The main purpose of this chapter is to establish how certain international developments of the 1980s were interpreted by the British left as they were happening. Towards the end of the chapter I will also establish what is considered to be of lasting significance in these developments today, at the time of writing. A general ideological retreat of the left could not have been forecast in the 1970s. There was evidence of mounting problems for the social democratic parties, but there were also signs of ideological renewal and more radical ambitions than had characterised the 1950s and 1960s in many countries. The evidence was contradictory, but persuasive interpretations of the political scene included those that focused on the unfolding crisis of liberal capitalism, sometimes theorised as a fiscal crisis of the state or a crisis of ‘overload’, ‘ungovernability’ and legitimation.1
The turn to more radical versions of social democracy occurred as the order based on Bretton Woods and the Keynesian welfare state began to break down. In Britain the socialist Alternative Economic Strategy (AES) dominated Labour Party economic thinking in the decade after 1973. In France there was the Union of the Left of 1972, bringing the socialists and communists together behind a Common Programme. In Portugal there were revolutionary events in 1974–75, when the authoritarian Estada Novo regime was overthrown and the left – much of it Marxist – emerged as the strongest political tendency in the country. In Spain, as another dictatorial system began to disintegrate, signs of socialist renewal were visible, especially after the death of General Franco in 1975.2 In Greece the rise of the Pan-Hellenic Socialist Movement (PASOK) after the collapse of the military junta in 1974 was a feature of another southern European country in transition to democracy in the second half of the decade. Even in established social democratic strongholds there was an appetite for radical change within the left. In Sweden the turn towards stronger measures promoting economic equality, such as the Meidner Plan, can be traced to the late 1960s, but it also lay behind a raft of social legislation produced in the first half of the 1970s. In West Germany the Social Democratic Party (SPD) government embarked upon a wide range of reforms in education, health and social policy in the early 1970s which greatly expanded the welfare state. Yet the party membership remained well to the left of its leaders at the decade's close.
Reasons for optimism on the left were not confined to social democracy. The big communist parties of Italy, France and Spain seemed to be emerging from aspects of the hidebound thinking which had prevented them from taking liberal democracy seriously. ‘Eurocommunism’ was the term coined to convey this apparent evolution, with the Communist Party of Italy (PCI) leading the way in both innovative thinking and practical politics – its share of the vote in national elections rising to 34.4 per cent in 1976. Communist parties, however, had long since lost their monopoly of Marxism and revolutionary thought in Western countries. New radical thinking on the left, associated with the so-called ‘new social movements’, had appeared in the 1960s and was expected to revitalise the old left and possibly produce a new socialist synthesis informed by feminism, ecology, direct democracy and identity politics. Capitalism was very much under scrutiny again and the left was also trying to find answers to the problems posed by stagflation, unemployment, poverty and inequality in an age of multinational corporations operating beyond the Keynesian controls adopted in the 1950s by social democrats and their mainstream rivals. In addition, avowedly Marxist regimes were on the increase in Asia, Africa and Latin America, and the Cold War view of the world depicted by the propaganda of Washington DC since 1946–47 was under increasing attack in the wake of the Vietnam War.
Long-term electoral trends showed that socialist parties had established themselves as the main government party in a majority of fifteen western European states by the mid-1970s, producing 54 per cent of cabinet ministers in the period 1945–75, on the strength of an average of no more than 31 per cent of the vote.3 However, since the mid-1970s the socialist position had been eroded, partly because of declining electoral support and defeat in general elections (as in Sweden 1976, Britain 1979, Norway 1981) but also because the parties concerned sometimes refused to join coalitions, as in both Sweden and Norway. There was evidence that social democratic parties moving to the left could find themselves isolated, like the Dutch Labour Party (PvdA), or confined to opposition, like the British Labour Party (1979) and the Belgian Socialists (since 1981). In West Germany, only Helmut Schmidt's prestige kept the SPD in coalition with the Free Democratic Party; much of the SPD was demanding left-wing policies which the Free Democrats would not accept, and it was widely predicted at the start of the 1980s that the Christian Democrats under Helmut Kohl would be the beneficiaries of this growing alienation. In October 1982 Kohl became Chancellor, and he held that position for the next sixteen years. There was also a long history of right-wing splits from socialist parties moving to the left, as had happened in Britain when the Social Democratic Party (SDP) was formed in March 1981 by a handful of former Labour Party leaders and MPs, but here the evidence was not encouraging for the right. Splitters calling themselves ‘social democrats’ had not thrived in Italy or Japan in the 1950s, or in Australia, France (1972–78), Luxemburg (1974) and Denmark (1973).4 It was the British general election of 1983 which demonstrated the damage caused to Labour by the formation of the SDP. The splitters took 11.5 per cent of the vote and made a major contribution to dividing the opposition to Prime Minister Margaret Thatcher, returning a Conservative government with a massive 144-seat majority on just 42.4 per cent of the vote.
