Leading Article: Who'll master the market?

GOVERNMENTS and Oppositions are concerned with practical policies, political parties with dreams and aspirations. Without some conviction about the kind of country they seek, the parties become nothing more than machines for retaining or obtaining power, mere vehicles for patronage and preferment. That is why Labour's conference last week was so important. For perhaps the first time in 50 years it was preoccupied, not with internal procedures nor with the details of, say, defence or industrial policy, but with the question of why it exists at all.

A party needs dreams, but not impossible dreams. Otherwise, it becomes like an octogenarian who still fantasises about scoring a Cup Final hat-trick. For the past quarter-century, that has been roughly Labour's position. It is hardly likely that a clause drafted in 1918 can adequately embody a party's aspirations at the end of a century of unprecedented change. Anybody who doubts this should read Age of Extremes, an account of the 20th century by Eric Hobsbawm, from which we begin extracts in today's Sunday Review. Hobsbawm, a Communist Party loyalist for most of his life, describes how 'the globalization of the economy' has put all governments at the mercy of an uncontrollable 'world market'. This market does not like high taxes, high public spending, high labour costs or high inflation; it abhors nationalisation. Any country that defies it will lose capital and jobs. Hobsbawm suggests that the United States might be the exception. James Carville, a Clinton adviser, disagrees. 'I used to think,' he told the Wall Street Journal recently, 'that if there was reincarnation I wanted to come back as the president or the pope or a top baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.' The only way to escape is, as Denis Healey put it in 1976, to stop the world and get off: to run, in effect, a siege economy, which scarcely trades with other nations.

Should this cause despair on the left? Yes, if the only answer is the muddy prose of Clause IV with its outdated emphasis on ownership and control. But, as Hobsbawm points out, the crisis of the late 20th century is not just a crisis of socialism. It is a crisis of all programmes for ordering social and international affairs. The neo-liberal belief in the infallibility of the market has not produced better solutions: it may have maintained economic growth (albeit at lower levels than when most governments followed Keynesian principles) but only at enormous social cost, in increased poverty, unemployment, crime and homelessness.

That provides the left with its opportunity. It can address three problems for which market ideology has no solutions. The first is investment. As Tony Blair put it in his speech last Tuesday, the market allows short-term private interest to crowd out long- term public good, to the ultimate detriment of the economy. That is illustrated by the condition of Britain's public transport, education, training and industrial research. The second is unemployment. With an historian's eye, Hobsbawm sees that the 'iron logic of mechanisation' is to throw people out of work, for the simple reason that the productivity of machines, unlike that of human beings, can be raised almost indefinitely. This truth was disguised only by the unusually sustained economic growth of the immediate post-War years. We may need to re-think working hours and working weeks, perhaps even the nature of work itself. The third problem concerns the growing social strains in Britain and other Western societies. The family, the traditional churches, the trade unions - all the institutions that once gave people a sense of belonging, and thus helped to protect society from crime, violence and mental illness, are in decline. So are the steady career structures of the big companies and old professions.

All these problems are likely to require some measure of state intervention and regulation. Would the international finance markets allow that? Perhaps not. Perhaps we should not be thinking of traditional state action at all. Perhaps Blair's social-ism in one country is no more practicable than socialism in one country proved to be. As Hobsbawm observes, the organisations and people that have flourished during the past two decades are those that operate effectively across international boundaries: transnational firms, currency dealers, satellite broadcasters. If governments are to have any clout in future, they must do the same. Creating supra-national bodies that have some form of democratic accountability is the biggest challenge for the future. We can be sure that the Tory party will never face it. Tony Blair must do so.