The Fabian Conference: An Economic Alternative?

But which alternative?

by Sam Bright

The Fabian Society is Britain’s oldest think tank, claiming every Labour Prime Minister past and writers as diverse as George Bernard Shaw, HG Wells and Oscar Wilde amongst its membership.

Such diversity of background and opinion was reprised at this weekend’s new year conference, entitled ‘The Economic Alternative’.

The conference took place on what was billed as a game-changing day for Labour, one where Ed Balls (the Shadow Chancellor) stated in a Guardian interview, and repeated at the conference that:

We cannot make any commitments now that the next Labour government will reverse tax rises or spending cuts…[b]ecause we don’t know how bad things will be on jobs, growth, and the deficit

This statement and the reception it has received from Labour party members reflects the gaping divisions that were on show amongst the Fabians. It is a division between a radical left and a reforming left, one which must leave many yearning for the relative unity of the years of tension between Blair and Brown, who at least appeared to agree on a common direction of travel. Little such shared sense of purpose was on show at the weekend.

Mr Balls opened the conference with his keynote speech, and though politely received, it was hardly to deafening applause. The shadow chancellor (half-) joked that:

Counsel that the world needs a plan for growth as well as deficit
reduction – and you are ‘an irresponsible deluded Keynesian deficit
denier’.

There were two premises to his Keynesian argument.

Firstly, he noted that Keynes had believed that in special situations, such as times of financial crisis leading to stagnation, it is necessary to spend and borrow to stimulate growth and reduce unemployment.

Secondly, and related to that, he argued that the UK economy risks recession not due to a failure to export – indeed, exports have instead overperformed – but that stagnation rather has flowed from a fall in domestic demand.

Taken together, you would expect these two premises to lead to an inescapable conclusion: that to alleviate the risk of recession, the UK must borrow significant sums (at a time when low bond yields allow cheap government borrowing) and spend it on infrastructure, housing, and other capital projects. This, it is suggested, might constitute a real alternative to the government’s program of austerity.

This is not the conclusion that many in the audience saw in Mr Balls’s speech. As one intervener put it in a later session, it pursued a Keynesian argument without reaching Keynesian solutions. This was a rather clever way of putting across an opinion shared by many of Labour’s traditional supporters, that such an apparent commitment to accept without question the coalition’s cuts is unacceptable to those who seek greater State investment, either to support those who rely on public services or to stimulate demand. Today in the Guardian, Len McCluskey, general secretary of Labour’s single biggest donor,  the trade union Unite, declares Mr Balls’s new policy to be ‘the last gasp of neoliberalism’.

In all this debate, two trends were clear at the conference, the first of which has some positive aspects, the second of which is deeply concerning.

In the first place, it is clear that a deep rift exists in the heart of the Labour party. One particularly vocal dissident took real offence to any suggestion of walking alongside capitalism: every time a panelist said ‘Of course, we must ensure we work with business rather than scare it off’, he would shout ‘Why should we? Why must we?’. Neal Lawson, the Chair of Compass, declared that it is impossible to put a human face on capitalism, because capitalism does not operate in a humane way, and that the Labour party must reorganize around socialism and the trade unions if it is to enjoy renewed electoral success, decrying the futility of triangulation. Baroness Lister stated that ‘the rich got us into this crisis, the rich can get us out’. A number of questions from the audience asked why the Labour party had not already committed itself to the overthrow of capitalism.

Against this, Labour MPs such as Chuka Umunna argued that ‘Good business is good business’, following the Labour leader’s line that what is required is a more responsible, fairer capitalism. They were supported in this by the formidable economist and ex-minister Kitty Usher, who repeatedly suggested that the left must seek to use the private sector to achieve its goals, and should use the rhetoric of the right ‘without conceding their priorities’.

A sharp divide is exposed between a radical left and a reforming left. The radical left follows something much closer to the old Labour tradition, seeking to dismantle much of our capitalist system. The reformers instead acknowledge the strengths of capitalism, but equally emphasise its current dreadful weaknesses, that cuts are ‘too far and too fast’ (rather than fundamentally misguided), that business and finance should not be broken but rather encouraged to operate in a more ethical fashion. In the words of Hopi Sen (author of In the Black, Labour) when speaking on ethical business, ‘We must not underestimate how great social democratic capitalism is’.

As damaging as such divisions might appear, they could yet represent a healthy debate in a party attempting to construct an authentically radical vision for how the UK can best take advantage of this crisis to reshape or reform its economy. Far more damaging is the second trend: a worrying lack of substance. From Mr Balls to Rachel Reeves MP, through Mr Umunna and the Green Party leader, very few substantive proposals were heard from the mouths of politicians. This dearth of ideas extended much further: panelists and audience members alike confined themselves primarily to century old discussions of capitalism and socialism, drawing on grand themes of Keynesianism and placing the products of their labour into labourers’ hands, of the need to nurture business to the need to restrain the same.

All this ideological discussion may befit the Fabians, but does nothing to deal with the real issues facing the electorate (one point, in fairness, that Mr Umunna did hit upon). The talks and debates felt permeated with a real air of frustration as one politician after another, one raucous audience member after another, spouted platitudes and theories, whilst many of us sat there thinking, ‘please, just one concrete example of how you would do this’.

After many hours of this, it was a relief to reach ‘the Dragons Den’, where Will Straw forcefully presented a well-argued proposition for a national infrastructure bank, voted best idea of the day by the audience, and even more stimulating to listen to a campaigning Ken Livingstone who, old-timer as he is, knows that fierce elections are won not by highlighting the flaws in an opponents political theory, but rather by pointing to the policy errors he has made and demonstrating precisely what you would do better. Of course, it cannot be expected that the official Opposition would yet have a full program for government. But the Fabians’ failure to engage in real discussion of concrete proposals to fix the economy, be it in the direction of socialism or of a reformed capitalism, is a troubling sign of a left lacking a coherent vision.

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