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Capitalism and Social Democracy 
by Adam Przeworksi.
Cambridge, 269 pp., £25, May 1985, 0 521 26742 0
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Those who voted for the Alliance at the last election tended to be as hostile as Tories to nationalisation. They were nearly as fierce about the Unions too. But they were well disposed to redistribution, as keen on creating jobs as those who’d voted Labour, and on several of the ‘moral’ issues markedly more liberal. Who are they? Tories had the vote of two-thirds of the managers in private concerns; Labour of two-thirds of the workers in public ones; the Alliance, of nearly half of all graduates.* They are, in Julian Critchley’s description, ‘the examination-passing classes’. Decent people.

The Party is decent too. It accepts that ‘defining rights and freedoms by negative laws and procedural remedies’ will no longer do. It wants to introduce a Bill of Rights to fit with the European Convention. It also wants more access to government information and a licence to inspect any information – any information? – about oneself. It promises to increase spending on health by about 1.5 per cent a year in real terms, and to favour preventive and community medicine. It suggests taking advantage of falling rolls to refurbish schools, re-train teachers, and raise their pay. It intends to restore the stock of public housing; then, it will encourage tenants to buy. It wants to refashion the State Earnings-Related Pensions Scheme to make it less inegalitarian. It proposes to abolish the at present regressive married man’s allowance to pay for a new, unified and higher benefit, calculated from a single tax-benefit return to the Inland Revenue. It would tax wives separately from their husbands, pay child benefits directly to the responsible parent, simplify and strengthen the law on equal opportunities, outlaw sexual harassment (at work), and more easily allow dependents in to join their immigrant families. It would keep private medicine, although, of course, ‘no patient need endure unequal treatment through inability to pay.’ It would also do nothing about private schools, although, of course, it ‘would seek to end any unfair advantage which stems from attending them’. The miners, one need hardly add – but the Party Conference did – can go dig for their forfeited funds. We’re nicer, but we’re not One Nation yet.

Nevertheless, the undeclared civil war of the last six years seems to have had its effect. In 1981, the only poll that got anywhere near reflecting what actually happened in the Warrington by-election was taken in haste outside the local vodka factory, and it would not be wise to put too much weight on more careful ones made more recently. But these have been quite striking. The Alliance is consistently preferred by between a quarter and a third of all voters. Nearly two-thirds of those who voted Conservative last time, well over a third of those who voted Labour, said earlier in the autumn that they’d consider voting for it at the next election. Nearly two-thirds said they were ‘very worried’ about the economy. More thought that the Alliance would sort it out better than Labour, and produce a fairer society. Of all the qualities desired in a future leader, ‘compromise’ was twice as often ticked as ‘toughness’. Sixty per cent, when asked to choose, said they would rather we were more like Sweden, only 20 per cent more like the United States. Nevertheless, Mrs Thatcher may not call an election until late 1987 or early 1988, and even then, whereas the Conservatives only have to have 35 per cent of the total vote to be sure of being called by the Queen, and Labour 36, the Alliance has to have 41. The two old parties, even now, are but a whisker away. The new one is not. John Curtice thinks that the next Parliament could have about 305 Labour MPs, 151 Tories and 168 from the Alliance. ‘The capitalist vote,’ Brian Walden inferred on his Weekend World, ‘will be divided. Labour will form the next government.’

He was not quite right. The capitalist vote will divide three ways. There are no socialists. If ‘socialism’ means anything at all, short of what Adam Przeworksi nicely describes as the distant although not absurd arcadia of ‘automation, accumulation and the independence of want-satisfaction from labour’, it’s the abolition of private property and the assumption of all production and distribution by the state. The Labour Party has never advocated that and doesn’t now. This is not to say that it doesn’t otherwise condemn itself. It may form the next government, but in the longish run, it’s finished as the party it’s been. Przeworksi doesn’t talk much about Britain, but in his marvellously sharp analysis, quite the best that there’s been of his subject for years, he explains why this must be so.

