Jeremy Corbyn speaking out against austerity outside Parliament, 27th May 2015. Photo: Sleeves Rolled Up via Flickr (CC BY-NC-SA).
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Labour's choice: neoliberalism, more neoliberalism - or Jeremy Corbyn?
4th July 2015
Within minutes of Labour's election defeat its MPs were denouncing Miliband for failing to 'embrace aspiration' and alienating 'wealth creators', writes Ben Whitham. But the real problem was that he never expressed a coherent alternative to neoliberalism and austerity, presenting at best a 'Tory lite' agenda that failed to inspire. And who are the real wealth creators anyway?
Labour must stand for the real wealth creators: the great mass of ordinary people who are struggling to make ends meet in a morally cold and materially precarious political and economic climate.
The leadership candidates are promising support for business leaders and "wealth creators", suggesting a return to the neoliberal agenda of the Blair years.
The weeks since Labour's crushing general election defeat and the run-up to the party's leadership election have been characterised by calls for major changes to its economic policy. Of the four candidates that will appear on ballot papers in the leadership contest, three have demonstrated at least one shared commitment in this regard:
"We can't be set against the government's recent cut in corporation tax for the future. Our rhetoric can't be set against the wealth creators and drivers of our future economic growth. We can't be set against business." Yvette Cooper
"Today I want to focus on another weakness: our relationship with business. I am clear that no political party can win a general election in Britain if they convey a sense of being anti-business, wealth creation and success." Andy Burnham
"I champion wealth creation, because without a dynamic economy in every part of the country, we won't get the decent jobs or public services people need." Liz Kendall
Before pulling out of the race early, leadership favourite Chuka Umunna had also suggested that one of the most important reasons for the party's electoral defeat was that "we allowed the impression to arise that we were not on the side of those who are doing well" and "we talked too little about those creating wealth and doing the right thing."
Of the four names that will appear on the Labour leadership ballot papers to be sent to party members in August, only one does not speak about prioritising and protecting "wealth creators".
Jeremy Corbyn, who received the fewest nominations from the parliamentary party of the four, and who - at least according to the bookies - is by far the least likely to win, doesn't find the need to refer to 'wealth creators' at all in his anti-austerity agenda.
Why not just call them 'capitalists'?
So who are these "wealth creators" and "drivers of our future economic growth"? Like everyone from Tony Blair to Alan Sugar, Burnham, Cooper and Kendall are all clear that they are referring to what we now tend, euphemistically, to call 'business leaders' ('capitalists' just sounds too archaic in the post-Steve Jobs world).
Lord Sugar, himself a 'business leader' (how could we forget the Amstrad E-m@iler?), has gone so far as to abandon the party to which he owes his peerage over its "negative business policies" and perceived failure to support his fellow wealth creators under Ed Miliband.
But who really creates wealth and drives economic growth in Britain? Are businesses and their leaders really the source of wealth creation? What about the great mass of ordinary people working to produce, distribute and sell goods and services across the country and abroad?
Economist Mariana Mazzucato recently picked-up on this one-sided view of 'wealth creators' in her analysis of Labour's post-general election soul-searching. Mazzucato - herself an outspoken advocate of the integration of capitalist markets into more spheres of social life - suggests that a more expansive definition of wealth creation is needed, including businesses, workers and the public sector.
This rather misses the point. Clearly, Labour has not always been so keen to cosy up to capitalists. The very name 'Labour', though it might easily be forgotten today, derives from the fact that the party represented labour in its inherently antagonistic struggle with capital. This was the party of workers, of trades unionists, and of socialists - those who put people before profit.
So what changed? Why are prospective Labour leaders so keen to have the party identify itself with the facilitation of business?
How did the party supposed to represent ordinary working people come to argue, as Yvette Cooper does, for a reduction on the taxes levied against capitalist enterprises, and to describe capitalists, as Andy Burnham does, as the real "heroes" of British society?
Risk, uncertainty, and profit
The story of this transformation can be traced back to 1921, when an economist at the University of Chicago, Frank Knight, published his most influential work, Risk, Uncertainty, and Profit. It was to be a foundational text of what would become known as the 'Chicago School' of economics, a school that has in turn come to be identified as synonymous with the project of neoliberalism.
Among the great Western political economists of the 18th and 19th centuries - Smith, Ricardo and Marx - versions of a 'labour theory of value' predominated.
Despite their radically different views on the rights and wrongs of capitalism, they all saw the production of wealth in societies as something that happens 'bottom-up'; the workers mix their labour with the environment around them and in so doing produce socially useful things, from handbags to heroin. The accumulated value that such things are accorded is a society's 'wealth' - created by workers and, usually, appropriated by their bosses.
Knight sought to radically redraw this picture of society and the creation of wealth. In reflecting on the centrality of risk-taking to investment and therefore production in capitalist societies, Knight emphasised the role of a "special social class, the business men" and "entrepreneurs". Knight saw these people as society's real "producers, while the great mass of the population merely furnish them with productive services."
In venture capitalists and financiers Knight identified a heroic exposure to risk. The "special social class" of business people risk their own capital in the pursuit of profit, and in so doing produce all of our society's wealth - the sum of our goods and services - almost as a by-product.
While Knight is overlooked in many potted histories of neoliberalism, one of his most enamoured students was Milton Friedman. Together with another key Austrian economist, Friedrich Hayek, Friedman is often seen as a founding father of neoliberalism.
