The rise of "Bernism" and "Corbynomics" - accounting for the leftward turn in social democracy

How do we account for the victory of Jeremy Corbyn in British Labour's leadership election?

Many adherents of Blairite philosophies have been decrying his victory as a sad day for British Labour. Dan Hodges,, writing in the Daily Telegraph, described his victory as "the day the Labour party died", stating that "Labour has not just relinquished any prospect of being a party of government. It has just relinquished any prospect of being a party of opposition". 

During the leadership campaign, Tony Blair himself chimed in, stating that "The Labour party is in danger more mortal today than at any point in the over 100 years of its existence." 

In some ways this reaction is understandable. For a generation of Blairites and centrist social democrats, Jeremy Corbyn's victory represents a repudiation of their project. Corbyn represents everything they tried to expunge from the Labour party in the 1980s, in both image and policy substance.

Blair and others were brought up in a political environment where Thatcherism was ascendant, and where someone with Jeremy Corbyn's views would almost certainly have been unelectable.

Why then, has Blairism, the most electorally successful period in British Labour history, been expunged by Labour party members?

Some have blamed entryism by left groups, but I am not so convinced. Jeremy Corbyn's margin of victory was so convincing, that even without the large range of new members and registered supporters, he would likely still have convincingly won an election.

I think there is a much easier explanation. 2015 is not the 1980s. Politically, social democratic parties are struggling everywhere, but not for the same reasons that they struggled in the 1980s.

More importantly, the policy challenges of today are different to the 1980s. Centrist social democracy appears weak and ideologically impotent.

The economic policy challenges of today

In Europe and North America, the economy has undergone a fundamental transition.

In response to the GFC, many governments initiated large scale fiscal stimulus packages to bail out financial institutions and to put a floor under the economic recession.

The vast majority of these governments were already in debt when the crash occured, and had little room for maneuver. Not only did the global financial crisis destroy economic growth, it also blew a hole in future tax revenues.

Economic growth has been sluggish in the United States and non-existent in some parts of Europe. This has had tremendous consequences for governments and workers.


The impact on working and middle class people in Europe and North America

In many European countries, unemployment remains at depression-levels. In countries like Spain, Italy andd Greece, youth unemployment hovers at 50 percent or higher.

Those who do have jobs have also seen stagnant wages growth. In the United Kingdom, real wages growth has only just returned to levels higher than inflation. In the United States the situation has been similar.

In many countries with a large public sector, high government debt has meant heavy restrictions on public sector wage increases and pensions. The best example is, of course, Greece, who has had to substantially cut public sector jobs, wages and pensions in exchange for bailout payments.

When you break down the statistics by social class, many working class people have seen their real wages falling. Middle class people have seen real wages stagnate.

In The United States, while Obamacare has helped fix the health care crisis in many states, there are still problems. Many states have low minimum wages, heavy restrictions on unionisation and have not signed up to the health insurance exchanges and medicaid expansion. Bernie Sanders has highlighted that the vast majority of income growth in America has gone to the top 1%, while poverty rates remain high.

Given all of these problems, governments would ordinarily have a generous social safety net system to reduce some of the impacts of inequality. However, this has often not occurred. When cash-strapped governments have faced the choice between increasing progressive taxation and cutting benefits, they have too often chosen the latter.

Governments have cut back on tax concessions, unemployment benefits, pensions, housing benefits and other services that help put money in the pockets of vulnerable people. This arguably has contributed to a slow economic consumer recovery, as workers have lower disposable income.

Even in some of the better off economies, the impacts have been substantial. In the United Kingdom, the government has cut welfare payments, pensions, and has placed taxes on vacant rooms in public housing (the "bedroom tax"). As a result, there has been an explosion of vulnerable people using food banks.  Since his re-election, David Cameron has proposed a welfare bill that would place a total cap on the amount of welfare a person can receive, making it near-impossible for a working class person on benefits to live in a major UK city. While he has also argued for a rise in the living wage, in the short term there is likely to be another explosion in poverty and food bank use.

One of the other big issues of this age is the cost of housing. Although inflation has been low almost everywhere, low interest rates have contributed to a continuing high expansion of the cost of housing, well beyond the growth in real wages. First home buyers in particular  have found it difficult to get in the property market, especially in the face of an explosion of foreign investment from countries like China and the Middle east.


To summarise these points, during this decade many countries face a number of the following economic problems: unemployment is high, real wages are stagnant for workers and the middle class, house prices and rents are exorbitantly high, government debt is high,and tax reciepts are down.

Governments have often responded with policies that make inequality worse, including cutting welfare and tax concessions aimed at the poor, rather than increasing taxes on the middle and upper class.

It is a perfect storm of factors - and yet the centre-left has seemed becalmed.


The impact on social democratic politics

It was originally thought that the global financial crisis would usher in a new era of social democracy, finally reforming unregulated global capitalism. but it didn't work out that way.

Instead, vulnerable people in the middle classes have often returned to conservative governments. Many voters have been scared by high rates of government debt, and have wished for a return to relative economic stability.

The former Labour leader Ed Miliband did understand some of these fundamental economic problems, of stagnant wages, high unemployement and benefit cuts in combination. He called this phenomenon the "squeezed middle". But in response, his ideological and policy direction seemed confused.

