The Role of the State
The Tory party has always been the party of a small state, while Labour has used the enlargement of the state to secure its social reforms. In 1945 this took the form of nationalisation of industries and public utilities; after 1997, following the dumping of clause four, nationalistion was off the menu and was replaced with the state as employer of legions of people in jobs which did not need doing or could be done by the private sector. Neither of these approaches has stood the test of time nor proved financially viable.
At present we have a coalition government led by the Tories, busy dismantling big government and supported by the Lib Dems whose approval is secured in the knowledge that the money has run out through outspending income on an historic scale. This trend will continue and, if history repeats itself, will be taken too far. This will present a new opportunity for Labour.
In order to use it to electoral advantage, with a prospect of making success in government, Labour has to re-engineer its understanding of the role the state should play. There are several roles. The most obvious is provider of benefits to those in need. The needy do not have to be seen as scroungers. Some undoubtedly are but a lot are not and receive benefit in return for a lifetime’s service or as carers or parents, out of all of which activities society as a whole makes a profit. Some benefits, however, such as unemployment or sickness could be transferred to an insured or part insured system, so that they ceased to be part of the taxation drain altogether. There is nothing inherently wrong or immoral requiring those in work to provide for a situation when they are not. Self employed people have to do this anyway.
This leaves for Labour an opportunity to look at a more productive area for the state. The banking crisis showed a new kind of state ownership; the state as part or majority shareholder of companies operating at a profit. In the case of the banks, this required a rescue, but in a future takeover of the railways, water, energy and other public utilities, an investment would be the order. It is impossible to find anyone who now feels that we are better off since all these things fell into private, ofter foreign, ownership.
A plan to allow for the government to own the majority of shares in such companies, while allowing the private sector to retain a stake, and have the businesses run at a profit with dividends going into the public purse to pay for services, has political merit. Unlike the old nationalisation system when there were no shares and the businesses were run (mostly at a loss) by Boards packed with people who knew little about how to run them, this way the state would be an investor like any other and would expect and demand the businesses were run properly.
What these thoughts are intended to develop is the idea that there is a positive role for the state in a modern vibrant economy (China has done wonders with its version of state capitalism) and that if Labour wants to remain true to its roots, but offer a fresh alternative, the theme is worth developing. Its first attempt at state primacy was inefficient and the second was unaffordable. Maybe third time lucky.
Since the advent of Thatcher’s reforms and the demise of socialism, there has been no creative tension between the ideology of state versus private enterprise. The state has become the provider and private enterprise, through taxation, has become the paymaster. This had not worked very well. There should be competition between state investment and private capital. Not all banks, railways, or energy companies should have state investment, but those that do should be very good, so that the state becomes more of a driver and the tension between state and private becomes a motivation not a drag. The state would need to show a talisman rather than a dead hand.