There is something tragi-comic about a politician resigning for not paying property taxes just as her party was about to raise them. In terms of political scandals, the events that forced the resignation of Angela Rayner rank pretty low. Political parties have survived worse than a resignation from the non-job of a deputy prime minister. My prediction, however, is that the Labour Party will most likely not long survive in its current form. It is on a path to political insignificance, a fate that has nothing to do with Rayner. It is the result of a total loss of contact with the economic realities of the fast-advancing 21st century.
The British-German sociologist Ralf Dahrendorf, one of the smartest people I have ever met, famously talked about the 20th century as “the Social Democratic century”. The term stands for all the parties of the centre-Left: Social Democrats, Democratic Socialists, or Labour. Dahrendorf’s characterisation was about the institutions and practices the centre-left managed to create: collective bargaining, the welfare state, pensions, universal healthcare, unemployment protection, and free education. The parties of the centre-left prided themselves on taming capitalism. They managed to turn the EU’s single market, which started off as a force for market liberalisation, into a regulatory behemoth. The Social Democrats in Germany, the French socialists, and Britain’s Labour Party did not win most elections in the 20th century. Until recently, the Conservatives were the natural party of government in the UK, as were the Gaullists in France and the Christian Democrats in Germany. But it is the parties of the centre-left that won the battle of ideas. Their main political opponents, the centre-right, were simply alternative managers of the system the centre-left created.
Today, the Left is in synchronised decline everywhere. Industrial workforces, the backbone of the centre-left’s electorate in previous decades, have disappeared. The Left has split into various parties – Greens, hard-Left, centre-left. In Germany, the SPD ended up at 16% at the February election, its worst result ever. The French Socialists are nowadays a junior partner in a political group whose only visible figure is Jean-Luc Mélenchon, the leader of the hard-left. François Hollande was the last French Socialist president. He was very keen to get to the top, but when he arrived there, he forgot what he wanted to do.
Keir Starmer is Britain’s version of Hollande. Like Hollande, he was flushed to the top by a backlash against an unpopular previous incumbent, but has been clueless since he became Prime Minister. With the help of the UK’s first-past-the-post electoral system, he managed to get two-thirds of the seats with one-third of the vote. But he does not know what to do with it.
Today Labour is polling in the same ballpark as the German Social Democrats or the French Socialists. The long-run trend is brutal. In the short-run, voting systems matter, but they cannot arrest secular decline.
The decline had already started to kick in during the 1970s and 1980s, but the collapse of the Soviet Union gave the Left a new lease of life, allowing them to reinvent themselves as globalists. The Socialist François Mitterrand was president in France at the time. Bill Clinton was soon to gain power in the US. The age of Tony Blair would follow in the UK. At that point it appeared that we were able to create a new Social Democratic age — the centrist, globalist version. It lasted for thirty years. I always thought of the World Economic Forum as the quintessential quango of that period — where Left-wing intellectuals met with the world of finance and business. From the heights of the mountains in Davos, the globalists did not see what was going on beneath them.
The age of the Left-wing globalist is gone — but vestiges remain. Starmer’s appointment of Minouche Shafik as his chief economic adviser is a throwback to that age. Shafik spent most of her career as a diplomat in international financial institutions, with a mixed record during her stint on the monetary policy committee at the Bank of England. If you are desperate and in search of a new economic strategy, as Starmer surely must be, this appears to be an odd appointment. He needed an original thinker, but he got himself a salesperson.
“The age of the Left-wing globalist is gone — but vestiges remain.”
The most visible outward sign of socialism’s failure in the 21st century is its alienation from digital technologies. Dahrendorf’s Social Democrats were creatures of the analogue age. Modern socialists are digital Luddites. When confronted with data, their instinct is to regulate. Data protection is a big deal in Europe and in the UK. In Brussels, people still celebrate the General Data Protection Regulation (GDPR) — the set of legislation that brought us the irritating cookie popups online. What the bureaucrats don’t know, and don’t care about, is that GDPR has become a nightmare for small companies in particular, and a big cost factor for everyone. It purports to protect consumers against data abuse, but it kills fledging data-based business. With GDPR and the AI directive, which subjects companies offering AI services to regulations on data protection, Europe made sure that it will not participate in the single most important industry of the 21st century. Nor will it reap the spoils of this industry as a user of AI services. AI is a technology that could deliver the much needed improvements in productivity. Unlike the Europeans, Starmer regularly pays lip service to AI and quantum computing — but his policies are the same as those of the Europeans.
His government’s mindless pursuit of the net zero target is wrecking UK energy policy. His big idea is to realign regulation with the EU. This will guarantee that the UK will remain stuck in the worst of both worlds. It does not enjoy the benefits that come with EU membership, yet it is hamstrung by its regulation.
The tech industry is the driver of economic growth in China and the US. The only socialists anywhere in the world who understood this are the Chinese. Despite this, I still get people quoting at me the old quip that the “US innovates, China imitates, and the EU regulates”. The joke is spot-on for the EU. Whether it is true for the US is a more complicated story that deserves a column on its own. But the joke gets modern China completely wrong. China has out-innovated Europe. They are the world leaders in many important pockets of high-tech engineering, leaving Europe with no chance to catch up.
If you travelled back in time and told this story to intellectuals of the 20th century, this is the part that would probably surprise them the most. The big delusion of the centre-left has been that they won the battle against the Communists. In fact, because hard-Left parties are on the rise, the post-social democratic age is looking increasingly like the pre-social democratic one. Once again, the social democrats find themselves outflanked by communists on the left and by nationalists on the right.
The West deluded itself for a long time that China was becoming Westernised. Few predicted the rise of the Right. Donald Trump has now dominated the Republican Party for a decade. Nigel Farage has a real shot at winning the next General Election. So does Marine Le Pen in France. The Alternative for Germany outpolls the venerable CDU. The German SPD’s brilliant new idea is that they want to ban the AfD. They have run out of ideas.
I see the right resurgence everywhere in Europe, including the UK, as a natural backlash to the Social Democratic age and its now dysfunctional institutions. I don’t think that the Left will reverse the trend. But they could do better by following a few simple policy rules. First, allow your economy to participate in the technologies of the 21st century. But don’t try to pick winners. We should let the private sector do it and give it the room it needs through light-touch regulation and moderate levels of taxation.
Second, when productivity growth is low, the only source of available money for redistribution should be structural reforms like changes to welfare and healthcare systems. Another option is the privatisation of dysfunctional state-owned entities. Don’t do what Rachel Reeves is about to do: plug your fiscal holes through higher taxes, which ends up depressing productivity growth. In Germany, Lars Klingbeil, finance minister and SPD chief, is about to do the same as Reeves is.
And finally: change the story on immigration. Make it your priority that businesses can get the labour supply they need. Crack down on crime committed by immigrants. You are not going to beat Farage by doing what he does. Healthy economies not fret about immigration nearly as much as unhealthy ones.
The centre-left will absolutely not follow this advice. What was once said about the Bourbons applies to them too. They learnt nothing. And they have forgotten nothing. Starmer has no tech policy, no policies for structural reform, he will raise taxes, and he will follow Farage on immigration.
The Left is still overrepresented in the media, in academia, and in the legal system, but that only amplifies the delusion. Therein lies the real tragedy. The Left blames its misfortunes on Right-wing conspiracies or on social media. In their worldview, there can be no other explanation. They live in a bubble where the like-minded reinforce each others’ views — a cocooned version of Dahrendorf’s 20th century.
That is why I think Labour is finished as a force of politics. Angela Rayner would be gone either way.
