Kinnock goes to market ... to ditch Clause IV

Labour Briefing no. 57, 24 February 1988, p. 6

Transcribed or corrected by hand from the printed page.

By-line as printed: Phil Hearse Islington North CLP.

Neil Kinnock and Roy Hattersley have put their cards on the table.

Their "fundamental statement of democratic socialist aims and values" extolling the virtues of the free market was published at the end of a week in which Kinnock had refused to appear on nurses' picket lines.

Theory and practice have come together — in neither is Kinnock prepared to associate himself with socialist principles.

Following Labour's 1959 election defeat, then Labour Leader Hugh Gaitskell, a much more formidable social democratic politician than Kinnock, decided to "modernise" Labour by making an all-out assault on Clause IV. He was rebuffed by the Party rank and file.

Kinnock is taking a different tack. Clause IV will not be dropped; it will be "redefined" to mean its opposite.

The Kinnock-Hattersley document contains three interlinked ideas. It states that:

• in the distribution of most goods and services the "supply and demand mechanism" (i.e. the market) is "generally satisfactory";
• public utilities (water, gas, rail, etc.) and social services should stay in the public sector;
• it calls for new forms of "social ownership", including employee share ownership, and enterprises in which public and private capital are mixed.

Even in its own terms, the document is contradictory. If the market is "generally satisfactory", why should we bother thinking about any new forms of "social ownership"?

Leaving such details aside, we must question whether the market is "generally satisfactory". Socialists must look at capitalism's track record and ask:

• Why are there 35-40 million unemployed in the advanced capitalist countries (where the market system prevails)? Do democratic socialist thinkers find this reality "generally satisfactory"?
• Why are there in these same countries hundreds of millions of people living on the poverty line? Is this also "generally satisfactory"?
• Why does a world dominated by market allocation of resources have millions of starving people in it?
• Why do tiny minorities control the bulk of the wealth and power in every market-based country?

The authors of the document fail to grasp one of the ABC's of the socialist critique of capitalism. If "most goods" are allocated according to the laws of the market, and most property is in private hands, then that will determine everything else about the character of the economy and how it works.

As night follows day, inequality, poverty, unemployment, and priority to the needs of profit, not the needs of people, follows a market-based economy.

When production retailing of goods and services is dominated by a private ICI, a private Fords, a private Marks & Spencer, then investment and production in general will be dominated by the same people. And the investment and production decisions made by the big monopolies determine the overall shape of the market, and therefore the overall distribution of resources in society.

Authors

Social democratic mythmakers like Jay, Crosland and Strachey in the 1950s, and the authors of the NEC document say that governments can leave the big monopolies to produce useful goods and services, but determine the overall pattern of economic allocation by taxation and other legislative measures.

In fact this has never worked. The reformist Labour governments of 1945, 1964 and 1974 never succeeded in changing the fundamental distribution of wealth, of resources between public and private sectors, of investment, and even of employment.

To do that would have meant huge inroads into the prerogatives of the big monopolies. It would have meant, at the very least, massive taxation of profits, and compulsory planning of economic decisions — in other words overriding the mechanisms of the market and the prerogatives of capital. But none of the post-war Labour governments were prepared to do that.

Utilities

The NEC statement does admit that utilities and social services (like the health service) are best left in public hands. But many of our basic nationalised utilities and services are now falling apart for lack of investment, which is a result of the overall priorities for investment and production determined by the market. Efficient public utilities and services, especially if they are to be democratically run and publicly accountable, can only be resourced by making major inroads into the profits of the private sector, and therefore the workings of the market.

The Kinnock-Hattersley statement adds together two statements which have caused much confusion on the left, and which need to be rejected. The first is that national economic planning automatically leads to an East European command-style economy. The second is that a mixture of private and public capital represents an improvement over both the "generally sastisfactory" market and the unsatisfactory East European style centralised economy.

Economy

It is a myth that the left in the Labour Party wants an economy which would lead to East European conditions. It is quite possible to have a socialised economy and democratic control without private capital intruding into any of the major national industries.

