Michael Jacobs and Andrew Hindmoor: Left and Right: On the British Labour Party's Economic Policy and Party Positioning
I
The comprehensive defeat of the British Labour Party in the 2019 General Election led to a widespread belief that, in seeking a return to power, Keir Starmer would inevitably lead the party on a decisive rightward turn toward the political center ground. To many, this scenario might feel like déjà vu. There is a cliché of analysis suggesting that Labour must invariably choose between winning elections and ideology, a tension reflected in a history of periodic policy shifts. After a depressing period in opposition, the party turns right to seek voter support; after experiencing the compromises and disappointments of governing, it retreats back to a more distinct left-wing ideology. We call this the "electoral-ideological" explanation of the Labour policy pendulum.
This article provides an alternative explanation: the oscillation of Labour's policy originates from changes in the external economic environment—a "political economy-policy" approach. When the economy is performing well, Labour turns right and adopts a redistributive economic strategy (emphasizing increased investment in public services and welfare); when it perceives the economy to be performing poorly or even falling into crisis, Labour turns left and introduces structural economic reform programs (emphasizing state intervention in investment and ownership).
The second part of this article provides a general explanation for Labour's shifts since World War II based on the economic policy approach. The third part explores in greater detail the assumptions and claims of the "electoral-ideological" and "political economy-policy" explanations. The fourth part argues that for the controversial period of Labour history under Harold Wilson's leadership between 1960 and 1975, the "political economy-policy" approach provides a more appropriate explanation. While this article focuses primarily on Labour’s history, its arguments are predicated on the general case of why and when political parties shift their policy stances. The fifth part points out that theories of party positioning must be understood in conjunction with the process by which parties adopt and change their policies—policy incubation. Regarding economic policy, this policy deliberation focuses on how a party achieves its overall goals in light of changing economic conditions. This focus on policy incubation serves as a correction to the party positioning models derived from Anthony Downs's rational choice theory. Recognition of policy incubation, in turn, provides a new perspective for predicting when actors such as politicians will change their ideological stances. The final part of the article elucidates how the aforementioned circumstances currently influence the policy orientation of the Labour Party under Starmer's leadership.
II
The history of the Labour Party is usually described as a history of oscillating between a further-left and a further-right wing.
In different historical periods, the left and right wings of the Labour Party have held differing opinions on a multitude of issues. Membership in the European Economic Community (EEC), nuclear disarmament, foreign policy, and views on law and order and the organization of public services have all been areas of conflict. However, one ideological disagreement—the party's economic policy—has persisted across all historical periods. It was the issue of economic policy that prompted the party's early policy statements, such as Labour and the New Social Order. Its analysis of the changing nature of capitalism provided the intellectual platform for revisionism in the 1950s. Since the 1970s, the struggle between the Labour left and right has primarily revolved around economic policy issues such as taxation, public ownership, trade unionism, and industrial strategy, while economic issues have consistently remained the top priority for voters.
Generally speaking, the Labour right believes that goals such as promoting social justice, reducing inequality, and improving the situation of the poorest can be best achieved by expanding and improving public services and building a more generous welfare state. To this end, it is necessary to ensure that the capitalist economy functions well to stimulate strong and sustained economic growth, thereby generating sufficient tax revenue to provide resources for redistribution through public services and welfare. We may call this the "redistributive" approach to economic policy. Conversely, the Labour left has always remained skeptical of the value of British capitalism, believing that the British economy is excessively dependent on the City of London [1] and its shareholder-interest-based system of corporate governance; this has led to a chronic lack of investment in productive industries and shifted the returns of growth from labor to capital. Therefore, to achieve Labour's goals, the left advocates for more economic planning by the state, the nationalization of key sectors, and strengthened regulation of labor and financial markets. We may call this the "structural reform" approach to economic policy. Since WWII, these two major programs, though changing in detail, have maintained their general contours.
Regarding Labour's policy positioning between these two major programs, the common historical narrative is as follows.
