New Labour and the decay of democracy in Britain

By Julie Hyland
16 March 2006

Published below is a report delivered by Julie Hyland to an expanded meeting of the World Socialist Web Site International Editorial Board (IEB) held in Sydney from January 22 to 27, 2006. Hyland is a member of the World Socialist Web Site IEB and assistant national secretary of the Socialist Equality Party in the UK.

The opening report to this meeting by David North stressed that our elaboration of perspective and orientation must proceed from a historical understanding of the development of world capitalism. It presented two alternative hypotheses, with two very differing results for the prospects for socialism.

In his report on the world economy, Nick Beams also drew attention to the positions of Panitch and Gindin, who postulate that the strength of US imperialism means there is no possibility of an explosive outbreak of inter-imperialist antagonisms.

Interestingly, Alex Callinicos of the British Socialist Workers Party has been involved in something of a polemic with the pair. While disagreeing with certain aspects of their analysis, Callinicos conceded exactly this point. In a recent article, after pointing to tensions between the major powers, and US concern at the rise of China and India, he wrote that the position of Panitch and Gindin was a useful corrective to the mistaken claim he himself had previously made—that the end of the Cold War would see a return to potentially disastrous economic and geopolitical competition among the Great Powers, as in the era of classical imperialism.

From another angle, Martin Jacques, formerly of Marxism Today, has written a series of articles in the Guardian postulating the imminent rise of China as the second super power, which he insists proves not merely the continued viability, but also the absolute necessity of the nation-state form.

Then there is the position of Cliff Slaughter, who has broken years of silence, releasing a single chapter of a yet to be published book, supposedly articulating, “New thinking on the old idea of socialist internationalism”. As could be anticipated, Slaughter’s essential argument is that there is no basis for socialist internationalism. With globalisation, capitalism no longer threatens the world simply with barbarism but with “the very destruction of nature and humanity”.

Consequently, it is no longer sufficient for socialists to “restrict” their perspective to winning political power from the bourgeoisie. The destructive character of capital means that it is actually destroying the basis for its revolutionary overthrow. Socialists, therefore, must seek to “defend, preserve, protect and nurture the natural and cultural conditions of the future social metabolism that is the true objective of the proletarian revolution”.

Moreover, this must be done under conditions in which globalisation has produced in the imperialist centres a stupefied mass, bought off with a new crumbs—in the form of “transient commodities”—from the exploitation of the oppressed masses in Africa, Asia and the Americas. This “corrupts the human personality” and means that workers in the West “are separated in consciousness and organisation” from the oppressed masses. The solution is to defend and celebrate “humankind’s cultural heritage”, which cannot “wait upon socialism”.

Slaughter’s position is not new—it is essentially a regurgitation of the position of the Pabloites and others that the embourgeoisement of the working class in the West has shifted the epicentre of revolution to the colonial and semi-colonial countries. But whatever the starting point of the ex-radicals, they agree that any perspective of socialist revolution is completely utopian. To the extent that they advance any programme for social change, it is one based on certain minimal demands aimed at blocking an independent movement of the working class. This is essentially the standpoint of movements such as Attac, Left Alternative, Respect, etc.

The more the old labour and national bureaucracies have moved to the right, the more so have the ex-radicals. It is important, however, to recognise just how discredited these positions are, and the profound objective difficulties involved in attempting to breathe life into the reformist opposition to socialist revolution.

In contrast, we have insisted that the developments associated with globalisation provide the objective basis for a socialist internationalist development of the working class, so that the class struggle is international not only in content but in form.

Whatever Slaughter’s claims, it is a matter of record that unlike at the turn of the previous century, when imperialist penetration of the globe enabled the development of a labour aristocracy in the advanced capitalist countries, which in turn provided the basis for opportunist politics, the exploitation of the world’s resources today by the transnationals is not accompanied by such concessions. Rather it is the basis for undermining these gains and carrying out an unprecedented transfer of global wealth to a narrow layer of the super-rich.

