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The New Depression

The business and political elite are flying blind. This is the mother of all economic crises. It has

We are living through a crisis which, from the collapse of Northern Rock and the first intimations of the credit crunch, nobody has been able to understand, let alone grasp its potential ramifications. Each attempt to deal with the crisis has rapidly been consumed by an irresistible and ever-worsening reality. So it was with Northern Rock. So it was with the attempt to recapitalise the banks. And so it will be with the latest gamut of measures. The British government – like every other government – is perpetually on the back foot, constantly running to catch up. There are two reasons. First, the underlying scale of the crisis is so great and so unfamiliar – and, furthermore, often concealed within the balance sheets of the banks and other financial institutions. Second, the crisis has undermined all the ideological assumptions that have underpinned government policy and political discourse over the past 30 years. As a result, the political and business elite are flying blind. This is the mother of all postwar crises, which has barely started and remains out of control. Its end – the timing and the complexion – is unknown.

Crises that change the course of history and transform political assumptions are rare events. The last came in the second half of the 1970s, triggered by the Opec oil price spike and a dramatic rise in inflation, which marked the end of the long postwar boom. Its political consequences were far-reaching: the closure of the social democratic era, the rise of neoliberalism, the discrediting of the state, the embrace of the market, the undermining of the public ethos and the espousal of rampant individualism. For the next 30 years, neoliberalism - the belief in the market rather then the state, the individual rather than the social - exercised a hegemonic influence over British politics, with the creation of New Labour signalling an abject surrender to the new orthodoxy.

The modalities of this present crisis are entirely different. Extreme as they may have appeared to be at the time, the economic travails of the 1970s were progressive rather than cataclysmic. The old system did not hit the wall, but became increasingly mired and ineffectual. What swept the social democratic era away was not the force de frappe of an irresistible crisis but that it was accompanied by the steady rise of a new ideology and political force in Thatcherism - and Reaganism in the United States - and its victory in the 1979 general election.

In contrast, the financial meltdown of 2007-2008 demolished the neoliberal era and its assumptions with a suddenness and irresistibility that was breathtaking. The political class, from New Labour to the Conservatives, is standing naked. They are still clinging to the wreckage of their old ideas while acknowledging in the next breath that these no longer work. The financial crisis is a matter of force majeure; political ideas and discourse change much more slowly, even when it is obvious that the old ways of thinking have become obsolete. Meanwhile, there is no political alternative waiting in the wings, refining its radical ideas in think tanks ready to storm the citadels of power as there was in the 1970s, notwithstanding the fact that think tanks are now far thicker on the ground. Instead, it has been the mainstream which senses that neoliberalism no longer works, fatally undermined by events and, ultimately, the author of its own downfall. This crisis will have the most profound and far-reaching political consequences and will in due course transform the political landscape, but it remains entirely unclear in what ways and when that might be.

In all these senses the financial meltdown has far more in common with the Great Depression than the Great Inflation. When the financial crisis consumed Wall Street in 1929 and proceeded to undermine the real economy, engulfing Europe in the process, it was not accompanied by a radical shift towards Keynesianism, but rather a reassertion of sound finance orthodoxy, followed in due course by the adoption of protectionism. The political mainstream as represented by Labour's Ramsay MacDonald and Philip Snowden and the Conservative Stanley Baldwin all sang from the same hymn sheet. Only Keynes and a faction of the Liberal Party enunciated a plausible alternative. Eventually a programme of fiscal deficits and public works was pursued by Franklin D Roosevelt in the United States, but in Britain Keynesianism was not properly embraced until rearmament and the approach of war. Indeed, it was not until 1945 that the combined legacy of war and the Depression belatedly resulted in a fundamental political realignment and the birth of the social democratic era.

The Grim Reaper has finally spoken:

a boom pumped up by credit steroids and a bust that takes us back to the 1930s

Since the financial meltdown dramatically intensified in September 2008, Gordon Brown has managed to ride the economic storm rather more successfully than the Conservatives, or, for that matter, than Tony Blair would have done. It is Vincent Cable, the Liberal Democrats' econo­mics spokesman, however, who has indubitably emerged as the political sage, unafraid of confronting neoliberalism's shibboleths, demonstrating a clarity of mind and the political courage to tell things as they are, in a way that has escaped all other prominent politicians. Although Brown was the economic architect of the past decade and was responsible, more than anyone else, for its excesses and was shaping up to be a rather disastrous Prime Minister, he displayed last autumn, at least initially, an agility of mind and nimbleness of foot that defied the expectations of those who believed he was capable of neither. He revelled in the sense of purpose and vision offered by the crisis, seemingly prepared to jettison the thinking that had imbued his previous decade as chancellor.

