Alas poor Gordon...

The crisis engulfing Gordon Brown's leadership is of New Labour's own making and any promises to lis

The vultures are circling over Downing Street. Labour’s defeat in the Glasgow East by-election was a disaster. This was supposed to be Labour’s third safest seat in Scotland and our 25th safest in the whole of Britain.

Such ‘meltdown’ figures would not of course be replicated in a General Election. But crushing defeat now stares the party in the face - the biggest crisis in Labour for a generation - and it is a crisis of governance and vision as much as of personal leadership. The great tragedy for the party is that most of the vultures circling around Gordon Brown would only perpetuate the crisis.

For months now, a group of ex-ministers have been cruising the corridors and cafeteria of Parliament in search of stray Labour MPs to descend on. “Carruthers, dear boy/girl, we haven’t spoken for ages, but have you got a moment? What are we going to do about Gordon? He is leading the party into disaster. I know you don’t want to lose your seat at the election, but what do we do?”

If we were children, the process would be called ‘grooming’. It has little to do with the well-being of the MP or the party. Most of the approaches are coming from the remnants of the Blair Witch-Way Project, looking for a way back to power. Their interests are more in shafting the Labour Party than in saving it.

For a couple of years now a group of 20 or so ex-ministers (mostly junior ones) have been meeting to discuss how they could maintain the flame of the Blairite revolution.

Not content to see that it lives on under Gordon Brown, discarded ambitions within the Dead Ministers Society pump out delusions that only a greater lurch to the Right can save Labour: accelerate privatisation, bring more private capital into public services, equivalents of Bush’s Project for a New American Century.

Meanwhile, back in Gordon’s bunker, the messages about ‘listening’ and ‘learning’ from each by-election defeat increasingly sound like the word ‘help’.

Sadly, Gordon does not appear able to reach out from the legacy of his own past. All the pronouncements are merely assertions that the policies that took us into this mess will ultimately get us out of it. You wish.

It isn’t credible to claim that Labour’s woes are all caused by the world outside. The economics and politics of our current impoverishment were constructed by the Blair/Brown leadership.

An obsession with off-balance-sheet accounting made public investment dependant on private finance.

Private finance demanded deregulation of financial markets. Banks were turned into casinos in the helter-skelter creation of credit.

The ‘safety net’ was supposed to be found in an ever rising spiral of property values. Such delusions chased themselves into absurdities and then into tears. It was where New Labour was always going to take us.

Domestically, the equivalent part of the process was in the neutering of government. Politics itself was outsourced. Ministers were in office, but not in power. Those promoted into office loved it, for they brought with them an ambition that was politics-free. They argued for the transfer of responsibility from parliament to an array of regulators, arms-length providers and private contractors, because it protected ministers from criticism.

The lightest touch of regulatory frameworks left parliament and government in a Pontius Pilate position. If anything went wrong it was “nothing to do with me, Guv”. But when it does go wrong government, quite rightly, cops the blame.

So it is that we end up in a summer of self-inflicted humiliation. The fiasco of pupil assessments (SATs), before children move on from primary to secondary school, illustrates the impoverishment of government. One inspired cartoon had a child sitting over an assessment paper and being asked if she was completing her SATs paper. Her reply was “No I am marking them”.

The same logic applies to the wave of local Post Office closures. Even though the Post Office is a publicly owned company, with a ‘universal public service obligation,’ Ministers declare themselves powerless to intervene in its running.

As energy companies cash in on the windfall profits of oil price rises and also hump 60 per cent price increases on the public, ministers shrink from ‘interfering in the market’.

No matter that it is pushing households in fuel poverty up from 4.5 million to 6 million. Government insists that market rules are set by the regulator, and that the regulator should have no responsibility for fuel poverty.

The emasculation of parliament and government has nothing to do with the big bad world ’out there’. It is the construct upon which New Labour built itself. No amount of musical chairs at the top will put this right if we don’t change the policies at the bottom. Doing so is not complicated, but it does require courage.

The next couple of years will be a global financial nightmare. The emphasis should be to repatriate capital wherever possible and to revisit the Roosevelt/Keynes doctrines in the form of a
Green New Deal

Stuff the notion of Gordon’s rules. In a recession the government must borrow and spend. Trade Union pension funds, looking for a shelter that will not wipe them out, should be re-directed into public bonds to fund public works.

Today’s political priorities would have to be found in the ecological infrastructure that will survive the 21st century, climate change and peak oil. None of this is beyond our reach, but none of it is compatible with the New Labour obsession with deregulated, neo-liberal economics.

The problem is that this is the world-view that Gordon and Tony created for themselves. It was supported to be their sanctuary, and their guarantee of greatness. Now it is the millstone that will sink them and anyone else tied to it.

