Social democracy and neoliberalism: victim or vanguard?

By Damien Cahill, Sydney

December 4, 2014 -- Damien Cahill: Thoughts on Politics, Economy and Culture, posted at Links International Journal of Socialist Renewal with the author's permission -- Earlier this year Ed Miliband, leader of the British Labour Party, addressed a specially organised gathering of business leaders with the following words: “I would be a prime minister who champions the rights of the consumer and the rights of businesses to succeed and make profits in a competitive market at the same time.”

That such sentiments could be expressed by a Labour leader in the neoliberal era is unremarkable. Social-democratic parties have been falling over themselves during the last few decades to reassure capital that, not only have they jettisoned their socialist inheritance, they are also firmly on board with the neoliberal agenda.

For British Labour, Miliband is just the latest in a series of leaders that have driven the party to embrace neoliberalism.

I have been thinking about this a lot recently for an article I am writing with Liz Humphrys on how Labour made neoliberalism. As part of the research for the article I’ve been re-watching a great TV series made in the 1990s called Labour: The Wilderness Years. It examines the Labour Party’s experience of opposition during the era of Conservative Party Prime Minister Margaret Thatcher: a time of bitter internal disputes, disastrous election results, all the while faced with a government intent on destroying the legitimacy and social base of the policies, institutions and values to which Labour had been historically committed.

The dominant narrative is of the party undergoing a pragmatic and painful shift towards neoliberalism: simultaneously jettisoning much of its socialist heritage and embracing elements of the very Thatcherite values it had previously railed against. The catalyst for this was the low point of the 1983 general election when Labour went to the polls with what, from today’s vantage point at least, appears to be a radical left-wing platform and was electorally decimated. Neil Kinnock, who replaced Michael Foot as leader after that election, is portrayed as the embodiment of the party’s neoliberal transformation.

For me, however, a striking fact that is highlighted, although underplayed, by this documentary is that just a few decades ago, what appear today as radical left-wing policies were living, breathing traditions that enjoyed legitimacy within significant sections of the British working class. Certainly, socialism, or even radical social democracy, did not have majority support – as was evidenced by the Labour Party’s aforementioned disastrous 1983 election campaign. Yet, the very fact that the Labour Party’s platform could contain commitments to widespread nationalisation and other measures such as currency controls speaks to a strong and organised socialist current within the Labour Party.

This is amplified by other developments, such as Ken Livingstone’s mayorship of the Greater London Council and the Militant Tendency’s control of Liverpool City Council.

In part, this was a product of the political and economic turbulence from the late 1960s through to the late 1970s. While the period is most often remembered as one dominated by student radicalism, anti-war protests and the rise of the new social movements, what such a view misses is the upsurge of the labour movement that occurred across the advanced capitalist world at the time. With their bargaining position strengthened by full employment, and facing attempts from the bosses to arrest falling rates of profit by squeezing employees harder, workers took militant action in defence of their pay and conditions, as well as to capture a greater share of the surpluses generated through capitalist production. And more radical agendas and practices emerged too, including work refusal and a general questioning of the legitimacy of the profit system itself.

As a result of this upsurge, more radical political economic platforms began to gain added traction within the labour movement. Certainly, such radicalism came at a time when labour was finding it more difficult to make such proposals concrete. Nonetheless, as Andrew Glyn noted, "proposals from the labour movement to restrict the prerogatives of capital within its own sphere – private business" were gaining support within the mainstream parties of labour, not simply within its more radical wing.


Yet, what a focus on the radical left tendencies of the labour movement at the time can miss is that if socialism and radical social democracy were alive within the Labour Party and broader labour movement, so too was neoliberalism. Indeed, the research that Liz and I are doing suggests that labour movements and parties bear a significant degree of responsibility for the early implementation of neoliberalism, even as sections of the labour movement fought fiercely against it.

Australian Labor and neoliberalism

This is perhaps most obvious in the case of Australia, where the longest period of social-democratic governance in the country’s history (the successive Labor governments from 1983-1996) oversaw a radical neoliberalisation of the state and economy, at precisely the same time that the better-known Conservative governments of Thatcher and US President Ronald Reagan were also unleashing radical neoliberalisation. This followed on the earlier steps down the neoliberal path taken by the Gough Whitlam-led Labor governments in 1972-1975, which began the process of dismantling tariff protections.

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Yet, this wasn’t a case of Australian exceptionalism. A closer look at the British Labour Party shows that it too led the way towards neoliberalism – even before its well-documented lurch to the right in the 1980s, and prior to the election of Thatcher as prime minister in 1979.

After it won office in 1974, the British Labour government negotiated a "social contract" with the trade unions that limited wage rises to below the rate of inflation. It presided over cuts to real wages and to social spending more broadly. The roots of British neoliberal austerity in Britain thus lie not with Thatcher, but with her predecessors on the Labour Party side of politics.

Certainly, there was a turn away from this when unions broke from the social contract during the "Winter of Discontent" and took industrial action in pursuit of higher wages. And, as discussed previously, Labour’s 1983 election manifesto was a radical repudiation of neoliberalism.

Nonetheless, the seeds of Labour’s embrace of neoliberalism, so gut-wrenchingly traced in The Wilderness Years, were sown in the 1970s.

For me this prompts several conclusions.

First, neoliberalism wasn’t simply the product of conservative governments imposing an ideological agenda on labour. While neoliberalism has been an attack upon working class living standards and working-class forms of political and industrial organisation, and while some of the most radical forms of these attacks have come from conservative governments, Labour governments and sections of the labour movement were also active agents of neoliberalism either before, or contemporaneously with, the better-known neoliberal governments led by Thatcher and Reagan.


Second, this suggests that the neoliberal transformation of states and economies should not be seen primarily as an ideological phenomenon. Most accounts of neoliberalism view it as a result of politicians coming under the influence of fundamentalist neoliberal intellectuals like Friedrich Hayek and Milton Friedman. Yet, if Labour parties and labour movements that had little if any contact or sympathy with such intellectuals were actually in the vanguard the neoliberal revolution, this suggests that such ideational explanations have little to recommend them. Rather, we are better advised to look to the prevailing political-economic conditions of the 1970s, and the ways that these emerged out of the dynamics of the capitalist mode of production and its historical evolution as providing the particular problems to which capitalist states viewed neoliberalism as the preferred solution.

Finally, it is difficult to escape the conclusion that the making of neoliberalism was also an active confrontation with and against socialism. Just as Thatcher sought, quite strategically, not only to use socialism as a spectre against which to discursively frame her own policies, but also to attack the social and institutional support bases of socialism in Britain and elsewhere, so was the embrace of neoliberalism by sections of the labour movement part of a reaction against socialism from within the working class and its representative organisations.

Labour’s embrace of neoliberalism was thus a reaction against socialism, against working-class democracy and against economic and political democratisation more generally, none of which have yet recovered from the devastation wrought by four decades of neoliberalisation.

[Damien Cahill is an academic and trade union activist based at the University of Sydney.]