See the bigger picture

Labour lost, not because it was too soft on immigration and welfare, but because it failed to convin

People have a common desire to search for something good in their lives. Labour in power did not give voice to this hope: we broke our tacit covenant with the people - a covenant about housing, work and security, a sense of neighbourliness and community. We lost their trust and so lost the election; and we lost it badly.

Now we need to rediscover our campaigning traditions of democracy and socialism, and build a grass-roots movement for a new coven­ant between the people and Labour.

Yet Labour appears to be heading elsewhere. Since polling day a new orthodoxy has emerged: it is all about immigration and welfare recipients. Let's prioritise the "indigenous" folk, the argument goes; let's crack down on those hoovering up welfare and take the gloves off when it comes to dealing with new arrivals. This wretched prognosis is all about Labour rediscovering the "working class" and camping out on the governing coalition's right flank. That is a deadly position to adopt.

This is a "working class" long present in Lab­our history. It is the working class of the Webbs and the late-Victorian social investigators, of William Beveridge and fellow members of the Eugenics Education Society - the degenerate mob at the gate, undermining secular, rationalist progress. The distinction between the "deserving" and the "undeserving" poor is back.

Political economy

Where in these current debates are issues of political economy? Where is the deep analysis of power and structural inequality? Indeed, where are the hope and generosity, the optimism and warmth, the search for a different world? Why are we retreating into a sour, kiss-up, kick-down politics?
The future of Labour will be shaped by how we judge our incumbency. Let us celebrate our achievements in government, but also face up to what went wrong. In a hostile climate, we rebuilt our public services. We lifted nearly a million pensioners out of poverty. The fall in child poverty rates was the second largest in the OECD after Mexico. Education, health care, childcare have all improved. And Britain is a more tolerant place than it was 13 years ago.

But we cannot avoid looking at the larger picture. The National Equality Panel made it clear in its January report: "the large inequality growth of the 1980s has not been reversed". In 1976, the bottom 50 per cent of the population owned 8 per cent of the nation's wealth. By 2001, the figure had fallen to 5 per cent. Labour presided over some of the highest levels of poverty and inequality in Europe, despite ten years of uninterrupted growth.

The power of financial capital was left unchecked and a banking oligarchy captured the financial regulatory system and the political class. While business productivity failed to grow, the business model of shareholder value ensured that the pay of company directors and of those working in the upper echelons of the financial houses soared. Meanwhile, the housing market became the centrepiece of a casino economy. Instead of investment in homes for future generations, there was asset inflation and speculation. Like an imperial cantonment in a colonised land, the City exerted economic control and gave nothing back. As for Labour, it made its Faustian pact: in return for tax revenues that were a fraction of City profits, it played cheerleader to a new "golden age" of finance.

The crash in the financial markets that followed was a crisis of fixed investment. But it was also a crisis of democracy - a profound political failure, on the part of our government, to manage the economy and to protect the security of British citizens. The banking bailout and quantitative easing stopped the collapse of the financial system, but did nothing to halt the transfer of wealth to the rich. Between the third quarter of 2009 and the second quarter of 2010, national income grew by £27bn. Higher profits have accounted for £24bn of the increase, while wages have risen by £2bn. This is an almost unprecedented growth in profits over wages in absolute terms.

Between 1978 and 2008, more than four million jobs in manufacturing vanished. Deindustrialisation undermined the income base of the working class. The share of the national wealth going to wages peaked at 65 per cent in 1973; by 2008, it had dropped to 53 per cent. Over a 30-year period, there was a huge transfer of wealth and power to a rich elite. To maintain their living standards, low- and middle-earning households increased their borrowing, fuelling the debt crisis in the process.

Labour's response was to prepare workers for the global market. It began to promote an entrepreneurial way of life and the aspiration of "earning and owning". The drive towards a more flexible labour market increased the use of short-term contracts, agency work, subcontracting and the hiring of those who were "self-employed". The model encouraged immigration into Britain, but left the British workforce one of the worst protected in Europe.

The whirlwind of globalisation has destroyed working-class communities. In the most deprived areas, a culture of shame and failure has taken root. Children grow up expecting nothing, and so give nothing in return. People fear that their identity and way of life are under threat; in consequence, they fear the stranger. This fear then spreads outwards to the wider population, like ripples across a pond.

Broken Britain?

Nowhere has the impact of liberal-market modernisation been felt more acutely than in the family. The strains placed on women as they juggle the roles of worker, mother and housekeeper make ordinary family life much more difficult to sustain. Time poverty in working families deprives children of contact with their parents. The intensification of work has led to significant increases in levels of anxiety and sleep problems.

For many young people without decently paid work and housing, it has become impos­sible to follow the conventional rites of passage into adulthood - leaving home, getting a job, establishing a family and taking on legal obligations and rights.