But Package Part I, widely hailed at the time and imitated elsewhere, proved woefully inadequate, and the financial system remains frozen. Meanwhile the waters are rising up the Good Ship UK, threatening to transform the banking crisis into a fiscal and currency crisis. It seems unlikely that, if that should happen, Brown will survive the next election.

Even if it does not happen, Brown faces a serious problem about his own past role, because Britain’s crisis has been greatly exacerbated by the soft-touch regulation, easy credit, runaway house inflation and overexpansion of financial services over which he presided and for which he is accountable. So far he has refused to admit or accept responsibility for his actions – he initially had the temerity (or foolhardiness) to argue that the UK was better placed than other countries to deal with the credit crunch, even though it has become abundantly clear since that the very opposite was the case. So while Brown remains in denial, the plausibility of his new turn, and his understanding of what is entailed, must be seriously doubted.

Indeed, after its initial boldness, the government now seems trapped by its past actions and its former ways of thinking. Brown's failure to accept the need to nationalise the banks suggests the limits of his new-found political courage, and his inability to embrace the logic and imperatives of the new situation. He is still a prisoner of his old timidity and his conversion to the neoliberal cause. It is his good fortune that the Cameron Conservatives have been hugely wanting in their response to the financial meltdown. Having spent his first years as leader of the opposition seeking to reassure the country of his centrist credentials, David Cameron, at the first whiff of gunfire, has turned on his heels, rejected Keynesianism and, at the very moment when events have shown Thatcherism to be deeply flawed and historically out of time, headed back to the Thatcherite womb of sound finance, arguing that a government must balance its books and that deficit financing, Keynesian-style, is reckless and irresponsible.

But all this, it must be said, is the small change of politics. The crisis threatens in time to sweep away the political world as we know it and those who fail to grasp its magnitude and meaning. Far more is at stake than the fortunes of a few leaders, be their name Brown or Cameron. Who knows where things will be this time next month, let alone next year or, indeed, in 2012? The financial meltdown now rapidly plunging the western world into what increasingly looks like a depression is the first great crisis of globalisation. There was plenty of warning. The Asian financial crisis of 1997-98 proved a salutary lesson about the dangers posed by huge capital movements that were subject to precious little regulatory control. Three economies capsized (South Korea, Thailand and Indonesia) and others stood on the brink.

There were other earlier warning signs, notably Mexico in 1995, when GDP fell by 9 per cent and industrial production by 15 per cent, following a run on the peso. These crises were blamed on the immaturity and fecklessness of national governments - in the case of east Asia on so-called crony capitalism (which, incidentally, prompts the question of how we should describe Anglo-American capitalism) - which the International Monetary Fund obliged to engage in swingeing cuts in public expenditure as a condition of their bailouts.

Yet what if such a crisis were to be no longer confined to the peripheries of global capitalism but instead struck at its heartlands? Now we know the answer. The crisis has enveloped the whole world like an uncontrollable virus, spreading from the US and within a handful of months assuming global proportions, at the same time mutating with frightening speed from a financial crisis into a fully fledged economic crisis. In so doing, it has undermined the foundations on which the present era of globalisation has been built, namely scant regulation, the free movement of capital, a bloated financial sector and immense reward for greed, thereby bringing into question the survival of globalisation as we now know it.

Enormous international flows of unregulated capital have capsized the international financial system - with disastrous consequences for the real economy - in a manner akin to the effect of a roll-on, roll-off ferry shipping too much water. We can now see the cost of free-market capitalism and light-touch regulation. Iceland may provide an extreme example of the consequences of the credit crunch but it also illustrates the dangers facing the more vulnerable economies, the UK included, in a deregulated world where the market rules: a small, open economy; a large, internationally exposed banking sector; an independent currency that is not a serious global reserve currency (of which there are only three); and limited fiscal strength. These propositions have constituted the core economic beliefs - from Thatcher and Lawson to Blair and Brown - that have informed policymaking over the past three decades and without which, it was claimed ad nauseam, an economy could not succeed. Heavy-handed regulation and an overbearing state would serve only to frighten off capital and condemn a country to slow growth, stagnation and global marginality. Now we know the fallaciousness of these claims and the consequences of "letting the market decide".