The left's prospects at the start of the 1980s were as difficult to interpret as those of the previous decade; by 1990, after years of domination by Thatcher, Kohl and President Ronald Reagan, the picture was much clearer. There was evidence of left-wing strength and vitality in the early 1980s and contemporary events suggested that voters were not automatically lost when parties advanced stronger left-wing policies to deal with national problems. In May 1981 François Mitterand became the first socialist to be elected president of France, after campaigning on the 110 Propositions For France, the programme of the Socialist Party, variously calling for the creation of public sector jobs, a wide-ranging policy of public ownership, workers’ control, a 35-hour working week and measures of decentralisation to the regions. A landslide victory for the Socialist Party followed in the legislative elections, producing the first-ever socialist majority in the Fifth Republic and a reforming government, with four communists included at cabinet level, which proceeded to nationalise banks, insurance and defence companies and to implement many other aspects of the left's Common Programme.
In October of the same year PASOK (the Panhellenic Socialist Movement) won a landslide majority in Greece, forming the first socialist government in that country since 1924. The rhetoric of its leader, Andreas Papandreou, suggested that PASOK was just as radical as the French Socialists. A year later, in October 1982, the Socialist Party (PSOE) in Spain formed its first government since the civil war. The question in Spain was about the survival of democracy and whether a democratically elected government would be allowed to remain in office, not whether socialist reforms were on the immediate agenda. Even so, the PSOE leader, Felipe Gonzalez, who had been unable to obtain a formal repudiation of the party's Marxist programme without a protracted fight (up to 1979), had to be content with a large internal faction continuing to reject the party's alleged ‘modernisation’ under his leadership.5
In short, it was possible to survey the European left at the end of 1981 and perceive ‘a period of strength’ and even ‘a high point for European labour’ in terms of electoral results and government office since the late 1960s for Austria, France, Italy, West Germany and even Britain (in respect of years in government). In most of Europe this relative political success was accompanied by a decline in the confessional vote, a vote which generally favoured the right, and an increase in trade unionisation up to the end of the 1970s, which was associated with stronger left parties. The same period, roughly since 1965, witnessed the most rapid expansion of social services and social security in the history of capitalism. None of this meant that the prospects for socialism were good; if anything, it was a reminder that the labour movement in the past had nearly always been a minority affair, isolated from large sections of the working class as well as governmental power.6 What the British called the ‘crisis of the post-war consensus’, soon to become evidence of the corresponding crisis of social democracy, could be interpreted at the beginning of the 1980s as one of the reasons for the period of relative labour strength since the late 1960s. This is because the turn to the left, the growth in trade union membership and the increased social democratic participation in government of these years might be perceived as related to the end of the long post-war economic boom and the onset of capitalist economic crisis, visible since the early 1970s. Labour movements grew in organisational strength and in a number of countries (Britain, Sweden, France, Greece) adopted demands for more radical measures for the redistribution of wealth and a degree of democracy in industry.7
But, as the economic crisis stretched out over the rest of the 1980s these elements of apparent strength for the left were surpassed by indicators of growing weakness such as chronic mass unemployment, which began to undermine trade union power and promote divisions within the working class. In the longer term the economic crisis could be seen as evidence of ‘a geological shift … in the historical geography of capitalism’, evidence of restructuring to the detriment of Western Europe and parts of North America and to the benefit of the Pacific Rim and Asia. Observers also noted that if the crisis was one of welfare capitalism, welfare appeared to be far more endangered than capitalism. The success of the attack on welfare in the 1980s, it could be argued, was ultimately connected to the vivid failure of actually existing socialism – symbolised by the inability of the communist regimes to feed themselves, as signified by their dependence on food imports from North America. Already by 1981 there was a sense that capitalist logic was the only form of economic reason available in practical politics.8
Evidence of capitalist crisis abounded, but so too did evidence that the left could not take advantage of it. While the ‘international monetary and credit system [was] walking along the precipice of a major collapse’, the left could only look on. The ‘extreme case of Britain’ was only ‘a more dramatic version of the troubled state of the left elsewhere’ and it showed already in 1982, according to Eric Hobsbawm, Britain's most illustrious Marxist historian, that the Labour Party was so ‘disrupted, demoralised and defensive’ that most of its members had written off the chance of effectively opposing Thatcher.9 The Keynesian and communist alternatives – so powerful from the 1930s to the 1960s – now held little or no promise in Hobsbawm's view.