This is the subject of open discussion among the financial elite. Recently the banks HSBC and Citigroup carried out research into global inequalities. Citigroup argued that a new aristocracy is emerging—called plutocracies—exemplified by the US, Canada and the UK, where the extraordinary wealth of a tiny few has commandeered a vast chunk of the rising profits, either through drawing capital profits or paying themselves massive amounts, and these riches essentially power the economy.

HSBC’s research looked at the redistribution of income between countries, drawing attention to the weakening of the position of labour in the developed world due to the opening up of Eastern Europe and the entry of China into the world market, along with the growing mobility of capital.

Commenting on the HSBC research in the Guardian, Larry Elliot noted: “When there was a risk, however small, that people in the West might be seduced by communism, social democracy was an insurance policy. Now it is seen as an impediment in the more efficient application of the market. Politics in the West has adjusted to this new reality, with parties of the left far more aggressive in their embrace of the market than Thatcher and Reagan were prepared to go in the 1980s.”

This is an extraordinary phenomenon that cannot be passed over. Other speakers have drawn attention to the significance of the fact that in the US, the process of wealth accumulation has been disconnected from socially useful production and analysed its impact in terms of the domination of a parasitic and corrupt elite.

This process is mirrored in the UK but with the distinction that, while this process began under the Conservatives, it has been carried far further by the Labour Party, which in turn has been entirely transformed into a political representative of a global financial oligarchy.

These developments are the source of major instability, in that the resulting class polarisation takes place under conditions in which the old bureaucracies are directly responsible for facilitating and administering the requisite conditions of exploitation and social cuts.

New Labour and the oligarchy

Let me try to flesh out the full extent of Labour’s transformation into a vehicle of the oligarchy.

Whereas the trade unions once generated 90 percent of Labour’s income, they now account for just 30 percent. Three multi-millionaires account for just as much.

We have previously noted relations between Tony Blair and Rupert Murdoch. In July 1995, Labour’s then newly elected leader made the keynote speech to a News International conference on Hayman Island, where he “vowed to free media companies from ‘heavy regulation’”.

This earned Blair the support of his most high-profile and wealthy backer, whose News Corporation has about 800 subsidiaries, including 60 in tax havens like Bermuda and the Virgin and the Cayman Islands: That is besides Sky Global Networks, the owners of BSkyB.

It is known that Blair meets with Murdoch and that the media baron’s adviser, Irwin Steltzer, was at one point paid as a consultant by Downing Street. According to reports, since 1998 News Corporation has paid less tax in the UK due to tax rebates it has received in some years, which have cancelled out payments in others.

But Murdoch is only the head of a stable of oligarchs who directly determine government policy. Among Labour’s biggest donors are the richest men in Britain. Some are unreconstructed Thatcherites, while others, such as Lord Sainsbury and Lord Diamond, were key supporters of the Social Democratic Party—a right-wing break-away from the Labour Party in 1981.

We have pointed out that Labour Party conferences have been closed as a venue for discussion—as the octogenarian Walter Wolfgang found out to his cost last year. During last year’s conference, some 600 people were arrested under the Prevention of Terrorism Act—Wolfgang among them—for making anti-Blair noises, wearing oppositional t-shirts, etc.

The conferences are little more than forums for business to set up its stalls. Fringe meetings discussing Labour policy are sponsored by the likes of Nestle, Unum Provident and Barclays. Many of these events are directly related to taking over the running of privatised government services. Private health company BUPA sponsors discussions on the future of the National Health Service (NHS) addressed by health ministers, while Murdoch’s Sky TV hosts meetings to discuss ending the BBC’s Charter Review, also addressed by Labour ministers.

This is important because the attacks on the gains of the working class involve not only cuts in wages, but the gutting of social provisions, in order to benefit private capital and stock markets. One of Thatcher’s key changes was the creation of the London International Financial Futures Exchange for betting on the future price of currencies, interest rates and derivatives. The deregulation of the financial markets was crucial for British capital. Four of the top ten global financial corporations are based in the UK. It is estimated that the global value of derivatives rose from $2.9 trillion to $127 trillion between 1990 and 2002, with the UK snaring an average daily turnover of £643 billion in April 2004.

That is why the UK, alongside the US, has been vociferous in the support of international measures aimed at ending national laws and regulations that act as a barrier to trade in services. The UK ranks second to the US as an exporter of commercial services and accounts for 7.8 percent of world trade in this sector.