Like Iceland, albeit not as extremely, Britain has been living in a fool's paradise. A failure to regulate the banks and other financial institutions in any meaningful fashion allowed bankers to behave in a grossly irresponsible and avaricious fashion; a boom that was made possible only by a government-enabled credit binge in which people borrowed recklessly; a bloated financial sector that grew to represent over 8 per cent of the total economy and which was found to have been built on foundations of sand; an overvalued currency that made manufacturing exports uncompetitive and thereby resulted in an unnecessary and counterproductive contraction in the manufacturing sector which must now be reversed; an absurd belief that boom and bust had been banished for ever, allowing the banks to turn a blind eye to the inflating of various asset bubbles and display a profound ignorance of the history of capitalism; a persistently chronic current account deficit that can no longer be compensated for by inward capital flows; monstrous salaries for those at the top of the financial and corporate tree, which were justified in terms of a trickle-down effect that remained a chimera, and as the reward for risk which was, in fact, a reward for greed and failure; growing inequality, which was justified in the name of a more competitive economy accompanied by declining social mobility in the cause of an open and flexible labour market; and, finally, the mushrooming of what can only be described as systemic corruption on a mega-scale as the state ignored the gargantuan abuses of those who ran the banks and other financial institutions, while regulatory authorities willingly colluded in their excesses.

This is the sad story of the New Labour era.

The ultimate cost of this debacle as yet remains unknown. What began as a financial crisis is threatening, as the government seeks to bail out a bankrupt financial sector, to become a currency crisis, with foreign investors concerned about the effects this might have on the value of sterling, and perhaps even worse, ultimately a sovereign debt crisis, with growing doubts about the UK’s financial viability. Until there is some end in sight to the financial crisis, and a line can be drawn under the banks’ indebtedness, we will not know the answer to these questions. One thing is clear, however: whatever the limitations of the social democratic era, it was never responsible for such an all-enveloping and cataclysmic crisis as the one that the neoliberal era – and the Thatcherites and New Labour – have managed to produce. After all the boasting about the virtues of the Anglo-American model of capitalism, the Grim Reaper has finally spoken: a boom pumped up by credit steroids and a bust that takes us back to the 1930s.

There are two key aspects to this crisis: national and global, with the latter promising to be rather solutions are concerned, we are in uncharted territory, with close to zero interest rates, a Keynesian-style fiscal boost that may prove inadequate to the task and could well fail, a hugely indebted financial sector that threatens to leave us with an enormous future tax burden and a greatly expanded national debt. All of this, furthermore, must be addressed in the context of an open-market regime which is very different from those of previous eras, and which could render Keynesian-style national solutions ineffectual. What would greatly assist any national recovery is a co-ordinated global response to the crisis; in other words, global co-operation at the highest level. This cannot be ruled out, but it would be a brave person that would bet on it. It was exactly the lack of international co-operation that bedevilled recovery in the 1930s and eventually led to the Balkanisation of the world into regional currency and trading blocs.

The most important single question in this context is the relationship between the US and China. Will the Obama administration be able to resist the slippery slope of creeping protectionism? Will arguments over the revaluation of the Chinese renminbi be resolved amicably? If the answer is in the negative, then the global outlook will be very bleak indeed and so, also, as a result, will be the prognosis for national recoveries. Indeed, the prospects would look disturbingly like those of the 1930s, with growing international antagonism and friction and a continuingly intractable crisis at a national level, with only the very slowest of recoveries.

Around the world there is growing evidence by the week of a resort to national solutions at the expense of others: measures to subsidise industries that are in severe difficulties; the Buy American clause that was inserted by the House of Representatives into Barack Obama's latest package (though since weakened); the industrial action in Britain against foreign workers; the withdrawal of banks to their national homes; the attack by Timothy Geithner, the US treasury secretary, on China as a currency manipulator. No Rubicon has been crossed but the warning signs are clear. A retreat into protectionism and beggar-thy-neighbour policies will deliver the world into a second Great Depression.