The Labour Government in Britain had already accepted this verdict in 1976 when, on discovering that it was not possible to spend its way out of a recession, to paraphrase the Prime Minister, James Callaghan, it implemented austerity measures and borrowed from the International Monetary Fund (IMF). The turn away from Keynesian priorities of full employment was also signalled in the USA in October 1979 when the chairman of the Federal Reserve Bank, Paul Volker, ‘engineered a draconian shift in US monetary policy’ that focused on the suppression of inflation, whatever the consequences for unemployment rates.10 The welfare state was transformed in public rhetoric from a capitalist asset, supporting Keynesian macro-economic management, to an insatiable cost and liability, at first in Britain and the USA but later even in social democratic Sweden.11
Britain was ahead of the curve because, along with the USA, it had been among the first countries to be hit by the rapid decay of old industries, combined with rising unemployment and faster inflation of prices. There were already signs of other weaknesses too, as Hobsbawm pointed out in his Marx Memorial Lecture in London in 1978. The presumed ‘forward march’ of labour had arguably ceased in the UK since as far back as the late 1940s, when measured against important criteria.12 The old blue-collar industrial working class had been shrinking as a proportion of the work-force in all the advanced capitalist economies during the post-war period. The class and occupational structure had changed radically, becoming more fragmented and more feminised, but not more trade unionised or more inclined to support Labour or a rival to its left. In some countries, the USA and Britain in particular, there was talk of ‘de-industrialisation’ before the 1970s came to an end. Changes to the class and occupational structure were possibly connected to evidence that class identity was of diminishing importance in voting behaviour.13 Certainly the ties that bound the manual working class to the left parties were weakening even as that class diminished in size. The return of mass unemployment had not favoured and would not automatically favour the left.14
In the USA, the New Deal coalition forged by Roosevelt was in an advanced stage of decomposition and Ronald Reagan's success in the presidential election in November 1980 was secured with an agenda sufficiently similar to Thatcher's that this was noted by observers. ‘Reaganomics’ in practice cemented the alliance as trade unions were weakened or destroyed, real wages stagnated or fell for most workers and the wealthiest benefited from deregulation and tax cuts. But the Republican Party had been making great incursions into the white working-class vote for some time and Republican dominance of the White House mattered in Western Europe because of the importance of the USA in the global political economy. A new right-wing alliance had taken shape since the failed campaign of Barry Goldwater in 1964. Foregrounded in Republican rhetoric in the late 1970s was the need to restore American power in the world.
The domestic foundations of such power were to rest on the reduction of welfare dependency, cuts in direct taxes and the removal of other obstructions to free enterprise such as trade unions. Yet Reagan's victory drew on support across the class and ethnic map of the USA. Only black Americans and, to a lesser extent, Hispanics rejected him emphatically. Reagan's winning formula was based on his ability to attract interest groups with overlapping concerns comprising themes of anti-statism, nationalism and the concerns of the ‘moral majority’. ‘Big government’ was blamed for stagflation, the stifling of enterprise and the encouragement of welfare dependency (and evils which the right associated with it, such as the decay of family values and the growth of crime). Reagan's success in making these equations and attributing responsibility to ‘liberal’ (left) ideology echoed Thatcher's a year earlier. It also revealed the parlous condition of the Democrats’ mass organisations, his rivals’ ‘lack of programmatic and ideological vision’ and their internal divisions.15 Already the suggestion was that these problems of the American left were of a secular rather than episodic character, connected to the social and economic restructuring that heralded post-industrialism and the fragmentation of contemporary society.16
The Soviet invasion of Afghanistan in December 1979 assisted Reagan's campaign for the presidency and provided an additional platform for a Reagan–Thatcher alliance once he was elected. The détente of the early 1970s had been in decay since the middle of the decade, but after the invasion of Afghanistan the tone of East–West polemics, the emphasis on military matters (such as NATO's siting of Pershing and Cruise missiles in Western Europe, in response to Soviet upgrades of intermediate-range missiles) and the polarisation of opinion suggested a return to the Cold War.17 This was the context in which the Campaign for Nuclear Disarmament (CND) was revitalised and European Nuclear Disarmament was launched in April 1980 to campaign for a nuclear-free Europe. Alarm was fuelled not merely by the revival of familiar Cold War rhetoric and a new generation of nuclear weapons but by talk of ‘limited nuclear war’ – the ‘Schlesinger doctrine’ – emanating from NATO and Washington DC. This helps to explain why West German peace activism took on the dimensions of a mass movement in the early 1980s, focusing its oppositional energies on the NATO decisions. West Germany was one of the anticipated ‘theatres’ in which limited nuclear war would take place and from which Pershing and Cruise missiles would seek to prevail against Soviet SS-20s; the West German left noticed the assumption and reacted with some anger. Socialists nevertheless could also recognise that the hopes placed in détente in the early 1970s had been dashed by Soviet decision making as well as by the imperatives of American domestic politics.18 Expressions of dissent continued to be suppressed in the Communist bloc, contrary to the promise of détente, while Soviet investment in weapons, Moscow's military support for insurgencies overseas and the decision to invade Afghanistan confirmed the sceptics in their belief that the USSR understood only force or the threat of force.
It was a feature of the early Reagan years that the USA was prepared to use force or support force against its ideological opponents overseas, thus underlining the West European left's perceptions of US foreign policy as a support for reactionaries. Fears of military confrontation had already been stoked in the late 1970s by the Carter administration, in its support for the neutron bomb (presented by the media as lethal to people but kind to property) and its decision to deploy intermediate nuclear forces in Europe. In December 1979 the Thatcher government decided to buy Trident missiles from the USA, while NATO resolved to deploy Cruise and Pershing missiles in Europe. Soviet and Cuban interventions in Africa (Angola and Ethiopia) formed a sinister pattern for some observers, and when Soviet troops invaded Afghanistan in late December 1979 they concluded that one of the overall aims was Soviet domination of the Persian Gulf.
