One nation under Labour?

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At Labour's annual conference Ed Miliband claimed his party could unite Britain as "one nation". Mark L Thomas looks at the reality of Labour's arguments for a responsible capitalism

The Labour List website ran a headline in early October declaring, "There's a class war being waged in Britain - but not by Labour."

This was meant to be a compliment, not a criticism, of Ed Miliband's attack on the Tories as the real enemies of "One Nation" Britain. Yet, of course, it's an observation that is close to the mark.

There is a growing feeling of class bitterness in Britain. That was visible on the TUC demonstrations in London, Glasgow and Belfast last month. But so too was Labour's refusal to stand unreservedly on the side of workers who face a Tory-led government determined to substantially drive down living standards and recast the welfare state into something much meaner and market-driven.

Miliband's insistence in his speech at the London march that Labour in government would also face "hard choices" requiring "some cuts" (actually huge cuts) went down very badly with a significant section of the crowd.

Class arrogance
Miliband did get a resonance when he attacked bankers' bonuses and the class arrogance of the cabinet who think they are born to rule, or when he promised to repeal the new NHS bill and end the "free market experiment" in the health service.

Labour has taken a step away, verbally at least, from New Labour's abject love affair with big business, the City and the rich. So Miliband's speech at Labour's party conference included a promise to "sort out the banks" and to end "rip-off" energy bills and rail fares and a denunciation of tax cuts for millionaires. Len McCluskey, leader of the Unite union, even claimed Miliband's speech was a "rebirth of radical social democracy".

Yet this can only involve turning a blind eye over Labour's approach to austerity, and its willingness to echo the notion that at least some of the unemployed choose not to work (rather than unemployment being the result of not enough jobs) and blaming immigrants for low wages rather than employers.

And despite Miliband's harsh words for some of those at the top, Labour's proposals to actually tackle the inequalities in society are remarkably timid.

Take the energy companies. Relentless price rises by the "the big six" energy companies now mean that the average annual energy bill is £1,345, a staggering sum. At the start of 2004 the average bill was just £522.

Meanwhile the profits roll in. Centrica, which owns British Gas, announced a 23 percent profit rise to £345 million while EDF made £1.6 billion in profits last year.

Energy
When Ed Miliband attacks the "rip-off" prices of the energy companies it is a message that resonates with millions of working class people, many of who had voted Labour in the past but had turned away from them under New Labour.

But what does Labour propose? Renationalisation, which would offer the most effective way to exert control over prices and investment decisions? No, Labour is simply promising to replace Ofgem with a new regulator which will insist on more transparency over the price the energy companies pay to buy fuel wholesale and to encourage the entrance of new suppliers into the market to end the existed "rigged cartel".

Labour's solution is not to remove the market from energy distribution but somehow to "make the market work". But the market always gives rise to a few large capitals dominating - whether in cars, supermarkets, oil companies or energy companies. To believe otherwise is to confuse an idealised image of the efficient and just market, found nowhere outside of economic textbooks, with the actually existing reality of capitalism.

Equally Miliband's calls for action over rail fares don't translate into support for re-nationalisation. Yet the privatisation of the rail industry has been a disaster. Nearly 20 years after privatisation it continues to be a state subsidised system costing government around £1.2 billion a year. Without renationalisation what mechanisms would a Labour government have to control rail fares?

Taming the banks?
Miliband plans to tackle the banks by ensuring that casino-like gambling activities will never again be bailed out by the state. Labour is demanding that last year's Vickers report into the banks be fully implemented. This called for the high street "retail" activities of the banks to be "ring fenced" off from their "investment" arms which engage in speculative activities.

Only the retail activities of the banks, which serve ordinary bank account holders and make business loans, will be subject to state support in a financial crisis. By removing the implicit state guarantee to bail out the speculative activity of the banks, the assumption is that the banks will act in a more prudent way - and if not, be it on their heads, not the taxpayers'.

But what guarantee is there against a financial crisis developing in the retail part of the banks? Mortgage lending to households has, after all, been central to retail banking, and fuelled an unsustainable property bubble.

And if the vast "casino" arms of the banks collapsed, would the state really just stand aside with the resulting huge damage to capitalism? Tough talk of sink or swim for the banks would almost certainly give way, once again, to sending in a taxpayer funded lifeboat, as Alastair Darling, the former Labour chancellor, has cynically but accurately noted.

And for all Miliband's verbal assault on the banks, he has been careful to ensure that his position remains within the parameters of the ruling class debate about them. John Vickers, the author of the report, is a former chief economist at the Bank of England and the governor of the Bank of England, Mervyn King, has also echoed the calls for the full implementation of his report.

Tough choices?
Ed Miliband had some warmer words for the "millions" as against the "millionaires" in his conference speech, but the harshest measures he proposed - and the ones a future Labour government would actually have the means to pursue - are those directed at workers.

