The rise and fall of New Labour

The architect of the Third Way argues that although the Blair-Brown years may not have been the new

The era of Labour hegemony is over. How should we assess its legacy? It is conventional these days to disparage Labour's record in government over the past 13 years. Even sympathetic observers argue that little of substance has been achieved. For the more determined critics, Labour in power - Labour as New Labour - has been more than a disappointment; it has been a disaster. The party led an onslaught on civil liberties, betrayed leftist ideals, failed to make any impact on inequality and, worst of all, embarked upon a calamitous war in Iraq. New Labour had promised a "new dawn", and many feel betrayed.

I have some sympathy with these criticisms. Yet it is possible, nevertheless, to mount a robust defence of many of Labour's core policies. And a balanced assessment is needed if the party is to chart an effective path in the future. A realistic starting point for doing so is to compare Labour's period in government with those of its sister parties in other countries over roughly the same period - Bill Clinton and the Democrats in the US, Lionel Jospin's Socialists in France and Germany's SPD, led by Gerhard Schröder.

Labour managed to stay in power longer than any of these - longer, indeed, than any other left-of-centre party in recent times, including those in Scandinavia. The ideological changes associated with the invention of the term "New Labour" were a large part of the reason for this electoral success. "New Labour" was not an empty soundbite designed to disguise a vacuum where policies should have been.

From the outset, the architects of New Labour offered a compelling diagnosis of why innovation in left-of-centre politics was needed, coupled with a clear policy agenda. In outline, this diagnosis ran as follows: the values of the left - solidarity, a commitment to reducing inequality and protecting the vulnerable, and a belief in the role of active government - remained intact, but the policies designed to pursue these ends had to shift radically because of profound changes going on in the wider world. Such changes included intensifying globalisation, the development of a post-industrial or service economy and, in an information age, the emergence of a more voluble and combative citizenry, less deferential to authority figures than in the past (a process that intensified with the advent of the internet).

Most of Labour's policy prescriptions followed from this analysis. The era of Keynesian demand management, linked to state direction of economic enterprise, was over. A different relationship of government to business had to be established, recognising the vital role of enterprise in wealth creation and the limits of state power. No country, however large and powerful, could control that marketplace: hence the "prawn cocktail offensive" that Labour launched in the mid-1990s to woo the City of London.

The expansion of the service economy went hand in hand with the shrinking of the working class, once the bastion of Labour support. Henceforth, to win elections, a left-of-centre party had to reach a much wider set of voters, including those who had never endorsed it in the past. Labour could no longer represent sectional class interests alone. In Tony Blair - not a Labour tribalist by any description - the party seemed to have found the perfect leader to help it further this aim.

Labour's policies evolved during its years in government. However, some core ideas remained the same. Economic prosperity, in a global­ised marketplace, had to take primacy as the precondition of effective social policy. An increasingly prosperous economy would generate the resources to fund public investment, dispensing with the need to raise taxes. Labour sought to break away from its previous predilection for tax-and-spend. "Prudence" was Gordon Brown's watchword as chancellor. Prudent economic management was essential if welfare spending was to rise and social justice to be enhanced.

Here, Labour had to struggle with the disastrous legacy of the Thatcher years. Inequality had increased more steeply in the UK during those years than in any industrial country except for New Zealand (which had also followed Thatcher-style policies). The welfare system was run-down, so investment in public services, coupled with reforms designed to make them more flexible and more responsive to the needs of their users, became a guiding principle. Labour was to be the party not of the big state, but of the intelligent state.

