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Diary Note /0032
Saturday 9 March 2002
for yesterday's thoughts

Thatcherism
finally unravels

Looking back, we will see 2001 as the year in which the Thatcherite Settlement finally unravelled. The perceptions of the 1980s, which won for Margaret Thatcher such glittering political prizes, have finally disintegrated, undoing the Tory Party in the process. But it could also prove the undoing of New Labour, which has so far failed to generate a convincing alternative view of the world. New Labour could yet be dragged down by the collapse of Thatcherism, because it has become closely associated with it. I fear that, in the absence of a convincing "new socialist settlement", Labour could be sucked in by the implosion of the Thatcherite star.

Thatcher in her time worked wonders, in shifting the balance of power from the public realm to the private. The Left seemed powerless to stop her, and Major could only play out the hand she dealt. Under Thatcher, public legitimacy was systematically suborned and demeaned. Private power was systematically enhanced. Vast resources were effortlessly stolen from the public purse and handed over to corporate marauders, waiting with their getaway cars. "Privatisation", always a mischievous and misleading concept, carried all before it. Right-wingers evolved the destructive jargon of the "enabling state", and diminished the role of the state as provider, manager, and agent for the equitable distribution of wealth. This phase lasted a full fifteen years (1981/96), after which it ran out of steam.

Railtrack

That Thatcherite Settlement is now imploding. Railtrack is just one one example - it was one last, enormous, fraud perpetrated in 1996 upon the UK public. The collapsing UK rail system was literally given away - lock, stock and smoking barrel - to the corporate sector, at an awesome undervaluation, perhaps Ł4 billion below its true value. True, the system was already in terminal decline (and will in practice have to be run down still further, because it represents an old, expensive and outdated technology - but that's another story). But in capitalist terms, this decaying transportation system still had "value", because 7% of all freight and passenger traffic still went by rail, and the network generated a lorra lorra cash. The Tories were adept at these techniques for enriching their City friends, because they had used them so often before. And once the Tory ink had dried on those infamous privatisation contracts, a booby-trap had been laid which was bound to ensnare New Labour.

Once all those assets had passed into the territory of "private property law", the die was cast. They would never come out again without the payment of compensation - the Tories' City friends would profit from both transactions, both the sale and the re-purchase. That was the beauty of the Tory conjuring-trick. The legal logic was inexorable. And it was Stephen Byers who had the misfortune to be the one who sprung the trap. John Prescott avoided it while he could, but it could not be avoided for ever.

The Railtrack shareholders will win their case for compensation, against the Government. It grieves me to say so, but that is my Opinion, as an erstwhile "learned Counsel" by trade. If the Government does not settle the claim quickly, the legal proceedings will drag on and on, poisoning Labour's relationship with the City and eroding Labour's political credibility. The Government will have to act quickly to settle the claim, change policy decisively on rail, and promote road transport instead. Rail transport is a busted flush, and should be drastically curtailed. And all that, inevitably, would mean dispensing with Stephen Byers.

Stephen Byers does not deserve to go. The underlying problem is the disarray of Labour's transportation strategies. Neither the media vendetta against him over the Sixsmith/Moore Affair, nor the dishonest spinning-campaign by the City (arguing that his action "destroyed the confidence" of City investors) would ordinarily justify his departure.

But there is a third factor, which is in my view decisive. It was Byers who actually sprung the booby-trap. And throughout this whole process, both with Railtrack and with the London Underground, he has exhibited a woeful lack of commercial understanding. It is not his fault, exactly: he has no commercial experience, and will certainly be forgiven, when he meets his Maker. But current politics are less forgiving. There was his crass misjudgment in giving away the negotiating position of London Underground in a misjudged Commons speech, having been asked by the Underground Chairman not to do so. True, he apologised for that gaffe but the critical damage had by then been done. Then there was his use of artificially low after-tax figures in defending the return-on-capital to be earned by the Tube contractors: he gave the appearance of wanting to minimise the true return-on-capital figures. That was a terrible error, which nobody with any business experience could possibly have made. For me, that was the decisive moment: it brought home to me, as nothing else had done, the depth of his commercial ignorance.

