Capitalism's premature mourner

"Old Labour" has had a rather poor press recently. Anyone curious to know more about so apparently discredited a phenomenon would do well to consult the three books under review: David Reisman's learned two-volume study of Tony Crosland and Noel Thompson's illuminating survey of the economic ideas of the Labour party.

Socialism, Crosland declared, was not about transforming the property system, nor about the extension of public ownership and state planning: it was about alleviating social want and securing equality. The "fundamental divide between left and right, socialists and non-socialists," he claimed, "has always been about the redistribution of wealth, power and class status." (Crosland's Future) Socialism was a set of ethical precepts of which two were paramount (as he wrote in his major work, The Future of Socialism), "first to relieve misery wherever it exists ... secondly, to promote a greater social and economic equality for the mass of the people". These precepts were to govern Crosland's career as politician, theorist and government minister. Socialism, he insisted, entailed a willingness to give an exceptional priority in the disbursement of resources to the needs of "the poor, the deprived and generally the under-dog" (Crosland's Future). Throughout his life he never - unlike some fellow Gaitskellites - abandoned the conviction that equality must remain the central tenet of the party's creed, its advancement a prime task of any Labour cabinet.

What did he mean by equality? Recently, Gordon Brown has posed the choice as between equality of outcome and equality of opportunity. There is no reason why this should be so and neither choice represented Crosland's position. Complete equality was not possible, he argued, since an adequate flow of profits for investment and the need to reward expertise, effort and skill required disparities in the income structure. Nor was he attracted by equality of opportunity. Not only did it serve to legitimate a hierarchical order of society difficult to reconcile with equal respect, but an equal start in the race of life was impossible in a highly uneven society. Inevitably, he wrote, the most handsome rewards would be lavished upon those fortunate to be borne into privileged circumstances. He favoured "democratic equality", that is a presumption in favour of equality "with inequalities being justified if, and only if, differential rewards work to the benefit of the community as a whole and we can assume that access to jobs which command differential rewards would be on the basis of genuine equality of opportunity", in the words of Raymond Plant. Equality so defined not only involved challenging entrenched privileges but attaining a more equal distribution of wealth, income, power and status.

The old politics of "tax and spend" is nowadays often disparaged but, as Reisman shows in considerable detail, Crosland's thinking was of a subtlety, balance and complexity that defies the simplicity of the soundbite. His quest for the middle ground sometimes bred a certain ambiguity and his conviction that the public school system lay at the root of a steep social hierarchy was not matched by any scheme to transform it. But upon one point he displayed both unwavering consistency and passionate commitment. "Equality and higher public expenditure," Crosland avowed, "is what divides us from the Tories." In one of his last speeches, he declared himself an "unrepentant believer in higher and growing level of public expenditure" to be financed by high progressive taxation. (Crosland's Future) He was unimpressed by the proposition that the lower the taxation, the greater the ability of taxpayers to dispose of their income as they pleased - then the greater their freedom. He did not agree that market-determined income patterns were a true measure of desert: the better-off enjoyed sufficient advantage arising from social background, education and inherited wealth to procure for themselves the most handsomely remunerated, prestigious and powerful positions in society. Public spending, whether through the provision of services free at the point of delivery and allocated according to need or through cash transfers, were (along with the redistribution of property via fiscal means such as wealth and gift taxes) the most effective means of spreading the cost of social risk and eradicating unjustified inequalities. Social benefits helped equalise life chances for those who through poverty, illness or age could not secure full remuneration through work; and the type of services that public spending made available - schools, hospitals, pensions and housing - were those that defined a civilised society.

Crosland's great work, The Future of Socialism, was confident and sanguine in tone. The aggressive and ruthless pursuit of profit had been replaced by a sense of social responsibility. The "veneration of individualism and competition ... the insistence on the absolute and unconditional rights of private property"; the belief that "the unfettered exercise of private rights must, by 'the invisible hand' of economic competition, maximise the welfare of the community" - all these features of capitalism could now be consigned to history. The Labour left, he felt, had exaggerated the power which control over capital placed into the hands of the property-holding class and underrated the power of the democratic state. "Whatever the modes of economic production, economic power will, in fact, belong to the owners of political power."

Crosland, however, concentrated almost exclusively on the power of British industrial firms, ignoring the City and international financial flows. This was odd since both the British Labour government and the French Popular Front governments in the 1930s had been laid low not by industrial corporations but by the foreign exchange markets and the central banks. His fellow, but less well-known thinker John Strachey, (formerly a Marxist but by the 1950s broadly a Keynesian social democrat), displayed a sharper sense of the realities of power. "Economic power," he contended, "threatens to submerge political power unless political power can at the critical moment obtain control of economic power." In an unpublished note (cited in Michael Newman John Strachey), he warned of "a sort of 'social ejection mechanism' which, unless its operation is foreseen and neutralised, will ruin governments of the left." Unless a Labour government imposed firm controls over capital movements it would be "quickly bankrupted by the efflux of liquid capital seeking what it considers the most attractive conditions."