The sense of crisis was heightened by the hostage stand-off in revolutionary Iran which began when the American embassy in Teheran was occupied in November 1979 by followers of the Ayatollah Khomeini. Vietnam, Iran and Afghanistan were all of a piece, according to Reagan, as evidence of the USA's failure to lead the ‘free world’ by standing up to its enemies. The incoming administration thus increased US defence spending, while some of its members talked openly about prevailing in nuclear war, and the President announced, in March 1983, that the USA itself could be protected from missile attack by a protective shield.19 Protests on the streets against the perceived bellicosity of the Reagan administration increased in Britain, West Germany, Belgium, Holland, Denmark, Sweden and Norway – the so-called ‘Arch of Angst’.20
This is the context in which the British Labour Party was led by a founder-member of CND in 1980–83, Michael Foot (and another staunch supporter of CND, Foot's successor, Neil Kinnock). Labour remained committed as a party to unilateral nuclear disarmament and the removal of all US nuclear bases from Britain until 1989, by which time Gorbachev's policies had virtually ended the Cold War.21 Labour was not alone in taking fright at American foreign policy – the governments of Denmark and Norway considered declaring a Nordic nuclear-free zone and the Reagan administration's support for low-intensity warfare against the Soviet Union in Afghanistan was publicly supported in Europe only by the Thatcher government. Reagan's support for the Contras against the Sandinista government in Nicaragua and US diplomatic and military aid interventions in the civil wars in Angola and Cambodia generated little public enthusiasm. The American invasion of Grenada – a member of the British Commonwealth – in the autumn of 1983 provoked criticism even from the Thatcher government, despite US support for the Conservatives’ own war with Argentina over the Falklands in 1982.
The progress of the first majority socialist government in France inevitably produced lessons for the left in Britain. It was proof, according to one prominent commentator, that ‘far-reaching political changes were possible’.22 One year into the experiment it was clear that France was polarised: the right had been mobilised against the government and the left was deeply divided, despite the participation of both major parties in the coalition. Only a ‘façade of governmental solidarity’ concealed the divergences that officially ended left unity in 1978.23 A radical programme of economic and social reform had been implemented, although without popular mobilisation and on the basis of a legislative majority elected by only one third of the voters. The government contained Marxists, but also anti-Marxists like Michel Rocard, Minister of the Plan, and influential moderates such as Jacques Delors, Minister of the Economy. Together they had boosted domestic demand, increased aid to small and medium-sized firms, reduced unemployment and the length of the working day, lowered the retirement age and created a large programme of professional training for young workers. They had also gone ahead with extensive nationalisations of finance and manufacturing and higher rates of taxation on wealth, business and higher-income groups. Yet industrial unrest was on the increase and opponents of the reforms were far more active than supporters in organising their side of the argument. The decline of the Communist Party (PCF) since 1970 showed no signs of slowing down. The fortunes of the French left were in the hands of social democrats. After just twelve months of socialist government there was already evidence of an investment strike.24 By March 1982 the government began to retreat and by December 1983 definite signs of fatigue in the left project were visible.
The right had seized the initiative in cantonal and municipal elections in 1982, making use of law and order and immigration issues to feed its vision of France on the brink of economic and moral disaster at the hands of the left. Worse was to come. The Front National entered a united right coalition for the second ballot of a by-election in the town of Dreux in September 1983 – a major breakthrough for this neo-fascist force which was already making inroads in the erstwhile red suburbs of Paris. A divided and shrunken left could only look on, such was the apathy on the streets. The dominant intellectual discourses, despite the socialist government, flirted with Reaganomics and equated socialism with totalitarianism, while sound economics and the open society were paired with the theories of Milton Friedman and Friedrich von Hayek. The French left had discovered the Gulag in the 1970s and the PCF further obliged its opponents after 1978 by abandoning the Eurocommunist rapprochement with liberal democracy, disapproving Polish Solidarity and turning back to an uncritical defence of the Soviet Union and it actions (such as the invasion of Afghanistan). Marxism in France was in clear retreat, while xenophobia and racism were becoming commonplace.25 The victory of the socialists in 1981 proved only to be a temporary detour in this political trajectory.
In the course of 1983–84 the government's U-turn covered every area of policy. Reducing inflation became the most important economic objective, while major concessions were made to the opposition's demands for stronger immigration controls. British observers were clear, however, that the ‘crisis’ of the French left was not to be explained in terms of the politics of the last few years but, rather, with reference to the ‘long-term process of social and ideological change’ affecting the country.26 The by now familiar ingredients of this process were said to include changes in the economic and class structure of France, involving the growth of the tertiary sector and the decline of both blue-collar manufacturing and the relative weight of agriculture. This fundamental restructuring was said to be ‘reflected in the trade union and political spheres’ – in the events of 1968, the recent electoral success of the Socialist Party, the initial rise of the CFDT (French Democratic Confederation of Labour) as a competitor to the Communist-led CGT (General Confederation of Labour) and the subsequent loss of membership in both trade union federations. The new social strata that supplied the personnel of the new social movements in 1968 and after were only temporarily aligned with the left, according to this argument. What were permanent among them were values of individualism and anti-statism – values which the New Right could champion effectively, all the more so in the context of the recent ‘discovery’ among French intellectuals that socialism led to totalitarianism.27
The U-turn of the Socialist government, it was argued, also demonstrated the power of the objective constraints on the relatively open French economy – notably a world economy hostile to socialist priorities. Internally, the government provoked the ire of farmers, doctors, lawyers, lorry-drivers, Catholics, the police and most of the mass media. The right sought to mobilise these different interests under the banner of neo-liberalism and a harder line on law and order and immigration – echoes of the ‘free economy, strong state’ formula that had proved efficacious in Britain for Margaret Thatcher.28 A mass radical right had emerged and its appearance signalled more than the short-term problems of 1981–86, according to British commentators.29 It was the ‘direct result of the ideological earthquake’ shaking French politics since the 1970s. Socialism had ceased to be a viable alternative. Governments, it was now fashionable to believe, could make only a small difference when confronted by the realities of power in contemporary society. This was said to be the meaning of the Socialists’ U-turn.
