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The most promising road forward for the left is to attack the failure of our economies to understand the depth of the crisis of capitalism' - Eric Hobsbawm considers the lessons of his influential essays of the '70s and '80s for the Labour party of today.

Jonathan Rutherford: In a series of essays in Marxism Today beginning with 'The Forward March of Labour Halted?' in 1978 and concluding with 'Another Forward March Halted' in 1989 you analyse the changing nature of capitalism, the shifting class structure of British society, and the consequent rise of Thatcherism and political crisis of Labour. Has the crash in 2008 now brought this era of capitalist modernisation and social transformation to a close?

Eric Hobsbawm: My lecture in 1978 was indeed one of the earliest warnings of an impending crisis for the Labour party, though I did not realise how soon this would convulse British politics. Oddly enough I had not intended it as an intervention into current politics, still less as a political forecast. It was essentially a call to assess the situation of the Labour movement realistically in the light of economic and social changes whose significance was often overlooked by the left.

If it had any political purpose, it was to warn the movement against the growing sectional and social divisions that undermined the sense of a single working class and the narrow 'economism' of trade union action. Successful militancy was not universally applicable and might even antagonise the public when it caused serious disruption of public services. It was not an analysis of the changes in British or world capitalism during the 1970s, nor did I at that stage recognise the sudden rise of a new anti-state laissez-faire ideology that was soon to come into power with Thatcher and Reagan.

Of course Marxism Today very soon recognised the difference of Thatcherism from earlier conservative governments and indeed Stuart Hall found the now-accepted name for it. However, my own contributions to the journal concentrated overwhelmingly on saving the Labour party from the sectarians behind Tony Benn and above all on demonstrating that Thatcher enjoyed only minority support in the country and was certainly less than an alliance between centre and left.

JR: I'm interested in your opinion about the role of culture in constructing Thatcherism. You make no mention of Enoch Powell and his politics of cultural difference in its formation. What do you think of the argument that the left has to contest the politics of identity and belonging in order to win political power?

EH: There is no doubt that Thatcher's appeal to a jingoist patriotism and inclination to xenophobia and racism in large parts of the English middle and working classes had some effect. There is also little doubt that the Falklands war offset the disastrous effect of Thatcher's economic policies in the early 1980s. On the other hand, the new regime's patriotic, militarist and eurosceptic rhetoric probably cut the ground from under the feet of the ultra right-wing and racist parties who succeeded in the 1980s elsewhere in Europe and had looked a potentially serious problem here in Britain in the 1970s.

However, if there was one major cultural appeal of Thatcherism to its middle class constituencies it was the open declaration of war against the organised working class movement, dramatised in the ruthless destruction of the miners in 1984-85. She appealed to her potential working class supporters culturally by counterposing the 'upright' job- holders to the demoralised dependants of the welfare state; by offering them the benefits of buying private homes on public property and recognising the extent to which they had become beneficiaries of the consumer society. The left has its own tradition of appealing to identity, such as the widespread opposition to joining the European Economic Community in the 1970s. There is no reason to believe that this has disappeared, though an all-British identity has been in retreat before Scottish and Welsh identities and (to a much lesser extent) an ideologically-suspect English identity. We don't know at present what bearing it has on Labour's prospects of power.

JR: I want to turn to the political situation today. David Cameron's return to more traditional forms of Toryism and an emphasis on compassion, mutuality and neighbourliness was an attempt to detoxify the Conservative party and return it to the centre ground. His strategy to construct a new centre-right was derailed by the 2008 financial crash, but it was given a second chance by his coalition with the Liberal Democrats. However, government policy appears to be heavily influenced by the Conservative and Lib Dem neo-liberal right suggesting that the Coalition government is a third phase, following Thatcher and New Labour, in the 30-year hegemony of neo-liberalism. What is your assessment of the Coalition's political character and its place in this historical schema?

