Success has always rested upon a partnership between the market and the state”. But what does this mean? And what is the nature of the relationship between the state and the markets in a capitalist society?

Marxists argue that capitalism is an inherently blind system, based on the private ownership of the means of production by a numerically tiny group of individuals competing with each other in the pursuit of profit. Under capitalism, the production and distribution of goods and services is determined by what generates the maximum possible levels of profit for the capitalists. It is for this reason that it is a chaotic and unplanned system, with cyclical economic crisis woven into its DNA.

It is this truth, key to understanding how capitalist society functions, which Reeves papers over. Following the end of the post-war boom in the 1970s, profit was increasingly to be found for the capitalist class in Britain by gambling their wealth in the stock and financial markets, not through investment to develop production and new technology. It is the profit-before-everything system of capitalism which therefore remains the ultimate barrier to the mission Reeves sets for the next Labour government “to deliver the strongest sustained growth in the G7, with good jobs and productivity rising in every part of our country”.

The role that the state plays in capitalist society – by which is meant the government, civil service, the judiciary, as well as the police and army – is to in the final analysis protect and represent the best interests of that nation’s capitalist class as a whole.

But this also includes at certain stages pro-capitalist governments taking stock of the longer-term strategic interests of capitalism and attempting, against the chaos of the markets themselves, to enact policies to best protect those longer-term interests which the markets alone are incapable of securing.

This is what Reeves is referring to when she says that “governments can take a strategic view of a nation’s comparative advantages and where they could lie in the future”. According to the Institute for Public Policy Research, green industries globally could potentially be worth $10.3 trillion by 2050. One risk posed for British capitalism is that it loses ground to other world capitalist classes in the race to muscle in on this potentially highly lucrative market in the medium to longer term.

It isn’t purely economic, but strategic and political considerations too, which motivate sections of the capitalist class and their political representatives to consider the future in the longer term. One such strategic objective in the race for new green industry and green energy production is the strengthening of Britain’s energy independence. This is particularly pressing in the new era of breakdown of relations between the capitalist powers, underscored by the ongoing war in Ukraine.

For an incoming Labour government this would mean state-led “public investments into industries that are vital to Britain’s future success, paving the way for significant further private investment” in Reeves’ own words.

This is the essence of the ‘partnership’ the pro-capitalist leadership of the Labour Party advocate, with the state stepping in to absorb the cost of initial capital investment into green infrastructure to create a sufficiently profitable market for potential ‘green capitalists’ to invest in, confident they will see a healthy return on their investment. The ‘success’ that Reeves touts would mean then success not for ‘the nation’, but success for the ruling capitalist class and their ability to continue raking in levels of profit acceptable to them, both in the short and the longer term.

But the weakness of British capitalism imposes real limits on the ability of any government representing the capitalist system to achieve those aims. In June, Reeves announced the dropping of the pledge she herself had made in 2021 in her first Labour Party conference speech as shadow chancellor, to spend £28 billion of public money a year on capital investment into new green technology. This would now be postponed until the later years of a new Labour government, ‘if the economic conditions allow’.

The reason given for the move was the recent and ongoing Bank of England interest rate hikes, prompted by the revolt of international finance markets against Liz Truss and Kwasi Kwarteng’s Autumn budget last year, which in turn has pushed up the cost of government borrowing.

In the words of one of Starmer’s aides, ‘if it’s a choice between the green prosperity plan and the fiscal rules, the fiscal rules would trump the former’. Read – in the choice between the potential mobilisation of society’s resources to meet the needs of the majority, against the demands of the capitalist class and the markets not to cut across their short-term profit-making opportunities, we will allow the capitalist class to call the shots. Ironically, Reeves bemoans the short-termism of successive Tory governments!

Britain however, despite the recent shocks to its economy and the ongoing crisis of British capitalism, still remains the fifth richest nation on the planet. Recent figures from Credit Suisse in 2021 show that just 685,500 Britons who count themselves among the richest one percent in society control a total wealth of £2.8 trillion.

A programme of green capital investment of £28 billion a year would then be a mere 1% of that total wealth. But truly mobilising those resources poses the need to replace capitalism – a system in which the creation of profit comes above all else – with a new socialist society in which that wealth would be democratically owned and planned by the working-class majority to meet the needs of society.

But for any government acting in this era to protect the interests of the ruling class and the system of capitalism, any such measures are a closed book. This doesn’t apply only to the question of green public investment. Reeves also talks in the New Business Model report about the role a future Labour government will play in investing in public services. “Strong public services are an engine of growth. Good schools equip a future workforce with the skills to succeed, creating opportunity and driving our economic prosperity. Affordable childcare helps parents participate in the workplace. A functioning NHS keeps people healthy and able to contribute to Britain’s economic success”.

All of that may well be true. But the question of how such services are to be resourced and expanded is left vague.

Starmer’s disgraceful announcement that a future Labour government would uphold the Tory two-child benefit cap, keeping an estimated 250,000 children in poverty in exchange for a saving of £1.3 billion of public spending a year, is indicative of the approach which now guides the leadership of the Labour Party. While shadow health secretary Wes Streeting’s remarks about the role he would like to see the private sector playing in bringing down NHS waiting lists is a taste of what ‘solutions’ for crumbling public services the Labour Party will in reality attempt to advance when in power.

Neither does Reeves outline clearly any plans to scrap the anti-trade union laws which exist in Britain, despite a vague word on “updating our inefficient industrial relations framework, giving trade unions greater freedom to organise, represent and negotiate on behalf of workers”. Starmer has subsequently committed to repealing the Tories’ new Minimum Service Levels Act, but no call has been made to fight now by instructing Labour-led local authorities to not issue work notices and by pledging to annul any attacks on the workers’ movement initiated under the Act.

But what conclusions then should the workers’ movement draw from these signals from the Labour leadership, confirmed by the leaks from the NPF process? As the crisis of British capitalism is set to rumble on, the need for militant working-class struggle to fight against the coming attacks of a pro-capitalist Labour government is clear.

Part of this is not only having an industrial strategy to fight any attacks on wages and living standards, but a political strategy too. Vital for the workers’ movement in preparation for a Labour government will not only be the building of a mass working class political alternative to challenge all the defenders of the capitalist system at the ballot box, but one armed with a socialist programme to answer the limitations posed by British capitalism in decline and decay. The building of such a party, and the political battles which would develop within it for a clear socialist programme to take society in Britain and worldwide forwards, would add immensely to the re-establishment of socialist consciousness amongst workers and a new generation of activists.

Theo Sharieff