But let's be frank: any member of the Cabinet could have made the same mistakes. There is nobody in either the English or Welsh Labour Cabinets with even the most elementary business experience. Stephen Byers' misfortune was simply to be Duty Officer. It all happened "on his watch", as they say. And Labour will suffer , do not doubt that. It is of the essence of true tragedy (I seem to remember, from those days when I was a bit more cultured) that the victim is unable to avoid his fate. Stephen Byers is the tragic hero, the tragic victim.

My plea to Blair is simply that, as he says goodbye to Byers, he should extract full political value from this retreat. He should use the occasion to make a decisive policy switch away from the promotion of an archaic technology (i.e. rail itself) and force rail-users to pay its full economic cost. Otherwise, everyone should use the superior and modern form of transportation, namely road transport - see my views at Letter to John Birt My hope is that Tony Blair will wean Labour away from its teenage enthusiasm for trains. The future lies with road transport, decent public bus services, and many more taxis.

All around us, there are other sounds of the collapsing Thatcherite Settlement. Regulators, the officials designated by Thatcher as the fig-leaves of privatisation, are manifest failures - like toothless chaperons, they have been given impossible functions to perform, with corporate laws biased systematically against them. I now regard the very presence of a "Regulator" as decisive evidence of a political fudge.

National Health Service

For I now think that every system should be placed firmly either in the market sector or the managed sector. The market sector should be governed, within a prescribed body of general law, by market forces - and it should be quite clear that society will live with the outcome, without Government bail-out. The managed sector should be governed by the exercise of public-service managerial skills - just like the Police, or the armed forces, or the NHS. Or the Post Office, which should remain a public service monopoly Post Office should stay public .

In my maturity, I have come to see things in black-and-white. And all Regulators represent, to me, a grey Thatcherite fudge. It is the tragedy of the NHS that Labour has not yet escaped from the ambivalence of Thatcher, whose original intention was to convert the NHS into a market-sector system. That continuing ambivalence explains Blair's failure to convince the NHS trade unions of his bona fides - he is still suspected of harbouring Thatcherite aspirations, in spite of all his "social-ist" protestations.

Corporate fragility

The last ten years have demonstrated the sheer fragility, the sheer lack of institutional substance, of the corporate sector. Ordinary citizens are deeply anxious about the long-term effectiveness of private-sector pension commitments. As for investment generally, Enron is merely the last in a long line of spectacular collapses, some fraudulent, some negligent, and some merely the ordinary consequence of inadequate company laws and accounting conventions.

The corporate sector is a jungle where no normal person should venture > see News from the Jungle . In 2003, Labour's proposals for company law reform will come under the political microscope - and the Left will have to fight its radical corner vigorously, if any substantive change is to be achieved: at present, the omens are not good.

Private Finance Initiative

Nowhere is the imploding Thatcherite star to be seen to greater effect that in the misnamed "Private Finance Initiative". It is not a private initiative at all - it is entirely a public initiative, undertaken in part to find an ingenious way around public accounting conventions. Nor is it really a matter of private finance - the whole object of corporate investors is to get their claws into the soft white flesh of public tax revenues. That's the real point of PFI. What matters to the corporate sector is the Government guarantee of payment, either express or implied. A leader in the Financial Times this week gives the most brilliant (and shortest...) exposition of PFI reasoning that I have ever seen Lost Trust in the City . It is that guarantee that makes State transactions infinitely preferable to private-sector transactions - debts can be enforced by sending people to prison (i.e for refusing to pay taxes). Imprisonment for debt has long been banned from the private sector, but that additional security is still available in the public sector. And PFI is very good for business, as this week's reported profit figures from Balfour Beatty clearly show Balfour boasts big PFI profits

But the fatally fuzzy reasoning of the Private Finance Initiative, with its spurious doctrines of risk-transfer, continue to dominate Cabinet calculations, as part of the poisoned legacy of Margaret Thatcher. One UK spin-off (and another part of the unravelling process) is the increased militancy of the public sector trade unions, protesting against the deployment of PFI contracts, eroding security of employment in the public sector. The World Trade Organisation and the International Monetary Fund are also infected with privatisation doctrines, much beloved of the corporate sector. This further fuels the global protest movement, from Seattle onwards. The unravelling continues.