EH: I honestly don't know what to think of David Cameron. Returning the Conservative party to a centre with a wide appeal makes sense, but Cameron's very successful act as a public presenter does not allow one to judge how far he really believes that he can be another Baldwin. He does not strike me as a strong or impressive premier. Ministers have certainly put forward some socially welcome reforms, but one's general impression is of a prime minister who has no general sense of his government's policy, who allows unprepared projects to go forward until some short-range turn of events forces a change. On the other hand, the Conservatives and the Clegg Liberal Democrats' commitment to Thatcher, Blair and Brown's free-market policies has not weakened. Unfortunately this is the direction to which the Cameron government is inevitably committed.

JR: There is a convincing argument to be made that you provided the intellectual groundwork for the revisionism of New Labour. I'm thinking of your analysis of the changing nature of the working class and its political loyalties, but also your insistence that the left has to understand the 'world the way it is', which means both a fundamental rethinking of left politics and an openness to building new kind of coalitions. In 'Labour's Lost Millions' [Marxism Today, October 1983] you make a strong case (if with reservations) for what you call neo-socialism, which is suggestive of New Labour. You presciently point out the fragility of this strategy in the instability of political support it ends up with. What is your assessment of New Labour?

EH: Inasmuch as my 'The Forward March of Labour Halted?' started the first debate within the movement about what turned out to be its major crisis in the 1980s, I may have helped to lay a foundation-stone. But it was Marxism Today collectively that established the groundwork. My point, as you suggest, was that Labour had no promising future if all it could achieve was to recover the millions who traditionally identified with the party and which it had so dramatically lost in the first Thatcher years. It would have to learn or re-learn how to lead a broad front of people who supported other parties or none into backing a Labour policy.

In response to this, I suggested two possible strategies, based on the experience of socialist parties in some other European countries in the early 1980s. In retrospect my optimism about the Italian communist party was misplaced, since its decline was to become spectacular after 1989. Since then it has been less capable of forming or leading an alternative left-centre government than the Labour party. Nevertheless its strength was never exclusively single-class based. The other alternative was the neo-socialist one to which you refer, as illustrated in France, Spain and the Italian socialist party of the 1980s, before its justified disappearance in the miasma of cronyism and corruption whose main beneficiary proved to be Silvio Berlusconi.

In itself, there is nothing wrong in abandoning socialist parties as 'movements' and turning them into common electoral fronts of all who are for one reason or another opposed to reaction, interested in reforms and prepared to sympathise with progressive appeals. But the case for such 'neo-socialism' is that its governments should carry out active policies on the left. The case against New Labour in Britain when it came to power is that it did not do so. Economically speaking, New Labour after 1997 continued to operate as 'Thatcherism in trousers'.

There were historic reasons why it did so, not least the increasing reliance of the economy on the financial centrality of the City of London and the frivolous irresponsibility British governments ever since Thatcher had consequently shown for the erosion of our manufacturers. In this respect Britain was strikingly different from financially centred states like Switzerland. Given the inability of nation states under globalisation to dispose of their national product, the vast surpluses generated in and around Canary Wharf seemed the easiest way of generating the revenue to pay for our welfare system; perhaps even - through easy credit and the glories of super shopping centres fed by dramatically cheapened products from the east - in part to replace it. As Marxism Today pointed out in its one posthumous issue [November/December 1998] ideologically the Blair government was then 'distinctly to the right of the other centre-left governments of the West'.

Looking back it is clear that the Thatcher government in 1979-80 and the Coalition government in 2010-11 launched themselves into visible policies of change. Not so the Labour era of 1997. Indeed it is only since 2008-09, the moment of potential catastrophe for the global financial system, that economic neo-liberalism is no longer accepted even by the Gordon Brown side of the Labour party. Marxism Today may be credited or blamed for pioneering the rescue of the Labour party from the left sectarians and its restoration as a potential government, but a New Labour regime that had internalised the assumptions of economic neo-liberalism was not the only conceivable result of our campaigns. It was certainly not what we wanted and much of our critique therefore remains valid.