A further important strand of New Labour policy was its refusal to allow any issues to be "owned" by the right. The task, rather, was to provide left-of-centre solutions to them. This strategy became the focus of attacks by critics worried about its implications for civil liberties, but was vital to Labour's longevity in power. Social democrats fell from power in other countries because of their failure to do the same. In the past, the left had tried to explain away, rather than confront directly, questions having to do with crime, social disorder, migration and cultural identity - as if the concerns citizens had about such issues were misplaced or irrelevant. It was assumed, for example, that most crime resulted from inequality, and that once inequality was reduced, crime would inevitably decline. Without denying the connection, New Labour took a different view. Tony Blair's 1997 manifesto pledge "tough on crime and tough on the causes of crime" was not just a slogan; it was adopted as a principle of policy.

It might seem a long way from these concerns to New Labour's emphasis on the need for an activist foreign policy. But it is not. Because of globalisation, domestic and foreign policy now overlap each other far more than previously. Britain faces no visible threat of invasion, but must be prepared to assume an active role in the wider world. Interventionism becomes necessary doctrine when national sovereignty has lost much of its meaning and where there are universal humanitarian concerns that override local interests. Transnational terrorism, itself a creature of globalisation, is a threat far greater than the more localised forms of terrorism prevalent in the past.

How far did these strategies and policies bear fruit? Labour's record is distinctly patchy, but it would be hard to deny that it has had far more impact than did any of the other centre-left governments mentioned above. The UK enjoyed ten years of unbroken economic growth, not to be dismissed as simply based on a housing and credit bubble. That growth took place alongside the introduction of a national minimum wage. Large-scale investment was made in public services and significant reform was achieved in the areas of health and education.

Wage and income inequality was contained, though not significantly reduced. The position of the poor, however, improved substantially. Targets to reduce child poverty were not met, but before the recession 600,000 children were raised out of relative poverty; measured against an absolute standard, the number is about twice that figure.

The New Deal, Sure Start and tax credit policies have all had their difficulties, but have mostly proved their worth. Even the much-derided PFI has worked, at least when measured against public procurement. Devolution of power to Scotland and Wales has largely been successful, and what looks like a lasting peace has been achieved in Northern Ireland. Crime rates have come down substantially in the UK as a whole, and Britain has made a more fruitful adaptation to increasing cultural diversity than most other European countries.

From a party so often seen as illiberal and authoritarian, there were substantial achievements in the opposite direction. Labour signed up to the EU Social Chapter, together with the European Convention on Human Rights, introduced a Freedom of Information Act and endorsed civil partnerships for same-sex couples. Britain is a more liberal and tolerant society than it was, and Labour's policies played a part in this change. In foreign policy, overseas aid was increased well beyond anything preceding Tory governments had managed.

The military interventions in Bosnia, Kosovo - where Blair played a crucial role in persuading the Americans to contemplate deploying ground forces - and Sierra Leone were widely regarded as successes. If only he had stopped there! Nothing corroded Blair's re­putation more than his ill-starred decision to become George Bush's main partner in the invasion of Iraq.

Other far-reaching mistakes were made. The experiment with spin and media management during Labour's early years in power backfired and helped to create the impression that New Labour was about presentation rather than policy. Blair did not succeed in integrating Britain more closely into the EU, and some of his closest relationships with other European leaders - notably with the Italian premier, Silvio Berlusconi - were puzzling.

It was right to argue that Labour should become more business-friendly, and it was also right to recognise the importance of the City to the British economy. But it was a fundamental error to allow the prawn cocktail offensive to evolve into fawning dependence, with the result that the UK was transformed into a kind of gigantic tax haven. The idea that Labour should be "intensely relaxed about people getting filthy rich" not only exacerbated inequalities, but also helped to create a culture of irresponsibility. Bosses protected themselves from the risks they asked their employees to bear.

I don't accept the simplistic idea that New Labour was just a continuation of Thatcherism. Labour's policies involved extensive government intervention in economic life, although mainly on the supply side. And there was a genuine preoccupation with increasing social justice - a notion alien to Margaret Thatcher, Keith Joseph and their guru Milton Friedman. Yet Blair and Brown should have made it much clearer than they did that recognising the virtues of markets is quite different from prostrating oneself before them. Market fundamentalism should have been more explicitly criticised and its limitations exposed. As for proportional representation and wider constitutional reform - surely Labour should have endorsed these as a matter of principle, not as a result of political expediency?