A party of the Left in an industrial society represents and draws support from labour. But labour, wage-earning manual labour, has only once constituted even half the electorate, and that was in Belgium in 1920. In all other places at all other times, and certainly now, in Britain, it’s much less. Accordingly, parties of the Left, if they wish for electoral success, have long since had to make a wider appeal. And in so doing, they’ve weakened labour’s capacity to act as a class. But they’ve not all done so to the same extent. In societies like Sweden, even more Norway, in which labour has been organised independently of any political party, it has suffered less. But in societies like Britain, where its organisation has depended on the party, has even been the party, the two have worked to frustrate each other. The Unions want the party to press their case. If it does, and disproportionately values their votes, it will polarise the society and so lose the votes of others. If it does that, it may well not get in. But if, despite itself, it manages to, it will do so only to fail. The hostility it has caused will inhibit it, and its supporters will then leave it or pull it back once more to the left. Yet it can’t abandon them, it’s too closely tied to them. Neither it nor they can win.

History too is against it. Old labour in Britain, like old labour everywhere, manual, and largely employed in the older industries, becomes more defensive as these industries decline. It opposes closures, and if no other options are offered, and it can’t face unemployment, it’s natural that it should. Newer labour, non-manual, and largely employed in the newer industries and in administration and services, divides. One part of it, employed in the public sector that Labour is committed to extending, becomes more radical. The party can fudge the differences between the two by saying that each has an interest in ‘socialism’. But if it does, it alienates the other part of new labour and also those of its existing supporters who’ve always been more reformist and remote from the Unions, but have never had any other party to go to. For this reason too, therefore, it’s less and less likely to get elected to pursue a programme which it couldn’t carry out if it were. Thatcher, Jenkins and Scargill all saw this, and given their interests, each drew the correct conclusion. The one who got it wrong was Benn.

Meanwhile, and compounding the agony, Britain had come to have the lowest rates of investment, capital accumulation, and growth of output per worker, of any economy of its kind. Thatcher noticed. In common with many others in the world, she decided that the prevailing Keynesianism could no longer work. It had been fine for making better use of the existing capital stock, which it did by public spending to raise demand. It had generated some inflation but this had proved tolerable: because in raising demand, it also went some way towards raising production, maintaining employment and increasing wages – that’s to say, towards a greater equality, and that had pleased labour. Indeed, it legitimised the living wage. But in the longer run, although economists still dispute the point, it seemed to serve to reduce what was left to invest. To raise this again, as Przeworksi puts it in quite the most incisive essay on the New Right that I’ve read, would seem to mean freeing ‘accumulation from all the fetters imposed on it by democracy’. It would seem to mean completing that bourgeois revolution which, in Britain, was arrested at its outset and has been frustrated ever since by that long line of compromisers whom Thatcher so hates.

Even she, however, has not been able to go the whole way. That would have required her to relax taxation on profits, abolish environmental protection, remove government control over product safety and conditions of work, devolve wage-bargaining to the work-place, eliminate welfare programmes, and, where all this proved insufficient, let the threat of unemployment do the rest. This is what ‘the Chicago boys’, as the Chileans called them, told Pinochet to do, and this is what he did. This is what the Argentinians did, and were praised for doing by Cecil Parkinson. The generals did it more ferociously, because in less plural societies the opposition was more concerted, and they were generals. All the same, Thatcher has been able to go some distance. Yet like them – without the mad bankers, it’s true, but with oil – she’s failed. All these economies are in a mess. In what Roy Jenkins described at the SDP Conference as Year VII of our own Revolutionary Regime, we are further back than we were before, saved only from seeing more clearly that we are, and feeling it more acutely, by the sale of the oil and other public assets.