As we noted in relation to the Turner Commission on pensions, which recommended raising the retirement age to at least 68 years of age, one factor behind the push for workers to take out private provision for their old age is the expected annual inflow of almost ten billion pounds into the stock market.

Nepotism and corruption

Blair is on record as the biggest dispenser of political patronage in the House of Lords since life peerages were created in 1958. In eight and a half years, he created more peers than Thatcher did in 11 years, so that Labour is now the largest party in the Lords for the first time in history. Many are leading donors to the party, including Lords Levy, Sainsbury and Drayson.

According to the Sunday Times, a “tariff system” operates in which donors to Labour’s educational reforms—which are aimed at facilitating privatisation—are nominated for a CBE or peerage depending on how much they gave to the programme. The donors, who include the likes of Sir Peter Vardy, a car dealer and Christian evangelist, can determine curricula. So Vardy’s recipient school teaches creationism.

The Times revealed that every £1 million donor to Labour had been given an honour.

The relations go beyond patronage. Ties between politicians and big business are nothing new, but Labour has circumvented the need for surreptitious brown envelopes by drafting businessmen directly into government, where they draw up plans for privatisation and dispense government contracts.

Lord Sainsbury has been Science Minister and a member of the cabinet biotechnology committee responsible for national policy on GM crops and foods. He has significant interests in GM companies such as Diatech and Innotech. The laboratory that Sainsbury helped set up in 1987 to conduct research into GM crops has been a beneficiary of government grants.

Lord Paul Drayson’s company, PowderJet, won a £32 million government smallpox vaccination contract, from which he made an estimated £20 million. Drayson made his second £50,000 donation to Labour just as the government was deciding who should win the contract. He was subsequently made a life peer.

Gavyn Davies, who has since fallen out with Labour after being appointed chair of the BBC, took out a 54 percent stake in UKprocure, an internet company supplying the NHS, just as the government instructed the NHS to order its equipment on-line. His partner was one Chai Patel, a City banker and Labour donor, who has advised the government on private sector involvement in the NHS. In 2002 the Observer established that Patel’s Priory chain of psychiatric clinics was regularly charging the NHS—which made up more than half its overall business—significantly more than private providers.

Others who have benefited from Labour’s creeping privatisation of health and education include Lord Sawyer, former Labour general secretary, who was chairman of a recruitment agency making £5 million a year supplying NHS with workers, and Alan Sugar who owns Viglen. Sugar’s company supplies IT to two-thirds of UK universities and sells curriculum and network software to schools.

Enron’s donations to Labour just as it was bidding for the contract to take over Wessex Water—which it won—are well documented. So is the role of Enron’s business advisers and accountants Andersen, which drafted in staff to act as government advisers on such schemes as the London Underground public-private partnership and the sell-off of air traffic control.

Another accountancy firm, KPMG, has provided staff to Downing Street to promote the government’s Private Finance Initiative (PFI). So has the Brunswick Group, the largest financial communications consultancy in the UK, to help work on the Financial Services and Markets Bill.

In 2002 the government awarded a £4 billion contract to Tubelines to run one-third of the London Underground for 30 years. It is a consortium of three firms: Amey, Jarvis and Bechtel. The Jarvis board includes a number of Labour donors and it owns shares in Partnerships UK, the government’s official PFI backer. Both Amey and Jarvis finance the New Local Government network, a pro-privatisation think tank addressed by Labour ministers. Jarvis also has contracts for running schools, whilst Bechtel was brought in by Labour to manage the Jubilee Line extension in 1998.

The growth of the super-rich

This elaborate network of nepotism and corruption is only the most naked example of Labour’s services to the super-rich. It is an edifice built on policies that have facilitated the greatest negative transfer of wealth from the poor and transformed Britain into a playground for billionaires.

London is said to be home to 40 billionaires, including that most nakedly corrupt and criminal representative of the breed—the Russian oligarch.

Russians resident in London include Roman Ambramovich, Boris Berezovksy and Leonard Blavatnik. In 1992 only one Russian was granted British citizenship, but by 2002 this had grown to 806. London has become known as Moscow on the Thames, such is the rush of Russians looking for somewhere to spend or stash their ill-gotten loot gained by plundering the Russian economy.