Do not mistake me. I consider that mankind learnt much, in the 1980s, about the conduct of trading systems, regionally and globally. I am keenly aware, as a socialist corporate manager, that there were gains made under Thatcher, in the understanding of human society and its motive forces. I am convinced that national economies must develop new flexible, responsive institutional forms, if they are to survive in the global economy which is already with us. I am convinced that the future well-being of our society lies in strengthening the cultivation of trading and business initiation skills among our young people, not in the location decisions of large existing firms. I am convinced that welfare systems must also adapt to the fluidity of future personal movement and migration. I am convinced that all our institutions need to be re-thought and re-expressed in individualist terms, not the collectivist terms of past left-wing politics. I am convinced that trade unions should change in character, and become enforcement agencies for the rights of individual workers. These are all perceptions which derive from the experience of the 1980s/90s.

But in Thatcherism, these advances were accompanied by many adverse side-effects. In philosophical terms, the Thatcherite Settlement was deeply flawed, and cries out for replacement. Yet the Left has not yet nailed those flaws, by generating its own coherent world view. New Labour is strangely devoid of intellectual content, mired in a mindless pragmatism - "all that matters is what works". The Blair clique skilfully hi-jacked the Labour Party and made brilliant use of its network and its resources, but has not yet made any principled contribution to its future development. As a rank-and-file member of the Party since June 1963 (without a break..), I am still content to play my part within the Party, seeking to influence the Party from the inside.

I hate government by clique. I hate the overcentralisation of power. I mistrust pragmatism, whether in Tory or Labour leaders. But I have no intention of resigning from Labour. It's my Party, and I want it back.

The lessons of the Thatcherite Settlement must be learnt by Labour, they cannot be ignored. They must be built into a more profound socialist perception that will be meaningful to our children, generating a better society for them and for their children.

That represents a huge intellectual challenge, and I intend to play my part in meeting it. I will return to this subject next week, and outline my views of the New Socialist Settlement

What do you think? Drop me a line.

Missing Opinions

But these preoccupations of mine have certain side-effects. And I have received a complaint - that I am becoming obsessed with these socialist topics, and failing to deal with a wide range of Other Current Issues. Let me quickly put that right, with a few snapshot responses.

Arab-Israeli Hostilities >>> Grave and serious threat of wider Middle East war - US sponsorship of Israel should be replaced by UN initiative to broker establishment of two nation-states, with the exception of Jerusalem - new status of "UN International Trust" to be created for Jerusalem - simultaneously with the formation of the Palestinian State, both states should grant to the UN Trust a "Head Lease" of Jerusalem (for say, for 100 years cf Hong Kong) both states would defer the resolution of their conflicting claims to the freehold for that period, without foregoing them - operational rights of both Israelis and Palestinians to be entrenched as sub-Lessees - settlement to be guaranteed by the full resources and authority of the United Nations

Iraq >>> It is vital that UK should refrain from the use of outright military aggression against Iraq - US Afghanistan attack was a critical error of judgment by the Bush clique, and must not develop into an international gun-law regime - Blair's uncritical endorsement of US Afghanistan attack was a quite separate error of judgement, which weakened his position nationally and internationally - UK should refuse (albeit privately at this stage) to commit front-line troops to Iraq aggression - UK should advocate the formation of a standing UN "Peace Force", capable of discharging policing functions without requiring ad hoc commitments by Member Nations.

US Steel Tariffs >>> Not an issue of political principle - disturbing evidence of the political short-sightedness of the Bush clique - a throwback to primitive protectionism, which should be exposed through the WTO procedure - UK should adhere to its free-trade position - an anti-US WTO ruling could prove most beneficial to world order - tit-for-tat retaliation should at all costs be avoided.

European Union >>> Plans for written Constitution - Labour is right not to oppose this in principle, but great skill will be needed to handle the process, because of profound linguistic ambiguities (in particular between English and French) - we should participate actively in the Convention process under Giscard D'Estaing, but make sure that we deploy our very best diplomatic resources.