Yet Thatcher persists, and in reply, her Tory opponents and Labour, too, propose only to increase public spending again, and to finance it with a mixture of borrowing, taxation and National Insurance. So does the SDP. Noting that our public sector borrowing, at 2 per cent of GDP, is the lowest ‘in the Western world’, the Party suggests increasing it to 3.5 per cent and so having £5 billion more a year to use on cutting employers’ National Insurance contributions by 1 per cent, providing jobs for those who’ve been unemployed for more than a year, paying for benefits for these and the working poor, and – the remaining £2 billion – financing local authority current expenditure and central government investment, this mainly in construction. At the same time, and unlike Labour, the Tories and the Treasury, the SDP wants us to join the European Monetary System. This would, it concedes, ‘require a disciplined monetary policy and possibly higher interest rates than we have previously advocated’. But in tying the pound to the franc and the deutschmark, it would reduce the fluctuations that have so confounded business in the past few years. And it would give us greater protection against the dollar and the yen. The Party has, however, learnt from the last twenty years. As a support for the first part of this policy, it proposes a voluntary restraint on incomes with the threat of an ‘inflation tax’ on the private employers who break it. As a support for the second, it proposes a subsidy of £100 million a year over five years to enable £2 billion of short-term loans to be made to ‘go-ahead businesses’ at 5 per cent below the prevailing rate. In its economic policies, it lies almost exactly between new right and old left.

But can it stay there, and should it? On the first question, as Ferdinand Mount reported – and of all the reports on the SDP’s Conference, only the Spectator’s had more than a sentence on its policy – the man who’s responsible for many of these ideas, Richard Layard, is suitably sceptical. But it may not be so silly as it was even recently to suppose that some sort of incomes policy might work. Engineers and electricians, even miners, are calling each other ‘colleague’ now. (It’s only ‘brother’ and ‘sister’ still in unions like NATFHE, the teachers in further and higher education.) There are more definite signs – the AUEW’s agreement with Nissan is one, its attitude at the TUC Conference another – that some of these unions may at last be coming round to the view, always, as Przeworksi points out, the rational view, that the object is not to replace capitalism, thus risking disinvestment and a siege, certainly not to go on trying to defy it, but to get it to work. This, though, will require a bargain. The SDP’s is to have, not only employee councils, in which the Unions would have a say, and some profit-sharing, but also directors elected by employees to help decide the nature and allocation of jobs within the enterprise and presumably – although here the SDP’s Policy Handbook is coy – its investment and production too. The Unions would lose a lot of their monopoly powers, and the established directors a lot of theirs. (They’d also lose their perks, which the SDP wants to tax at value.) It may be too late. The ritual dance of dogged defiance, called ‘executive responsibility’, ‘free collective bargaining’, and other such names, and so long constitutive of our way of life, may now be too ingrained.

But even if it isn’t, there are two reasons for thinking that what the Party proposes does not go far enough. The first is economic. The really successful post-war economies, West Germany’s, Japan’s, Sweden’s, have long since come to the conclusion which even the New York Stock-Exchange came to recently in its report on US Economic Performance in Global Perspective. This is that lightly taxing profits isn’t necessarily an incentive to invest. Investment has to be encouraged, and it has to be directed. It therefore makes sense to tax profits to the hilt and then to untax them again if they’re sensibly re-employed.

As Przeworksi, among others, says, this isn’t a panacea. All hell might break loose among the profit-makers. More important, what’s ‘sensible’ is very much open to dispute. Future comparative advantages are not easy to see, and as technical change gets faster, are more and more easy to mistake. Most important of all, perhaps, in an economy dependent on international trade, the measures must not be too protective. Nevertheless, the Swedish Social Democrats stumbled on the idea in 1951 (as, incidentally, they stumbled on the management of demand in 1932), and it’s done them and their country a lot of good. ‘The question,’ as Przeworksi says, ‘is simply who will pay the cost of accumulation: the wage-earners and the unemployed or the owners of capital.’ The SDP makes a few nervous gestures in the right direction, but it clearly balks at a properly fierce tax on profits for consumption. And it doesn’t even address the second issue, the central issue for any such policy, the central issue indeed for survival, if we’re to be anything more than a reserve army of cheap labour – of what institutionally would be necessary to plan in this way.