The other parties have had to respond to the agenda that New Labour set. The Tories now endorse gay rights, accept the necessity of reducing poverty, support the Climate Change and Energy Acts that Labour introduced, and will continue most of the labour-market reforms that were made. In propagating the idea of the "big society", the Conservatives are drawing upon the same communitarian traditions that Tony Blair also endorsed. Naturally, they may retreat from these emphases, but at the moment they look genuine.

The global financial crisis, foreseen by very few, seems to have put an end to the world that helped to shape New Labour. Suddenly, everything has gone into juddering reverse: Keynesianism and government economic intervention are back. No one denies that we should seek to regulate the financial markets that once seemed so omni­potent. A tax on world financial transactions, previously dismissed as unrealistic, is now on the cards. It is, after all, possible to elevate the tax rates of the rich.

Meanwhile, there is talk among all the main parties of a return to an active industrial policy and of a renaissance of manufacturing. Climate change and other environmental risks, which Labour did little to confront until late on, are now at the heart of mainstream political concerns. Planning, for years in the shadows, is once more on the agenda, as are severe public spending cuts - the very opposite of the bold, expanding social investment on which New Labour policy was built. Fiscal prudence has ceded place to huge borrowing and very large accumulated debt.

New Labour as such is dead, and it is time to abandon the term. Yet some of the core social and economic trends to which it was a response still obtain, and significant portions of its policy framework remain relevant. In the future, Labour will still need to attract mainstream, affluent voters, against the background of a changing political culture in which the electronic media play a growing role. While it makes eminent sense to aim to reduce the dominance of the financial sector in the economy and encourage a renaissance in manufacturing, the UK will continue to be a post-industrial economy, with service- and knowledge-based occupations dominant.

Welfare reform will loom as large as ever, even more so when efficient spending will be a priority. The problem of sustaining progressive policies on immigration and multiculturalism without losing voter appeal will remain, as will that of how to reduce citizens' anxieties about crime. So, too, will that of finding an appropriate balance between civil liberties, on the one hand, and protecting the country against the threat posed by international terrorism on the other. Keynes is back in fashion, but there can be no return to Keynesian demand management as practised between 1945 and 1979. The challenge ahead of us is to preserve and enhance the flexibility and creativity that markets engender, while turning these qualities to long-term, socially desirable goals.

Fundamental rethinking is needed and a fresh set of policies has to be created. The key problem for Labour out of power will be to minimise the internal squabbling that afflicts so many parties, especially on the left, following an election defeat. Ideological reconstruction could have a decisive role here. The starting point should be to redefine the role of the public sphere.

“Blairites", it could be said, leaned more towards the market than "Brownites", who were keener on the state. However, the public sphere is distinguishable both from markets and from the state, and can be used as a platform for reconstructing each. Labour can be seen to be groping towards such an insight with its attempts, in the wake of the financial crisis, to reintroduce the idea of mutualism to political debate. These rather primitive efforts should be developed further and applied to the task of constructing a form of responsible capitalism, coupled to a sophisticated approach to issues of sustainability.

Anthony Giddens is a former director of the London School of Economics and a Labour peer.

This article first appeared in the 17 May 2010 issue of the New Statesman, On a tightrope

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The secret anti-capitalist history of McDonald’s

As a new film focuses on the real founder of McDonald’s, his grandson reveals the unlikely story behind his family’s long-lost restaurant.

One afternoon in about the year 1988, an 11-year-old boy was eating at McDonald’s with his family in the city of Manchester, New Hampshire. During the meal, he noticed a plaque on the wall bearing a man’s face and declaring him the founder of McDonald’s. These plaques were prevalent in McDonald’s restaurants across the US at the time. The face – gleaming with pride – belonged to Ray Kroc, a businessman and former travelling salesman long hailed as the creator of the fast food franchise.