So what will be the political effects of the financial meltdown? Some are already evident. Just as the Great Inflation of the 1970s played to the tunes and concerns of the right, with its invocation of the market, the New Depression suggests the opposite, the inherent limitations of the market and the indispensability of the state. Indeed, the speed with which the neoliberal refrains and invocations have unravelled has been breathtaking. The single most discredited aspect of the social democratic legacy was nationalisation, and yet the government, with the most extreme reluctance, has been obliged to nationalise Northern Rock and partially nationalise the Royal Bank of Scotland and the merged Lloyds TSB and HBOS. Who would have ever imagined, at any point during the past 30 years, that no less than the financial commanding heights of neoliberalism would have ended up in the hands of the state, with precious little opposition from anyone except a few disgruntled shareholders? Even now, however, the Labour government, still trapped in the ideological straitjacket of New Labour and displaying extreme timidity in the face of powerful vested interests, which has always been a New Labour characteristic, is running scared of the inevitable logic of the situation, namely that all the high-street banks should be taken into public hands until the mess is sorted out. Anything else leaves the public responsible for all the debts and risks, while the banks continue to be answerable to the very different interests of their shareholders. But such is the fury and depth of the crisis that this scenario is highly likely.

The state is experiencing an extraordinary revival. The credit crunch is the most catastrophic example of market failure since 1945. It became almost immediately obvious to wide sections of society that there was only one institution that could potentially sort out the mess: the state. Far from being a rational distributor of resources, the market had proved the opposite. Far from bankers and financial traders embodying the public interest, they have been exposed as irresponsible and dangerous risk-takers whose primary motivation was voracious greed. If trade unionists and the nationalised industries were the demons of the 1970s, bankers and the financial sector have assumed the mantle of public enemy number one in the late Noughties. In fact, the irresponsibility of bankers, and the damage they have inflicted on the economy, hugely exceeds anything that the unions could possibly be held responsible for in an earlier era. Meanwhile, the fallen heroes of the pre-Thatcher era, most notably Keynes, are duly being exhumed, restored to their rightful position, and pored over for their ability to throw light on the present impasse and what might be done; if the recession turns into a depression, Marx will once again become required reading.

This political shift is not just a British phenomenon, but a more general western one. The most striking feature of President Obama's inaugural speech was the way in which it embraced and legitimised African Americans for the first time in American history. But it also had another powerful theme, namely its invocation of the public interest and public service. After decades during which American political discourse has been dominated by the language of individualism and the market, it came as a shock to hear a US president articulate a very different kind of philosophy, renouncing private greed in favour of the public good. Obama's election can in part be seen as a response to the failure of the neoliberal era, as well as of Bush's neoconservative agenda; certainly his election represents a remarkable shift to the left in US politics, in contrast not just to Bush, but every recent US president, including Reagan, Bush Sr and Clinton. That Obama is the first African-American president also represents a remarkable redrawing of the political landscape. There is no more powerful - nor difficult - way of redefining society or to embrace a new form of representivity than to include a racial minority that has been excluded.

This brings us finally to what might be the longer-term global consequences of the crisis. Again, we are inevitably stumbling around in the dark because so much depends on whether the recession metamorphoses into a fully fledged depression and in what way and shape the world eventually emerges from the debacle. That said, two key points can be made. First, the credit crunch signals the demise of the Anglo-American, neoliberal model of capitalism, which has exercised a hegemonic influence over western capitalism and been the blueprint for globalisation since 1980. Because of its catastrophic failure there seems very little chance of its resurrection. The process of recovery - whenever that might be - will be accompanied by an overriding concern to ensure that the events of 2007-2009 are not repeated in the future, just as happened in the US in the 1930s with the strict regulatory framework that was introduced for the banks after their comprehensive failure in 1929. This will include the search for a new global regulatory framework that controls and constrains international movements of capital, as well as strict controls over the financial sector at a national level. A new set of political priorities - and with it a new political language - will be born.

Meanwhile, the influence and prestige that the US, and to a far lesser extent Britain, have enjoyed will vaporise in the same manner as their neoliberal model. Their 30-year project has failed and they will be obliged to pay the price in their reputation and the esteem in which they are held. The countries of the former Soviet Union and the casualties of the Asian financial crisis that were forced to swallow the neoliberal medicine will have good reason to feel aggrieved and resentful. The west has been forthright in accusing the non-western world of corruption. The financial meltdown suggests that the west has been guilty of huge hypocrisy. Systemic corruption has lain at the heart of the western financial system. An entirely disproportionate and extortionate level of bonuses has ensured the enormous enrichment of top executives in the financial sector, all in the name of reward for success, when in fact it was the reward for failure. In addition, we have had the collusion of the credit-ratings agencies; a regulatory system characterised by its failure to act as any kind of constraint; and governments that ensured the continuation of this web of relationships and applauded its achievements. The corruption was on a breathtaking scale as evidenced by the size of the bailouts required to rescue the banks. It will be difficult for western governments to make these kinds of accusations of others in the future. That Obama represents such a voice of hope will help to mitigate the inevitable ill-will towards the US, but this should not be exaggerated amid the euphoria surrounding developments in Washington.