Events in the 1970s proved the superior prescience of Strachey's analysis. By 1976, recently appointed as foreign secretary, Crosland stood at the apex of his political career. But the words that he confided to his notebook were anything but hopeful. In stark contrast to the serene optimism of his major work, he gloomily reflected upon a world in thrall to the ideas of the right: "monetarism, anti-egalitarianism, free market economy". (The Mixed Economy) A wave of speculation against the pound, a collapse of confidence in the bond markets stoked by apparently massive budgetary and balance of payments deficits persuaded Jim Callaghan, the prime minister, and his chancellor, Denis Healey, that they had to seek an IMF loan, under harsh terms that included deep and painful cuts in public spending. In neither of his two studies does Reisman give so seminal an episode due attention. The prime minister and his chancellor induced a doubtful cabinet to swallow the IMF's medicine, signalling the effective abandonment of the Keynesian approach. Crosland was eventually brought on board, though only because politically he felt he had no choice. He continued passionately to believe that the IMF's prescription (as recorded by Tony Benn in his diary at the time) "was wrong economically and socially, destructive of what he had believed in all his life". As it happened, he only had a few more months to live.

Healey later acknowledged that much of Crosland's case was correct but added that the government had no option but to toe the IMF's line if it was to regain credibility in the financial markets. In 1956 Crosland had proclaimed that "political authority has emerged as the final arbiter of economic life: the brief, and historically exceptional, era of unfettered market relations is over." (The Future of Socialism) The IMF episode demonstrated in the starkest of ways the extent to which he had underrated the power of capital. He had been right to argue that the cornerstone of the postwar settlement was a redistribution of power in favour of Labour and the democratic state, but wrong to assume it would be permanent. Indeed in his last years the bright hopefulness of his earlier work evaporated as he felt mounting dismay at the revival of right-wing ideas and "the breeding of an illiterate and reactionary attitude to public expenditure". (The Mixed Economy)

Few who have doubts about the relevance of studying Crosland would retain them after reading Reisman's detailed and insightful analysis. Whether two volumes are required is not so clear. There are strange omissions: Reisman appears not to have conducted any interviews nor made use of diaries (Crossman, Benn and Castle) and private papers. The discipline of compressing all into a single volume would have given the style an incisiveness in presentation and judgement it sometimes lacks. And it is odd that in so extensive a study that there is no systematic analysis of Crosland's influence on the Labour party. Notwithstanding, given their breadth of coverage and sureness of understanding, both books are of considerable value to the students of both the Labour party and political ideas.

Crosland inevitably also figures in Political Economy and the Labour Party which, though brought up to 1995, is primarily a study of "Old Labour". In fact it demonstrates that this concept, while useful for public relations purposes is empirically and heuristically without value. The study charts in a thoughtful, perceptive and dispassionate manner the main currents of economic thought within the Labour party since its inception. But if "Old Labour" is a figment of the spin doctor's skill, the same is not true of "New Labour". Thompson rightly refers to the "magnitude of the shift in policy emphasis that has occurred in recent years". The change is not incremental, for a "new economic discourse dominates ... the language of competition, efficiency, productivity, economic dynamism and, above all, that of individual choice and self-fulfilment in the context of the market economy." The various elements themselves, he shows, all appeared previously in various guises but the extent to which the new discourse pervades all thinking about economic questions is new.

Thompson is too good a scholar with too solid a grasp on his material to slip in the error of a simple new/old Labour dichotomy. There are indeed continuities, for example the respect which successive Labour chancellors (perhaps with exceptions for the postwar government) displayed for the Treasury and economic orthodoxy and the preferment they generally gave to the priorities of the City (the maintenance of sterling as an international currency in the 1960s, for example). Yet reading these three volumes, one senses that, beyond all the distinctions in policy, priorities and objectives there is another, less tangible element that distinguishes new from old. This can be summed up in a rare passage cited in The Mixed Economy, where Crosland describes why he became a socialist: "I came to hate and loathe social injustice, because I disliked the class structure of our society, because I could not tolerate the indefensible differences of status and income that disfigure our society." Do the same sentiments animate New Labour - or has it adopted a new morality?

Eric Shaw is senior lecturer in politics, University of Stirling.