The Liberal-Labour dialectic


“Worth reading to show how Liberals have played their part in the development of much of Labour’s social and economic policies over the years” John Rogan


Geoffrey M. Hodgson



Labour did not win a majority in the 2017 general election. A future majority Labour government seems less likely than a progressive alliance of Labour with other parties.

But as Neal Lawson put it: “Labour’s tribalists, including its leader it seems, simply cannot stand the idea of working with others.” Furthermore, Britain’s unfair electoral system means that, even with 20 per cent of the vote in the new constituency boundaries, Labour could retain about 150 MPs, while the Liberal Democrats would be likely to get less than 50 MPs with the same share of the overall vote.

Labour’s tribalism and self-interest could transform it into a rump party of purists in permanent opposition, rather than as a serious engine of political power that can tackle the pressing problems of poverty, inequality, poor education, declining health services and global warming.

Labour has depended on Liberalism

My purpose here is to argue that such insularity is historically ungrounded. Furthermore, while Liberals too have their sins – from support of the First Word War to endorsement of Tory austerity in 2010-2015 – the very vitality and survival of the Labour Party has been largely due to Liberals and liberalism. Strange but true.

“Nonsense,” you might say: “Labour was built on the trade unions and the organised working class.” True. But what made strong trade unionism possible?

William Ewart Gladstone

Trade unions were made legal in the UK for the first time in 1871, under the Liberal Prime Minister William Ewart Gladstone. Gladstone also introduced the Representation of the People Act 1884, which extended the right to vote from roughly 28 per cent (in 1867) to about 60 per cent of adult males.

Liberals also introduced the Education Act of 1870, which established schooling for all children between the ages of 5 and 12 in England and Wales. (It was already instituted in Scotland.) This widened literacy and political awareness.

Liberalism in the nineteenth century made possible the widespread development of trade unionism and the election of working class members of parliament. Many of these reforms were prompted by the expansion of the industrial working class and fears of riot or revolution. The Lib-Lab dialectic has run both ways.

Gladstone was an individualistic Liberal, advocating low taxes and a minimal state. But from the origins of liberalism in the Enlightenment, there have co-existed welfarist, cooperative and redistributive strains within liberalism.

Thomas Paine

These include the proposals by Tom Paine (1737-1809) for welfare provision and redistributive wealth taxes. John Stuart Mill (1806-1883) supported taxes on unearned income, inheritance taxes, trade unions, worker cooperatives, participatory democracy, votes for women as well as men, and care for the natural environment. Thomas Henry Green (1836-1882) argued that the state should protect the social, political and economic environments in which individuals could freely develop. Liberalism has always fostered notions of social obligation beyond narrow self-interest.

As the male franchise was widened, Liberals recruited working-class candidates, including those financially maintained by trade unions. The first Lib-Lab candidate stood in the Southwark by-election of 1870. The Lib-Labs represented working class interests but remained within the Liberal Party.

But as socialist ideas became more widespread, some working-class leaders began to move away from the Liberals. The Independent Labour Party was formed in 1893 and it put up its own candidates in the 1895 general election. The ILP was involved in the formation of the Labour Representation Committee in 1900, which was renamed the Labour Party in 1906. This was the great schism between Labour and Liberalism.

Liberalism, solidarity and welfare

Gladstone’s resignation in 1894 was partly prompted by his opposition to the proposal by his Liberal chancellor Sir William Harcourt to introduce death duties – a substantial tax on property. These events dramatized the tension between individualist and redistributive-welfarist strands within liberalism. Even after Gladstone’s departure, the Liberal Party remained internally divided on these issues, and it suffered a cataclysmic defeat in the 1895 general election.

Liberals were also divided on the question of Irish home rule, imperialism and war. A faction of “Liberal Unionists” broke away to form their own party in 1886: they entered a coalition with the Tories in 1900 and later fused with them.

But this period also saw the rise of a “new” or “modern” liberalism in both Britain and the United States. It stressed the importance of economic equality, a welfare state and judicious state intervention in a market economy. A key British intellectual involved in this revival was John Atkinson Hobson (1858-1940).

John A Hobson

Frustrated by the Liberal Party divisions of the 1880s and 1890s, Hobson had been in favour of the formation of a new party, but by 1901 he was calling for an alliance between labour representatives such as Keir Hardie and “progressive” Liberals. But Hardie eventually came to the conclusion that his Independent Labour Party had “nothing in common” with the Liberals.

A revived Liberal Party won a huge election victory in 1906, and Hobson returned to working within its ranks. After the 1910 general election the Liberal Party did not have a majority and formed a coalition with 42 Labour Party MPs who had been elected. The Liberal Henry Campbell-Bannerman was Prime Minister until 1908, followed by Herbert Asquith, who was in power until 1916.

Aware of the need to retain and extend support among the working class, the 1906-1914 Liberal-led governments executed a series of major reforms and laid the foundations of the British welfare state. These reforms included the introduction of a state pension, compulsory health insurance, unemployment and sickness pay, an extension of free secondary education, and a reform of the House of Lords. As Chancellor of the Exchequer from 1908 to 1915, David Lloyd George was a key figure in the introduction of many of these reforms.