JR: Following Mrs Thatcher's third election victory in 1987 you wrote an essay 'No Sense of Mission' [Marxism Today, April 1988] in which you asked: 'What is Labour's project for the future? Has it got the future in its bones?' These are the exact same questions being asked today. In the same year in another essay 'Out of the wilderness' you describe 'an economy in decline and a people in disarray'. Again the description mirrors those we make today. Despite 13 years of a Labour government it can feel as if nothing fundamental has been transformed. Here we are again in the dark times of the 1980s. What do you think are the prospects for the left and where might it find its collective agents of change?

EH: In electoral terms I am rather less gloomy than your question suggests. The chances of another Conservative or conservative Cleggite era stretching over two or three elections are small. A single-party Labour government is admittedly unlikely in future, though not totally excluded, but the potential of a centre-left alliance government headed by Labour is reasonably good. After all, even in 2010 it would not have taken more than a handful of seats to make possible a Lib-Lab coalition, assuming both parties would have wanted one. However this is clearly not the core of your question.

Actually I don't agree with you that 'it can feel as if nothing fundamental has been transformed'. This may be so in politics but patently most people in this country are aware that the world and the country in which they live are changing at a dizzying pace, and not for the better. Much of this seems to be happening outside and beyond the control of politics and the governments of nation states, at least in the western world. What is more, for most people in this country I suspect the nature of the fundamental transformations they once expected from governments has changed. In the 20th century they were almost invariably hopeful: a society transformed by or through political action into something different and better such as socialism, democratic constitutionalism, an inevitably superior state of freedom from imperial national or racial oppression.

I suspect that in the west the great hopes of the future are negative: to control and perhaps reverse the environmental crisis created by unlimited economic growth, to create a 'sustainable' pattern of economic change, and to maintain the enormous achievements of western capitalism in the 20th century - including its remarkable welfare systems - against erosion and decline and the shift of the centre of gravity of the globe from the Atlantic to the western Pacific. We are faced with managing decline. At the same time we are faced with an extraordinary growth in social and economic inequality that has benefitted a tiny minority of the super-rich, and has left a rather large minority of the post-industrial poor helpless and depoliticised, and most of the squeezed strata in between under increasingly severe stress and economic pressure.

The combination of growing discontent and a widely-felt moral outrage against the maximisation of economic inequality provides the most promising element for an ideology of social transformation. So far it has not been very effectively mobilised on the side of the left, largely because the most effective carriers of such an ideology at present are university-educated classes, now very numerous, and because the most obvious form of contemporary mass ideology, xenophobia, is impossible to use by the left and correspondingly easy to use by the right. The consequences can be seen in the US, if to a much lesser extent elsewhere, where the right has been able to mobilise the helpless poor against what can be presented as a left-wing intellectual elite as prosperous as it is culturally exclusive and dedicated to issues such as environmentalism and conservation, which have little mass purchase.

In the short run, the most promising road forward for the left is to attack the failure of our economies to understand the depth of the crisis of capitalism since 2008 - a crisis which, as is increasingly evident, is far from overcome in the Atlantic countries and Europe. The critique of neo-liberalism and its failures must remain basic. So must the defence of the state and public sector.

Politics is the only aspect of the 21st-century world which globalisation weakened but not transformed. It remains the only effective mechanism for social redistribution. Given the weakness of the private sector to generate sufficient jobs, it remains the necessary support, the 'employer of last resort' for de-industrialised labour, the guarantor of retirement pension, the necessary foundation of mass education. It has its problems and abuses, but it remains the last bastion against the free market. And it needs politics - politics by collective action to move it. Unless they have given up most people know it. It does not provide much of a hope but it does provide some.

This interview was first published in PPR 18(3), which marked 20 years since the close of Marxism Today, the seminal magazine of British progressive politics through the 1980s.