So Miliband declares that austerity would continue under Labour, with "tough settlements for the public services" and spelling out that this "will make life harder for those who use them and harder for those who work in them".

The claim is that under Labour the cuts would be slower and more caring, but since this would still involve enforcing the worst cuts and biggest fall in living standards since the 1920s this is not much of a crumb of comfort.

What the Labour leadership never do is ask a simple question: why does there need to be any austerity at all? They all too readily accept the assumption crudely expressed by the infamous note left by the wretched Liam Byrne to his Liberal Democrat successor as chief secretary to the Treasury in 2010, which announced, "There's no money left."

Yet it is a travesty to declare that Britain is broke. The most recent Forbes Magazine Rich List puts the combined wealth of the 1,000 individuals in the UK - not so much the 1 percent, more the 0.01 percent - at £414 billion, a record amount and equivalent to almost a third of the UK's total annual output.

Miliband does promise to restore the top rate of tax to 50 pence in the pound for those on incomes over £150,000 a year, after George Osborne cut it to 45p in the budget and he also says Labour would tax bankers' bonuses. Welcome though this is, it represents only a scratch on the vast wealth at the top of society.

Why is Labour so timid when it comes to measures against the rich and so committed to austerity for workers?

One argument is that, however regrettably, Labour must moderate its policies in order to keep the support of the "centre ground". If Labour's programme is too radical then it will be unable to win the next election.

Support for renationalisation
Yet poll after poll shows huge support for renationalization of the rail industry (between 70 and 80 percent), and 71 percent of people supported renationalisation of water services. A 2009 poll suggested 67 percent supported either "strongly" or "slightly" renationalising the electricity, gas, water, rail and telecommunications industries!

The real secret of why Labour doesn't offer a radical agenda isn't because it wouldn't be popular, but is too be found is Miliband's support for "responsible capitalism". Jon Cruddas, head of Labour's policy review, echoed this notion in a recent interview with the New Statesman, when he called for the establishment of a new "moral economy" that will "re-embed capitalism in society."

Such language echoes the notion that capitalism ought to be run fairly, with the market and firms regulated to ensure the system delivers for the majority. As Cruddas put it, "Our ambition is to build a country in which prosperity is shared and in which citizens can genuinely feel that we are all in this together".

But capitalism's driving force isn't morality, but profits. This can be compatible with high wages and expanding welfare spending or with low wages and an assault on the welfare state, but profits are the lifeblood of the system and dictate its health and the scope for concessions to those it exploits.

This is the key to explaining both the post-war settlement established by the 1945 Labour government under Clement Attlee (and not reversed by subsequent Tory governments) and the Labour government of 1974-79 which turned to neoliberalism even before Margaret Thatcher came to office.

The system expanded uninterruptedly without major crises in the core of the system for three and half decades after 1940, allowing for full employment, rising living standards and the establishment of the NHS and the modern welfare state.

The return of crisis as profit rates fell in the mid-70s has seen repeated crises and persistent attempts to squeeze workers harder. Concessions to workers and restrictions on capitals' freedom for untrammeled exploitation were much less tolerated.

And because Labour accepts capitalism even as it dreams of a "fairer" sharing out of wealth, it cannot be done at the expense of profits.

Take Ed Miliband's recent call for "predistribution" as opposed to redistribution. Miliband argues that rather than subsidising low wages through in-work benefits like tax credits, as New Labour did in office, inequality should be tackled at source through higher wages.

This sounds excellent, but how can this be done? A simple measure, if Labour were serious, would be to double the legal minimum wage, from £6.19 to over £12 an hour. This, of course, is not what Miliband has in mind. Instead he claims workers need to have their skills increased, so boosting profits and allowing for higher wages.

One nation under Labour?
But a study of work in Britain by the Good Work Commission, drawing on evidence from the National Employers Skills Survey between 1992 and 2006, suggests that the overall level of skills among workers has increased over this period, yet the share of national income going to wages has been falling for 30 years. The extra profits from more skilled workers have been pocketed by capital, not shared with workers.

Labour's calls for a "responsible capitalism" lead to Labour taking responsibility for capitalism. The health of the system must be restored if reforms are ever to be delivered in the future, even if that means undermining existing reforms in the present. Reformism doesn't simply no longer offer reforms, but takes away reforms once conceded.

The "One Nation" rhetoric Miliband is pushing hard can sound radical when directed at the rich at the top of society, but is quickly turned against the unions as an expression of "sectional interests" (ie working class interests).

The deep class divisions in our society can appear capable of reconciliation when the system is booming, but in an era of crisis it is becoming clearer that one class can only gain at the expense of the other.

Collective struggle is the only way for workers to defend their interests. The prospects for doing so are much greater if there is a confident and organised layer of socialists inside the working class who are willing to politically challenge the notion that profits are sacrosanct and fight for a vision of society where the vast wealth created by workers serves human need and not a tiny minority.