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Socialism's comeback

At the beginning of the century, the chances of socialism making a return looked close to zero. Yet now, all around Europe, the red flag is flying again.

 

"If socialism signifies a political and economic system in which the government controls a large part of the economy and redistributes wealth to produce social equality, then I think it is safe to say the likelihood of its making a comeback any time in the next generation is close to zero," wrote Francis Fukuyama, author of The End of History, in Time magazine in 2000.

He should take a trip around Europe today.

Make no mistake, socialism - pure, unadulterated socialism, an ideology that was taken for dead by liberal capitalists - is making a strong comeback. Across the continent, there is a definite trend in which long-established parties of the centre left that bought in to globalisation and neoliberalism are seeing their electoral dominance challenged by unequivocally socialist parties which have not.

The parties in question offer policies which mark a clean break from the Thatcherist agenda that many of Europe's centre-left parties have embraced over the past 20 years. They advocate renationalisation of privatised state enterprises and a halt to further liberalisation of the public sector. They call for new wealth taxes to be imposed and for a radical redistribution of wealth. They defend the welfare state and the rights of all citizens to a decent pension and free health care. They strongly oppose war - and any further expansion of Nato.

Most fundamentally of all, they challenge an economic system in which the interests of ordinary working people are subordinated to those of capital.

Nowhere is this new leftward trend more apparent than in Germany, home to the meteoric rise of Die Linke ("The Left"), a political grouping formed only 18 months ago - and co-led by the veteran socialist "Red" Oskar Lafontaine, a long-standing scourge of big business. The party, already the main opposition to the Christian Democrats in eastern Germany, has made significant inroads into the vote for the Social Democratic Party (SPD) in elections to western parliaments this year, gaining representation in Lower Saxony, Hamburg and Hesse. Die Linke's unapologetically socialist policies, which include the renation alisation of electricity and gas, the banning of hedge funds and the introduction of a maximum wage, chime with a population concerned at the dismantling of Germany's mixed economic model and the adoption of Anglo-Saxon capitalism - a shift that occurred while the SPD was in government.

An opinion poll last year showed that 45 per cent of west Germans (and 57 per cent of east Germans) consider socialism "a good idea"; in October, another poll showed that Germans overwhelmingly favour nationalisation of large segments of the economy. Two-thirds of all Germans say they agree with all or some of Die Linke's programme.

It's a similar story of left-wing revival in neighbouring Holland. There the Socialist Party of the Netherlands (SP), which almost trebled its parliamentary representation in the most recent general election (2006), and which made huge gains in last year's provincial elections, continues to make headway.

Led by a charismatic 41-year-old epidemiologist, Agnes Kant, the SP is on course to surpass the Dutch Labour Party, a member of the ruling conservative-led coalition, as the Netherlands' main left-of centre grouping.

The SP has gained popularity by being the only left-wing Dutch parliamentary party to campaign for a "No" vote during the 2005 referendum on the EU constitutional treaty and for its opposition to large-scale immigration, which it regards as being part of a neoliberal package that encourages flexible labour markets.

The party calls for a society where the values of "human dignity, equality and solidarity" are most prominent, and has been scathing in its attacks on what it describes as "the culture of greed", brought about by "a capitalism based on inflated bonuses and easy money". Like Die Linke, the SP campaigns on a staunchly anti-war platform - demanding an end to Holland's role as "the US's lapdog".

In Greece, the party on the up is the Coalition of the Radical Left (SYRIZA), the surprise package in last year's general election. As public opposition to the neoliberal econo mic policies of the ruling New Democracy government builds, SYRIZA's opinion-poll ratings have risen to almost 20 per cent - putting it within touching distance of PASOK, the historical left-of-centre opposition, which has lurched sharply to the right in recent years. SYRIZA is particularly popular with young voters: its support among those aged 35 and under stands at roughly 30 per cent in the polls, ahead of PASOK.

In Norway, socialists are already in power; the ruling "red-green" coalition consists of the Socialist Left Party, the Labour Party and the Centre Party. Since coming to power three years ago, the coalition - which has been labelled the most left-wing government in Europe, has halted the privatisation of state-owned companies and made further development of the welfare state, public health care and improving care for the elderly its priorities.