His 2015 election campaign swung from left to right - one minute proposing a freeze on energy bills, the next minute literally carving a fiscal restriction policy into stone.

The peculiar thing about Ed Miliband's campaign was that it was criticised on both sides. those on the left criticised it as "austerity-lite". On the other hand, the British Labour MP Mary Creagh described a letter she received from a constituent stating that he feared the economy was going to be destroyed by Labour. Liz Kendall and other Blairites argued that the Labour campaign was too anti-business, and continue to argue that it was the reason Labour lost the election.

Who is right? Did Labour lose in 2015 because it was too radical, or because was there no brand differentiation?


The rise of the hard left and decline of the third way

Politically, social democracy finds itself weakened and out of power in many countries. Caught between "economic responsibility" and "anti-austerity", it sits in nowhere land. Frustrated, many people have turned elsewhere.

In other countries, social democratic parties have been under attack from reinvigorated socialist parties (like SYRIZA), populist parties (like Podemos, or the Italism 5-star movement), or Right-wing nationalist parties (like UKIP or Marie Le Pen's  Front Nationale). Some have even turned to independence movements (like the Scottish National party or the movement for Catalonian independence).

All of these are, in their own way, a reaction to a perceived impotence of the political class to address serious economic problems. They have lashed out at "political elites" who support the eisting pro-globalisation, neoliberal cosensus. Social democratic parties, who swallowed the neoliberal consensus before the crash, have been left in the dark after it. Many of their leaders have been trained in the ways of moderation and pragmatism, but these seem unsuited to our political age.

The question for social democracy is simple: Do we return to the centre and abandon an interventionist approach to get elected, or do we return to a critique of capitalism in response to new, structural  economic challenges?

British Labour party members answered that question emphatically last week. They want differentiation, and a more muscular social democracy. They do not want the bizarre spectacle of three Labour leadership candidates abstaining on a welfare bill that would place a benefit cap on some of the most vulnerable people in society.  They wanted to draw a line in the sand and say that they weren't going to take it any more.

Part of the reason why they went back to a more hard line policy is because moderate, centrist social democracy is ideologically weak. It has not ideologically refreshed itself since the Blair era. There is no convincing moderate social democratic manifesto for government, like Tony Blair had in 1997.

To pick one example: what is the Blairite policy to fix the housing crisis? If one exists, it hasn't been heard. Into this vacuum steps Jeremy Corbyn proposing rent controls, opposing right to buy, and a substantial increase to public housing stock. The right policies? I don't now. But the contrast is substantial.

What is the Blairite vision for real wages growth and unemployment? Other than a whole lot of pro-business rhetoric, not very much. Corbyn walks in and says "you can't cut your way to prosperity", throws a few ideas out there like mass stimulus spending, higher progressive taxes and money printing for infrastructure investment, and suddenly he looks like a man with a plan. Whether it's a good plan or not is besides the point. At least he has one.

Corbyn's personal style must not be underestimated. He does not appear to be a "typical Westminster politician". The same could be said about Bernie Sanders. Both have the luxury of authenticity, and people have responded positively to them. In their own way, the Canadian New Democratic Party under Jack Layton did as well. They generated excitement around their strong vision and plain speaking. They know what they believve, and they say it. People appreciate honesty and plain speaking.

The contrast with leaders like Bill Shorten could not be more stark. Shorten struggles to articulate his vision with passion and gusto.  Hillary Clinton's campaign has been criticised as well. Despite the fact that her 2016 platform is noticeably more left-wing than her 2008 campaign in many areas (especially Industrial relations and child care), her campaign has drawn criticism for accepting donations from many wall street connections. The fact that she has shifted around positions and has appeard cllose to the big end of town has made her look inauthentic to many.

Where to?

Last week on insiders, one of the panellists asked a very interesting question - is Bill Shorten the last centre-right leader of a centre-left party in the western world?

I asked the question on twitter. A friend of mine reminded me of Matteo Renzo in Italy and Thomas Mulcair in Canada. Fair comment. But that's about it. Barack Obama, while more of an American liberal, did not come from the right wing of his party. Neither did Ed Miliband.

It should be remembered that Bill Shorten only sits in his job because of the Labor caucus - not party members, who voted for the left's Anthony Albanese in a similar numbers to the percentage won by Jeremy Corbyn.

What do we conclude from all this?

There seems to be a mood for a more muscular, market-critical social democratic vision. People are looking for an interventionist solution to the housing crisis, real wages, unemployment and inequality, not a rehash of the free market solutions of before.

People chose Jeremy Corbyn because he was authentic and had a clear vision that tackled the problems of today. It made him popular and a winner. Candidates with his views are likely to continue to experience a rush of popularity unless the moderates in social democratic parties come up with  a convincing centrist vision that can solve the problems of today.

Perhaps instead of decrying the victory of those on the hard left, they should come up with a new centrist manifesto for today.

If social democracy stays with an "anti-austerity" vision, the next question will be even more simple. Is someone like Jeremy Corbyn just as unelectable at he would have been 30 years ago, or is it possible for someone like him to win government?

Lachlan Drummond
NSW Fabians (Vice President)