Like both men, Knight was a co-founder of the Mont Pelerin Society, which David Harvey cites in his Brief History of Neoliberalism as a crucial moment in the emergence of neoliberal doctrine in the aftermath of the Second World War.
A moral case against welfare
What Friedman inherited from Knight, primarily, was a commitment to his vision of a society in which business people - capitalists - were in some senses morally superior to their proletarian and middle class compatriots, because of the 'risks' they took.
Both Hayek and Friedman were at pains to add to this insight the correlative: welfare as the "social insurance" against individual risk - the safety net of benefits for the unemployed or unemployable - is morally wrong. It is only when people risk their livelihoods that they achieve greatness.
This neoliberal worldview has become the orthodoxy of Western - and, increasingly, global - politics and economics. It is the social trajectory to which Margaret Thatcher is supposed to have declared that "there is no alternative."
It is the basis of the increasingly precarious employment system, reliant upon casualised labour and zero-hours contracts, and it is the moral justification drawn upon by successive governments for the privatisation of national industry and the slashing of welfare benefits for the poor and vulnerable.
Neoliberalism has come to shape a shared way of seeing the world among the leaderships of both Labour and the Conservatives. Andy Burnham has indicated, for example, that he would continue with welfare cuts started by the coalition and Conservative governments.
He explains this not in terms of a mere spending imperative, however, but in moral language that depicts risk-taking entrepreneurialism as heroic and vulnerability as laziness. Burnham suggests that a Labour government under his leadership would avoid the mistakes of the past, by not "being soft" on benefit claimants, who are looking for an "easy ride".
This is not a party-specific phenomenon. The last three Conservative Prime Ministers - Thatcher, Major, Cameron - have been Conservative with a 'big C' only. Far from the Burkean project of gradual, organic social change and the conservation of social tradition, all three instead acted as the zealous vanguard of what the late Stuart Hall called the "neoliberal revolution" in Britain.
Programmes of privatisation, which more traditional Tories like Harold Macmillan famously likened to "selling off the family silver", and the marketization of the NHS, along with the undermining of the wider moral framework that justified this and other elements of British welfare, are radical, not conservative changes.
Neoliberalism is more than an approach to economic policy that privileges the free market, more than a revival of the 'classical' liberalism of Adam Smith and his "invisible hand".
It is, rather, a fundamental reconfiguration of state and society, a reprogramming of our understanding of morality. It sets the basic limits of right and wrong, good and bad, within which all 'normal' politics takes place. And this leads us to the real function of a term like 'wealth creators' when it is used in the way Burnham, Cooper and Kendall use it.
The 'divine right' of kings and wealth - still with us today?
Once upon a time, the rich ruled by 'divine right'. As gruesome contemporary fairy tales like Game of Thrones vividly remind us, legitimate political power in medieval life was all about one's blood ties or political allegiance to a family, and that family's proximity to the throne (since the king or queen was God's chosen servant).
While concepts of 'modernity' and 'enlightenment' have been rightly deconstructed in recent decades, not least for the ways in which they provided moral legitimation for the repugnant European imperialism of the 18th and 19th centuries, their cardinal achievement - the overthrow of divine right - is in danger of being lost today.
Where once the rich and powerful in society - the Lords and Ladies of the great old houses - were seen to rule over low born commoners in accordance with divine ordination, the period of bourgeois revolutions in Europe led people to question this.
It also enabled the spread of ideas like socialism - the idea that the real world of existing societies has primacy over an abstract notion of the atomistic individual, and that individually-held wealth is never the product of individual effort.
Ideas like this seriously threatened the myth that a wealthy and powerful minority - let's call them 'the 1%' - is a natural and right thing. After the 'enlightenment', people in Europe were more able to challenge the mystical justifications for elite domination of society.
They were more able to call out the rich for what they were - lucky. Born into the right conditions at the right time, their accumulation of wealth was arbitrary, not divine.
Re-enchanting the rich
Neoliberalism re-enchants the rich. The neoliberal assumption structuring British politics today is that a small special class of wealth creators, which three of the Labour leadership contenders describe so admiringly, are able to conjure wealth out of thin air. This assumption is false.
Wealth is produced by workers. The 'special' minority class of businesspeople - capitalists - merely create profit. This profit is drawn precisely from the exploitation of ordinary people. This activity, and the financial risk-taking it involves, is not heroic at all, it is the result of arbitrary social conditions. It is also the cause of the massive global economic collapse that has been underway since 2008.
Regulation, not facilitation, of businesses is needed at a time like this. Moral and material support, not moral condemnation, is what should be offered to those most vulnerable to the deleterious effects of the financial crisis.
Neoliberalism has, for too long, defined our political horizons - setting the limits to what we think politically possible. If the efforts of Burnham, Cooper and Kendall amount to Labour searching its soul, then it's looking in all the wrong places. To be truly electable again, to represent more than Tory-lite, the party must stand for something distinctive.
That something is not the special social class of business people, the 1%, but rather the real wealth creators in our society: the great mass of ordinary people who are struggling to make ends meet in an increasingly morally cold and materially precarious political and economic climate.
Vote: Jeremy for Labour!
Ben Whitham recently completed a PhD on the 'Neoliberal Way of War' at the University of Reading. He has taught politics and international relations at several UK universities and currently works as a policy researcher in the third sector.
This article is published under a Creative Commons Attribution-NonCommercial 3.0 licence.
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