Let us Rebuild the House of the Left: Labour and the Liberal Democrats



Originally posted 14 July 2016


“A lucid and persuasive piece” – Richard Surr

“A very thoughtful and informative article” – John Boughton

“A frank and thought-provoking assessment” – John Hill

“An excellent and thought-provoking article” – Michael Kelly

“A great read” – Graham Sutton


Geoffrey M. Hodgson


12 July 2016 will go down in UK history for two major political events. First, it was the last full day that David Cameron was Prime Minister. Second, the National Executive Committee of the Labour Party decided to put Jeremy Corbyn on the membership ballot for the party’s re-election of Labour’s leader, despite an overwhelming vote of no confidence against him by Labour MPs.

On this day, the Labour Party destroyed its chances of victory in the next general election. A party so deeply divided cannot win. For Labour, this is the most optimistic assessment: 12 July 2016 might come to be seen as the day that Labour died.

My latest book elaborates on some of the political issues raised in this blog:

Wrong Turnings: How the Left Got Lost

Published by the University of Chicago Press in January 2018

Progressive Left politics in Britain has to be rebuilt. It is as if the clock has been turned back 100 years. We must begin again.

Labour’s Grim Prospects

Labour now faces another election among its members for its Leader. Even with a strong and commanding alternative candidate, Corbyn is likely to win this contest. This would leave Labour as a party in Parliament where 80 per cent of its MPs have no confidence in its leader.

Momentum1Consequently, all 172 of the ‘rebels’ would face possible deselection by their local constituency parties. Few would survive the show trials by Corbynistas for their alleged crimes. They would be replaced by hard-left stalwarts.

A small consolation for the deselected MPs is that few of the Corbynista parliamentary candidates would survive trial by the British electorate, especially when made aware of Corbyn’s record as a supporter of terrorist organisations such as Hamas, Hezbollah and the IRA.

In a more optimistic scenario, suppose that Corbyn is defeated for Leader in the membership vote. At least then, the Parliamentary Labour Party and much of the Labour Party machine would be ostensibly in the same hands. But the party would be in civil war. It would become a cockpit of personal abuse and factional machination, unattractive to ordinary, thoughtful, soft-spoken, Labour supporters. Many of the so-called rebels would be deselected by the local parties that were in Corbynista hands.

Electorates are not fond of parties that are unable to quash their internal feuds. Voter want results – not rifts. The Tories are masters of the swift coup to end dissent. That is because they have a thirst for governmental power. Sadly, much of the Labour membership does not. They prefer to be ideologically pure. That is why Labour is dying. It looks likely to be pulverised in a general election. The chances of a majority Labour government have disappeared, at least for 2020 and maybe forever.

Will the Majority of Labour MPs Breakaway?

Assume that a large segment of Labour MPs breaks away and forms a new party. If their numbers were sufficient, then they could claim the official mantle of Her Majesty’s Opposition. They might outnumber the remaining parties, including the SNP and Corbyn’s Rump Labour. They would have to find a new name, be it ‘Social Democratic Labour’ or whatever.

Finding a name would be the least of their problems.

First the new party would have to be built up from the grassroots, in every winnable constituency. Then there would be the problem of party funding. Gaining credibility in Scotland would also be important.

The Global Crisis of Social Democracy

Added to all this is the global ideological crisis within social democracy itself. Social democracy was originally synonymous with socialism, where the latter meant an economy dominated by public enterprise and planning. Many of the early ‘social democratic’ parties were led by Marxists, including the Social Democratic Workers’ Party of Germany, founded in 1869. Although some social democrats favoured peaceful reform rather than violent revolution, they mostly agreed on the goal of large-scale common ownership.

Da Vopedo


Social democracy began to change its meaning more substantially after 1945, especially when the German Social Democratic Party embraced private enterprise and a mixed economy in 1959. Today social democracy is often distinguished from socialism in terms of a stronger emphasis on a mixed economy and private enterprise, while retaining the goal of greater equality and social justice.