In the UK, non-domiciled resident tax status exempts people who spend fewer than 90 days a year in the UK from paying tax on any earnings overseas or from investments in offshore havens. Up to 100,000 benefit from this largesse—accounting for tens of billions of pounds every year. A report in the Observer in March 2005 revealed that the world’s richest individuals have placed $11.5 trillion of assets in offshore havens—that is 10 times Britain’s GDP.

The beneficiaries of Labour’s policies are not all foreign oligarchs. A recent study on the changing composition of high income and wealthy/high net worth individuals in the UK defined three categories. The most visible of these are the FTSE’s top 100 CEOs who are now earning about £1 million a year, and the self-made new rich (all either in financial services, retail or property). There is a third, nearly invisible group whose wealth and importance arises from the extended scale and scope of the finance sector—through large fees on mega transactions and/or ownership stakes in private equity and hedge funds.

Under Blair, the top 1 percent has increased its wealth by 152 percent, taking its share of national wealth from 20 to 23 percent and giving it the largest share of national income since the 1930s.

At the other pole of the social order, half the population of the UK owned just 5 percent of the wealth in 2001, down from 8 percent in 1976. In 2002-03, 17 percent of the population lived in households with incomes below 60 percent of median disposable income. Personal debt has surpassed one trillion pounds, with the UK accounting for two-thirds of total credit card debt in the EU. Individual bankruptcies are at all time high, increasing by 30 percent between 2003 and 2004.

While the capital is flooded with the super-rich, it has the highest incidence of child poverty after housing costs in the country—fully 53 percent in inner London—and one-third of adults are in poverty.

The ex-radicals’ attempt to ignore the degeneration of reformism and the parties based on it is not accidental. To the extent they seek to explain Labour’s transformation into “New Labour”, it is generally presented as a takeover by outsiders who had bowed before the new realities of Thatcher’s monetarist orthodoxy.

There is not the time available here to go through all the issues involved but it is the vast changes within capitalism over the past two decades that have completed this degeneration.

The failure of the system of international economic regulations established in the post-war period to overcome capitalist contradictions was marked by the breakdown of the Bretton Woods Agreement in 1971. It opened the way for the extraordinary development of globalised production as the bourgeoisie sought new means to offset the falling rate of profit.

The generalised crisis that came to a head in 1973 unsparingly exposed the decline of British capitalism against its major rivals. At the same time, the dominance of finance capital in Britain made it especially vulnerable to capital movements, which, with the break-up of Bretton Woods, were outside government control.

Amid major class confrontations culminating in the miners’ strike that brought down the Heath government, Labour’s nominally left Tribune group publicly bemoaned the growth of multinational corporations, blaming them for causing the “downfall of conventional Keynesian economics”.

Labour briefly toyed with the “Alternative Economic Strategy” of national economic regulation, public ownership, economic planning, price controls and import restrictions. However, in 1976, with massive international speculation against sterling, the Labour and trade union bureaucracy turned to the IMF for emergency funds of £3.3 billion and summarily ditched this policy in favour of imposing spending cuts and a wage freeze.

Papers just released under the Freedom of Information Act show that the Callaghan government concealed the full extent of the spending cutbacks it had agreed with the IMF—by one-third in the space of one year—and secretly forecast a massive increase in unemployment to almost 2 million by 1978.

It was perhaps one of the first structural adjustment programmes dished out by the IMF. Callaghan formally launched it by telling Labour’s 1976 annual conference: “For too long, perhaps ever since the war, we postponed facing up to fundamental choices and fundamental changes in our society and in our economy. We used to think you could spend your way out of recession, and increase unemployment by cutting taxes and boosting government spending. I tell you in all candour, that option no longer exists.”

US President Ford apparently congratulated Callaghan on his speech the following day.

Labour was not able to complete its new-found mission to refashion British economic and social life to meet the requirements of the international financial institutions and global corporations. The Winter of Discontent led to Thatcher’s ascendancy in 1979 and she was given the dubious privilege of destroying the social fabric of Britain and thrusting millions into unemployment and poverty.