Flickr/Phillip Pessar

But this wasn’t the man the young boy munching on fries expected to see. That man was in the restaurant alongside him. “I looked at my grandfather and said, ‘But I thought you were the founder?’” he recalls. “And that’s when, in the late Eighties, early Nineties, my grandfather went back on the [McDonald’s] Corporation to set the history straight.”

Jason McDonald French, now a 40-year-old registered nurse with four children, is the grandson of Dick McDonald – the real founder of McDonald’s. When he turned to his grandfather as a confused child all those years ago, he spurred him on to correct decades of misinformation about the mysterious McDonald’s history. A story now being brought to mainstream attention by a new film, The Founder.


Jason McDonald French

“They [McDonald’s Corporation] seemed to forget where the name actually did come from,” says McDonald French, speaking on the phone from his home just outside Springfield, Massachusetts.

His grandfather Dick was one half of the McDonald brothers, an entrepreneurial duo of restaurateurs who started out with a standard drive-in hotdog stand in California, 1937.

Dick's father, an Irish immigrant, worked in a shoe factory in New Hampshire. He and his brother made their success from scratch. They founded a unique burger restaurant in San Bernardino, around 50 miles east of where they had been flogging hotdogs. It would become the first McDonald’s restaurant.

Most takeout restaurants back then were drive-ins, where you would park, order food from your car, and wait for a “carhop” server to bring you your meal on a plate, with cutlery. The McDonald brothers noticed that this was a slow, disorganised process with pointless costly overheads.

So they invented fast food.

***

In 1948, they built what came to be known as the “speedy system” for a fast food kitchen from scratch. Dick was the inventor out of the two brothers - as well as the bespoke kitchen design, he came up with both the iconic giant yellow “M” and its nickname, the “Golden Arches”.

“My grandfather was an innovator, a man ahead of his time,” McDonald French tells me. “For someone who was [only] high school-educated to come up with the ideas and have the foresight to see where the food service business was going, is pretty remarkable.”


The McDonald brothers with a milkshake machine.

McDonald French is still amazed at his grandfather’s contraptions. “He was inventing machines to do this automated system, just off-the-cuff,” he recalls. “They were using heat lamps to keep food warm beforehand, before anyone had ever thought of such a thing. They customised their grills to whip the grease away to cook the burgers more efficiently. It was six-feet-long, which was just unheard of.”

Dick even custom-made ketchup and mustard dispensers – like metal fireplace bellows – to speed up the process of garnishing each burger. The brothers’ system, which also cut out waiting staff and the cost of buying and washing crockery and cutlery, brought customers hamburgers from grill to counter in 30 seconds.


The McDonald brothers as depicted in The Founder. Photo: The Founder

McDonald French recounts a story of the McDonald brothers working late into the night, drafting and redrafting a blueprint for the perfect speedy kitchen in chalk on their tennis court for hours. By 3am, when they finally had it all mapped out, they went to bed – deciding to put it all to paper the next day. The dry, desert climate of San Bernardino meant it hadn’t rained in months.

 “And, of course, it rained that night in San Bernardino – washed it all away. And they had to redo it all over again,” chuckles McDonald French.

In another hiccup when starting out, a swarm of flies attracted by the light descended on an evening event they put on to drum up interest in their restaurant, driving customers away.


An original McDonald's restaurant, as depicted in The Founder. Photo: The Founder

***

These turned out to be the least of their setbacks. As depicted in painful detail in John Lee Hancock’s film, Ray Kroc – then a milkshake machine salesman – took interest in their restaurant after they purchased six of his “multi-mixers”. It was then that the three men drew up a fateful contract. This signed Kroc as the franchising agent for McDonald’s, who was tasked with rolling out other McDonald’s restaurants (the McDonalds already had a handful of restaurants in their franchise). 

