New crisis, old solution

Capitalism's failure finds the left without a plan

I know many people are going to lose their jobs, their houses and possibly their pensions, but there is still something irresistibly comic about the response of western governments and banks to the crisis that now assails them.

It is not just the spectacle of new Labour reluctantly contemplating the nationalisation of Northern Rock as though it were on a moral par with selling your daughter into prostitution. Far more significant is the plight of such pillars of international capitalism as Citigroup, Merrill Lynch, UBS and Barclays. With their balance sheets devastated as a result of the ideology their executives have espoused for the past quarter-century - unregulated market capitalism - they have had to raise billions of dollars in foreign capital to bail themselves out.

But it's not just any old foreign capital. At the head of the rescue posse are the Government of Singapore Investment Corporation, China Investment Corporation, Abu Dhabi Investment Authority and Kuwait Investment Authority. Yes, these are government bodies making investment decisions - in other words, doing precisely what the panjandrums of western capitalism have long insisted governments shouldn't do.

The alarm from Financial Times columnists is palpable. Martin Wolf, the paper's chief economics commentator, fears the destruction of "the political legitimacy of the market economy itself". John Willman, the business editor, warns that "nationalisation . . . is making a comeback" and adds that "younger FT readers may be surprised to learn" that there are precedents, notably in the prehistoric days of Clement Attlee. Jeffrey Garten, a Yale professor, detects "a transformation" comparable to the switch from feudalism to capitalism.

One is tempted to echo Michael Winner: do calm down, dear. Market liberalism has suffered a blow, but there is nothing new in banking crises leading to a revival of state regulation and ownership.

This crisis can be seen as a reverse version of the 1970s, when rising oil prices and industrial stagnation destroyed the regulated, welfarist, mildly egalitarian capitalism of the postwar era. That led to the hegemony of right-wing ideas which would infect most western centre-left parties. But in the 1970s, right-wing think tanks had a fully worked-out programme for a new world, available to Reagan and Thatcher as they came to power.

I see no comparable programme coming from the left, despite the admirable efforts of Compass. If anything, the agenda in Britain is being set by Policy Exchange and other centre-right think tanks.

However much old Labourites like me may dream, there are few signs of voter support for the revival of a traditional left agenda, largely because no major western party has stated its case for more than a decade. The latest British Social Attitudes, just published, finds only 35 per cent think the government should spend more on welfare benefits for the poor against 58 per cent in 1991. Answers to a range of questions lead Peter Taylor-Gooby and Rose Martin of Kent University to conclude that a 28 per cent majority in favour of welfarism in the early 1990s has turned into a 13 per cent majority against it now. As for regulation and nationalisation, does anybody in Whitehall still know how to go about it? Perhaps civil servants will fly to Venezuela for lessons from Hugo Chávez.

A programme that captures the public imagination over the next ten years is more likely to come from some combination of environmentalism and what can loosely be described as "the politics of happiness" - the view that we need to go beyond an ever increasing Gross Domestic Product as the criterion of a nation's success.

The running on that is coming as much from the right as the left.

Conservative greenery is not confined to David Cameron. Look, for example, at Comeback: Conservatism That Can Win Again, a book just published in America from David Frum, former special assistant to George W Bush. "As people get richer," Frum writes, "material things come to matter less, things of the spirit matter more . . . leisure, tranquillity and beauty come into greater demand". He refers to a global "revolution in environmental consciousness" and goes on to propose carbon taxes.

In France, Nicolas Sarkozy has also decided that, in the words of the song, he should "spread a little happiness". He may be privatising the ports, but he has also commissioned some leftish economists to help him design a "quality of life" index. He has even started to quote an octogenarian guru, a former communist called Edgar Morin, who has proposed "a politics of civilisation". Perhaps Morin will play the same role in whatever political programme develops in the 2010s that Friedrich von Hayek, also an obscure octogenarian when Margaret Thatcher came to power, played in the 1980s. But a great deal of hard thinking still needs to be done.

Peter Wilby was editor of the Independent on Sunday from 1995 to 1996 and of the New Statesman from 1998 to 2005. He writes the weekly First Thoughts column for the NS.

This article first appeared in the 28 January 2008 issue of the New Statesman, Merchant adventurer