As Neal Lawson has pointed out, modern European social democracy was built during, and affected by, the Cold War of 1948-1991. It was also founded on a mass industrial working class. Until the 1970s there was a widespread concern the USSR might overtake the West in terms of productivity and economic prowess. Post-1945 social democracy was forged as a compromise between Soviet planning and market economy, within a democratic political system, based on the support of industrial workers and progressive intellectuals.

But the sixteen years from 1975 to 1991 saw this consensus collapse. The post-war political settlement, accepted by parties on the Left and Right, disappeared. In addition, de-industrialisation in the West and the shift of much manufacturing to East Asia, pulverised the traditional working class base. The collapse of the Berlin Wall in 1989 ended the Soviet Bloc and its experiment with socialism.

Fall of the Berlin Wall 1989

Fall of the Berlin Wall 1989

Consequentially, modern social democracy is now in crisis the world over. It is failing in government in France and it is in retreat almost everywhere else, including in its great heartlands in Northern Europe, and no less in Germany and Scandinavia.

Social democrats have been slow to adjust. As Lawson has argued, they have retained ‘their statism and tribalism, their urge to command and control’. They are ‘at odds with a zeitgeist that demands pluralism, complexity’. They failed to develop an adequate alternative vision of ‘a good society that is about much greater equality but is at odds with consumption without end.’

A problem shared by Marxist, ‘Labour’ and social-democratic parties is that they all stem from a post-Enlightenment, doctrinal offshoot (around Louis Blanqui and others in the 1830s) that focused on the interests and aspirations of the working class, rather than on those of humanity as a whole.

Marxism went furthest in this direction, with its doctrine of class struggle and the ‘dictatorship of the proletariat’. But the very name ‘Labour’ speaks to one class rather than to all humanity. One of the great lessons of the Enlightenment is that human rights are universal. Especially in our fractured world, political parties should have a universal appeal.

In particular, the very aim of greater economic equality should be seen not as an outcome of envy, struggle or revenge, but as a moral mission to make society more amenable and cohesive for all.

Class-based, social-democratic, mind-sets have dominated both the Left and Right of the Labour Party for the last seventy years. If the majority of Labour MPs try to build something out of the ruins, then they will face the profound problem of reconstructing their own philosophy and identity for the twenty-first century, alongside a myriad of other practical difficulties.

Radical Liberalism

I do not pretend that I have adequate answers, but I am sure that a new radical movement that faces the problems of the twenty-first century must build on the achievement of the political and scientific Enlightenment in the seventeenth and eighteenth centuries. Hence it must relate in some way to the broad liberal tradition that stems from this Enlightenment.

DaVinci1This tradition emphasises democracy, liberty, equality and cooperation. Socialism derives from the Enlightenment, but has been neither consistent nor adequate in the pursuit of these goals.

In particular, the liberal tradition also recognises that private property is essential to a dynamic economy, notwithstanding the importance of state intervention in health, education, market regulation, redistribution and elsewhere. As the twentieth century shows us, some private property is a necessary (but insufficient) guarantee of liberty. Its abolition has without exception led to totalitarianism.

It is for the reason that one of the greatest achievements of liberal and Enlightenment thought, the United Nations Universal Declaration of Human Rights, includes these words: ‘Everyone has the right to own property alone as well as in association with others. No one shall be arbitrarily deprived of his property.’ Property, in short, is a basic human right.

At the same time, property-owning market economies have important limitations. These must be addressed without destroying private enterprise, competition and the well-springs of innovation and wealth. Greed and individualism must be countervailed by a recognition that, just as we have all benefitted from the work of others, we have a duty to society in return. Extreme inequalities of income and wealth are deleterious to social solidarity and cohesion, and these too must be tackled. This puts radical policies, such as a guaranteed basic income and some viable form of redistributive taxation, on the agenda.

