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Labour is given the opportunity to show what it stands for

The global economic crisis has made us all more aware of the state’s weakness in the face of “superc

The momentous economic events mark the end of free-market fundamentalism as certainly as the collapse of the Berlin Wall in 1989 signified the end of the Soviet Communist era. They have vividly revealed that the market is a terrible master (not to be trusted to look after even its most loyal servants) and they have confirmed that democracy demands a state ready to intervene on behalf of its citizens.

It is a moment of opportunity, and responsibility, for Labour. There is a widespread unease about the growing earnings and wealth of the super-rich that has spread far beyond its usual ideological confines: in the UK, 1 per cent own nearly a quarter of the nation's assets while 50 per cent own a mere 7 per cent; chief executives take home 75 times more than the average worker. Inequality preoccupies the middle classes as much as (perhaps more than) the working classes, readers of the Daily Mail and the Daily Telegraph as much as readers of the Guardian.

The "trickle-down" argument, always weak, that we should be very relaxed about the super-rich because of the wealth they make for the rest of us, has been disproved for all to see. Hedge-fund managers, traders and bank directors, far from enriching the lower-paid, have directly impoverished them. Their catastrophic mistakes, made precisely because their generous reward schemes contained incentives to take wild risks, have led hundreds of thousands into negative equity and many millions more into fear and anxiety. There is certainly worse to come, with those who have done nothing (not even taken out an unwise loan) at risk of losing their homes and jobs.

Over the summer, Labour's standing in the opinion polls was on a downward trajectory; there has been talk of certain defeat at the next election. But following the Manchester conference, as the economic crisis deepened, the party's poll ratings started to rally. In three successive ComRes polls it has inched away at the Tory lead. More importantly, the beleaguered Gordon Brown led David Cameron by 43 per cent to 33 per cent when voters were asked who was the better leader in a crisis.

Labour has gained in part from the Tories' poor judgement. The soundbites from the Conservative party conference in Birmingham, such as George Osborne's glib promise to freeze council tax, sounded triumphalist and opportunistic, hitting television screens as Bradford & Bingley was being taken into public ownership. And the shadow chancellor did his party no favours when he chose to berate City financiers. It sounded as if he was condemning the international bailout, then still being discussed in Washington, when he told bankers: "If you took risks, then you must bear the cost. If you pay yourself the sums far beyond what anyone else does in any other walk of life, then be prepared to lose it when you make mistakes." That evening the House of Representatives unexpectedly rejected the US bailout and stocks plunged. Mr Osborne's finger-wagging looked callow.

David Cameron has now, wisely, announced his intention to support Mr Brown in the government's strategy for financial stability and we applaud him for that decision. But other policies emerging at Birmingham demand scrutiny. Consider two of them: nearly tripling the inheritance tax threshold to £2m a couple and giving married couples a special tax allowance. Both would overwhelmingly favour more affluent sections of the population. The Tories' own social justice policy group, under Iain Duncan Smith, has conceded that the marriage premium would help mainly the well-off, because marriage is concentrated in the "more educated, middle-class . . . sections of the population". But Mr Cameron persists in claiming that the policy sends a "signal" to what its members would once have called the lower orders, but now call "the lower deciles". In other words, the Tories offer tax breaks to the well-off but moral homilies to the poor.

Elsewhere, Conservative policies conspicuously lack detail. Would a Tory government continue with Labour's modest attempts to create a fairer university admissions system, one that does not favour children from privileged homes who have been coached at private schools to achieve the necessary entry grades for elite institutions? Will it continue with Labour's attempts to impose stricter controls on school admissions so that some do not become middle-class ghettos while others become rebranded secondary moderns for plebs? Will it maintain Labour's Sure Start scheme for pre-schoolers? We don't know.

But if we want to understand what a Tory government would look like, we should consider not only cabinet members but MPs on the benches behind them and, outside the Commons, constituency activists. British governments are more responsive to party and back-bench pressures than is sometimes acknowledged. The decision by Mr Brown and Alistair Darling to abolish the 10p tax band was a grievous error. That Mr Brown finally acknowledged it and partially reversed the decision was the result of pressure from MPs. Similarly, when Tony Blair, in his final education bill, proposed to create a special tier of schools that might be exploited to the advantage of middle-class parents, it was the backbench MPs who insisted on a stronger admissions code to stop schools cherry-picking pupils.

The pressures on a Conservative government, even if we believe in its professions of concern for social justice, would always be in the opposite direction. Above all, if you think Labour is too open to corporate lobbying, think how much more open the Tories would be. The pressures on governments from business are now unrelenting. As Robert Reich, the former US labour secretary (whose article on the international financial crisis is on page 12), puts it in his book Supercapitalism, large companies, with their lobbyists, lawyers, PRs and financiers, now "drown out the voices and values of citizens". They are allowed to avoid taxation, weaken regulation, suppress trade unions, transform urban landscapes, damage the environment, seduce children into food stuffed with salt, sugar and fat, pay their executives preposterous salaries, buy up political parties and, it turns out, destabilise the world's financial system.

The global economic crisis has made us all more aware of the state's weakness in the face of "supercapitalism". Labour, in attempting to create a fair society, has been swimming against the tide. Globalisation and new technology increase inequality and, by making capital more mobile, they increase resistance to taxation and regulation. The crisis has shown that governments, far from becoming irrelevant, need to work harder for social justice. Labour may be criticised for not having worked hard enough, but does anyone believe the Conservatives would do more?

Events, that unknown quantity in politics, have given the Prime Minister a breathing space in which to make a powerful case for a fourth term. The government can start by focusing on that part of its record which is distinctively associated with Labour, and developing ways in which to extend those achievements. It is easy to forget that, because of Labour, hospital waiting lists are a fraction of what they were, our schools are no longer crumbling, 600,000 children have been lifted out of poverty and millions enjoy the benefits of a minimum wage.

Labour's biggest error of the past decade was to strive too hard to be a pro-business party. It should never again become anti-business (Mr Brown's speech in Manchester made it clear it will not). But the economic crisis has given Labour a chance to prove over the coming 18 months that its priority is to protect the interests of ordinary people. There will be ample opportunity.

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This article first appeared in the 06 October 2008 issue of the New Statesman, Perils of power