Jon Cruddas & Jonathan Rutherford: The time has come for a new socialism

The economic crisis is a turning point in the life of this country. For a brief period, history is in the public realm and ours for the making; the opportunity will not come again for generations. People are angry and they want justice. We have to rediscover our capacity for collective change.

The recession has dealt a serious blow to the neo-liberal orthodoxy. It was the sale of council housing that helped to secure its popular support. In the name of a property-owning democracy, the modest economic interests of individuals were aligned with the profit-seeking of financialised capitalism. It was a new kind of popular compact between the market and the individual.

A similar compact between the business elite and shareholder value created a tiny super-rich elite – and became the unquestioned business model of the era. Its values of self-reliance and entrepreneurialism legitimised market-based welfare and pension reform, the drive to a flexible labour market and the transfer of risk from the state and business to the individual. New Labour entered government in 1997 having accommodated itself to the neo-liberal orthodoxy and with plans to deepen and extend its compact.

Growth in the UK depended on this compact. It was driven by mass consumption which required consumers buying cheap credit. The housing market turned homes into assets for leveraging ever-increasing levels of borrowing. The credit economy created an indentured form of consumption as it laid claim to great tranches of future earnings. The lives of millions were integrated into the financial markets as their personal and mortgage-backed debt became the economic raw material for global capital. This commodification of society engineered a massive transfer of wealth to the rich.

The neo-liberal model of capitalism generated unprecedented affluence for many. But it corroded the civic culture of democracy. Commodification and huge inequalities helped create a social recession with widespread mental illness, systemic levels of loneliness, growing numbers of psychologically damaged children, and an increase in eating disorders, obesity, drug addiction and alcoholism. It created monopoly forms of capitalism and an increasingly authoritarian, technocratic and centralising state. A ruling class accrued a dangerous amount of power and became a financial law unto itself. The gulf between the political elites and the population widened as economic restructuring destroyed traditional working-class cultures and communities.

While asset prices rose and the economy boomed these problems were evaded by the government. But the recession has exposed how the neo-liberal model has weakened our capacity to weather the economic storm. Britain fell into a recession with personal debt standing at £1.4 trillion, of which £231bn was unsecured. In the three months to January this year GDP declined at the annualised rate of 7.5 per cent.

This speed of collapse heralds a possible depression. The partial dismantling of the welfare state, and employment deregulation has undermined the economic stabilisers that act as buffers to deflationary pressure – secure jobs, decent wages and proper benefits. This lack of structural solidity is made more severe by government neglect of the manufacturing industry. The declining share of manufacturing in GDP, and the relocation of industries to low-wage economies, has reduced the income base of the working class.

The recession has destroyed the neoliberal compact that provided the economic and cultural glue of its market society. What kind of social values shall we put in its place? The Government has no alternative and nor does the Conservative Party. In all the fear and turmoil, the political elites offer no analysis of the crisis and no leadership. Their goal is to return the economy to business as usual. But the status quo has vanished, and there is no turning back to the past.

It is time to rediscover our capacity for collective change and to address questions of how we live as well as how we make money. We believe that a good society can be created through drawing on our traditions of socialism. We only thrive as individuals when we experience a feeling of safety, when we feel respected, when we feel we are worth being loved and when we have a sense of belonging. These are the basic social needs of human beings which a good society must value.

We need a new socialism not dictated by the few from above, but made by the many from below. It should be grounded in the interdependency of individuals and the value of equality. It should be democratic, because only the active interest and participation of individuals can guarantee true freedom and progress. It should be ecologically sustainable and pursue economic development within the constraints placed on us by the earth. And it should be pluralist, because we need a diverse range of political institutions, and a variety of forms of economic ownership and cultural identities, to provide the energy and inventiveness to create a good society.

The political fault lines of a new era are starting to take shape. They divide those who believe that privileging the market and individual self-interest is the best way to govern society and those who believe that democracy and society must come before markets. These fault lines cut across party lines and divide them from within: Thatcherite politics versus compassionate Conservatives; market Liberal Democrats versus social Liberal Democrats; neoliberal New Labour versus social democratic Labour. The pro-market factions of all three main parties have lost credibility and there is now a growing crisis of political representation.

From the youthful cultures of cosmopolitan modernity to the conservative cultures of mainstream working-class life, people feel disenfranchised. They have no political organisation to give voice to their hopes and fears. For many Labour is seen as a party of war, injustice and insecurity. And despite their lead in the polls there is no great enthusiasm for the Conservatives either. As a priority we need changes to our electoral system to revitalise our democracy and create the conditions for new political alliances and new forms of political organisation.

The task is not to win the political centre ground – it is gridlocked and dead – but to transform it. A new social politics of democracy must be capable of creating the conditions for recovery, and setting out a set of principles and a political direction for the future, and it must also address the threat of global warming. The boom is over. In the future there will be less to go round and so let us share it out fairly amongst ourselves and embark on the deep and long transformation that will bring about a good society. It will be the great challenge of our time, and it will shape the lives of generations to come.

Jon Cruddas is the Labour MP for Dagenham; The Crash – A View from the Left, edited by Jon Cruddas and Jonathan Rutherford, can be downloaded at www.soundings.org.uk