The Communist Party's steep decline – by 1986 down to its lowest share of the vote for fifty years (at 9.8 per cent) – reflected a broader revulsion from Stalinism and was even more marked among the young (and students in particular). The rising forces promised markets, privatisation and deregulation combined with tougher constraints on trade unions, anti-social elements and immigrants. The French Socialists had entered office with old ideas worked out in the 1960s, innocent of modern business and its requirements yet assuming an environment of economic growth congenial for their reform programme. Instead they got inflation, a balance of payments deficit, an investment strike and a weakening franc. The Socialist government began by wanting to control the economy and ended with the roles reversed, the evidence of its failures contained in the electoral setbacks of 1982, 1983, 1984 and 1986.30
By the end of March 1986, the debit side of the left balance sheet included the defeat of the French Socialists and the formation of a right-wing government under Jacques Chirac. Reagan had been resoundingly re-elected in 1984 and Helmut Kohl was as comfortably ensconced in government in West Germany as Thatcher was in Britain. The socialist governments in Spain and Greece offered little consolation. The Spanish Socialists (PSOE) in office made a virtue of pragmatism and moderation, justifying their policies in terms of the country's necessary modernisation via integration into the European Economic Community (EEC) and NATO. They had no use for socialist economic policies and there was no sign of a mass movement in support of them.31 PASOK was re-elected in Greece with 45.8 per cent of the vote in 1985. It continued to talk against NATO and the EEC but there was no sign of any action being taken against either, and this was true of the other prominent demands of its nominally radical programme. In practice it was dominated by its charismatic leader and was bereft of ideological and organisational roots in the Greek population.
It was widely accepted by socialists that the working class was shrinking in size in all West European economies and that a general convergence was taking place in their economic and social structures. Their national economies were increasingly woven together and all were affected by the decline of heavy industry, the growth of unemployment and curtailment of public spending. Old assumptions about the efficacy of the nation-state as the vehicle for social reform and economic management were subject to questioning. Though the term ‘globalisation’ was still confined to business literature and entered popular usage only ten years later, people on the left were already saying farewell to the nation-state.
Peter Glotz, secretary-general of the West German Social Democratic Party (SPD), told the New Statesman in 1985 that ‘Social democracy and democratic socialism can only be achieved today as European concepts; in national terms these ideals become more illusory and hopeless every day … an effective economic policy for democratic socialism is now scarcely possible within the empty vessel of the nation-state’.32 Donald Sassoon thought that it was one of the New Right's ideological achievements that it was able to critique statism, deregulate the economy so that the citizens and their state were left at the mercy of international capital and yet promote itself as the defender of the nation.33 This verbal conjuring trick was something that the populist and radical right was perhaps beginning to see through, as was obvious in France with the rise of the Front National and similar divisions in the right in other parts of Western Europe.
But Sassoon identified three trends on the left which responded to this problem differently, although they were perfectly capable of cohabiting within the same parties: ‘Europeanist’, ‘centrist’ and ‘traditionalist’. The ‘Europeanist’ trend – strong in the SPD and PCI – recognised both the crisis of a particular structure of capitalism and a crisis of socialism and looked to the EEC for answers to both. The centrists – strong among Spanish and Italian socialists – had concluded that the crisis of socialism was irreversible and accepted most of the neo-liberal alternative and the idea that the best antidote to ‘overloaded’ government was to reduce the demands placed upon it. The future, according to the centrists, entailed reorganising Europe around an American model of political economy. Among those who denied this, Sassoon identified ‘traditionalists’, comprised of those who admitted that the left was in crisis but who blamed social democracy and called for new issues to be integrated into working-class politics operating within national parameters.34
Sassoon clearly favoured the Europeanist approach and he took this to entail recognition of the need for supranational power in order to control transnational economic processes. The supranational power had to have popular legitimacy, and already socialist Europeanists in the SPD, PCI and French Socialist Party were calling for political union of the EEC. On this basis they could imagine a European industrial policy, monetary union and a trade policy that could face the challenge of the USA and Japan. But it was not clear how political union could be achieved on the basis of popular consent. In fact, of course, European integration took a huge step forward with the signing of the Single European Act in February 1986, the first major revision to the Treaty of Rome since 1957. It envisaged the creation of a single market by 1992. But this step was determined by political elites working in close alliance with big business. Their intention was to strengthen capitalism. The drive for further integration successfully fused the priorities of British neo-liberals with those of continental enthusiasts for federalism, and those who believed that nation-states were increasingly defunct as agencies of domestic economic management.
