Workers of the world must unite, says the former Labour cabinet minister—but not for the reasons that Marx or Engels believed they should

In January, the world’s pre-eminent living Marxist historian, Eric Hobsbawm, publishes a new book, How to Change the World (Little, Brown). It’s a collection of old essays striving to make two new points: that capitalism is as much in crisis as communism; and that (therefore) Marx and Engels merit re-examination. He is wrong on the first point, but right about the second. And this is not just a historical curiosity, but central to political debate on the left today.

First, the recent credit crunch was not a crisis of capitalism; it was a crisis of western financial markets. Capitalism is doing perfectly fine in China, India, Brazil and Germany. Moreover, totalitarianism was just as much the cause of the credit crunch as capitalism. It was the democratic deficit in China and elsewhere that created the savings glut which tornadoed through the US property market. Were China fully democratic, workers would be able to claim their rightful share of their productivity; Chinese consumption would increase and its savings ratio would fall. If this had been replicated from Singapore to Dubai, there would not have been a mountain of cash for western banks to chisel into subprime-backed phantom financial assets, sparking the crisis.

Hobsbawm claims that economic and political liberalism “cannot provide the solutions to the problems of the 21st century.” Yet a bit more political liberalism in China and economic liberalism in Africa is precisely the solution to many of their problems. Some free trade unions and the right to worship wouldn’t go amiss, either.

And the problem with the “Washington consensus” which Hobsbawm attacks was not that it was liberal, but that it was so extreme: implying that markets must not be interfered with and that, for example, African countries should charge for public health or education. Compared with this, no country in Europe has ever been part of the Washington consensus. In England in 1844, Engels found “everywhere barbarous indifference, hard selfishness on one side, unspeakable misery on the other, everywhere social war.” But by the 1970s, as Hobsbawm says, “the objectives of reformism had been achieved, and workers were incomparably better off than even the most optimistic representatives of reform could have imagined before 1914.”

Social democracy in Europe triumphed during the last century; so why is it in such retreat now? In part because its victory is so total: the right (at least in Europe) accepts the role of government in protecting people, the debate now is about how best to do that. It’s also because of the limits of the European social democratic tradition. In his opening essay on pre-Marxian socialism, Hobsbawm brilliantly traces the difference between the scientific socialism of the continent and the utopian socialism of Britain and Robert Owen. France and Germany had the theory; Britain, in the Chartists and then the first “real” proletariat, had the movement.

The great mystery for Marx (and Hobsbawm) is why the British labour movement never fulfilled the role Marxism assigned it, of prime mover in the revolution against capitalism. The reason is that the movement was right, but the theory was wrong. It was the assumption of inevitable progress, underlying both neoliberalism and Marxism, that was at fault. Both theories assume that progress is inevitable, predicting a utopian future from a few flawed assumptions (that markets will clear; that the dictatorship of the proletariat will be benevolent, and so on). Just as free-market ideologues believe that if you remove interference in the market, optimal equilibrium will result, so Marx and Engels seemed to predict the same would result from overcoming class antagonisms.

But the opposite is true. Improvements in protection at work or in the welfare state had to be fought for, through the ballot box and the picket line. They were not rights to be claimed purely because of their theoretical strength; but changes to be won through political action.

This matters today. It is not the spectre of communism that haunts Europe, but of scientific socialism: the process of thinking, most common on the left in the work of John Rawls and books like The Spirit Level, that we should rationally identify a perfect society and then bend our country into this conceptual framework. The writer Amartya Sen has shown that such “contractarian” thinking is not only impossible, but unnecessary. We understand justice better by comparing real alternatives than by trying to build a castle to social justice in the air. Movements work by deciding between available alternatives, whereas theorists fail by blaming each other for still being so far away from perfection.

The left in Britain was never Marxist because it was always a movement, rather than a theory—and, for that reason, a better solution to the cruelty that Engels found. First through the Chartists, and then the co-operatives and labour movement, people came together to protect themselves. They weren’t pursuing a theory; they were choosing between security and exploitation.

Marx was right to identify false consciousness—but it was the false consciousness of the intellectuals, not the proletariat, that he should have worried about. And it was the wisdom of the labour movement that proved a better solution to reducing this unnecessary suffering than the predictions of inevitable revolution.

Today, this debate haunts Labour again. Should we prioritise reducing inequality as defined by the Gini coefficient? Or should we start from the suffering that people feel, and how we might remove that part which is unnecessary? Is success to push tax credits round on an Institute for Fiscal Studies graph, or for people themselves to have the power to lead the life they desire?

New Labour wanted the latter. But it failed to offer a sufficient political economy for working people. After introducing the minimum wage and the social chapter, we, in essence, took the market solution as given, and then tried to compensate for it through redistribution and public services. But what this ignored is the potential for global capitalism to trample on the dreams that people hold dear.

What Marx, Engels and Hobsbawm all remind us is that, while we should harness the “creative destruction” of capitalism, we must not forget that destruction is painful. The left needs to find a way of being in favour of markets, while recognising the pain and fear that they can create. But to do that, the traditions of the Labour movement are a better guide to “how to change the world” than either modernised Marxism or European social democracy.