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7 November 2017updated 10 Nov 2017 3:42pm

The European centre-left keeps losing because neoliberalism is broken

The current model is failing, as more and more people cannot see the social justice in sharing scarce resources with those who arrive suddenly and randomly.

By Paul Mason

On 13 October, Lloyd Blankfein, the CEO of the multinational finance company Goldman Sachs, tweeted, “At IMF in DC. Puzzling that politics everywhere are so difficult when world’s economies are (mostly) good and the world is (mostly) at peace.”

Here’s my answer to the puzzle: neoliberalism is broken. By neoliberalism, I do not mean simply the ideas of Friedrich Hayek and Milton Friedman – their ideology never described the actual system created by Margaret Thatcher, Ronald Reagan, Boris Yeltsin and Deng Xiaoping. Rather, I mean the global economic system that drove growth and technological progress between 1989 and 2008 but has now stopped doing so.

For me, neoliberalism describes the system in its totality: the countries that borrow, import and consume; and the countries that save, lend, export and produce. When it worked, it drove a gross global imbalance. The logic of the imbalance was to create financial catastrophe.

As the economists Anton Brender and Florence Pisani wrote in 2010, the only thing that could have rebalanced the world was the financial crisis of 2008. Since then, neoliberalism has been on life support, in the form of $15trn of quantitative easing. You can keep an economy on life support for a long time, but you cannot keep an ideology on life support. The human brain demands coherence.

For many people in developed countries, there is no coherent story of how their lives will get better. They know that their kids will be poorer than they are, and they see an elite – the likes of Mr Blankfein – that just doesn’t get it. Indeed, seeing the elite become richer and go on failing to get it is even more painful than simply staying poor.

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In 2015, the Bank of England produced an analysis of the sources of global growth, past and future (see chart on page 33). The black line represents actual and projected growth. The coloured bars show what contributed to that growth. They reveal that between 1980 and 2015 – the entire course of neoliberal globalisation – growth remained more or less static, but what drove it changed.

In the upswing of neoliberalism, before 2000, much of the growth resulted from an expanding workforce (the so-called Great Doubling), shown in blue. But there was also growth at the frontiers of productivity, shown in yellow, which came from better education and technological change.

After 2000, much of the growth was “catch-up growth”, as the Brics countries (Brazil, Russia, India, China and South Africa), foremost among them China, truly entered the world market. But look at the black line for the future. If the Bank’s economists are right, there will be less growth in the future than in the past 40 years. A lot of it will be catch-up growth. None of it will be driven by technological change.

Though the great majority of voters in Britain, France, Germany, Austria and the US have never seen this chart, their behaviour and psychology are beginning to reflect the suspicion that it is right and that the best days of capitalism are over. The shock is all the greater because neoliberalism was supposed to last for ever: like this for ever, only better. Since 2008, neoliberalism’s promise has been: like this for ever, only worse.

In my 2015 book, PostCapitalism, I argued that we face a choice – ditch neoliberalism, or it will destroy globalisation. That is what is happening. It’s not just that we have xenophobic movements, violent misogyny and racism; we have sections of the business elite prepared to use these movements and sentiments to gain political power. Donald Trump, Alternative für Deutschland (AfD), Marine Le Pen, Ukip and the Austrian Freedom Party all exhibit the essential characteristic that Hannah Arendt described in her book The Origins of Totalitarianism (1951): they are an alliance of the “elite and the mob”.

Though they are, in the main, not classically fascist parties, they are succeeding because of the factors that the German sociologist Erich Fromm observed in the 1930s: tiredness, combined with loneliness, and the exhaustion and failure of the left.

What the far-right and the conservative parties are now converging around is not a return to the national state-led capitalism of the Keynesian era. If you listen to Donald Trump, to the right-wing British Conservative MP Jacob Rees-Mogg and to the AfD, the project is national neoliberalism.

It will not work. As the historian Charles P Kindleberger reminded us in The World in Depression, his account of the 1930s, when states enthusiastically compete in a negative-sum game, the outcome is a smaller global economy.

What can we do? First, we need to say clearly: neoliberalism is over. If social democracy’s strategy was to generate a surplus through a highly financial, globalised free market economy and distribute it downwards as a compensation for stagnant wages and atomised communities, that is no longer possible. The more you try to do it, the more you have to coerce competitive behaviour into people’s lives, from the counter of the coffee bar to the welfare system, to housing, to the process of finding someone to go on a date with.