British Labour's interest in all of this was stimulated only when Jacques Delors, President of the European Commission, set out his vision of social reform at the 1988 Trades Union Congress, apparently demonstrating that preparations for the single market included commitments to enhanced workers’ rights. Unlike Thatcher, Delors realised that if most of the remaining work to remove barriers to trade involved non-tariff issues such as different national standards, there was an opportunity to raise standards for citizens and workers rather than allow market forces to promote ‘a race to the bottom’. Workers’ rights in Britain had been degraded by the Thatcher governments, many of whose supporters were already voicing fears about a ‘creeping federalism’ at Brussels that threatened to undo their work in the manner Delors favoured.
Labour's fleeting conversion to a pro-European stance took place in this context. For Labour, the prospect of placing Britain ‘at the heart of Europe’ promised, by the end of the 1980s, to raise standards in Britain across a range of industrial relations and social policy issues. But this proved to be a brief and unstable opportunism and from the mid-1990s, under Tony Blair's leadership, the rhetoric of getting closer to Europe had to be made compatible with preservation of what New Labour had come to believe was the comparative economic advantage of the UK bequeathed by the Thatcher reforms – a relatively low-paid and flexible work-force and a relatively deregulated business environment in which financial institutions were particularly dynamic and in tune with the realities of globalisation. This Blairite modification was always sensitive to the growth of popular ‘Euroscepticism’ in Britain, which increased as the process of European integration accelerated after the passage of the Maastricht Treaty.35 As always, domestic and national foreign policy considerations informed the stance of parties, and these changed over time as they chased the votes that mattered – the ones cast in national elections.
The Lawson Boom in Britain in the second half of the 1980s may have reinforced the sense – at least for many – that Thatcher's reform programme, although painful, was beginning to work. The collapse of the communist regimes of Eastern Europe during 1989 provided evidence that a viable systemic alternative to capitalism did not exist. There was also evidence that capitalism was the truly radical force in the world. The consumer experienced this creative dynamism partly in the flow of new commodities – such as personal computers, video recording, gaming, compact discs, cellular phones and other gadgets – together with rising house prices and expanding areas of commodification, like health, sport, expanding retail chains and shopping centres. The ‘business knows best’ philosophy preached by the Thatcher Government was given expression in diverse ways such as the cult of business studies, business schools and the MBA; the uncritical admiration expressed for Japan and the Asian Tiger economies of Singapore, Hong Kong, South Korea and Taiwan; and the increasing reliance of mass media, like the BBC, on agencies with a vested interest in the economic practices they were asked to comment on, such as the firms that operated in the City of London. The deregulatory dynamic affecting finance spread quickly after the ‘Big Bang’ measures taken to liberalise the City by the Thatcher government in October 1986, and it would not be long before this sector was celebrated as a triumph of globalisation.
But many of the problems which brought Thatcher to power were still present, not only in Britain. The Lawson Boom was no sooner named than it had to be restrained by British membership of the European Exchange Rate Mechanism in October 1990, as inflation surged towards 10 per cent and the rate of unemployment began to grow again.36 In reality, the 1980s continued the trend of the 1970s, signalling the end of the era of strong economic growth, low rates of inflation and full employment of the post-war boom years and the decay of the party systems and corporatist arrangements that had dominated the first twenty-five years after the Second World War.37 The claim that the social democratic movement was especially suited to the macro-economic management tasks of welfare state capitalism had of course dissolved in the course of the same decades as policies prioritising the battle against inflation and promoting the revival of market dynamism came to the fore.
