This book traces the economic ideology of the UK Labour Party from its origins to the current day. Through its analysis, the book emphasises key crises, including the 1926 general strike, the 1931 Great Depression, the 1979 Winter of Discontent and the 2007 economic crisis.
In analysing this history, the ideology of the Labour Party is examined through four core themes:
the party’s definition of socialism;
the role of the state in economic decision making;
the party’s understanding of inequalities;
its relationship with external groups, such as the Fabian Society and the trade union movement.
The result is a systematic exploration of the drivers and key ideas behind the Labour Party’s economic ideology. In demonstrating how crises have affected the party’s economic policy, the book presents a historical analysis of the party’s evolution since its formation and offers insights into how future changes may occur.
This chapter centres on the Second World War, the sterling crisis of 1947 and the Labour Party’s 13 years in opposition from 1951. Like the First World War, the Second World War offered Labour a route to government, overcoming many of the problems associated with the split of 1931. The war also provided public support and legitimacy for a nationalisation programme. However, Labour encountered challenges to implementing its full programme, and adopted a consolidatory approach following the sterling crisis, including limiting plans for further nationalisations. Defeat in 1951 and 1955 led to a new wave of revisionist thought, which sought to redefine socialism and challenged fundamentals such as Labour’s commitment to nationalisation and Clause IV of the party’s constitution.
This chapter centres on the devaluation of sterling in 1967 and 1976 and the ‘Winter of Discontent’ in 1978/79. Labour adopted a technocratic approach to economic policy on its return to office in 1964. It sought to combat some of the institutions that were seen as obstructing the socialist cause, and create a new framework for economic governance. These plans were frustrated by wider economic circumstances, before Labour encountered increased tensions with the trade unions. Labour’s 1969 White Paper In Place of Strife (Castle, 1969) generated a Cabinet split and had to be withdrawn. The fractured relationship between the party and the trade unions was partly mended during Labour’s period in opposition between 1970 and 1974, but compounded when the next Labour government sought to impose wage restraint in 1978. The resulting crisis would propel Labour from office for 18 years.
This chapter centres on the Labour Party’s 18 years in opposition between 1979 and 1997. It argues that the failure to achieve electoral success caused the party to rethink its approach and, as in previous periods of opposition, rethink its understandings of economic policy and socialism. It explores the tensions within the party, which first moved leftwards before embarking on a further period of revisionism. It concludes by looking at the ‘Third Way’ and the creation of ‘New Labour’. It explores how a need to demonstrate economic credibility and redefine traditional commitments was critical to this, and how understandings of socialism and equality were central to this process.
This chapter centres on the global financial crisis of 2007/08. It explores how the crisis challenged the post-Thatcherite paradigm that New Labour had adopted. It explores how the party’s proximity to the existing economic model made it difficult for it to adopt a radically new approach. As in 1931, the party, when faced with a crisis of capitalism, opted to defend existing institutions rather than seek to establish a new economic orthodoxy. However, the chapter highlights how Labour’s response to the crisis, for example through bank bailouts and the nationalisation of Northern Rock, drew on Keynesian influences, although as the subsequent sale of that bank demonstrated it did not ultimately diminish Labour’s belief in the market.
This chapter centres on Labour’s period of opposition from 2010. Unlike other chapters, it ends prior to the resolution of Labour’s electability crisis (defined here as Labour returning to government). It explores how the party assessed the New Labour project and interpreted its legacy following election defeats in 2010 and 2015. It explores how changing methods of electing Labour leaders tested the relationships between the party and its constituent elements. The tensions within the party were also highlighted during the Brexit referendum and negotiation period, which raised questions about the nature of parliamentary democracy. Labour had been a pro-EU party from the mid-1980s, but many Labour MPs now represented seats with a majority of Leave voters. Having lost economic credibility following the 2007/08 global financial crisis, Labour risked being presented as anti-democratic in the wake of the referendum and Brexit negotiations.
This chapter centres on the General Strike of 1926 and the Great Slump of 1931. This period covers Labour’s in the inter-war period. Although now the second-largest party within British politics, Labour had not yet developed a meaningful economic strategy. The General Strike demonstrated that the trade unions, although holding the potential to orchestrate revolutionary actions, lacked revolutionary goals. The Great Slump further demonstrated the difficulties in achieving socialist goals. Labour’s lack of economic understanding meant that when faced with a capitalist crisis, the party was unable to challenge economic orthodoxies and introduce socialist measures. The prospect of austerity measures generated a split within the party and a dramatic end to the second Labour government as key ministers left to form a national government with Conservative support. The split encouraged the party to think more holistically about its economic policy and develop plans surrounding nationalisation.
This chapter establishes an understanding of crises. It argues that crises are suboptimal events and warrant additional resources to alienate their effects. The notion of a ‘crisis’ increases the salience of such events and requires agents to respond accordingly. This chapter highlights that crises are subjective and contested entities – as well as leading to discussions surrounding how to overcome crises, they often provoke questions of blame. The chapter sets out the parameters for the remainder of the book, and introduces the crises to be explored.
This chapter explores the Taff Vale case and the First World War. It outlines different factions that existed within the early Labour Party and explores how the trade unions came to find a political home there. Prior to the First World War, the Labour Party owed much of its electoral success to agreements forged with the Liberals and adopted a defensive position with respect to workers and trade union rights. The Taff Vale case encouraged the party to look towards representation as a means of furthering working-class concerns. The First World War gave Labour’s leaders a seat in government for the first time, as part of the coalition. By the end of the war, largely due to a split within the Liberal Party, Labour emerged as the main opposition to the Conservative Party.
This final chapter returns to the four themes established in Chapter 1: tensions between pragmatic and ideological responses to events; Labour’s understanding of socialism; distinctions between revolutionary and parliamentary socialism; and the relationship between the party and the trade unions. It demonstrates how crises have shaped the party’s economic ideology and challenged contemporary understandings of socialism and the means of achieving it. It traces the different strands of Labour’s socialism and argues that the party’s commitment to socialism has drawn from an ethical rather than economic or Marxist lineage. It highlights some differences between the experiences of the party in government and opposition but rejects simple classifications of Old and New Labour, arguing that throughout its history Labour’s economic policy has been guided more by pragmatic concerns than ideology.