The second point is more far-reaching. It is doubtful whether we can still describe ourselves as living in the American era or, indeed, the Age of the West. If not yet quite over, both are certainly drawing to a close, and it seems likely that the effect of the financial meltdown will be to accelerate the rise of China as a global power. The contrast between the situation in China and that in the US could hardly be greater, even though it has been partially obscured by the depressive effect of the western recession on Chinese exports and on China’s growth rate. While the US economy is contracting, China’s grew at roughly 9 per cent in 2008 and is projected to grow at about 6 per cent in 2009. Its banks, far from bankrupt like their US counterparts, are cash-rich. China enjoys a large current account surplus, the government’s finances are in good order and the national debt is small. This is a crisis that emanates from the US and whose impact on China has been essentially indirect, through the contraction of western markets. It is the American model that has failed, not the Chinese.

One of the factors that intensified the Great Depression, and indeed was part cause of it, was Britain's growing inability to continue in its role as the world's leading financial power, which culminated in the collapse of the gold standard in 1931. It was not until after the war, however, that the US became sufficiently dominant to replace Britain and act as the mainstay of a new financial system at the heart of which was the dollar. The same kind of problem is evident now: the US is no longer strong enough to act as the world's financial centre, but its obvious successor, namely China, is not yet ready to assume that mantle. This will undoubtedly make the search for a global solution to the present crisis more difficult and more protracted.

Martin Jacques's new column will be published fortnightly in the New Statesman. His book "When China Rules the World: the Rise of the Middle Kingdom and the End of the Western World" will be published in June (Allen Lane, £25)

the global downturn in numbers

    0.5%

    IMF prediction for global growth in 2009 - worst since WWII

    Up to 40 million

    Number of people who will lose their jobs this year, according to the International Labour Organisation

    $9.7trn

    Total pledged by the US alone towards solving the crisis

    3.6%

    Proportion of GDP pledged by the G7 and BRICs countries towards fixing the crisis (1.5% this year)

    2.3m

    Number of US properties that received a default notice or were repossessed in 2008. In the UK, 45,000 homes were repossessed - another 75,000 are expected to be taken in 2009

    14

    Number of major global banks which collapsed, were sold or were nationalised during 2008

    200,000

    Number of European companies expected to fail this year; an additional 62,000 are expected to fail in the United States. These figures represent record levels of insolvency

    52%

    Increase in UK company failures between late 2007 and late 2008

    14%

    Drop in level of Chinese exports during January

    1%

    Current UK interest rates (down from 5% in October 2008). In the US, rates have fallen to between 0 and 0.25%

How the crisis unfolded

13 September 2007 Run on Northern Rock begins when it is revealed that the bank has requested emergency support from the Bank of England

21 January 2008 FTSE suffers worst falls since 11 September 2001

February 2008 Northern Rock nationalised

17 March 2008 JP Morgan Chase takes over the US investment bank Bear Stearns

12 July Mortgage lender IndyMac collapses - second biggest US bank in history to fail

9 August 2007 European Central Bank pumps ?95bn into banking market

7 September Financial authorities step in to rescue Fannie Mae and Freddie Mac

9 September Bradford & Bingley becomes second British bank to be nationalised

15 September Lehman Brothers files for bankruptcy

16 September AIG, biggest insurance firm in the US, receives $85bn rescue package

3 October 2008 US government announces $700bn Troubled Assets Relief Programme

8 October UK launches its first bank bailout plan, making £50bn available

October 2008 Iceland's banks collapse. IMF extends £1.4bn ($2.1bn) loan a month later

24 November Alistair Darling announces a temporary cut in VAT from 17.5 to 15 per cent

23 January 2009 UK enters recession

28 January US Congress passes Barack Obama's $819bn stimulus package

5 February UK Monetary Policy Committee votes to cut interest rates to 1 per cent - the lowest in over three centuries

Michael Harvey

Martin Jacques is the former editor of Marxism Today. 

This article first appeared in the 16 February 2009 issue of the New Statesman, The New Depression

Photo: Getty/Julia Rampen
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Can Jeremy Corbyn win back Scotland for Labour?

