A bet­ter fu­ture? No wonder cap­i­tal­ism is dis­trusted

Post-cold war pol­i­tics shifted to­wards the right, and or­di­nary peo­ple were forced to suf­fer. Main­stream par­ties need to learn what went wrong

The Guardian Weekly - - Comment & Debate - Larry El­liott

His­tory tells us the first cold war lasted from 1945 un­til 1990, and was won by the west. Cap­i­tal­ism tri­umphed over com­mu­nism, free­dom over tyranny. The early 1990s wit­nessed a vic­tory roll for mar­kets: eco­nomic shock treat­ment was ad­min­is­tered to the for­mer Soviet Union and its satel­lites; a global free trade deal was wrapped up; and par­ties of the left got with the pro­gramme. They stopped talk­ing about so­cial­ism and em­braced the need for greater com­pe­ti­tion, ef­fi­ciency and labour mar­ket flex­i­bil­ity.

The cen­tre of grav­ity of pol­i­tics shifted. Be­fore the col­lapse of the Soviet Union, the mid­dle ground in the west was half­way be­tween full-blown com­mu­nism at one ex­treme, full-blown cap­i­tal­ism at the other. From the late 19th cen­tury on­wards, the fear that the work­ing classes would be se­duced by Marx­ism prompted par­ties of both left and right to in­tro­duce re­forms in­tended to knock some of the rough edges off cap­i­tal­ism.

There were plenty more con­ces­sions af­ter the sec­ond world war. Amer­ica’s Mar­shall plan was not just phi­lan­thropy. It was also the re­sult of fear of com­mu­nism and a feel­ing that, if cap­i­tal­ism couldn’t de­liver for or­di­nary peo­ple, they had some­where else to go. This anx­i­ety dwin­dled as it be­came clear the Soviet econ­omy worked a lot bet­ter when the need was to pro­vide tanks and air­craft than it did to pro­duce con­sumer goods. The end of the cold war re­moved the threat of an al­ter­na­tive ide­ol­ogy al­to­gether. So the new mid­dle ground – the third way – moved closer to an undi­luted form of cap­i­tal­ism.

To take just one ob­vi­ous ex­am­ple, the eco­nomic strat­egy be­ing pro­posed at present by John McDon­nell, Britain’s shadow chan­cel­lor – higher per­sonal and cor­po­rate taxes, state own­er­ship of the pub­lic util­i­ties and the rail­ways, a na­tional in­vest­ment bank – would have been firmly in the so­cial demo­cratic main­stream when the cold war was at its height. Now it is seen as so ex­treme that Labour dis­si­dents are – in an­other echo of the past – toy­ing with the idea of form­ing a new cen­trist party.

In the new post-cold war pol­i­tics, par­ties that once be­lieved their job was to make cap­i­tal­ism work for vot­ers now be­lieved their task was to make vot­ers fit for cap­i­tal­ism. State in­ter­ven­tion did not cease, it merely took a dif­fer­ent form. Gov­ern­ments might have be­lieved they could do noth­ing to pre­vent com­mu­ni­ties wiped out by dein­dus­tri­al­i­sa­tion and were no longer to guar­an­tee full em­ploy­ment, so they used welfare re­form to get the un­em­ployed to take low-paid jobs and told the poor they needed to smoke less, drink less and eat more healthily. State con­trol over peo­ple re­placed state con­trol over the econ­omy, and it didn’t re­ally mat­ter whether the vot­ers liked the tough love or not, be­cause there was nowhere else to go. The aus­ter­ity poli­cies of the past decade saw the full flow­er­ing of the new pol­i­tics. Those re­spon­si­ble for the big­gest fi­nan­cial cri­sis since the sec­ond world war went un­pun­ished; those who were in­no­cent felt the full force of deficit-re­duc­tion pro­grammes. There was noth­ing like Mar­shall aid for Greece when ex­pe­ri­enc­ing a 30% fall in GDP.

The de­ci­sion to em­brace the dis­ci­pline of the global mar­ket has proved dis­as­trous for the par­ties of the cen­tre-left

It is now al­most three decades since the cold war ended, and few han­ker for a re­turn to the days when the iron cur­tain di­vided Europe. Yet the prom­ises made in the early 1990s have not been ful­filled. Lib­er­al­is­ing mar­kets did not lead to eco­nomic per­fec­tion; in­stead the orgy of spec­u­la­tion un­leashed led to the fi­nan­cial cri­sis of 2008. Liv­ing stan­dards have con­tin­ued to rise in the west, but more slowly than they once did. Pro­duc­tiv­ity growth has stalled. In the UK, per­sonal debt lev­els are not much lower than they were be­fore the crash.

The coun­try that has done best in the post-cold war era – China – has done so with a ver­sion of the old mid­dle way. Strong growth has meant a great fall in poverty rates, but move­ments of cap­i­tal have been reg­u­lated, trade bar­ri­ers are higher than in the US or Europe, and the state has kept own­er­ship of large chunks of in­dus­try. China is more mar­ket-friendly, but only up to a point.

The de­ci­sion to em­brace the dis­ci­pline of the global mar­ket­place was dis­as­trous for cen­tre-left par­ties. They did well enough in the late 1990s and early 2000s, when cheap goods flooded in from China, but were bereft of ideas when the global econ­omy hit the wall in 2008. Where there would once have been a plan to re-reg­u­late cap­i­tal­ism there was in­stead an in­tel­lec­tual vac­uum.

There are some ob­vi­ous lessons to be drawn. The first is that main­stream par­ties need to come up with poli­cies that do things for peo­ple rather than do things to peo­ple. The record shows that the man­aged cap­i­tal­ism of the cold war de­liv­ered bet­ter re­sults than the un­man­aged cap­i­tal­ism since.

The sec­ond les­son is that vot­ers don’t buy the idea that global cap­i­tal­ism is a force of na­ture that can­not be tamed. That’s why Don­ald Trump’s pro­posed tar­iffs on Chi­nese im­ports and McDon­nell’s plan to na­tion­alise the util­ity com­pa­nies are prov­ing pop­u­lar. Peo­ple want now what they have al­ways wanted: a job, de­cent pay, a pen­sion, a roof over their heads and a sense that their chil­dren will be bet­ter off than they are. They can’t un­der­stand why the global econ­omy can’t de­liver to­day what na­tion states could de­liver half a cen­tury ago.

There is one fi­nal les­son. If main­stream par­ties don’t come up with the an­swers, the ev­i­dence is that vot­ers will look else­where for so­lu­tions. The rise of pop­ulism explodes the myth that they have nowhere else to go.

Eva Bee

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