Thomas Paine

Thomas Paine

Everything I mention in the previous paragraph was considered at length by the great Anglo-American radical Thomas Paine (1737-1809). Contrary to widespread belief, Paine was not a socialist. He was a radical liberal.

Take another relevant example. John Stuart Mill (1806-1873) was concerned about the problems of inequality, in wealth, power, voting rights and income. He advocated not simply a market economy but forms of cooperation, particularly worker cooperatives.

John A. Hobson (1858-1940), was a liberal and one of the great neglected economists of the last 150 years. He developed a theory of unemployment and opposed the imperialism of the great powers.

From 1908 to 1914 Herbert H. Asquith (1852-1928), as Liberal Prime Minister, led his party to a series of major reforms, including social insurance and the reduction of the power of the House of Lords. Asquith laid the foundations of the Britain’s welfare state. His Liberal successor, David Lloyd George (1863-1945), gave the vote to women in 1919 (but not on the same terms as men).

The Liberal Democrats

So why not join the Liberal Democrats?

Imagine we are back in 2005, with Charles Kennedy as Leader, but Labour in today’s mess. For many readers the Liberal Democrats would be an attractive option.

Kennedy became leader in 1999. His party won 52 seats in the 2001 election – their highest tally since 1923. He shifted his party to the Left and– unlike Labour and the Tories – the Liberal Democrats came out firmly against the 2003 invasion of Iraq. In the 2005 general election, 62 Liberal Democrats were elected. Kennedy stood down in 2006.

Nick Clegg became leader in 2007. After the economic crash of 2008, Clegg told his party at its 2009 annual conference that ‘savage cuts’ were needed to deal with the mounting budget deficit. When the 2010 election granted no single party an overall majority, Clegg argued that Labour was incapable of making the cuts in public expenditure that he deemed necessary. This was a key argument in persuading his party to join a coalition with the Tories. Kennedy voted against this coalition.

To some degree, the coalition did act as a check on the ideological, axe-wielding, Tory Right. They blocked, and postponed for five years, the dreadful mistake of the referendum on Europe. But the Liberal Democrats under Clegg made the serious mistake of willingly participating in a misconceived and highly damaging programme of cuts in vital public services and investment.

The Liberal Democrats also wrongly blamed Labour for overspending prior to the crash. In fact, Labour had the finances under control before 2008 and the big spending was needed after the crash, to save the financial system from collapse.

Clegg and other members of the Liberal Democrats had forgotten key lessons from their own history. Asquith learned the dangers of doing deals with the Tories. Lloyd George was cast aside by them in 1922 just as Clegg’s party was deliberately crushed by the Tory machine in the 2015 election.

John Maynard Keynes

John Maynard Keynes

Just as grave was the abandonment of Keynesianism by the Liberal Democrats. John Maynard Keynes (1883-1946) was a life-long Liberal and one of the greatest economists of all time. Keynes argued that the first priority of government was not the reduction of its deficit but the maximisation of employment. Through growth and greater employment a government could accrue greater income to resolve its budgetary problems. Attempts to deal with deficits by reducing government expenditure and austerity would be self-defeating: the economy would contract (or grow more slowly) and the deficit would increase.

The failure of a strategy of austerity has become abundantly clear in the six years that George Osborne was Conservative Chancellor of the Exchequer since 2010. The Liberal Democrats need to shout more loudly that they have learned that lesson.

Labour and the Liberal Democrats – Their Aims

Ever since Labour removed its commitment to common ownership from its constitution in 1995, its institutional aims have been unclear. The current Labour Party Constitution outlines commendable principles such as by ‘common endeavour we achieve more than we achieve alone’. It laudably aims for a society where ‘power, wealth and opportunity are in the hands of the many not the few’ and ‘where we live together freely, in a spirit of solidarity, tolerance and respect’.

But these words are too vague to provide a clear goal. They might be deemed consistent with a range of idealistic plans, from statist socialism to egalitarian ‘people’s capitalism’.