“At the end of the day, the referendum was about half the bloody things Corbyn was talking about.”

On a sunny Wednesday morning in mid-August, a small group of local Labour activists stood outside The Carloway Mill, on the Isle of Lewis in the Outer Hebrides. Gazing out at the tawny, rolling scrubland and glittering blue lochs, they waited for the man they had invited, who lived nearly 700 miles south. A minibus pulled up, the door rolled open and out stepped Jeremy Corbyn.

During the election campaign, when the idea of Labour winning two seats in Scotland still seemed mildly optimistic, Corbyn held rallies in Edinburgh and Glasgow. Now, with seven Labour seats, the Labour leader has the country in his sights. His trip to Lewis was the first day of a week-long tour of a country governed by the Scottish National Party.

Scottish Labour is not known for its Corbynism – a YouGov poll found a majority of members voted for Owen Smith in the 2016 leadership battle – but the conversion of local Labour voters has been swift. “Some people who voted Labour all the time said six months ago ‘[we] don't think we'll vote Labour because of Jeremy’,” Matt Bruce, the tweed-jacketed local party chair, told me. “Two weeks ago, it was ‘Jeremy's coming’. He's changed things.”

Harris Tweed may be associated with the elite lifestyle shops of Oxford Street, but manufacturing it is a humbler process. The wool is spun at mills like The Carloway, before being sent to individual crofters for the weaving process.

Inspecting the mill, Corbyn seemed genuinely fascinated. He entered a room of spinning cylinders, where green and pink wool streamed back and forth, and disappeared to inspect the looms. A worker in a black waistcoat showed him how to iron on the quality label on finished tweed. Corbyn’s wife, Laura, meanwhile, rifled through the hangers of finished, mossy green jackets (they each bought one).

Brian Wilson, a former minister in the Blair government, who lives on the island and works in the tweed business, watched approvingly.

“Against the predictions of people like myself, Corbyn really struck a chord with a lot of voters who maybe didn't vote Labour,” he said. “These are the realities and I recognise them.”

After Kezia Dugdale’s resignation, most pundits expect the next Scottish Labour leader to be someone who at least nominally supports Corbyn. But three years on from the independence referendum, will the energy of Corbynism be enough to transcend Scotland’s constitutional politics?

"There was a village with no road – the EU built it"

To get to the island of Lewis in the Outer Hebrides from Westminster, you need to first fly to Glasgow, and then board a propeller plane for a further hour to reach Stornoway. Lewis, in turn, is only the northernmost in a string of islands which make up the constituency of Na h-Eileanan an Iar (the Western Isles). The islanders’ self-sufficient outlook is countered by a deep dependence on the timetable of the ferry. There is little materialism, faith is everywhere, and yet every conversation comes back to economics. Residents have elected a stream of centrist representatives, from early 20th century liberals, to New Labour’s Calum MacDonald and since 2005, the Scottish National Party’s Angus MacNeil, or “Angus Brendan” as he is known to locals.

Centrism may well be a cover for a hard-defended consensus. When asked about Jeremy Corbyn, the default answer in Stornoway was “no comment”. Most locals seemed surprised to hear he was even there. “I haven’t heard much, and I live here in the centre of town,” said Annalisa Engebretsen, a retiree in pink-framed sunglasses. I told her he was at the other end of the street. “Was he?” There was a pause. She pointed to the sky in front of her. “About an hour ago I saw the most amazing group of seagulls.”

The Scottish Nationalists, too, wear their ideology lightly on the island. Alasdair Allan’s office has a copy of the Declaration of Arbroath, the 1320 declaration of Scottish independence, hanging on the wall. But the MSP was more interested in talking ferry fares than freedom fighters.

He was, however, outspoken about a different constitutional issue. “I would be telling a lie if I told you the fishing community took the same view as me in the EU referendum,” he said. “However since then we have had fishermen saying 'we wanted to leave the common fishing area'. The industry didn't realise it meant leaving the single market.” Some of the biggest export markets for Scottish fishing produce, he pointed out, were Spain and France. 

Allan said the EU had been almost solely responsible for funding the expansion of roads on the island: “There was one village in Harris that had no road to it at all and the EU built one.”

“People do have concerns about the common fisheries policy but their biggest concern is the future,” he added. “With respect to Jeremy Corbyn, the biggest question has been left unanswered is on Britain's relationship with the European Union.”

