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The rise and fall of Britain's neoliberals; the Social Democratic Party is kinder than Thatcher, smarter than Labour - so why is it falling apart?

The Rise and Fall of Britain's Neoliberals

Six years ago, when four members of the British Parliament walked out of the Labour party and formed the left-center Social Democratic party, all signs indicated a desperate need, and indeed a popular demand, for a third party. When it was founded, polls showed that well over 50 percent of the voters would vote for the SDP--if they thought it had a chance of winning. But that has turned out to be a gigantic "if.' Now, following the general election in June, when it failed to break through the near impenetrable barrier of a first-past-the-post electoral system, the SDP has split apart and lies in tattered disarray. It has fallen prey to the fatal tendency of small parties out of power to turn upon themselves looking for scapegoats.

After Labour lost the 1979 general election to Margaret Thatcher, it did what it has always done: it ceded power to its most left-wing elements, which succeeded in changing the way the party leadership was selected. That resulted in the election of Michael Foot, elderly guru and a keeper of the socialist conscience. The party turned unilateralist, calling for the abolition of Britain's independent nuclear deterrent and opposing the installation of U.S. cruise missiles on British soil. It produced a platform calling for more nationalization, including the nationalization of banks, and other unpopular socialist policies that flew in the face of changes taking place in the wake of Margaret Thatcher's victory.

Meanwhile, Mrs. Thatcher launched her own revolution, breaking the postwar consensus in British politics. She declared war on the welfare state and the attitudes that went with it. She began to outline her program for the privatization of large parts of nationalized industry. The policy that won her the most support on her road to victory was the sale of public housing to its tenants at knock-down prices. She was not personally pupular--indeed her personal rating fell to the lowest of any prime minister ever--but she was ruthlessly determined and admired for her strength.

The great majority of voters appeared to have no taste for the politics of either extreme, and were uneasy, sometimes indignant at the Manichean choice laid out before them. Moreover, the SDP leaders--the Gang of Four--who formed the new party consisted of Roy Jenkins, then president of the Commission of the European Economic Community, who had been a Labour chancellor of the exchequer and home secretary; Shirley Williams, who had, among other posts, been a Labour education secretary; William Rodgers, a transport minister; and David Owen, a health minister and a remarkably young foreign secretary. All had been part of a faction of the right within the Labour party as it moved rapidly leftwards.

A kick-start for business

What kind of party did the Gang of Four set out to create? The Labour and Conservative parties denounced it as unprincipled, rootless, destined to bend with the prevailing wind, stealing a little from either side, appealing to that essentially antipolitical urge found in all democracies where some people yearn hopelessly for less conflict and more agreement. The very same accusations are made in the United States against the neoliberals.

Certain broad policies were laid down in the original SDP constitution--a commitment to the Common Market and to NATO and to the creation of a more open and classless society. But it took time for the real character of the party to emerge. Gradually, the SDP made a wholehearted commitment to the market economy and to free enterprise--words never used in the Labour party.

It was not until after the SDP's first general election in 1983, when David Owen took over the leadership, that the SDP started to appreciate the scale and the permanence of the Thatcher revolution in British politics. Whether Thatcher was the cause or the result, the pursuit of profit and private enterprise was now at the top of the national political agenda. As nationalized industries were sold off by the government, public anxiety turned to strong approval. The government offered shares in these industries at bargain prices, creating a vast new pool of shareholders from people who had never owned a share in their lives.

Under Owen, the SDP moved away from an automatic opposition to these sell-offs. It urged competition in industry and opposed the establishment of monopolies in the newly privatized telephone and gas companies. Competition became the cornerstone of the SDP's industrial and enterprise policies, setting it apart from the far left and the far right. (The Labour party, following the traditional trade union and socialist lines, opposed all privatization; the Conservative party favored privatization but tolerated monopolies.) SDP advocated tax-free bonds for high-risk investments and regional development agencies--all to give industry a kick-start.

The importance of this was not so much the policies themselves--the electorate was never much interested in the specifics--but the waving of a bright flag to signal the SDP's belief in the value of enterprise for its own sake. While the Labour party had truculently accepted the need for a private sector to generate wealth so they could tax it back and spend it themselves, the SDP regarded private wealth as good and high taxation as economically undesirable. They never ducked the fact that taxes would be slightly higher under the SDP, but they refused to return to the astronomical rates that the Conservatives had brought down steadily.