None of this would have been possible had not Thatcher’s right-wing course been matched by Labour. Following a brief tack left under Michael Foot, Labour began to ditch all its old reformist nostrums under the leadership of Kinnock. This period saw a number of now familiar faces make their entry.

Last year we drew attention to the boast by Jack Straw—Britain’s foreign secretary—that he had cut his political teeth in the struggle against the “Trots” and could do so because he had been “first taught to spot a Trot at 50 yards in 1965 by Mr. Bert Ramelson, Yorkshire industrial organiser of the Communist Party”.

Straw is not the only one. Peter Mandelson, Blair’s right-hand man and now Britain’s EU commissioner, is perhaps one of the best known former Communist Party of Great Britain (CPGB) members in New Labour, as is Charlie Wheelan, the former adviser to Gordon Brown. To the ex-Stalinist credentials of the foreign secretary can be added those of Defence Secretary John Reid. Even the Home Secretary Charles Clarke was reportedly another fellow traveller of the CP.

In addition, there is an assortment of former radicals who, together with Blair’s infamous spin doctor Alastair Campbell, earned their spurs under Neil Kinnock, during the witch-hunts against Militant and other lefts.

The eviscerating of bourgeois democracy

The point is that New Labour is the monster offspring of the partnership of right-wing Labourites with the Stalinists and their fellow travellers on the periphery of the radical milieu, for the express purpose of disassociating the organisation entirely from any connection with the working class. That was the lesson Labour drew from 1979—never again could it be subject to pressure from below.

In the process, Labour has become a hollowed-out shell, with a membership of less than 200,000 and more than a third of its constituencies failing to send delegates to conference. It has lost four millions votes since 1997 and its vote in 2005 was less than it received in the 1983 election, which was considered to have been old Labour’s kiss of death. Far from being regarded as troubling, however, this state of affairs is welcomed as it makes Labour a more perfect vessel for big business.

Blair may consider this a victory, but the real consequences are that the major political prop through which British capital was sustained for an entire historical period has been removed.

This is under conditions in which British politics resemble a festering sore. The Tories—who have never recovered from Thatcher and do not have a single MP in the six largest cities outside London—are making an effort to present a popular face under their new leader David Cameron. Their efforts only point to the extreme narrowness of bourgeois politics.

In the first place, Tory policy consists of seeking to discredit Labour by backing every measure it puts forward—an explicit acceptance by the Tories that they are so hated that Labour is automatically doomed by any association with them.

Cameron, who like Blair, boasts of his pragmatism and lack of ideology, is an advocate of a flat tax and further measures to roll back the state. In all essentials he is another neo-con. In his effort to try and win some broad based support, however, he has made noises of the compassionate conservative type, on crime and education for example. The problem is that this feeble attempt at winning popularity was immediately denounced by Murdoch’s Sun, among others.

For the first time since World War II, the leaders of both main parties come from the top public schools in England and Scotland (Eton and Fettes respectively), which is why Blair has opposed any attack on Cameron as a privileged toff.

The Liberal Democrats, who made some headway due to their opposition to the Iraq war and mild social proposals, are currently tearing themselves apart. Charles Kennedy was unceremoniously dumped as party leader for being an alcoholic. Actually, he was a recovering alcoholic—the party did not move against him when he was still imbibing. Days later, Mark Oaten, who was considered a potential successor, was forced to drop out over his affair with a rent boy. Another Liberal Democrat MP crossed the floor to join the Tories, with mutterings that others could follow.

Meanwhile, Blair has begrudgingly said he will stand aside as Labour leader shortly before the next election. Speculation is rife that he will renege on his pledge to pass the crown to Brown, opening way for a bitter factional fight without any shred of principle.

Respect, which was created by the Socialist Workers Party and hailed as a serious left-wing electoral challenger, has been revealed as nothing more than the stagnant froth discarded by Labourism. In the space of months, George Galloway, its most prominent representative, has gone from facing down the US Senate over the Iraq war, and winning some kudos in the process, to becoming a resident of Big Brother’s latest reality TV show—degrading the antiwar movement with which he is associated, and the millions of people who had defended him against right-wing attacks.