"We need many changes here"

After visiting the mill, Corbyn’s next stop was an empty classroom in a Stornoway school, to answer questions from pupils beamed on to a screen. Some of the students were from Castlebay, more than 100 miles away, on the isle of Barra. Their questions were no less direct than a journalist’s, but Corbyn seemed to prefer answering them. One pupil asked him about leaving the single market and the customs union.

“The UK as a whole voted to leave the EU,” Corbyn said. He talked about getting tariff-free access to the European market, and then asked: “Do you feel we should keep very close trading with Europe?”

“Yes,” she said. “I do.”

In the months after the EU referendum, when Labour dissolved into civil war, the SNP stood out for its clear opposition to Brexit. Its position has since looked less wise, given a third of SNP voters backed Leave, and Nicola Sturgeon was forced to retreat from a call for a second referendum.

On Lewis, though, I found that Brexit was more than just a handy SNP rhetorical device. Elly Fletcher, chief executive of the An Lanntair Arts Centre, showed me around a smart auditorium which doubles as the island’s cinema. The building was funded in part by EU grants. “Brexit is a worry,” she said. Another institution at risk is the Stornoway campus of the University of Highlands and Islands, which has already put projects on hold.

John MacLeod, standing by the quay, had a different point of view. Dressed in a blue boiler suit, open to reveal a knitted jumpers, and leather boots to match his tanned skin, MacLeod claimed at 56 to be the oldest fisherman in town.

He remembered how, 30 years ago, the fishing boats in the harbour used to be 10-12 boats deep, compared to the single line bobbing there that day.

“This island is just dying on its feet in the fishing industry,” he said. “Even in the past 10 years it has changed. This place has been decline, decline, decline.” Brexit he saw as just one of many shake-ups required: “We need many changes here, or these islands are going to die a death.”

Corbyn told The New Statesman a "jobs-first Brexit" was "essential to local economies, industries and businesses in Scotland".

He added: "We are pushing for a Brexit deal that protects the interests of the many and repatriates powers from Brussels to every nation and region in the country."  

 

"Corbyn's message chimes with independence voters"

Corbyn finished his day in Stornoway with a rally which attracted several hundred supporters. The next day, he flew to Glasgow, where his first appointment was a photo-op at a building site. TV crews in loose hard hats and luminous jackets waited outside. Crammed into the Portakabin with him was Paul Sweeney, the newly elected Labour MP for Glasgow North East, and Frank McAveety, the leader of Glasgow City Council until the SNP shook it out of Labour’s grasp in the 2017 local elections in May.

In May, with Labour’s polling in the doldrums, the loss of Glasgow Council was seen as a harbinger of what was to come. McAveety disagreed. “Clearly there was something already happening,” he said. “The gap between the SNP and Labour on the council elections wasn't as profound as it had been in 2016 Scottish Parliament election. The glamour was coming off the SNP.”

Sweeney, on the other hand, thought it was Labour’s message of hope that persuaded some Yes voters to back him. “We have perhaps framed things too much in terms of our opponents,” he said. “The best way to defeat our opponents is to ignore them.”

Since 2014, Glasgow has been the spiritual capital of the independence movement. Campaigners gathered in George Square, its iconic Victorian centre, to cheer at rallies, and later to weep, after Scots voted No. Along with Dundee, it was one of only two major cities to vote Yes.

The trade unionist Cat Boyd was at the heart of the independence movement. In 2017, she publicly declared she voted Labour. An articulate trade unionist with striking black hair, I met her in a café near Glasgow’s busy Central Station. She recounted the reaction with rueful laughter. “People see Corbyn as a unionist who does not support Scottish independence, but a lot of the background to that is people’s complete disillusionment and anger with Scottish Labour,” she said.

Boyd, who came to political activism through the anti-war movement, retains a personal respect for Corbyn and she is not alone. Since going public with her vote choice, she has received messages from other Yes voters saying they had done the same. “Corbyn’s message chimes with them,” she said. “At the end of the day, that was what the referendum was about - half the bloody things Corbyn was talking about.”

The problem for Corbyn in Glasgow, it seems, is less his personality and more the party. Matt Kerr, a Labour candidate who narrowly missed out on Glasgow South, a constituency where turnout was also down, told me left-wing supporters could be split into three groups. There were those who switched to Labour, those who stayed at home, and those who were tempted to vote Labour but “believed that ‘Scottish Labour’ didn’t back Corbyn”.