Promise number one of a radical social democracy should be: we will switch off the great privatisation machine. Promise number two also costs you nothing: we will stop imposing, nudging and coercing market behaviour into the lives of people and foster instead the human, collaborative impulse that 30 years of neoliberalism suppressed. To do these things, we need an alternative economic model, a narrative of hope, a social movement to fight for it and party structures that can enable all of this to work, rather than hinder it.

In May, people spontaneously turned Jeremy Corbyn’s name into a football song. We got 12.9 million people to vote for Labour at the election in June because the party offered the first two things: a clear policy alternative to neoliberalism and a narrative of hope.

I opposed the Third Way strategy in the 1990s, but I recognise that the Blair/Brown government delivered real advances in social justice. The Third Way strategy was logical if you believed that neoliberalism would last for ever. The problem we have faced since 2010 is: what to do now that neoliberalism is broken?

Source: Bank of England

For five years, under Ed Miliband, we tried to avoid the problem. Yet in the meantime, the tribal alliance that formed British social democracy was being pulled apart, by progressive nationalism in Scotland; by the xenophobia of Ukip in England and parts of Wales, which garnered four million votes in the 2014 European elections; by the emergence of a socially liberal, networked salariat that was switched off from technocratic politics, which prioritised climate change, personal freedom and other social issues.

Once we reached 2016, many working-class people felt alienated from our political language and viscerally worried about the impact of European migration on public services. When the entire centre of politics, backed up by the liberal salariat, told them that they could reduce migration only by leaving the EU, 17.4 million decided to vote Leave.

Even before Brexit, it was clear that only one thing could pull the alliance back together: economic radicalism and a vision of a new kind of capitalism beyond neoliberalism. That is why, when Jeremy Corbyn stood for the Labour leadership in 2015, tens of thousands of people joined the party to vote for him. That is why, in 2016, when the party hierarchy, the majority of MPs and the UK media tried to depose him, more than 180,000 people joined in 48 hours to defend him.

The road from winning the party leader­ship to destroying Theresa May’s parliamentary majority was not easy. Corbyn made mistakes. His team was inexperienced and was sometimes made to look incompetent by its enemies.

In the EU referendum, Corbyn tried to lead a Labour-only campaign, based on criticism and reform of the Lisbon Treaty. The message was too complicated and got lost – above all because his answer to concerns about migration was the long-term reform of the labour market, while Labour voters were being offered an easier short-term solution: simply to leave.

In June 2017, almost 13 million people intervened in our internal argument and told us that they liked the idea of a radical, social-democratic government and a soft Brexit. A few factors changed things. First, there was the Labour manifesto. The moment it was leaked, the crowds around Corbyn started to be real, chaotic and spontaneous. By setting a strict fiscal rule – to borrow only to invest – Labour gave itself the ability to promise two things: a £250bn investment programme and a £49bn programme of tax rises to reverse austerity.

In more than one Ukip stronghold, I was told by Labour campaigners that active, politicised Ukip members came out of their houses and demanded Labour posters. “The manifesto was all we needed,” they said. They just needed the Labour Party to say that it was going to start serving their communities, not the rich.

Second, we developed a narrative beyond politics. To hike your share of the youth vote to 64 per cent in a single leap, you need more than policies – you need a narrative. And in the final week of the election campaign, on the advice of our friends from Podemos, we consciously staged “la remontada”. We campaigned in defiance of our own image, almost against our previous selves – seizing the high ground on issues of policing, national security and terror, which the right-wing press assumed were always negative for us.

Third, we developed an organisational form that matched the fast-moving online civil society of the electorate. Remember  that Jeremy Corbyn did not fully control Labour’s national executive or the party headquarters.

So we used the pro-Corbyn pressure group Momentum to do what the party headquarters did not: campaign in offensive parliamentary seats and not just ones that we were trying to defend. We sent people to constituencies where, in some cases, local officials tried to turn them away, as they were deemed “unwinnable”, and we won them. We produced, at the cost of a few hundred pounds, satirical videos that no party would ever have officially sanctioned. One of them, in which a girl questions her Conservative-voting father, was seen by eight million people.