The success of such forces shows that there can be an electoral dividend for left-wing parties if voters see them responding to the crisis of modern capitalism by offering boldly socialist solutions. Their success also demonstrates the benefits to electoral support for socialist groupings as they put aside their differences to unite behind a commonly agreed programme.

For example, Die Linke consists of a number of internal caucuses - or forums - including the "Anti-Capitalist Left", "Communist Platform" and "Democratic Socialist Forum". SYRIZA is a coalition of more than ten Greek political groups. And the Dutch Socialist Party - which was originally called the Communist Party of the Netherlands, has successfully brought socialists and communists together to support its collectivist programme.

It is worth noting that those European parties of the centre left which have not fully embraced the neoliberal agenda are retaining their dominant position. In Spain, the governing Socialist Workers' Party has managed to maintain its broad left base and was re-elected for another four-year term in March, with Prime Minister José Luis Rodríguez Zapatero promising a "socialist economic policy" that would focus on the needs of workers and the poor.

There are exceptions to the European continent's shift towards socialism. Despite the recent election of leftist Martine Aubry as leader of the French Socialist Party, the French left has been torn apart by divisions, at the very moment when it could be exploiting the growing unpopularity of the Sarkozy administration.

And, in Britain, despite opinion being argu ably more to the left on economic issues than at any time since 1945, few are calling for a return to socialism.

The British left, despite promising initiatives such as September's Convention of the Left in Manchester, which gathered representatives from several socialist groups, still remains fragmented and divided. The left's espousal of unrestricted or loosely controlled immigration is also, arguably, a major vote loser among working-class voters who should provide its core support. No socialist group in Britain has as yet articulated a critique of mass immigration from an anti-capitalist and anti-racist viewpoint in the way the Socialist Party of the Netherlands has.

And even if a Die Linke-style coalition of progressive forces could be built and put on a formal footing in time for the next general election, Britain's first-past-the-post system provides a formidable obstacle to change.

Nevertheless, the prognosis for socialism in Britain and the rest of Europe is good. As the recession bites, and neoliberalism is discredited, the phenomenon of unequivocally socialist parties with clear, anti-capitalist, anti-globalist messages gaining ground, and even replacing "Third Way" parties in Europe, is likely to continue.

Even in Britain, where the electoral system grants huge advantage to the established parties, pressure on Labour to jettison its commitment to neoliberal policies and to adopt a more socialist agenda is sure to intensify.

This article first appeared in the 08 December 2008 issue of the New Statesman, After the Terror

Picture: Archives Charmet / Bridgeman Images
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What Marx got right

...and what he got wrong.

1. You’re probably a capitalist – among other things

Are you a capitalist? The first question to ask is: do you own shares? Even if you don’t own any directly (about half of Americans do but the proportion is far lower in most other countries) you may have a pension that is at least partly invested in the stock market; or you’ll have savings in a bank.

So you have some financial wealth: that is, you own capital. Equally, you are probably also a worker, or are dependent directly or indirectly on a worker’s salary; and you’re a consumer. Unless you live in an autonomous, self-sufficient commune – very unusual – you are likely to be a full participant in the capitalist system.

We interact with capitalism in multiple ways, by no means all economic. And this accounts for the conflicted relationship that most of us (including me) have with capitalism. Typically, we neither love it nor hate it, but we definitely live it.

2. Property rights are fundamental to capitalism . . . but they are not absolute

If owning something means having the right to do what you want with it, property rights are rarely unconstrained. I am free to buy any car I want – so long as it meets European pollution standards and is legally insured; and I can drive it anywhere I want, at least on public roads, as long as I have a driver’s licence and keep to the speed limit. If I no longer want the car, I can’t just dump it: I have to dispose of it in an approved manner. It’s mine, not yours or the state’s, and the state will protect my rights over it. But – generally for good reason – how I can use it is quite tightly constrained.

This web of rules and constraints, which both defines and restricts property rights, is characteristic of a complex economy and society. Most capitalist societies attempt to resolve these tensions in part by imposing restrictions, constitutional or political, on arbitrary or confiscatory actions by governments that “interfere” with property rights. But the idea that property rights are absolute is not philosophically or practically coherent in a modern society.

3. What Marx got right about capitalism

Marx had two fundamental insights. The first was the importance of economic forces in shaping human society. For Marx, it was the “mode of production” – how labour and capital were combined, and under what rules – that explained more or less everything about society, from politics to culture. So, as modes of production change, so too does society. And he correctly concluded that industrialisation and capitalism would lead to profound changes in the nature of society, affecting everything from the political system to morality.