We did plan once, in the war, and although we did it quite well – too well, unfortunately, for Attlee, Gaitskell and the others who’d been involved in it to give it any more thought – we did it with instruments we can no longer use. Now it requires not only a stronger control over profits, very selective taxation, with credits too, perhaps, for domestic investment, but also a corporate connection between employees and the state – the kind of connection that the Unions, like the Liberals, have resisted – in which, in return for more say about where and how, employees would agree to the direction, for example, of their pension funds. It accordingly requires more thought than anyone has yet given to the relation between capital and labour and the powers of the Treasury, the private financial institutions, and Parliament.

The SDP not only fails to think about this: it goes off in quite the opposite direction. ‘The people,’ it says, ‘cannot properly hold their government to account or participate in the decision-making process.’ There should therefore be directly-elected assemblies, one each for Scotland and Wales – a rather different one for Northern Ireland – and 11 in all for England. These would have extensive, if not complete powers over housing, health, education and one or two other areas, would cut the more local authorities off completely from the centre, would be financed in part by local income taxes, would be free to raise their own loans, and would, of course, be elected by proportional representation. They would also themselves elect part of a new second chamber in London. But the Party seems to be undecided about how far these regions ‘would be responsible to their electorates’ for what they spent, and about the extent to which and the reason why they might get subventions from the centre. More consequentially, the proposal sits uneasily with what’s required for investment and its planning; it would seem actually to exacerbate problems for what would be – and in other more rational polities is – the already vexed business of social relocation; it wouldn’t obviously reduce the total number of civil servants; and for a party whose leader not unreasonably remarks that a more politicised society would be a markedly less pleasant one, for a party whose very emergence, indeed, was in part prompted by distaste for the fervid incompetence of local activists, it seems oddly unreflective.

It also seems unnecessary. Outside London and a few other large cities, there’s little reason to believe that local government matters to anyone other than greedy local businessmen, over-active unionists, and the compulsively concerned sort of person who works for the Liberals and the SDP. There clearly have to be some local powers. But ‘the people’ – that’s to say, those of us who didn’t go to Torquay and Dundee – can be entertained for some considerable time by the intricacies of the single transferable vote, the wonder of having two or three members in our large new constituencies, close runs in the lobbies, and other such novelties. Londoners themselves will be able to enjoy a new Metropolitan Transit Authority, and in the longer run, if they persist in being un-Green, to absorb themselves in navigating ‘an electronic system of road pricing’. There will be difficulties enough, without populist diversions.

No government can solve them all. No government, and certainly none as weak as any the SDP is likely to have a say in, can exorcise the past, the deadening and divisive institutional continuities, the laziness that lingers on from Empire, the advantage taken by foreigners of each – even the misplaced resentment between capital and labour for the results of all three. As Brandt, Kreisky and Palme agreed in their letters to each other ten years ago, any government can be pleased to have the means to manage for a month. But an opposition does have a chance to think. For all its decency and lack of old bull, for all its realisation that we have first to recover from the last six years, for all the detail in many of its more particular proposals, the SDP has barely begun. Labour and the Conservatives have given it an extraordinary opportunity, an opportunity that’s all the greater in view of the ‘partisan de-alignment’, as the students of voting call it, in the electorate. The crux, however, is not the next election, but the one after. If the Alliance hasn’t established itself by then, shown that it’s committed to starting real reform, and capable of it, it could merely have stimulated the old parties into recovering some of their former sanity and much of their former support. De-aligned partisans, the more alert descendants of what used to be called the ‘floating’ voters, could realign. If this were to happen, the Alliance would have caused us to be transported back from the Nineties to the Sixties. My worry is that there’s too little sign that isn’t where it would rather be: too little sign that it’s seriously interested in constructing the more directive sort of social democracy that we need.

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