We didn’t win. We need to go further in creating a social movement to gain – as Antonio Gramsci said – cultural hegemony in the wider society. Let’s be frank: what happened in Britain was possible because the political forces that would be in the European United Left-Nordic Green Left group in the European Parliament were already inside Labour. In Portugal, a similar effect has been achieved through coalition. Elsewhere, that may not be possible.

Yet we learned enough to offer some general advice. Be radical. We must put forward a clear, plausible economic alternative to neoliberalism. End austerity. Regulate the labour market to promote the interests of workers. Build new homes for young people on a huge scale. Use state intervention to promote an innovative, high-wage private sector. Preserve, modernise and extend the welfare state.

Beyond this, we must come up with concrete answers to the challenge of automation and precarious work. The citizen’s basic income may be hard to implement at scale, but we should begin to explore it as a solution – Labour has committed to that.

Equally effective can be the state provision of basic goods and services, cheap or free. Twenty-first century social democracy cannot be – as the social philosopher André Gorz said of Marxism – a Utopia based on work.

In a world where many people lack power, lack confidence and experience atomisation, small-scale collaborative projects – the credit union, the community garden, the workers’ co-operative, the food bank – assume much greater importance. As with the socialism of Ferdinand Lassalle in Germany in the 1860s, such projects allow people to achieve things today that provide a link to what will be done tomorrow. Labour, for example, has pledged to double the size of the co-operative sector.

As for globalisation, to save it, we must do less of it. End the tyranny of trade deals over social justice. If neoliberalism is broken, social democracy cannot accept the Lisbon Treaty as the final form of the EU.

Today, if Corbyn is prepared to offer state aid, nationalisation and new progressive limits on the exploitation of migrant labour, it is because for Labour, the Lisbon Treaty never fully implanted itself inside our heads. Outside the euro and, in effect, beyond the EU’s stability and growth pact (and, of course, as a large country), Britain has always been able to start from what is needed and how it can achieve it within the Lisbon framework.

Jean-Claude Juncker’s recent white paper on the future of Europe gives social-democratic parties an opportunity to formulate a new option – a Europe of social justice, where low-wage zones and social dumping are forbidden. If some countries do not want to be in that Europe, they can travel at a slower pace.

The key is to switch off the Lisbon Treaty that is inside your head. The biggest challenge will probably be migration and asylum. The Austrian election result is the latest example: people in relatively prosperous countries are withholding consent because, though some are simply xenophobes and racists, many others cannot see the social justice in sharing scarce resources with people who arrive randomly and suddenly.

The answer is not to close the borders of Europe. We need inward migration to Europe and the maximum amount of freedom of movement compatible with retaining consent for migration. The answer is to win back consent by taking control of migration; to manage the domestic labour market actively; to administer asylum justice fairly; and to equalise minimum wages and social benefits upwards across Europe.

Above all, we must fight for a new concept of citizenship in Europe. In Britain, the main hostility is to eastern European migration. In the EU27, it is probably resistance to the arrival of asylum seekers from outside Europe. In both cases, however, it is hard to defend migration using the concept of citizenship that the EU has adopted, in which your citizenship is primarily economic.

From the British experience, I believe that it was not the low-wage effect of inward migration that mainly drove the hostility to free movement; it was the arrival of three million extra people who were entitled to use taxpayer-funded services in a period of austerity. That many of them worked in the NHS and public services was not enough to convince some people that the overall impact was beneficial.

Many were instinctively hostile to the EU’s abstract notion of citizenship, according to which the social capital, traditions and community values of existing residents do not count and citizenship resides only in your ability to travel and work. At its most fundamental level, our problem is that we have allowed the constitution of Europe to be framed around an economic system that no longer works.

Neoliberalism, writes the British political economist William Davies, is the disenchantment of politics by economics. Right-wing populism is the re-enchantment of politics by nationalism, racism, nostalgia and misogyny. Radical social democracy must be the re-enchantment of politics by social justice and a concept of citizenship based on the whole human being – the zöon politikon, not the homo economicus

This edited essay was delivered as a speech by Paul Mason at the Europe Together conference in Brussels on 18 October 

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This article appears in the 01 Nov 2017 issue of the New Statesman, Boris: the joke’s over