What made the SDP more than a watered-down Conservative party? It put forward the most radical program for redistribution of wealth to the poor that any party had yet proposed. Because the Labour party was locked into class warfare--trade unions against management--it was ideologically unable to recognize that the majority of British were doing well and that their standards of living were rising fast. Labour also ignored those who were not represented by trade unions, those who were falling away just as fast--the old, the one-parent families, the unemployed and the unemployable.

Only the SDP, free of the grip of the trade unions, was able to tackle the problem realistically. It advocated that money be redistributed not just from the rich but from all those who were doing well. In practical terms, this meant removing some anomalous tax allowances from those in work and giving that money in benefits to the poor. The Married Man's Tax Allowance was the biggest of these, predicated on an outdated assumption that wives were an economic burden even though 70 percent now worked.

The SDP also advocated a major shift away from universal benefits toward benefits targeted to the poor. That meant increasing the state pension for those with no other income, for instance, and gradually reducing it for the rest. It also meant taking the universal child benefit of seven pounds a week, greatly increasing it, but taxing it back from families who did not need it.

The SDP was determined to expand the economy in a Keynesian fashion. The Labour party made the same commitment but offered no mechanism to stop the wage demands of the unions or to create new jobs for the poor. In government, Labour had proved itself entirely incapable of stopping rapid wage inflation. The trade unions were their paymasters and played a large role in Labour government economic policymaking. The SDP had no such ties and was insistent that new money injected into the economy should be targeted at industries that would create the most employment, especially in the inner cities.

The SDP owed its rise to the changing class perceptions of the past ten years. The blue-collar workforce had rapidly diminished into a minority. Home ownership had grown as fast. Only the poor now looked to the state for their security. Most wanted the state to turn from provider to enabler. Yet both old parties represented an outdated view of class loyalty. The very act of supporting the SDP was a gesture of classlessness, and much of its support came from white-collar workers, young managers, and technocrats, whose parents were blue-collar workers. It's identity as a classless party was probably as much of an attraction as any of its policies.

A ramshackle rump

There was euphoria and wild optimism in the SDP's early days. They won some spectacular by-elections to Parliament and local council elections up and down the country. A large and influential part of the intelligentsia flocked to their support. Local chapters grew up overnight, often manned by people with no campaign experience who were wide-eyed about what could be achieved in a short time. But wiser political heads warned of the inexorable mathematics of the electoral system, unless there were further major breaks in the two parties.

The voters understand all too well the nature of Britain's bizarre and antiquated winner-takes-all electoral system, which exists elsewhere only in ex-British colonies where Britain left behind its own miserable constitution. It is a system irredeemably built around a two-party democracy, and it crushes third-party contenders to death. It is possible for a third party to have more than 30 percent of the popular vote, spread evenly around the country, and win scarcely a seat in Parliament.

There was one other major obstacle in the SDP's path. Already occupying the center ground was the old Liberal party, a ramshackle rump of dubious principles, a repository for a mild protest vote over the years. It was the remains of the grand old Liberal party of the nineteenth century, which was superceded by the Labour party in the first decade of this century. Traditionally its vote went up when the Conservatives were in power, the party becoming a safe resting place for disaffected Tories, and went down when Labour was in--down sometimes to as low as 3 percent in the polls.

The Liberal party's most remarkable quality has been its ability to survive through the dark night of the past 60 years. Its survival has depended on dedicated local activists. In some areas they have been very right-wing and in others almost indistinguishable from the Labour party. It's clearest identity has been with environmental issues, antinuclear power, and, on many occasions, antinuclear weapons. Almost anyone who calls himself a Liberal and chooses to set up a local chapter can do so with no interference from the central party, which has never had funds to impose a central organization. This inability to run a formal party structure has been turned, over the years, into a virtue by Liberal activists, who swear by the independence of every local party and the right of any candidate to control election literature and endorse any policies that capture his or her fancy.

The Liberal party's greatest asset, though, is its leader, David Steel. He has tried to produce credible policies from this hopelessly anarchic party structure. But at the annual party conference, where almost any Liberal can turn up and vote, he finds his policies thrown askew, particularly on the disarmament issue. He has never taken on the party and confronted its internal contradictions.