"There's a feeling the establishment's against them"

The SNP, on its tenth year in power in Scotland, knows the danger of complacency. “Glasgow is a vivid illustration of the success of our party,” Nicola Sturgeon told the 2016 party conference. “But it also stands as a lesson. Labour lost because they took the voters for granted. They became arrogant on power.”

The question remains as to whether a Corbyn-led Labour party can win over such voters. I visited Mhairi Hunter, an SNP councillor with a big grassroots following in the party’s recent prize – the marbled halls of Glasgow City Chambers. Hunter, whose blue-and-gold walled office would put Westminster ones to shame, was quick to point out the SNP’s hold was a fragile one. “We’re a minority administration, which I’m quite happy with,” she said. “That’s the way proportional representation is supposed to work.”

Hunter believes Labour made gains in the 2017 general election because SNP voters stayed at home. The numbers suggest she is right. In Glasgow North East, Sweeney’s seat, 37,857 turned out to vote in 2015, of which 21,976 voted for McLaughlin. Two years later, the turnout was down by 6,082 voters, and votes for McLaughlin fell by 8,581. Similar patterns were evident in other seats where Labour won.

Yes voters’ attachment to Corbyn, Hunter thought, is more about his story than their politics. “There has been a feeling of the establishment being against them, and not getting a fair hearing. That resonated with a lot of people.”

The distinction between the man and the party was repeated again and again. Outside, in Glasgow’s shopping streets, 25 year-old George Dalkin, 25 told me he had “always been Labour” but “Jeremy Corbyn brought a bit more faith back in me”. Shona Joyce, 20, also voted Labour, but added: “I feel even if you vote for Corbyn you don't get the changes in the local party.”

Natalie Muir, 38, a conveyancer, repeated the same concerns I had heard across Scotland about Labour’s unclear stance on Brexit. She was relatively happy with the Scottish government, and respected Sturgeon.

She told me: “In terms of down south and Westminster, Jeremy Corbyn seems like a more sensible option.” Then she added: “What he says seems different from what Scottish Labour says.”

One structural difference between Corbynism in England and Scotland is that Momentum has little presence here. Since 2017 it has created a joint membership with the long-running Scotland-based Campaign for Socialism, but the two remain separate organisations. Whether Corbynism can organise at the grassroots level remains to be seen. 

"The party needs a new leader"

In August 2016, it was common to hear Scottish Labour activists bemoaning that “the axis of politics has shifted” to a pro-union argument dominated by the Scottish Tories, and the independence camp commandeered by the SNP. In August 2017, the SNP is playing down independence, a resurgent Scottish Tories are talking about housing policy and Corbyn enjoys at least part of the credit for six new Labour seats in Scotland without devoting much time to unionist politics at all.

The SNP looks tired. The problem for Dugdale’s successor, is so, too, does Scottish Labour. "I am convinced that the party needs a new leader with fresh energy," wrote Dugdale in her resignation letter, just two years after she took the job of leader. It may be tempting for London HQ to cultivate a mini-Corbyn, but this too has risks – one of the reasons Labour fell from grace in Scotland was a prolonged feeling that the absentee landlords were in power, and that Labour First Ministers were merely departmental heads of the branch office. 

Much also depends on the SNP, which holds many of the central belt seats ripe for Labour’s picking. The party has lost seats in its old stronghold of north-east Scotland, home to the old SNP of Alex Salmond, comfortable on the golf course. It has spent the summer soul searching, torn between left and right, Brexit and independence, and the different priorities of urban seats in Glasgow and the needs of places like Lewis. Despite its stumbles, the SNP is still capable of winning, as the Glasgow council result shows. On 5 September, Sturgeon unveiled the Holyrood government's latest programme, with policies including scrapping the public sector pay cap and a Scottish National Investment Bank. With the consequences of Brexit still playing out, it should not be underestimated. 

The SNP and Scottish Labour may be mortal enemies, but Corbynism and the wider independence movement have much in common. They both offer hope, an idealistic vision of the future, and a vision of "the early days of a better nation", whether that is renationalisation of the railways or reform of feudal land laws. Both are anti-imperialist, sceptical of centrism and driven by left-wing creatives and the young. The challenge for Scottish Labour is whether it can, as the SNP did, harness that idealism, yoke it to a party machine and turn it into practical politics. And that will take more than a Harris tweed photoshoot. 

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

This article first appeared in the 16 February 2009 issue of the New Statesman, The New Depression