The Labour Party that capitulated so completely to neoliberalism is exhausted. If it is to be reinvigorated, it will have to embrace bold ideas

The end of the neoliberal era is surely cause for some celebration. It marked a decisive shift in the centre of gravity of power in society: from the state to the market, from society to the individual, from relatively egalitarian values to the embrace of inequality. In the past 30 years, there has been a formidable redistribution of power and wealth in favour of the rich.

It can be argued that it is premature to announce the end of neoliberalism, and of course, in a sense, this is true. An ideology that has acquired such dominance at all levels of society, from the person in the street to the man at No 10 – to the point where it has acquired the force of common sense – does not and cannot disappear overnight.

On the contrary, for every one of us, it is remarkably difficult to change the way we think, far more so than it is to change our daily habits. Paradigm shifts are complex processes. Above all, they take time, as we slowly let go of and reject old systems of thought and begin, bit by bit, to adjust to new realities and systems of thinking.

But, for all the mind’s natural conservatism, that process now has the force of nature, and for one simple reason: neoliberalism has imploded. It has been found wanting where it matters most; it no longer works; it failed to deliver. But its abandonment will be a messy process. It will be driven by force majeure but, unlike the social-democratic era that came to an end in the late 1970s, it has not been undermined by an alternative ideology. Events may have delivered a coup de grâce, but there has been no intellectual preparation for the kind of ideological shift now under way. We are all stumbling in the dark, making it up as we go along, reaching out to past masters such as J M Keynes, trying to recall the lines and tunes that prevailed during the social-democratic era.

For those aged under 50, this will not be easy, as they are the true creatures of neoliberalism, having known precious little else. Those best able to make sense of what is happening, who have lived through profound discontinuities, who know that you can’t straight-line the future as if it were always an extrapolation of the past, are those, alas, now in their late eighties and upwards. These are the people who lived through the Great Depression, the Second World War and on into the postwar era. They have a sense of history because they have lived through very different epochs.

This brings me to the subject of the left. The end of neoliberalism may offer far more favourable terrain for the left – excepting those formerly left-wing ideologues who became true believers in the market and all its works – but there is nothing inevitable about this. We should remind ourselves that the left has had nothing to do with the demise of neoliberalism; on the contrary, it was a mere spectator.

Furthermore, in this country, New Labour has been a paid-up advocate and operative of neoliberalism, so its relationship with the new turn is inevitably ambiguous, as the government’s grudging and inadequate approach to reform of the banking system and its kid-gloves treatment of the bankers has illustrated. The problem is well illustrated by one fact: the clearest writing about the crisis has not been from the left. For intellectual nourishment and stimulation, I read Willem Buiter (a splendid and acerbic analyst) as well as Martin Wolf in the Financial Times. In the parliamentary world, Vince Cable of the Liberal Democrats has been consistently the most perceptive.

As yet, I am hard-pressed to think of a prominent left-wing sage on the crisis, at least in Britain. The situation is rather different in the United States, where Paul Krugman and Joseph Stiglitz are influential and weighty voices of the left.

This is not necessarily cause for acute concern, though it is hardly reason for celebration. Alas, it was forever thus. Labour has never been very good at thinking. When it comes to ideas, the party has always been a better borrower than a creator: Keynes, one might recall, was a Liberal, not a member of the Labour Party. New Labour itself came largely from Thatcherism, and the critique of Old Labour and understanding of Thatcherism from my old magazine, Marxism Today.

Major progressive renewal has invariably involved a very broad coalition, in which the Labour Party has been the main electoral vehicle but rarely a fount of ideas. If the Labour Party is to regenerate itself after what will, in all likelihood, be a punishing electoral defeat next year, it faces a formidable task of reconstruction, above all intellectual reconstruction. The triumph of New Labourism within the party represented its conversion to neoliberalism. That era is now dead, and so is New Labour.

But what will follow it? That problem will dominate the Labour mind for the next few years, if not the next decade. Nor can such a project be the work of the Labour party in isolation. It is, as I have said, not good at thinking new thoughts. It will need to be part of a much wider progressive conversation that draws on many strands of thought and many diverse thinkers.

It will not be easy to regenerate a party that was once leftist, but capitulated so comprehensively to neoliberalism. This regeneration will also take place in a context that has brought the fragmentation of the left and its de facto demise in the form that we knew it. There is no reason, however, to think that it is not possible; as we have seen time and time again, the powers of recuperation of both the Conservative Party and Labour are enormous. The possibility that this crisis might in time enable the Labour Party to resume its position as a major agent for social reform – in contrast to the miserable era of New Labour – is a prize worth contemplating.

Martin Jacques writes fortnightly in the New Statesman

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