For the newly arrived SDP it seemed electorally impossible to put up candidates against the Liberals in the center ground. It would have guaranteed failure for both parties in all seats. That meant that an electoral pact, an alliance, was essential.

A tangle of tin cans

After much wrangling, each party was allocated roughly half the districts in which to put up candidates. The Liberals took the 50 best seats, on the grounds that their candidates had been fighting hard for years and couldn't and wouldn't be stood down in favor of SDP newcomers. Even at the end of the inevitably bitter shake-out, some Liberal candidates held out in their local redoubts and refused to be budged.

The dazzling new rocket taking off from its launch pad into the clear blue skies now had the Liberal party attached to it, holding it back like a tangle of old tin cans. The Liberal party is an old party of failure, about whom there have been so many jokes that it has its own self-mocking song book of lost causes and fruitless campaigns. The Liberals are dubbed "the party of lost deposits' because parliamentary candidates must put up 1,000 pounds as a deposit.

One major policy difference between the Liberals and the SDP was defense. David Steel and his supporters are not unilateralists, but almost every year in the past ten years the Liberal Assembly has voted against nuclear weapons. It seems to be an extraordinary form of masochism that has gripped both the Liberal and Labour parties for the past two elections. However often the polls and their own common sense tell them that no party will ever win an election in Britain if it looks soft on defense, they prefer the feel of their own consciences to winning.

Being allied with a party widely regarded as unilateralist has been a great liability for the SDP. The SDP's Owen has had to spend an inordinate amount of time sounding tough about defense to try to counterbalance that impression. Only months before the last election, the destructive Liberal Assembly, in a fit of self-indulgence, again voted against nuclear weapons. As a result, throughout the election, the Alliance polling showed that people's strongest reason for not voting Alliance was weakness on defense. Defense is a curious issue. Not many people lie in bed fearing Russian invasion. Yet, as an issue, it has become a Plimsoll line, testing the seaworthiness of a political party. A whiff of unilateralism makes a party unelectable.

Despite their defense stance, Liberals are not left-wing in all ways. They strongly resisted the SDP's poverty package as far too radical and were dragged into agreement only shortly before the last election.

Liberal party members, of course, saw themselves as the key to the Alliance. They were veterans. They had staying power in adversity, while the SDP leaders would probably pack up and go home if they didn't win the first election. Some Liberals said the SDP was far too right-wing; others said it was still too contaminated by its Labour party origins. They were suspicious, jealous, and angry that SDP members had not chosen to join the Liberal party in the first place.

So, uneasily, the two parties went into the 1983 election together. Roy Jenkins, the elected SDP leader, was given the somewhat preposterous title of prime minister designate, while David Steel was named leader of the joint campaign. The two fell out during the campaign after Jenkins's performance on television resulted in a drop in his personal poll ratings. Steel knifed him neatly and publicly in the back and emerged for the second part of the campaign as the effective leader.

The result was a disappointment but not a disaster. The Alliance won 26 percent of the vote, and the Labour party self-destructed into its worst vote ever, only 28 percent. Mrs. Thatcher won in a colossal landslide, despite getting only 46 percent of the vote, less than she had polled in 1979. There was no despair in the SDP, though the members of Parliament who had come over from Labour lost their seats, as predicted. It seemed that Labour was in terminal decline, and with just one more push, the Alliance would overtake them next time.

Thatcher's revolution

Shortly after the 1983 election, David Owen took over as an SDP leader of a very different order. Jenkins was a distinguished establishment figure of culture, elegance, and charm, a speechmaker of exceptional thoughtfulness and intellect, yet he was uninterested in the daily cut and thrust of politicking. As an older man, he harkened back to the failed policies of the sixties and seventies, notably wage restraint. He never really grappled with the changed political reality that helped to create the SDP.