Kroc soon became frustrated at having little influence. He was bound by the McDonalds’ inflexibility and stubborn standards (they wouldn’t allow him to cut costs by purchasing powdered milkshake, for example). The film also suggests he was fed up with the lack of money he was making from the deal. In the end, he wriggled his way around the contract by setting up the property company “McDonald’s Corporation” and buying up the land on which the franchises were built.


Ray Kroc, as depicted in The Founder. Photo: The Founder

Kroc ended up buying McDonald’s in 1961, for $2.7m. He gave the brothers $1m each and agreeing to an annual royalty of half a per cent, which the McDonald family says they never received.

“My father told us about the handshake deal [for a stake in the company] and how Kroc had gone back on his word. That was very upsetting to my grandfather, and he never publicly spoke about it,” McDonald French says. “It’s probably billions of dollars. But if my grandfather was never upset about it enough to go after the Corporation, why would we?”

They lost the rights to their own name, and had to rebrand their original restaurant “The Big M”. It was soon put out of business by a McDonald’s that sprang up close by.


An original McDonald restaurant in Arizona. Photo: Flickr/George

Soon after that meal when the 11-year-old Jason saw Kroc smiling down from the plaque for the first time, he learned the true story of what had happened to his grandfather. “It’s upsetting to hear that your family member was kind of duped,” he says. “But my grandfather always had a great respect for the McDonald’s Corporation as a whole. He never badmouthed the Corporation publicly, because he just wasn’t that type of man.”

Today, McDonalds' corporate website acknowledges the McDonalds brothers as the founders of the original restaurant, and credits Kroc with expanding the franchise. The McDonald’s Corporation was not involved with the making of The Founder, which outlines this story. I have contacted it for a response to this story, but it does not wish to comment.

***

Dick McDonald’s principles jar with the modern connotations of McDonald’s – now a garish symbol of global capitalism. The film shows Dick’s attention to the quality of the food, and commitment to ethics. In one scene, he refuses a lucrative deal to advertise Coca Cola in stores. “It’s a concept that goes beyond our core beliefs,” he rants. “It’s distasteful . . . crass commercialism.”

Kroc, enraged, curses going into business with “a beatnik”.


Photo: The Founder

Dick’s grandson agrees that McDonald’s has strayed from his family’s values. He talks of his grandfather’s generosity and desire to share his wealth – the McDonald brothers gave their restaurant to its employees, and when Dick returned to New Hampshire after the sale, he used some of the money to buy new Cadillacs with air conditioning for his old friends back home.

“[McDonald’s] is definitely a symbol of capitalism, and it definitely sometimes has a negative connotation in society,” McDonald French says. “If it was still under what my grandfather had started, I imagine it would be more like In'N'Out Burger [a fast food chain in the US known for its ethical standards] is now, where they pay their employees very well, where they stick to the simple menu and the quality.”

He adds: “I don’t think it would’ve ever blossomed into this, doing salads and everything else. It would’ve stayed simple, had quality products that were great all the time.

“I believe that he [my grandfather] wasn’t too unhappy that he wasn’t involved with it anymore.”


The McDonald’s Museum, Ray Kroc’s first franchised restaurant in the chain. Photo: Wikimedia Commons

Despite his history, Dick still took his children and grandchildren to eat at McDonald’s together – “all the time” – as does Jason McDonald French with his own children now. He’s a cheeseburger enthusiast, while his seven-year-old youngest child loves the chicken nuggets. But there was always a supersize elephant in the room.

“My grandfather never really spoke of Ray Kroc,” he says. “That was always kind of a touchy subject. It wasn’t until years later that my father told us about how Kroc was not a very nice man. And it was the only one time I ever remember my grandfather talking about Kroc, when he said: ‘Boy, that guy really got me.’”

The Founder is in UK cinemas from today.

Anoosh Chakelian is senior writer at the New Statesman.