Labour’s current Clause Four Part One is silent on the question of property, whether it is to be private or owned in common. Reference to ‘a thriving private sector’ is tucked away in Part Two, alongside a mention of public ownership or accountability where ‘essential to the common good’.

Lib-Dems1The Preamble to the Constitution of the Liberal Democrats is much clearer. It mentions ‘a strong and sustainable economy which encourages the necessary wealth creating processes, develops and uses the skills of the people and works to the benefit of all, with a just distribution of the rewards of success.’

It continues: ‘We want to see democracy, participation and the co-operative principle in industry and commerce within a competitive environment in which the state allows the market to operate freely where possible but intervenes where necessary.’

It declares: ‘We will work for a sense of partnership and community in all areas of life. We recognise that the independence of individuals is safeguarded by their personal ownership of property, but that the market alone does not distribute wealth or income fairly. We support the widest possible distribution of wealth’.

This commitment to greater equality could be strengthened. There are other omissions, which have increased in importance in today’s multi-cultural Britain. They include measures for the development of social integration and cohesion, particularly by winding down state-funded faith schools.

No party is perfect, and we are obliged to compromise to get anywhere.

BrexitIn the current crisis, the Liberal Democrats have another strong card to play. Since 1959 they have been firmly in favour of (what is now called) the European Union. Labour was for withdrawal in 1983. Subsequently it changed its policy back to staying in. But Corbyn was in favour of leaving the EU until he became leader in 2015. His ambivalence during the referendum campaign was obvious.

The Liberal Democrats accept the result of the 2016 referendum but are pledged wholeheartedly to restore Britain’s strong ties with Europe, to the point of possible re-entry into the EU in the future.

So why not join the Liberal Democrats?

I just did.

I accept that others will try and retrieve something from the fragments of today’s Labour Party. Perhaps they can help build a base for progressive policies in the devastated former industrial areas, particularly in Wales and the North of England. I wish them success. We all need to work together to help make Britain and the world a better place.


14 July 2016

Bastille Day – liberté, égalité, fraternité.

Minor edits: 15-19 July 2016 and 17 August 2016.


Autobiographical Note

Born in 1946. Raised in rented council housing. Educated at state schools and at the University of Manchester. Member of the Labour Party, 1966-1968 and 1974-2001. Labour Parliamentary Candidate for Manchester Withington in 1979. Briefly advisor for Neil Kinnock and Roy Hattersley in the 1980s.

I left Labour over faith schools, inadequate House of Lords reform and neglect of economic inequality. Would have left over Iraq. Politically unaffiliated 2002-2016.

Formerly Reader at the University of Cambridge, now part-time Professor at the University of Hertfordshire. Editor in Chief of the Journal of Institutional Economics. Secretary of the World Interdisciplinary Network for Institutional Research (WINIR).

Author of 16 academic monographs in economics and 145 articles in academic journals. One of my books (How Economics Forgot History) was selected in 2016 by the World Economics Association as one of the 50 most important books in economics in the last 100 years, another (Conceptualizing Capitalism) won the 2014 Schumpeter Prize. Two honorary doctorates. Fellow of the Academy of Social Sciences.



Claeys, Gregory (1989) Thomas Paine: Social and Political Thought (London and New York: Routledge).

Fishman, William J. (1970) The Insurrectionists (London: Methuen).

Hobson, John A. (1902) Imperialism: A Study (London: James Nisbet).

Lawson, Neal (2016) ‘Social democracy without social democrats: how can the left recover?’ New Statesman. 12 May. http://www.newstatesman.com/politics/staggers/2016/05/social-democracy-without-social-democrats-how-can-left-recover.

Mill, John Stuart (1848) Principles of Political Economy with Some of Their Applications to Social Philosophy (London: Parker).

Mummery, Albert F. and Hobson, John A. (1889) The Physiology of Industry (London: John Murray).

Waldron, Jeremy (1988) The Right to Private Property (Oxford and New York: Oxford University Press).

July 14th, 2016 by