The consequences of this social marketisation were inevitable. Insecurity and a feeling of dispossession turned into hostility to foreigners. Righteous anger at class injustice soured into ethnic hatred. Self-interested individualism eroded the bonds of community and corrupted the ethics of public life. Chronic deprivation spawned self-destructive behaviour, addiction, mental illness, criminality and "conduct disorder". These are symptoms of incivility, however, not its root causes.

The media responded by scapegoating recipients of welfare, single mothers and immigrants. Images of "chavs" and "feral" children legitimised the criminalisation and incarceration of the young and the poor. Government welfare reforms identified the poor as responsible for their own unemployment and poverty. As it sought to repair the tensions in its electoral coalition using right-wing populism, Labour lost its moral compass. More of the same is not the post-election solution that Labour needs.

“Third Way" politics was based on the mistaken beliefs that Britain's class-bound society was giving way to a meritocracy and that globalisation was essentially benign. Labour has to find a narrative about this period that allows it to move on and build a future.

The good society

A first step would be to rediscover a politics of the common good. What type of society do we wish to create? Labour can draw on two coherent, deeply rooted strands of British political thought here. One is the kind of social democracy that is influenced by ethical socialism, and that grows upwards from the people. The other is the radical liberalism of thinkers such as Leonard T Hobhouse.

This politics is conservative, in that it values the continuity of the social goods which shape people's lives: home, family, relationships, good work, locality and communities of belonging. Yet it also promotes social justice in its commitment to personal freedom and to the deepening and extension of equality and democracy in the economy and society at large. Such a politics would enable Labour to engage with the contradictory elements of conservatism and cosmopolitan modernity in British society, and also with the contradictory desires for freedom and security, for the unpredictable and the familiar, that exist in each of us. However, an ethical politics on its own is not sufficient to realise a new society. It will require far-reaching changes in the organisation, control and ownership of the economy to achieve a just distribution of wealth, power and resources.

New covenant

A new covenant between Labour and the people would have three strands. First, it will be for an ethic of reciprocity: "Do not do to others what you would not like to be done to you." It will begin in the daily life of our neighbourhoods, in the commitments of family life. And it would extend to our working lives and our participation in society as citizens. In return for fulfilling our obligations as neighbours and parents, we will expect the government to create a fair tax system and to ensure a proper level of universal social protection, and guarantee a minimum income entitlement. The market, as well as the government, must provide a living wage for all, secure employment and decent working conditions and pensions. People need homes to live in - therefore a national housebuilding programme, along with reform of the private rented sector and the mortgage market.

Second, the covenant would be for an ethical economy that secures capital and employment in localities, creating the conditions for social growth. We are still in the early stages of the economic crisis, and rebuilding the British economy in the long term will require policy strategies for substantial wealth creation and its equitable distribution through well-paid jobs and regional spread. This will entail our government working with manufacturing industry to identify and nurture potential markets, and also demand "patient" or long-term capital investment. J M Keynes, no socialist, recommended this "somewhat comprehensive socialisation of investment" when fixed investment collapses. Meanwhile, reform of corporate governance would bring firms under greater democratic control by stakeholders, and thus make business more accountable.

Third, the covenant would be for liberty. Labour is the product of the long popular struggle for freedom and democracy. And its role has been to defend society against the power of the state and the market. Each person has the right to be human in his or her own way. Each has obligations to family, work and society. These rights and obligations can best be achieved by deepening and extending the democratic covenant. Britain needs a constitution based on a democratic state and the devolution of power. We need to bring elites and corporate power to account and our democratic cultures need strengthening by improving the opportu­nities for active participation and deliberative decision-making by the people. We need a new culture of freedom of information, and more plural ownership of the media.

A new Labour covenant would be the beginning of a new ethical relationship among individuals, and between individuals and society. This ethics will be the basis for an agreement between society and a new kind of democratic "developmental state", as well as a productive, wealth-creating economy. It will not thrive on soundbites, public announcements, passive listening, or the broadcasting of information. Rather, it will be made in campaigning, in the active process of building leadership through dialogue.

The task for Labour, as Raymond Williams once put it, is to "make hope possible rather than despair convincing". Listen to much of the post-election soul-searching and you detect an emptiness within Labour; the replacement of hope by calculation and a base pandering to its worst instincts. The anecdotes told by canvassing MPs about immigrants and scroungers are allegories of a deeper uncertainty about what the Labour Party stands for.

Richard Rorty once wrote that "the best way to cause people long-lasting pain is to humiliate them by making the things that seemed most important to them look futile, obsolete and powerless". This is an experience that many former Labour voters describe. To use dry terms such as "disconnection" to comprehend it is to underestimate the seriousness of what they feel: grievous pain and loss. The optimism of progressive politics seems to have been leeched from a party that once, at its best, was a byword for it. That is why we need a new covenant with the electorate.

Jon Cruddas is MP for Dagenham
Jonathan Rutherford is professor of cultural studies at Middlesex University