During the Reagan presidency, the World Bank and IMF became proselytisers for neo-liberalism across the globe, imposing ‘structural adjustment programmes’ which traded immediate debt relief for domestic reforms, forcing debtor countries to adopt the ruling neo-liberalism.38 The same institutions, according to observers, were ‘pivotal in squeezing Communism and collectivism out of the world economy in the 1980s’.39 In the liberal democracies capital controls had been reduced from the 1970s onwards as offshore markets grew rapidly free from state regulation.40 The USA, Britain, Canada, the Netherlands, Japan, Germany and Switzerland had all taken this path by 1979. The process deepened and spread in the 1980s. ‘Most of the major markets were completely unfettered by capital controls by the early 1990s.’41 The impetus was competitive and political as well as technological. Transnational capital flows rapidly increased in the 1980s both as foreign direct investment and as portfolio investment. National deposit banks began to operate internationally and became heavily involved in financial speculation. New financial instruments were invented to deal with volatility in exchange rates and interest rates. Futures markets expanded in value from about $220 million in 1975 to $440 billion in 1986.42 But, by the end of the 1980s, it was far from clear that these measures could be accounted a success in stimulating economic growth. One authority concluded in 1990 that in respect of the ‘eleven years of the Thatcher experiment’ there was no ambiguity of verdict:
All the signs point in the same direction: the experiment ended in almost unmitigated failure. By the end of the period, in 1990, Britain had the highest rate of inflation among advanced economies, though the curbing of inflation had been the Government's declared priority number one. It had, correspondingly, the highest interest rates; and it also had high and rising unemployment; large-scale bankruptcies of firms in all sectors of the economy, falling output and declining national income; and the largest deficit on the current balance of payment in history. Over the period as a whole, despite the [North Sea] oil, Britain had, unbelievably, a slower rate of growth than in comparable periods before.43
But this poor record served to underline the failure of the Labour Party to find a popular alternative policy, and this was an aspect of a bigger failure of socialists right across Europe. Instruments of economic policy associated with national macro-economic management such as monetary and fiscal aggregates could be undermined by global capital, as the French Socialists discovered in the early 1980s. Mitterand had entered government at a time of international deflationary pressures, chronic deficits on current account, currency speculation, financial disorder and capital flight.44
The end of the communist states in Eastern Europe also seemed to many to signal the defeat of the socialist project in another way. The spread of capitalism across the former Soviet empire proceeded apace with little sign that anything was to be retained from the old collectivism. The rapid pace of change was not confined to the communist bloc. The decline of old industries in the liberal democracies accelerated during the 1980s as economies became more open, international competition intensified, governments deregulated financial sectors, employers sought more flexible ways to manage, trade unions diminished in size and influence, unemployment increased and governments in most liberal democracies cut the top rates of income tax. Some socialists in Britain by the end of the 1980s theorised these and other changes as a transition from Fordism, amounting to an ‘epochal shift’ characterised by fundamental changes in the structures of industry, class and occupation.45 In political terms they added up to a shift in the balance of power towards global capital, against states and national labour movements, promoting social fragmentation and an undermining of class solidarity.
From the perspective of 2014, the process underway in the 1980s, and begun at the end of the 1960s, has been called the ‘dissolution of the regime of post-war capitalism’.46 It showed a similar pattern across the advanced capitalist countries, but the USA was where the various trends originated – ‘the ending of the Bretton Woods system and of inflation, the growth of budget deficits as a result of tax resistance and tax cuts, the rise of debt-financing of government activity, the wave of fiscal consolidations in the 1990s, finance market deregulation as part of a policy of privatising government functions and of course the financial and fiscal crisis of 2008’.47 States did not become less important after waves of privatisation and deregulation but, as the British case vividly showed, were active instruments in the promotion of the new dispensation in restoring the power of markets. Governments sought to depoliticise all those areas that the state had encroached upon to make the Keynesian welfare state work. The politically regulated Keynesian welfare state was supposed to have been crisis free. It was tolerated, even celebrated, for as long as this seemed to be true. Once that illusion was exposed, as it was in the 1970s and 1980s, the main components of the post-war settlement were jettisoned – including the maintenance of full employment, public ownership, universal welfare and social policies, redistributive taxation, tripartite consultations, strong trade unions and collective bargaining. Democratic pressure on government expenditures was curtailed by such methods and although economic inequality grew rapidly, those opposed to it were able to offer only feeble resistance, the more so as social democratic parties failed to find a compelling alternative to the regnant neo-liberalism. Voter turnout fell in almost all liberal democracies in the 1980s, especially within the lower-income groups, suggesting rising levels of resignation and alienation from mainstream parties. The contradictions between capitalism and democracy observed in the 1930s were back in force and democracy was once again the loser.48
1 James O’Connor, The Fiscal Crisis of the State (New York: St. Martin's Press, 1973); Jürgen Habermas, Legitimation Crisis (London: Beacon Press, 1975); Anthony King (ed.), Why Is Britain Becoming Harder to Govern? (London: BBC, 1976); Claus Offe, Contradictions of the Welfare State (Cambridge, MA: MIT Press, 1984).
2 Paul Kennedy, The Spanish Socialist Party and the Modernisation of Spain (Manchester: Manchester University Press, 2013), pp. 23–4.
3 The states are Iceland, Ireland, Britain, France, Italy, West Germany, Switzerland, Austria, Luxemburg, Belgium, Norway, Sweden, Holland, Denmark and Finland.
4 ‘Europe's Socialists Are Losing Their Taste for Power’, Economist, 7 August, 1982, pp. 39–40; ‘Social Democracy Doesn't Thrive Abroad’, Economist, 28 March, 1981, p. 26.
5 Kennedy, The Spanish Socialist Party, pp. 23–9.
6 Goran Therborn, ‘Prospects for the European Left’, Marxism Today, November 1981, p. 23.
7 Andrew Glyn (ed.), Social Democracy in Neo-Liberal Times: The Left and Economic Policy Since 1980 (Oxford: Oxford University Press: 2001), pp. 6–7.
8 Therborn, ‘Prospects’, p. 23. The planned socialist alternative was subject to influential critiques from across the political spectrum in a succession of books published around this time. I have in mind Friedrich A. Hayek, The Constitution of Liberty (Chicago: University of Chicago Press, 1978) and Alec Nove, The Economics of Feasible Socialism (London: George Allen and Unwin, 1983); André Gorz, Farewell to the Working Class (London: Pluto Press, 1982); Rudolf Bahro, Socialism and Survival (London: Heretic Books, 1982); André Gorz, Ecology as Politics (London: Pluto Press, 1987).
