The economic crisis is a turning point in the life of this country. For a brief period, history is in the public realm and ours for the making. But for Labour this is a crucial time. The pro-market values that have dominated much government thinking are being discredited. There are fundamental questions to ask about what the party might now become.
The recession has dealt a mortal blow to the neoliberal hegemony. It was the sale of council housing that helped to secure its popular support. In the name of a property owning democracy, the modest economic interests of individuals were integrated into the profit-seeking of financialised capitalism. A similar integration of the business elite and shareholder value created a tiny super rich elite – and became the unquestioned business model of the era. These compacts between the individual and the market cemented the social order. They were based on rising wealth and the values of individualism and self reliance. They legitimised market- based welfare and pension reform, the drive to a flexible labour market and the transfer of risk from the state and business to the individual. New Labour entered government in 1997 having accommodated itself to this new orthodoxy and with plans to deepen and extend these compacts.
Growth in the UK economy depended on them. It was driven by consumerism, and sustained by the hard selling of cheap credit. The housing market turned homes into assets for leveraging ever-increasing levels of borrowing. The financial services industries created an indentured form of consumption as it laid claim to great tranches of future earnings. Millions were entangled in the capital markets as their personal and mortgage-backed debt became the economic raw material for global capital. This commodification of society engineered a massive transfer of wealth to the rich.
The neo-liberal model of capitalism generated unprecedented affluence for many. But it corroded the civic culture of democracy. Commodification and huge inequalities helped create a social recession with widespread mental illness, systemic levels of loneliness, growing numbers of psychologically damaged children, and an increase in eating disorders, obesity, drug addiction and alcoholism. It created monopoly forms of capitalism and an increasingly authoritarian, technocratic and centralising state. A ruling class of diverse elites accrued a dangerous amount of power and became a financial law unto itself. The gulf between the political elites and the population widened as economic restructuring destroyed traditional working class cultures and communities.
While asset prices rose and the economy boomed these problems were evaded by the government. But the recession has torn away the veil. Britain fell into a recession with personal debt standing at £1.4 trillion, of which £231bn was unsecured. Economic insecurity threatens millions and it has weakened Britain’s capacity to weather the economic storm. The partial dismantling of the welfare state, and employment de-regulation has removed many of the economic stabilisers that act as buffers to deflationary pressure – secure jobs, decent wages and proper benefits. This lack of structural solidity is made more severe by government neglect of manufacturing industry in favour of finance. The declining share of manufacturing in GDP, and the relocation of industries to low wage economies, has reduced the security and income base of the working class.
Loss of trust is not confined to the markets. The recession has destroyed the compact between the market and the individual and the government has no social alternative to replace it with. The destruction of working class cultures threatens the existence of the Labour Party as the institutions which once supported it disappear or lose their social vitality. The current panic about rioting in the lead up to the G20 summit is a symptom of the breakdown in political representation. The youthful cultures of cosmopolitan modernity, like the conservative cultures of mainstream working class life have no political organisation to give voice to their hopes and fears. For many Labour is seen as a party of war, injustice and insecurity.
Our new ebook  The Crash - a view from the left is an attempt to raise some of these issues for debate. It is a call for radical change in the spirit of what G.D.H. Cole called a ‘sensible extremism’. We have to remake democracy and rediscover our capacity for collective change. We need a new socialism not dictated by the few from above, but made by the many from below. The task is not to win the political centre ground – it is gridlocked and dead – but to transform it and embark on the deep and long transformation that will bring about the good society. It is this ideal of a good society that offers hope. The political struggle to create it will be the great challenge of our time, and it will shape the lives of generations to come.
THE CRASH - A VIEW FROM THE LEFT
edited by Jon Cruddas and Jonathan Rutherford
The case for a new socialism and analysis of the economic and social issues that lie at the heart of the economic crisis.
Download here: http://www.lwbooks.co.uk/ebooks/crash.html 
Contributors: Jon Cruddas, Clive Dilnot, Bryan Gould, John Grahl, Colin Hines, Adam Leaver, Toby Lloyd, Lindsay Mackie, Robin Maynard, Richard Murphy, Carlota Perez, Ann Pettifor, Michael Prior, Jonathan Rutherford, Göran Therborn.