The evisceration of bourgeois democracy resulting from this social polarisation is testimony to the decay of British capital.

It is impossible to secure a democratic mandate for wars of colonial conquest and social and economic policies that impoverish the mass of the population. Hence the government resorts to lies, deception, intimidation and police state methods.

The scale of the attack on democratic rights is of historic magnitude—including abrogating habeas corpus. Blair complained that the whole British system starts from the false proposition that its duty is to protect the innocent from wrongful conviction, whereas its real duty must be to allow the law-abiding to live in safety. This is justification for the “shoot to kill” in broad daylight of Jean Charles de Menezes, the defence of US prisoner renditions and the British government’s own use of evidence extracted by torture.

The essential truth is that the assault on democratic rights is not a matter of policy that can be subjectively abandoned—it is the inevitable product of the acute state of social tensions in Britain.

The HSBC report cited earlier notes the biggest risk to stability comes from what it describes as a political backlash against “globalisation”. It attributes this danger to politicians responding to popular sentiment. However, Larry Elliot comes closer to the truth when he remarked that “to coin a phrase: capitalism is creating its own enemy within”.

There are clear signs of this, as we have noted in relation to the mass movement against the Iraq war, the defeat of the EU constitution in France and the Netherlands, the result of the German elections and more recently the French riots.

In the Guardian, the American academic Immanuel Wallerstein said of the French riots: “We are in an epoch of accentuating, not alleviating, inequalities. And therefore we are in an epoch of increasing, not decreasing, rebellions.”

In addition to these social tensions, or rather partially as a result of them, divisions have erupted within sections of the bourgeoisie itself. We have seen a series of leaks, parliamentary inquiries, and calls for Blair’s impeachment, most recently by former SAS commander General Michael Rose.

None of Blair’s critics disagree with Labour’s social agenda. Their concerns centre on foreign policy and its implications for British imperialism. We correctly opposed the notion that British support for the Iraq war resulted from some poodle mentality. Blair has spoken of the need for a pragmatic realism—a recognition of the enormous changes and challenges posed by globalisation, the rise of China and India, and competition for vital energy resources. Britain, from a weakened position, is attempting to maintain its global influence and interests.

Traditionally, this meant balancing between Europe and the US, but this policy proved unviable during the Iraq war and the situation has not become any easier. The British bourgeoisie’s biggest fear is of US unilateralism, which it has sought to deal with by “hugging it close”. As Iraq showed, however, when the chips are down, Britain basically must clamber aboard whatever the US is doing, irrespective of its domestic and international ramifications. That is one of the reasons for Blair speaking of Britain being on a permanent war footing.

There is distinct nervousness about this. It is striking how little comment there has been on Iran. Britain has significant interests in Iran, which is one of its largest trading partners in the Middle East. British Gas and Shell are involved in oil and gas exploration in the country, and Iran and BP are participating in a joint gas exploration venture in Scotland. In the event of sanctions on Iran, British companies will be heavily hit. So far, British efforts appear concentrated on trying to keep a coalition together to arrive at some kind of negotiated settlement, but this is not under Britain’s control.

Deep disquiet has arisen in sections of the military and among others over what is happening in Iraq. The British elite may be drawn into something that once again proves deeply injurious to its long term interests—not least in terms of arousing popular opposition—but no one has an alternative. It is striking the degree to which no venue exists for such disagreements within the elite to be resolved to any degree of satisfaction. Craig Murray, the former UK ambassador to Uzbekistan referred to by Al Gore in his speech recently, was effectively removed from his post for raising criticisms of Britain turning a blind eye to torture in the country. The government is attempting to ban his book on these issues.

In short, an almost hot-house environment has developed, in which the level of disconnect, the undermining of the old institutions of rule (which Blair derides as the forces of conservatism) and the complete discrediting of the old parties means that things cannot be held together.

Although this report is presented separately, it must be stressed that British developments cannot be seen apart from those on the European continent. The situation I have sought to outline unfolds under conditions of enormous flux throughout Europe at every level. Our political work must be rooted in the fight to build sections of the International Committee of the Fourth International across Europe.