Right wingers in the Labour Party point to the fact that the existing nationalised industries are authoritarian and unaccountable to discredit nationalisation. But they were never intended to be anything else.

It's true that socialists don't want a society dominated by 250 National Coal Boards. Neither do we want the private coal owners back, nor is private ownership of the mines by the coal miners themselves a practical proposition. But a nationalised coal industry under democratic workers control is a practical proposition — provided the same socialist principles are extended throughout the society in which it operates.

Debate

During the post-1960 debate on Clause IV, Gaitskell attacked Aneurin Bevan by saying "surely we don't want a society in which every corner chip shop is nationalised?" But no sensible socialist (certainly not Aneurin Bevan) ever wanted to nationalise everything or to deny a role to small individual traders. In fact a socialist society would help the many people who own small businesses, by providing them with cheap credit and ending the power of their real enemies, the big monopolies.

Gaitskell used demagogy about chip shops to obscure the fact that he wanted to leave these big monopolies in the hands of private owners. The socialisation of the "commanding heights" of the economy would not necessarily eliminate a private sector consisting of small businesses and co-ops. But in a socialist economy this private sector would be subordinate to the socially owned and democratically controlled sector, which would dominate production and investment.

Hattersley said recently that Labour needs to get the "right mix" of private and public enterprise. This reflects the discussion in the Party about "new forms" of social ownership" which, allegedly, avoid the pitfalls of the bureaucratic nationalisation of the past.

But the really important questions about any large economic enterprises are: "who controls investment and production?" and "who gets the profits?" There is no way that big capitalist concerns are going to put their money into any form of social ownership of workers' share ownership unless they own and control the operation as a whole and reap the bulk of its profits.

Hattersley and Kinnock's argument, and indeed the core of social democratic argument for fifty years, goes like this: by avoiding the excesses of the market and of centralised state planning, a mixture of public and private enterprise gives you both efficiency and fairness.

Paradise

This social democratic paradise, in which everything is for the best in the best of all possible worlds, is an ideological confection, a fantasy, whether it is dreamed up by Kinnock, Robin Cook, or Peter Hain. All of them talk as if you can mix "markets" and planning, as if the economy were made up of multiple markets, separated from each other, which could be divided up between public and private at will.

But decades of experience have shown that the "mixed" economy is a myth. The two conflicting mechanisms cannot be harnessed together. Either a national economy works basically according to the laws of the market, dictated by the rate of profit, or it works according to the mechanisms of a national plan.

Perhaps the worst fraud perpetrated by the social marketeers is their claim that socialisation of the main means of production (and the banks and the finance houses) leads automatically to Stalinist authoritarianism.

Always

This plays right into the Tories' hands. Didn't they always say that only capitalism can guarantee freedom? And that socialism means dictatorship?

Kinnock and Hattersley have now accepted their basic argument. By redefining Clause IV in terms of "market socialism" they are attempting to get round the quagmire in which Gaitskell nearly drowned — the prospect of an all-out fight inside the Party between socialism and social democracy.

But as Ken Livingstone said in his Tribune article on the possibility of civil war inside the Party, any attempt to impose social democracy on the Party will meet resistance. Either this hapless document is withdrawn, or it will provoke a major fight in the Party. Kinnock and Hattersley cannot have their pro-capitalist cake and eat it too.

transcribed from the page image, 2 Nov 2026; spelling as printed (sastisfactory; "in neither is Kinnock prepared"; "When production retailing of" without a comma; "social ownership of workers' share ownership"; the closing quote after "social ownership" in the Hattersley paragraph has no opening partner, as printed). By-line "By Phil Hearse / Islington North CLP" in a ruled box at the head of the second column; the bold opening paragraphs in the first column are taken as the standfirst. Complete on the page ("Labour Party"), no jump; it wraps around the photo and below the "Saving London from the Tories" headline band into the right-hand columns. "Gaitskell" in the Debate section has a damaged k in print, read as Gaitskell. Left out: photo of Kinnock and its caption ("I'm listening! I've got my thumb firmly in my left ear, so now you can begin...", credit Wayne Edginton) and Joan Twelves's "The Regions at Conference time: Saving London from the Tories" on the same page.