The Labour Party's historical affinity for state intervention, a cornerstone of its ideology since 1945, appears to be making a comeback in Keir Starmer's 2024 manifesto. This resurgence of statism, a concept that has shaped Labour's policies for decades, raises questions about the party's ability to learn from past experiences and adapt to modern economic realities.
The roots of Labour's statist approach can be traced back to the post-World War II era. In 1948, just three years after the war's end, the Attlee government established the National Health Service (NHS), a landmark achievement in state-provided healthcare. This period also saw the creation of a comprehensive welfare system, embodying the party's belief in the state's role in ensuring public well-being.
Throughout the 1960s and 1970s, Labour governments continued to embrace state intervention. Harold Wilson, who served as Prime Minister from 1964 to 1970 and again from 1974 to 1976, advocated for a "purposive" use of state power to drive economic growth. However, this approach faced significant challenges in the 1970s, culminating in the intervention of the International Monetary Fund (IMF) in 1976 and the infamous "Winter of Discontent" in 1978-1979.
The crisis of the late 1970s paved the way for Margaret Thatcher's Conservative government, which took office in 1979. Thatcher's approach, focusing on liberalizing the economy and reducing state intervention, marked a significant departure from Labour's policies. Her tenure, lasting until 1990, reshaped the UK's economic landscape.
Labour's response to these changes came in the form of "New Labour," unveiled by Tony Blair in 1994. Blair's vision sought to reconcile Labour's traditional values with the realities of a market economy and globalization. This approach proved electorally successful, with Blair winning three consecutive general elections in 1997, 2001, and 2005 - an unprecedented achievement for a Labour leader.
"If the party was to enjoy the benefits of the market economy and globalisation, it must end its reliance on the state."
However, Keir Starmer's 2024 manifesto suggests a return to Labour's statist roots. The manifesto proposes a "dynamic and strategic state" to drive economic growth, echoing Harold Wilson's approach from six decades earlier. It outlines plans for new institutions such as an Industrial Strategy Council, a British Infrastructure Council, and a National Wealth Fund, aimed at fostering "innovation, investment and high quality jobs."
Critics argue that this renewed faith in state-led economic planning may be misplaced. They point to historical examples, such as the National Economic Development Council established by Conservative Prime Minister Harold Macmillan in 1962, which had little discernible impact on growth despite its lofty ambitions.
The proposed £2.5 billion investment in the steel industry, a sector that has been declining since the 1970s, further exemplifies Labour's commitment to state intervention in struggling industries. However, skeptics question whether such investments can effectively drive innovation and growth, suggesting that these are more likely to come from new and small businesses operating in a less regulated environment with lower taxes.
As the UK continues to navigate the post-Brexit economic landscape, having left the European Union in 2016, the debate over the role of the state in driving economic growth remains as relevant as ever. The question remains: will Keir Starmer and the Labour Party learn from the lessons of the past, or will they, as critics suggest, be condemned to repeat the mistakes of their predecessors?