Gordon could cut the ties before any of his ‘friends’ cut his throat. The trouble is that neither he nor the encircling would-be wannabes have the courage or vision to do so. The choice may thus be between a Greek or a Shakespearean tragedy.

Alan Simpson is MP for Nottingham South

The original version of this article wrongly attributed difficulties with SATs examinations to a company called EDS. In fact it was ETS. We are happy to clarify this point.

Jeremy Corbyn. Photo: Getty
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Lexit: the EU is a neoliberal project, so let's do something different when we leave it

Brexit affords the British left a historic opportunity for a decisive break with EU market liberalism.

The Brexit vote to leave the European Union has many parents, but "Lexit" – the argument for exiting the EU from the left – remains an orphan. A third of Labour voters backed Leave, but they did so without any significant leadership from the Labour Party. Left-of-centre votes proved decisive in determining the outcome of a referendum that was otherwise framed, shaped, and presented almost exclusively by the right. A proper left discussion of the issues has been, if not entirely absent, then decidedly marginal – part of a more general malaise when it comes to developing left alternatives that has begun to be corrected only recently, under Jeremy Corbyn and John McDonnell.

Ceding Brexit to the right was very nearly the most serious strategic mistake by the British left since the ‘70s. Under successive leaders Labour became so incorporated into the ideology of Europeanism as to preclude any clear-eyed critical analysis of the actually existing EU as a regulatory and trade regime pursuing deep economic integration. The same political journey that carried Labour into its technocratic embrace of the EU also resulted in the abandonment of any form of distinctive economics separate from the orthodoxies of market liberalism.

It’s been astounding to witness so many left-wingers, in meltdown over Brexit, resort to parroting liberal economics. Thus we hear that factor mobility isn’t about labour arbitrage, that public services aren’t under pressure, that we must prioritise foreign direct investment and trade. It’s little wonder Labour became so detached from its base. Such claims do not match the lived experience of ordinary people in regions of the country devastated by deindustrialisation and disinvestment.

Nor should concerns about wage stagnation and bargaining power be met with finger-wagging accusations of racism, as if the manner in which capitalism pits workers against each other hasn’t long been understood. Instead, we should be offering real solutions – including a willingness to rethink capital mobility and trade. This places us in direct conflict with the constitutionalised neoliberalism of the EU.

Only the political savvy of the leadership has enabled Labour to recover from its disastrous positioning post-referendum. Incredibly, what seemed an unbeatable electoral bloc around Theresa May has been deftly prized apart in the course of an extraordinary General Election campaign. To consolidate the political project they have initiated, Corbyn and McDonnell must now follow through with a truly radical economic programme. The place to look for inspiration is precisely the range of instruments and policy options discouraged or outright forbidden by the EU.

A neoliberal project

The fact that right-wing arguments for Leave predominated during the referendum says far more about today’s left than it does about the European Union. There has been a great deal of myth-making concerning the latter –much of it funded, directly or indirectly, by the EU itself.

From its inception, the EU has been a top-down project driven by political and administrative elites, "a protected sphere", in the judgment of the late Peter Mair, "in which policy-making can evade the constraints imposed by representative democracy". To complain about the EU’s "democratic deficit" is to have misunderstood its purpose. The main thrust of European economic policy has been to extend and deepen the market through liberalisation, privatisation, and flexiblisation, subordinating employment and social protection to goals of low inflation, debt reduction, and increased competitiveness.

Prospects for Keynesian reflationary policies, or even for pan-European economic planning – never great – soon gave way to more Hayekian conceptions. Hayek’s original insight, in The Economic Conditions of Interstate Federalism, was that free movement of capital, goods, and labour – a "single market" – among a federation of nations would severely and necessarily restrict the economic policy space available to individual members. Pro-European socialists, whose aim had been to acquire new supranational options for the regulation of capital, found themselves surrendering the tools they already possessed at home. The national road to socialism, or even to social democracy, was closed.

The direction of travel has been singular and unrelenting. To take one example, workers’ rights – a supposed EU strength – are steadily being eroded, as can be seen in landmark judgments by the European Court of Justice (ECJ) in the Viking and Laval cases, among others. In both instances, workers attempting to strike in protest at plans to replace workers from one EU country with lower-wage workers from another, were told their right to strike could not infringe upon the "four freedoms" – free movement of capital, labour, goods, and services – established by the treaties.

More broadly, on trade, financial regulation, state aid, government purchasing, public service delivery, and more, any attempt to create a different kind of economy from inside the EU has largely been forestalled by competition policy or single market regulation.

A new political economy

Given that the UK will soon be escaping the EU, what opportunities might this afford? Three policy directions immediately stand out: public ownership, industrial strategy, and procurement. In each case, EU regulation previously stood in the way of promising left strategies. In each case, the political and economic returns from bold departures from neoliberal orthodoxy after Brexit could be substantial.

