Labour lost the election because it wasn't taken seriously on the economy — we need to learn from that
Why did Labour lose the General Election held on 12 December 2019 so badly? There had been a Conservative Government in power for almost a decade. It had presided over the slowest recovery from a major recession on record. It had implemented austerity programmes which had been deeply damaging to communities up and down the country. It had been so divided and disorganised during the years running up to the election that it was almost incapable of focusing on anything except Brexit.
Labour ought therefore to have walked the election but finished up by losing nearly 60 seats, leaving the Conservatives with a huge overall majority. It was not that Labour had nothing to offer which appealed to the electorate. Many of the Party’s policies – from ending austerity to nationalising the railways, from free tuition for students to compensating the WASPI women – appealed to the sense of community and mutual help which has always been a strong Labour tradition.
What stuck in the electorate's throat was too many spending promises in relation to what could be afforded, too much change in the way the economy was to be run which didn't look as though they were going to help ordinary people, a confusing and too Remain-orientated attitude to Brexit, and too little respect for patriotism and charity starting at home.
What needs to change if Labour is ever to regain power or even to be an effective left-of-centre opposition? The bottom line is that the Party needs to become less Democratic Socialist and more Social Democratic. In 2017, Labour achieved 40% of the vote. This time it was just over 32%. Part of the reason was the Party's attitude to Brexit, but most of it was that for most of the electorate, the more they saw of hard left policies, the less they liked them. There may be perhaps 20% of the voters to whom these sorts of policies appeal strongly but this is not nearly enough to win elections.
The trouble is, though, that if Labour's proposition is not wholesale redistribution to deal with stagnant or falling living standards, it needs policies to get the economy to expand a lot more rapidly and much more evenly than it has done recently to raise real incomes based on rising productivity. We also very badly need to address the huge imbalances there are between London and the South East and areas of the country where average incomes have fallen by 10% or more during the past decade. We also need to stop running a balance of payments deficit of some 5% of our GDP every year.
The only real solution to these problems is to see the UK economy reversing the process of deindustrialisation which has reduced the proportion of GDP coming from manufacturing from 30% as late as 1970 to less than 10% now. Because we have a very strong service sector, we don’t ned to have as a high a proportion of our GDP coming from industry as successful economies such as Switzerland and Singapore, but it is very hard to see how the UK economy can be rebalanced without getting manufacturing back to around 15% of GDP.
If we could do this, however, the productivity increases which are so much easier to secure from manufacturing than from services would lift our growth rate If new industries were sited largely in the regions, this would go a long way to even up their prospects compared to London and the South East. More exports and less imports would also get our trade balance under control.
Could we engineer such a transition? Yes, but only if we have a revolution in thinking on the same scale as happened in the 1970s and 1980s, when the threat of sky-high inflation pushed Keynesianism off the agenda in favour or monetarism and neoliberalism. Now the big threat is not rapid price increases. It is growth so slow that most of the population suffers from stagnant or falling wages as public services become overwhelmed.
Essentially the transition which now needs to be made is to run our macro-economic and exchange are policies — as they do in all the most successful economies in the world — to suit price sensitive manufacturing industry instead of largely non-price sensitive services. The key question is whether Labour is going to be able to find a way to persuade the electorate that this is the case. History suggests that the future — or the eclipse — of Social Democracy will depend on whether or not this happens.