Under Owen, the SDP found itself in very different hands. Long before his accession, a distinct froideur had grown up between Owen and the rest of the Gang of Four--Jenkins, Williams, and Rodgers--whose feet were still too firmly entrenched in their Labour roots. Shirley Williams saw her role as the conscience of the party. A magnificantly moving speaker with a silken voice and emotional delivery, she is still plainly ill at ease with her defection from socialism. She had always been, her ex-cabinet colleagues say, a muddled thinker, wishing to be seen firmly on the left, yet never quite enunciating what these left-wing policies should be. Rodgers suffered some of the same confusion. They constantly took rear-guard actions to try to undermine Owen, yet it was never clear what their objections were. It was just their vague feeling that Owen was moving too far, too fast to the right.

Owen emerged at once as an outstanding political leader with phenomenal energy and dynamism. From the beginning he had an agenda that was clear and precise, while others were struggling over the identify of the new party. He saw, as few did, that the Thatcher revolution was real and permanent. This was no mere temporary hiccup in postwar consensus politics. People were richer and wanted more independence from the state. High taxation did not appear to have yielded a fairer society. Home ownership had become an achievable goal for the great majority. Sixty-four percent of people now own their own houses, compared with 30 percent 20 years ago-- a remarkable change.

At its worst, Thatcherism represents self-ishness. A few months before the election she had reduced the income tax by 2 percent, and it is hard to lose an election on that. In Thatcher's view, people should not expect handouts from the state; they should buy private health insurance and private education. They should accumulate wealth--mainly in the form of property--to pass on to their children. Looking after yourself and your own is the first duty of every citizen and the devil takes the hindmost.

At her best, Mrs. Thatcher has broken the stranglehold the unions held over the economy. She returned trade unions to their proper role as the protectors of their members' rights, and not as absolute arbiters of government economic policy. She brought in a new spirit of entrepreneurship that has seen new small business flourish as never before.

A breath of fresh air blew through the system. No party that denies the value of these changes has much chance of succeeding. David Owen has taken what is best in Thatcherism and, at the same time, has appealed to the unselfish instinct of the people. Britain should not have to choose between a sound market economy and a welfare state that cares for those who cannot compete in it, Owen argues. That is what he means when he advocates the "social market economy,' a term that the other three SDP leaders regard as veering to the right.

But the truth is that personalities often matter far more in politics than anyone openly acknowledges. Owen has defects as a leader because he is impatient with those who lack his clear sense of direction. He is abrasive in discussion, even with his closest allies. He has a touch of Coriolanus about him. When on a public platform or in front of a camera or a journalist, he says what he thinks, and often unwisely. He does not bend willingly, appease, or compromise. This contributes to the impression that he is a right-winger, for he does not seem like a moderate man. Yet no one could question his commitment to a poverty program that far outstrips Labour party policies. It is his personal badge of radicalism, and he has steered it through harsh criticism, spelling out who the losers would be under SDP taxation and how much they would lose with an empassioned persuasiveness for the rightness of this course. He dwarfed the Gang of Three, who have faded on the political horizon and cannot hide the intensity of their dislike for him. It is this, far more than any policy difference, that has led to the current SDP split.

The two-party squeeze

This past June the SDP and the Liberal party fought again as the Alliance. They were packaged as two equal leaders, but Owen towered over Steel, who deferred to him at every turn. (A cruel satire program on British television depicts Steel as a puppet inside Owen's jacket pocket.) This time the election result was a disaster for the Alliance. It was clear from the outset that Thatcher was bound to win. There was no reason for her to be unseated. The Alliance fell back only 3 percent on its 1983 showing, but it felt worse. Its seats dropped from 27 to 22. It was also a disaster for Labour, which fought a brilliant campaign. Their platform was more socialist than that of the Alliance, and certainly more militantly opposed to nuclear weapons, but they had an attractive leader in Neil Kinnock, as U.S. Senator Joseph Biden knows all too well. Even so, they improved on 1983 (their worst ever showing) by only 3 percent, to 32 percent.

Within two days of the election, the Alliance fell upon its sword. Leading Liberals sharpened their knives to slice up Steel. Hours after the polls closed, two of them tossed their hats in the ring as putative Liberal leaders to replace him. Then to everyone's surprise, Steel suddenly showed the nerve and dynamism he had lacked during the election. Without consulting David Owen, he announced a proposal to merge the SDP and the Liberals, and, in collusion with Roy Jenkins, Shirley Williams, and William Rodgers, who had long favored a merger, a campaign was started-- "Merger or Bust.' No merger and the Liberals would go their own way.

