The people’s flag may be deepest red but for the 1994–2010 New Labour period it few from a pale grey masthead. What was therefore once distinct about the Labour Party became a matter of doubt, with even the party itself unsure what it stood for.
The uncertainty crept in well before the 2008 banking crisis exposed the limitations of New Labour’s light-touch, low-tax approach to economic management. But dealing with the credit crunch required a rapid change of stance. Labour spent over £100 billion to bail out bust banks to save the financial system from collapse and took strong fiscal and monetary steps to fight recession and get the economy growing again.
But although these measures worked, they meant big increases in government borrowing and national debt, providing the pretext for leading supporters of neoliberal economics who share an ideology of small government to implement severe public spending cuts and shrink the size of the state.
Hence the Big Deceit suffocating British politics today: that Labour government spending – which the Tories signed up to in September 2007, pledging to maintain it until 2010 – not the global banking crisis caused soaring borrowing, deficits and debt.
In Britain – as across the world, notably continental Europe – the left struggled to offer a coherent response, instead slipstreaming the centre-right parties in their call for huge cuts. But that just meant heading down the same austerity road at a slower pace, when (as Keynes showed in the 1930s) getting the economy back on the growth path was always a surer way to sort out the public finances.
Despite the cataclysmic failure of neoliberalism which the 2008 global banking crisis represented, it hardly incited a resurgence of democratic socialism.
My new book Back to The Future of Socialism provides a practical political alternative. It argues that the kind of capitalism we face today is a more integrated, more unstable and more unfair system than ever: productive but prone to paralysis, dynamic but discriminatory.
Although the neoliberalism of recent decades ideology caused the banking crisis, it has clung on nevertheless, as if somehow it were not the very root of the problem all along.
I argue for faster fairer greener growth. Growth because only an expanding economy can provide the resources needed to tackle Britain’s huge social problems.
Faster growth because that holds the key to bringing the public finances back into balance, and to generating secure, well paid work.
Fairer growth because unequal societies are unhealthy societies in which everyone loses out as all forms of social ills rise and economic growth rates slow.
Greener growth because without vigorous action to meet the threat posed by climate change, such as by backing a low-carbon economy and actively promoting renewable energy, environmental disasters can only become more frequent and more intense.
And, contrary to the stifling grip of neoliberal orthodoxy on the ‘Westminster bubble’, faster fairer greener growth is eminently feasible. £30 billion per year over two years extra public investment in housing, in the social infrastructure, in training and skills, and in the low carbon economy is substantial. It would mean the government borrowing more today in order to borrow less tomorrow, by raising Britain’s economic growth rate.
It is a democratic socialist alternative.
Peter Hain is the Labour MP for Neath and former Cabinet Minister, His new book Back to The Future of Socialism is published by Policy Press