Liberal decline and Labour gain

Subsequently, the Liberal Party suffered a rapid decline. In his classic diagnosis, George Dangerfield put this down to the crises over Ireland, where the Liberals were unable to prevent violence and revolt, to the rise of the labour movement and industrial militancy, and to votes for women, over which the Liberal Party fatally hesitated. During the war, the Liberal government antagonised progressive support by introducing illiberal measures including conscription and restrictions on freedom of speech.

David Lloyd George

The Liberal Party split again in 1916, when a wing led by Lloyd George entered a coalition with the Conservatives. The presence of the new and vigorous Labour Party on the Left gave a new home to disenchanted Liberals. Hobson quit the Liberal party in 1916, later to dally with Labour. But he always advocated a mixed economy and insisted on the virtues of market competition and extensive private ownership.

The much-diminished Liberal group in Parliament propped up the minority Labour governments in 1924 and 1929.

The Liberal share of the vote slumped, falling as low as 10 per cent in 1931. In the interwar period, liberalism was ground down by the rising, opposed totalitarianisms of Communism and fascism. It had to wait to the 1970s to begin a long, slow and punctuated revival.

The Labour Party was built on the twin pillars of socialist ideology and strong trade unionism. It rose from 21 per cent of the vote in 1918 to 48 per cent of the vote in 1945.

But these pillars are inadequate. Trade unionism is important for the defence of worker’s rights and as a counterbalance to powerful corporate interests. But trade unionism does not a government build. It lacks the hegemonic capacity to unite diverse sectional interests in a fractured and class-divided society.

At the outset, Labour’s socialism offered no defence of a private sector or of private property. From 1918 to 1995, Labour’s Clause Four offered common but not private or mixed ownership.

Clement Attlee

In 1937, eight years before he became Prime Minister, Clement Attlee wrote of the “evils” of capitalism: their “cause is the private ownership of the means of life; the remedy is public ownership.” Attlee approvingly quoted the words of Bertrand Russell: “Socialism means the common ownership of land and capital together with a democratic form of government. … It involves the abolition of all unearned wealth and of all private control over the means of livelihood of the workers.”

It was possible to advance such views at the time, without much loss of popular appeal. The full horrors of Stalin’s Soviet Union were initially unappreciated and then masked by the Soviet alliance with Western powers in the Second World War. The unprecedented famines and other brutalities of Mao Zedong were yet to come.

Liberalism defined Labour in power

After 1945, the position of many leading Labour Party members began to shift. The realities of gaining and holding on to power – as a majority party for the first time – dramatized the political and practical unfeasibility of abolishing all private enterprise. Some nationalization was achieved, but a large private sector remained. Then the outbreak of the Cold War in 1948 impelled everyone to make a choice between capitalism and democracy on the one hand, and state ownership and totalitarianism on the other.

The twin pillars of trade unionism and Clause Four socialism could not, and never will, sustain Labour in power. Labour nationalized several industries, but hardly more than the Liberal Hobson had proposed as early as 1909.

The greatest achievement of the 1945-1951 Labour government was its massive development of the welfare state, upon the foundations laid down by the Liberals in 1906-1914. In this second round, Liberals still played a major role.

Beveridge, Keynes and social democracy

William Beveridge

William Beveridge (1879-1963) was originally close to the Fabians but, against the prevailing current, he moved toward the Liberals, and was briefly a Liberal MP from 1944-1945. His wartime Beveridge Report (1942) became the foundation Labour’s post-1945 welfare state.

Impelled by a strong vision of social justice, Beveridge proposed a system of universal national insurance, conferring benefits to people who were sick, unemployed, retired or widowed. He argued that this system would provide a minimum standard of living “below which no one should be allowed to fall”. His proposals were developed in conjunction with the plan for a National Health Service, as developed by the Ministry of Health.

John Maynard Keynes

Near-full employment was pivotal to his system of social welfare. He expanded on this in his 1944 book Full Employment in a Free Society. In developing this goal, Beveridge relied explicitly on the policy approach developed by another great Liberal – John Maynard Keynes. Keynes was instrumental in instating full employment a major policy goal. In his General Theory of Employment, Interest and Money he provided the theoretical underpinnings of this policy.

Much of the success of the 1945-51 Labour government depended on Liberal ideas. The bland mantra of common ownership provided neither a theoretical rationale nor a practical grounding for detailed policy.

When the Labour government tackled the problems of poverty, inequality and unrealised human potential within actually existing capitalism, they turned to Liberal thinkers such as Hobson, Keynes and Beveridge, who had grappled with the policy issues for years.

Insofar as Labour became a social-democratic rather than a genuinely socialist party, it has done so by borrowing ideas from liberals. (Socialism today is too-often taken to mean almost anything, but it was originally defined by Robert Owen as the abolition of private property.)

Labour after 1951

The graph of Labour’s share of the vote shows a long decline from its peak in 1951 to the disastrous result in 1983. The Labour governments of 1964-1970 and 1974-1979 had seen major reforms under the premiership of Harold Wilson. From 1974 to 1979 there was a pact between the Liberals in Parliament and the Labour Government.