The second insight was the dynamic nature of capitalism in its own right. Marx understood that capitalism could not be static: given the pursuit of profit in a competitive economy, there would be constant pressure to increase the capital stock and improve productivity. This in turn would lead to labour-saving, or capital-intensive, technological change.

Putting these two insights together gives a picture of capitalism as a radical force. Such are its own internal dynamics that the economy is constantly evolving, and this in turn results in changes in the wider society.

4. And what he got wrong . . .

Though Marx was correct that competition would lead the owners of capital to invest in productivity-enhancing and labour-saving machinery, he was wrong that this would lead to wages being driven down to subsistence level, as had largely been the case under feudalism. Classical economics, which argued that new, higher-productivity jobs would emerge, and that workers would see their wages rise more or less in line with productivity, got this one right. And so, in turn, Marx’s most important prediction – that an inevitable conflict between workers and capitalists would lead ultimately to the victory of the former and the end of capitalism – was wrong.

Marx was right that as the number of industrial workers rose, they would demand their share of the wealth; and that, in contrast to the situation under feudalism, their number and geographical concentration in factories and cities would make it impossible to deny these demands indefinitely. But thanks to increased productivity, workers’ demands in most advanced capitalist economies could be satisfied without the system collapsing. So far, it seems that increased productivity, increased wages and increased consumption go hand in hand, not only in individual countries but worldwide.

5. All societies are unequal. But some are more unequal than others

In the late 19th and early 20th centuries, an increasing proportion of an economy’s output was captured by a small class of capitalists who owned and controlled the means of production. Not only did this trend stop in the 20th century, it was sharply reversed. Inherited fortunes, often dating back to the pre-industrial era, were eroded by taxes and inflation, and some were destroyed by the Great Depression. Most of all, after the Second World War the welfare state redistributed income and wealth within the framework of a capitalist economy.

Inequality rose again after the mid-1970s. Under Margaret Thatcher and Ronald Reagan, the welfare state was cut back. Tax and social security systems became less progressive. Deregulation, the decline of heavy industry and reduction of trade union power increased the wage differential between workers. Globally the chief story of the past quarter-century has been the rise of the “middle class”: people in emerging economies who have incomes of up to $5,000 a year. But at the same time lower-income groups in richer countries have done badly.

Should we now worry about inequality within countries, or within the world as a whole? And how much does an increasing concentration of income and wealth among a small number of people – and the consequent distortions of the political system – matter when set against the rapid ­income growth for large numbers of people in the emerging economies?

Growing inequality is not an inevitable consequence of capitalism. But, unchecked, it could do severe economic damage. The question is whether our political systems, national and global, are up to the challenge.

6. China’s road to capitalism is unique

The day after Margaret Thatcher died, I said on Radio 4’s Today programme: “In 1979, a quarter of a century ago, a politician came to power with a radical agenda of market-oriented reform; a plan to reduce state control and release the country’s pent-up economic dynamism. That changed the world, and we’re still feeling the impact. His name, of course, was Deng Xiaoping.”

The transition from state to market in China kick-started the move towards truly globalised capitalism. But the Chinese road to capitalism has been unique. First agriculture was liberalised, then entrepreneurs were allowed to set up small businesses, while at the same time state-owned enterprises reduced their workforces; yet there has been no free-for-all, either for labour or for capital. The movement of workers from rural to urban areas, and from large, unproductive, state-owned enterprises to more productive private businesses, though vast, has been controlled. Access to capital still remains largely under state control. Moreover, though its programme is not exactly “Keynesian”, China has used all the tools of macroeconomic management to keep growth high and relatively stable.

That means China is still far from a “normal” capitalist economy. The two main engines of growth have been investment and the movement of labour from the countryside to the cities. This in itself was enough, because China had so much catching-up to do. However, if the Chinese are to close the huge gap between themselves and the advanced economies, more growth will need to come from innovation and technological progress. No one doubts that China has the human resources to deliver this, but its system will have to change.

7. How much is enough?

The human instinct to improve our material position is deeply rooted: control over resources, especially food and shelter, made early human beings more able to reproduce. That is intrinsic to capitalism; the desire to acquire income and wealth motivates individuals to work, save, invent and invest. As Adam Smith showed, this benefits us all. But if we can produce more than enough for everybody, what will motivate people? Growth would stop. Not that this would necessarily be a bad thing: yet our economy and society would be very different.