Now the battle rages. The SDP is split between the Owenites, who want to retain the separate identity of the SDP, and those who favor not just an alliance but a merger. The Gang of Three would rather merge and abolish the SDP they created. Better to destroy David Owen than to stay in a separate SDP with him.

The whole spectacle resembles, alas, the fissiparous state of obscure Trotskyite parties, who, lacking the discipline of the prospect of power, turn to the joys of fighting one another on points of ideological purity. The mergerites believe that a combined SDP-Liberal party allied with Labour could defeat Thatcher.

On the other side, the Owenites fear being swallowed into the anarchic maw of the Liberal party and the end of the social democratic idea. They argue that even a merged party allied with Labour would be doomed. The last three elections have shown the antisocialist majority to be far bigger than the anti-Thatcher majority. The only hope of victory is to gain votes from the Conservatives, as well as from Labour. For as long as a party even threatens to coalesce with Labour, it will not gain a single Conservative vote. When Labour rallied a little at the start of the last campaign, it was enough to terrify the soft Conservative voters back into the Thatcher camp. People would vote for the Alliance only so long as they were sure it wouldn't put Labour into power. This is the nature of the two-party squeeze.

Sadly, the SDP enterprise may be lost either way--damned if they do merge, damned if they don't. If they decide in their final ballot, scheduled for early next year, not to merge, they still have to fight with the Liberals within the Alliance. All they can do is hope, as they always have, that the Labour party will fall into such disarray that there will be further splits, or, that some Conservatives will become so disgusted with Thatcher's politics of greed that they will break away.

Crushing force

Only a system of proportional representation can let the SDP in. So far both old parties resist it. But the time may come--and there are signs already--when the Labour party, unlikely ever to govern alone again, will find that proportional representation provides the only possibility for a return to power.

In this last election the SDP/Liberal Alliance tallied 23 percent of the popular vote, but because it was spread evenly it gained only 22 of the 650 parliamentary seats. Under a proportional representation system, as in most of Europe, the party would have gained 156 seats, and there would have been a coalition government with either Labour or the Conservatives. The SDP is caught in an old trap. It could break through only under proportional representation but it can bring in proportional representation only when it has broken through.

Americans who watched the rise of the SDP with enthusiasm ask in bewilderment why it didn't work. Plainly there was a public demand for a nonsocialist alternative to Thatcherism. Opinion polls from the very first showed that people wanted the SDP to succeed. Its support was huge, and it was greeted with enthusiasm and remarkable press support. In Owen it had the leader with the greatest charisma, intellect, and political talent in the land. Every necessary ingredient was there.

So how could it fail? It had one, and perhaps two, opportunities to persuade the voters. By the 1983 election, it had not taken off to break through the barrier of the two-party system. After that it was hard to persuade the voters it ever could. Infuriatingly, the voters on the doorsteps would wish SDP canvassers well but not promise to vote for them. They saved their votes to cast against whichever of the two old parties they hated most.

The SDP failed to make the middle way sound like a great political ideal--the kind of thrilling idea that sweeps people out of old loyalties. Voters would often look with puzzlement and ask, "But what do you stand for?' In truth, it was a question the SDP could never answer as sharply and succinctly as the other parties. There was no slogan, there was no pithy phrase that said it all. Thoughtful, reasonable--but, ultimately, unelectable.

Now, painful soul-searching and blame-seeking grows day by day in the remnants of the SDP. Merger, which will amount to a Liberal takeover, seems almost inevitable. A small rump of the SDP will remain around Owen and two of the SDP's five members of Parliament, a tattered reminder of what might have been.

But the overriding reason for the party's failure remains the electoral system. Even a third party that started out with such glittering assets, such popular good will, could not break through its iron rule. The failure of the SDP remains a solemn reminder to all dissident politicians in the two old parties never to buck the electoral system. Its inexorable crushing force will break any third party, any new grouping, long before they get the chance to break it.

Photo: The Gang of Four: (left to right) William Rodgers, Roy Jenkins, Shirley Williams, David Owen.
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Title Annotation:Margaret Thatcher
Author:Toynbee, Polly
Publication:Washington Monthly
Date:Nov 1, 1987
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