But the Labour pillar of trade unionism begat the strike wave in the so-called 1978-1979 Winter of Discontent, and Labour’s Clause Four mantra still hung around its neck.

These enhanced the conditions for the victory of Margaret Thatcher in the 1979 general election. With an inadequately-developed alternative ideology sustaining a mixed economy, Labour fell back on its founding twin pillars and lurched the Left. The result was the disaster of 1983 and Labour’s lowest share of the vote since 1918.

When Neil Kinnock became Labour leader in 1983 he pulled the party back from the brink. It took a further 14 years for Labour to recover sufficiently to win a general election.

The coalition that never was

Until the day of polling in May 1997, when the scale of his majority became clear, Tony Blair considered a coalition with the Liberal Democrats after the election, and negotiated with Paddy Ashdown on that possibility. In his first speech to a Labour conference after his landslide election victory, Blair declared:

“my heroes aren’t just Ernie Bevin, Nye Bevan and Attlee. They are also Keynes, Beveridge, Lloyd George. Division among radicals almost one hundred years ago resulted in a 20th century dominated by Conservatives. I want the 21st century to be the century of the radicals.”

Tony Blair

Blair of course referred to the 1900 decision to set up a party in parliament independent of the Liberals, to represent working people. Blair’s election victory was impelled by shift toward liberalism and an explicit rejection of classical socialism. He tackled the twin pillars of trade unionism and common ownership, upon which Labour was founded.

But Blair’s adjustments on these fronts were problematic and limited, and he did not change the party’s soul. His reputation became tarnished by the Iraq invasion of 2003.

The opportunity of another coalition emerged after Labour’s loss of an overall majority in 2010. But instead, the Liberal Democrats turned to the Tories and formed a coalition with them. One reason for this choice was that the Liberal Democrats under Nick Clegg had abandoned their Keynesian heritage and accepted a strategy of economic austerity. This mistake cost the Liberal Democrats dearly in the 2015 election.

When Labour suffered a second successive defeat in 2015 it moved again to the Left, ending in 2015 and 2016 with the election and re-election of a hard leftist with little experience in government and a preference for slogans over both theoretical argument and practical details.

Around sixty percent of the membership voted for Jeremy Corbyn on these occasions, showing that Labour had retained its 1918 roots. This has created the conditions for a similar return to Labour’s 1918 share of the vote.

Conclusion: history in reverse

The Labour Party was founded in an era of mass industrial trade unionism and increasing ideological support for socialism, as classically defined. Both of these forces have been gravely weakened and are in dramatic decline. Traditional trade unionism has not simply been undermined by the anti-union legislation by Conservative governments. Trade unions face vastly transformed workplaces with a much more fragmented workforce, often engaged in tasks that require detailed experience and specialist skills. To survive, their role must be transformed.

But the unions have been slow to adapt to this new reality and have declined in strength. Where some disruptive power has been retained – such as on some parts of the railway system – they hasten the demise of their jobs and their replacement by robots.

The ideological appeal of classical socialism has been fatally undermined by the practical experiments in Russia, China, North Korea, Cambodia, Cuba, Venezuela and elsewhere. These experiments have without exception undermined human rights and have led to an estimated total of 90 million deaths.

Jeremy Corbyn

From 1945 Labour was unable to rely on the twin pillars of trade unionism and socialism but it retained them nevertheless. Corbyn makes them central once again, but his anachronistic strategy is doomed to failure.

Labour’s problems are exacerbated by internal divisions over immigration, Brexit, defence and NATO (in a time of increasing international tension and insecurity). The Liberal Democrats alone speak for the 48 per cent that voted to remain in the European Union.


5 January 2017

Edited 6-8, 14 January, 1 July


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

Wrong Turnings: How the Left Got Lost

To be published by University of Chicago Press in November 2017



Allett, John (1981) New Liberalism: The Political Economy of J. A. Hobson (Toronto: University of Toronto Press).

Attlee, Clement R. (1937) The Labour Party in Perspective (London: Gollancz).

Beveridge, William (1944) Full Employment in a Free Society (London: Constable).

Clarke, Peter (1978) Liberals and Social Democrats (Cambridge: Cambridge University Press).

Dangerfield, George (1935) The Strange Death of Liberal England (London: Constable).

Harrop, Andrew (2017) ‘Stuck: How Labour is too weak to win, and too strong to die’, 3 January (London: Fabian Society).

Hobson, John A. (1909) The Crisis of Liberalism: New Issues of Democracy (London: King).

Hodgson, Geoffrey M. (2017) Wrong Turnings: How the Left Got Lost (Chicago: University of Chicago Press, forthcoming).

Keynes, John Maynard (1936) The General Theory of Employment, Interest and Money (London: Macmillan).

Lawson, Neil (2017) “Labour’s poll woes show why we need to do a deal with rival parties”, Labour List, 4 January.

Townshend, Jules (1990) J. A. Hobson (Manchester: Manchester University Press).


January 5th, 2017 by