While not banned outright by EU law, public ownership is severely discouraged and disadvantaged by it. ECJ interpretation of Article 106 of the Treaty on the Functioning of the European Union (TFEU) has steadily eroded public ownership options. "The ECJ", argues law professor Danny Nicol, "appears to have constructed a one-way street in favour of private-sector provision: nationalised services are prima facie suspect and must be analysed for their necessity". Sure enough, the EU has been a significant driver of privatisation, functioning like a ratchet. It’s much easier for a member state to pursue the liberalisation of sectors than to secure their (re)nationalisation. Article 59 (TFEU) specifically allows the European Council and Parliament to liberalise services. Since the ‘80s, there have been single market programmes in energy, transport, postal services, telecommunications, education, and health.

Britain has long been an extreme outlier on privatisation, responsible for 40 per cent of the total assets privatised across the OECD between 1980 and 1996. Today, however, increasing inequality, poverty, environmental degradation and the general sense of an impoverished public sphere are leading to growing calls for renewed public ownership (albeit in new, more democratic forms). Soon to be free of EU constraints, it’s time to explore an expanded and fundamentally reimagined UK public sector.

Next, Britain’s industrial production has been virtually flat since the late 1990s, with a yawning trade deficit in industrial goods. Any serious industrial strategy to address the structural weaknesses of UK manufacturing will rely on "state aid" – the nurturing of a next generation of companies through grants, interest and tax relief, guarantees, government holdings, and the provision of goods and services on a preferential basis.

Article 107 TFEU allows for state aid only if it is compatible with the internal market and does not distort competition, laying out the specific circumstances in which it could be lawful. Whether or not state aid meets these criteria is at the sole discretion of the Commission – and courts in member states are obligated to enforce the commission’s decisions. The Commission has adopted an approach that considers, among other things, the existence of market failure, the effectiveness of other options, and the impact on the market and competition, thereby allowing state aid only in exceptional circumstances.

For many parts of the UK, the challenges of industrial decline remain starkly present – entire communities are thrown on the scrap heap, with all the associated capital and carbon costs and wasted lives. It’s high time the left returned to the possibilities inherent in a proactive industrial strategy. A true community-sustaining industrial strategy would consist of the deliberate direction of capital to sectors, localities, and regions, so as to balance out market trends and prevent communities from falling into decay, while also ensuring the investment in research and development necessary to maintain a highly productive economy. Policy, in this vision, would function to re-deploy infrastructure, production facilities, and workers left unemployed because of a shutdown or increased automation.

In some cases, this might mean assistance to workers or localities to buy up facilities and keep them running under worker or community ownership. In other cases it might involve re-training workers for new skills and re-fitting facilities. A regional approach might help launch new enterprises that would eventually be spun off as worker or local community-owned firms, supporting the development of strong and vibrant network economies, perhaps on the basis of a Green New Deal. All of this will be possible post-Brexit, under a Corbyn government.

Lastly, there is procurement. Under EU law, explicitly linking public procurement to local entities or social needs is difficult. The ECJ has ruled that, even if there is no specific legislation, procurement activity must "comply with the fundamental rules of the Treaty, in particular the principle of non-discrimination on grounds of nationality". This means that all procurement contracts must be open to all bidders across the EU, and public authorities must advertise contracts widely in other EU countries. In 2004, the European Parliament and Council issued two directives establishing the criteria governing such contracts: "lowest price only" and "most economically advantageous tender".

Unleashed from EU constraints, there are major opportunities for targeting large-scale public procurement to rebuild and transform communities, cities, and regions. The vision behind the celebrated Preston Model of community wealth building – inspired by the work of our own organisation, The Democracy Collaborative, in Cleveland, Ohio – leverages public procurement and the stabilising power of place-based anchor institutions (governments, hospitals, universities) to support rooted, participatory, democratic local economies built around multipliers. In this way, public funds can be made to do "double duty"; anchoring jobs and building community wealth, reversing long-term economic decline. This suggests the viability of a very different economic approach and potential for a winning political coalition, building support for a new socialist economics from the ground up.

With the prospect of a Corbyn government now tantalisingly close, it’s imperative that Labour reconciles its policy objectives in the Brexit negotiations with its plans for a radical economic transformation and redistribution of power and wealth. Only by pursuing strategies capable of re-establishing broad control over the national economy can Labour hope to manage the coming period of pain and dislocation following Brexit. Based on new institutions and approaches and the centrality of ownership and control, democracy, and participation, we should be busy assembling the tools and strategies that will allow departure from the EU to open up new political-economic horizons in Britain and bring about the profound transformation the country so desperately wants and needs.

Joe Guinan is executive director of the Next System Project at The Democracy Collaborative. Thomas M. Hanna is research director at The Democracy Collaborative.

This is an extract from a longer essay which appears in the inaugural edition of the IPPR Progressive Review.