Although we are at least twice as rich as we were half a century ago, the urge to consume more seems no less strong. Relative incomes matter. We compare ourselves not to our impoverished ancestors but to other people in similar situations: we strive to “keep up with the Joneses”. The Daily Telegraph once described a London couple earning £190,000 per year (in the top 0.1 per cent of world income) as follows: “The pair are worried about becoming financially broken as the sheer cost of middle-class life in London means they are stretched to the brink.” Talk about First World problems.

Is there any limit? Those who don’t like the excesses of consumerism might hope that as our material needs are satisfied, we will worry less about keeping up with the Joneses and more about our satisfaction and enjoyment of non-material things. It is equally possible, of course, that we’ll just spend more time keeping up with the Kardashians instead . . .

8. No more boom and bust

Are financial crises and their economic consequences part of the natural (capitalist) order of things? Politicians and economists prefer to think otherwise. No longer does anyone believe that “light-touch” regulation of the banking sector is enough. New rules have been introduced, designed to restrict leverage and ensure that failure in one or two financial institutions does not lead to systemic failure. Many would prefer a more wholesale approach to reining in the financial system; this would have gained the approval of Keynes, who thought that while finance was necessary, its role in capitalism should be strictly limited.

But maybe there is a more fundamental problem: that recurrent crises are baked into the system. The “financial instability” hypothesis says that the more governments and regulators stabilise the system, the more this will breed overconfidence, leading to more debt and higher leverage. And sooner or later the music stops. If that is the case, then financial capitalism plus human nature equals inevitable financial crises; and we should make sure that we have better contingency plans next time round.

9. Will robots take our jobs?

With increasing mechanisation (from factories to supermarket checkouts) and computerisation (from call centres to tax returns), is it becoming difficult for human beings to make or produce anything at less cost than a machine can?

Not yet – more Britons have jobs than at any other point in history. That we can produce more food and manufactured products with fewer people means that we are richer overall, leaving us to do other things, from economic research to performance art to professional football.

However, the big worry is that automation could shift the balance of power between capital and labour in favour of the former. Workers would still work; but many or most would be in relatively low-value, peripheral jobs, not central to the functioning of the economy and not particularly well paid. Either the distribution of income and wealth would widen further, or society would rely more on welfare payments and charity to reduce unacceptable disparities between the top and the bottom.

That is a dismal prospect. Yet these broader economic forces pushing against the interests of workers will not, on their own, determine the course of history. The Luddites were doomed to fail; but their successors – trade unionists who sought to improve working conditions and Chartists who demanded the vote so that they could restructure the economy and the state – mostly succeeded. The test will be whether our political and social institutions are up to the challenge.

10. What’s the alternative?

There is no viable economic alternative to capitalism at the moment but that does not mean one won’t emerge. It is economics that determines the nature of our society, and we are at the beginning of a profound set of economic changes, based on three critical developments.

Physical human input into production will become increasingly rare as robots take over. Thanks to advances in computing power and artificial intelligence, much of the analytic work that we now do in the workplace will be carried out by machines. And an increasing ability to manipulate our own genes will extend our lifespan and allow us to determine our offspring’s characteristics.

Control over “software” – information, data, and how it is stored, processed and manipulated – will be more important than control over physical capital, buildings and machines. The defining characteristic of the economy and society will be how that software is produced, owned and commanded: by the state, by individuals, by corporations, or in some way as yet undefined.

These developments will allow us, if we choose, to end poverty and expand our horizons, both materially and intellectually. But they could also lead to growing inequality, with the levers of the new economy controlled by a corporate and moneyed elite. As an optimist, I hope for the former. Yet just as it wasn’t the “free market” or individual capitalists who freed the slaves, gave votes to women and created the welfare state, it will be the collective efforts of us all that will enable humanity to turn economic advances into social progress. 

Jonathan Portes's most recent book is “50 Ideas You Really Need to Know: Capitalism” (Quercus)

Jonathan Portes is senior fellow The UK in a Changing Europe and Professor of Economics and Public Policy, King’s College London.

This article first appeared in the 22 June 2017 issue of the New Statesman, The zombie PM

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