9 Eric Hobsbawm, ‘The State of the Left in Western Europe’, Marxism Today, October 1982, p. 9.
10 David Harvey, A Brief History of Neoliberalism (Oxford: Oxford University Press, 2005), p. 23.
11 Jenny Anderson, Between Growth and Security: Swedish Social Democracy from a Strong Society to a Third Way (Manchester: Manchester University Press, 2006), pp. 1–3.
12 Eric Hobsbawm, The Forward March of Labour Halted? (London: Verso, 1981), pp. 1–19.
13 Ivor Crewe, Bo Sarlvik et al., Decade of Dealignment: The Conservative Victory of 1979 and Electoral Trends in the 1970s (Cambridge: Cambridge University Press, 1983).
14 Hobsbawm, ‘State of the Left’, p. 14.
15 David Plotke, ‘Reagan: Is It as Bad as It Sounds?’, Marxism Today, February 1981, p. 8.
16 Plotke, ‘Reagan: Is It as Bad as It Sounds?’, p. 9.
17 See Fred Halliday, The Making of the Second Cold War (London: Verso, 1983).
18 Dan Smith, ‘Goodbye to Détente?’, Marxism Today, February 1981, pp. 22–4.
19 Geir Lundestad, The United States and Western Europe since 1945 (London: Oxford University Press, 2003), pp. 211–12.
20 Lundestad, The United States and Western Europe Since 1945, p. 212.
21 John Callaghan, The Labour Party and Foreign Policy: A History (London: Routledge, 2007), pp. 282–3.
22 Eric Hobsbawm, ‘The State of the Left’, p. 8.
23 Keith Dixon and Daniel Perraud, ‘The French Experiment’, Marxism Today, May 1982, p. 15.
24 Dixon and Perraud, ‘The French Experiment’, p. 29.
25 Keith Dixon and Daniel Perraud, ‘France's Resurgent Right’, Marxism Today, December 1983, pp. 16–21.
26 Keith Dixon and Daniel Perraud, ‘Le Fin: France Abandons Socialism’, Marxism Today, January 1985, p. 24.
27 Dixon and Perraud, ‘Le Fin’, p. 25.
28 Andrew Gamble coined this phrase as a summary of Thatcherite policy in Andrew Gamble, The Free Economy and Strong State (London: Macmillan, 1988).
29 Keith Dixon and Daniel Perraud, ‘The French Paradox: France after the Election’, Marxism Today, May 1986, p. 17.
30 Denis McShane, French Lessons for Labour (London: Fabian Society Tract 512, 1986), pp. 22–4.
31 Kennedy, The Spanish Socialists, p. 54.
32 Peter Glotz, ‘Europe – The Helpless and the Silent Continent’, New Statesman, 20–27 December 1985, pp. 30–2.
33 Donald Sassoon, ‘Europe's Left: A New Continental Blend’, Marxism Today, May 1986, pp. 22–4.
34 Sassoon, ‘Europe's Left’, p. 24.
35 Paul Taggart, ‘A Touchstone of Dissent: Euroscepticism in Contemporary Western European Party Systems’, European Journal of Political Research 33 (1998), 363–88.
36 By John Smith in the House of Commons in 1990.
37 John Callaghan, The Retreat of Social Democracy (Manchester: Manchester University Press, 2000), pp. 26–53.
38 See Michel Chossudovsky, The Globalisation of Poverty: Impacts of IMF and World Bank Reforms (London: Zed Books, 1997).
39 Robert Skidelsky, The World after Communism: A Polemic for Our Times (London: Macmillan, 1995), pp. 169–70. Skidelsky is here citing Jeffrey Sachs, Understanding Shock Therapy (London: Social Market Foundation, 1994).
40 Beth Simmons, ‘The Internationalisation of Capital’, in Herbert Kitschelt et al. (eds), Continuity and Change in Contemporary Capitalism (London: Cambridge University Press, 1999), pp. 36–69, pp. 40–1.
41 Simmons, ‘The Internationalisation of Capital’, p. 41.
42 Simmons, ‘The Internationalisation of Capital’, p. 55.
43 Sidney Pollard, The Development of the British Economy, 1914–1990 (London: Edward Arnold, 4th edn, 1992), p. 379.
44 Serge Halimi, ‘Less Exceptionalism than Meets the Eye’, in Anthony Dayley (ed.), The Mitterand Era: Policy Alternatives and Political Mobilisation in France (London: Macmillan, 1996), pp. 83–96.
45 Communist Party of Great Britain, Manifesto for New Times (London: Communist Party of Great Britain, 1989), pp. 6–7.
46 Wolfgang Streeck, Buying Time: The Delayed Crisis of Democratic Capitalism (London: Verso, 2014), p. ix.
47 Streeck, Buying Time, p. xii.
48 See, for example, Harold Laski, Democracy in Crisis (London: Allen and Unwin, 1933).