After 1945, Clement Attlee’s government adopted highly interventionist economic policies. It promised full employment and sought to increase labor productivity and output. The government nationalized 20% of the economy and formulated various industrial plans to ensure strict control over imports and capital flows. However, after Attlee left office in the 1950s, the Labour Party turned significantly to the right under the leadership of Hugh Gaitskell. Influenced by Anthony Crosland’s revisionism, the Labour Party abandoned its commitment to strengthening the planned economy and public ownership, turning instead to a commitment to reducing inequality by increasing spending on public services and the welfare state.
In the 1960s and early 1970s, under Wilson's leadership, Labour's positioning was called into question. However, by the early 1980s, the party again turned markedly to the left; in 1983, it promised a five-year National Economic Plan, the establishment of a National Investment Bank, and the re-nationalization of the steel, shipbuilding, and aerospace industries that had been privatized during Margaret Thatcher's premiership.
After the defeat in the 1983 General Election, Labour leader Neil Kinnock once again shifted the party's direction. After defeating the left wing led by Tony Benn, Kinnock, through extensive policy discussions, pushed the party to abandon its earlier commitments to nationalization and a planned economy, moving toward the political center ground. This shift, initiated by Kinnock and completed by Tony Blair and Gordon Brown, transformed "New Labour" into a party focused on utilizing the fruits of economic growth to increase spending on public services and welfare. After Brown's election defeat in 2010, the Labour Party changed its stance again. Ed Miliband distanced himself from "New Labour" and led the party on a cautious leftward turn, advocating for more interventionist economic policies. Following the 2015 election loss, his successor Jeremy Corbyn pushed the party on a major leftward turn.
We acknowledge that the stylized representation of Labour's policy oscillations conceals certain important nuances in policymaking. For example, during Attlee’s tenure, the economic agendas of Chancellors of the Exchequer Hugh Dalton and Stafford Cripps differed significantly. Blair decisively scrapped Clause IV [2] of the party constitution, yet briefly turned toward a "stakeholder" [3] path to cure the country’s capitalism of the "British disease." Furthermore, a "shift" to the right may leave a party further to the left than it was previously, and vice versa. For instance, Gaitskell reduced the importance of public ownership but did not oppose all forms of it. Although Kinnock pushed the party to the right, he continued to support active industrial policy, as reflected in the 1992 campaign platform.
We take the Labour Party’s election manifestos as the clearest indicators of its policy positioning. A manifesto provides a "snapshot" for verifying a party's stance. Of course, parties do not necessarily stick to a position: once in power, they may deviate from their campaign platform due to events, or they may choose paths in practice that are vastly different from previous promises. Nevertheless, the manifesto is the most important text in party positioning. At the critical moment of competing for voters, the manifesto is the public face of party policy. Manifestos are always the product of intra-party negotiation and thus reasonably represent the party's positioning at that time, allowing us to "anchor" a party's position in an objective sense, setting aside temporary fluctuations and intra-party disputes.
The academic community typically examines changes in party positioning around expert surveys or manifesto analysis. "The Manifesto Project" provides positioning data for over 1,000 parties in more than 50 countries since 1945. The project breaks down each manifesto into individual statements, categorizing them into 60 different issue categories and their policy stances. It then analyzes the overall content of each manifesto based on the relative importance of each issue. Finally, the data is adjusted to determine each party's position on a left-right spectrum.
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Figure 1 shows the Manifesto Project’s estimates of Labour’s position from 1945 to 2019, confirming the stylized history described above. Compared to 1945 and 1951, the Labour Party turnd right continuously starting from 1955, moving from -38 in 1955 to -26 in 1959, and thereafter under Wilson's leadership reaching -10 by 1970. However, the party subsequently underwent a sharp leftward turn, reaching -48 in February 1974. Subsequently, following rightward turns in October 1974 (-28) and 1979 (-27), Labour again turned markedly to the left, reaching -39 in 1983. Despite some oscillations in the following years, Labour as a whole turned sharply to the right: in 1997, it even crossed the center line to become a center-right party (+8). However, under Ed Miliband's leadership, Labour turned sharply left again, reaching -18 in 2015, and maintained a leftward turn under Corbyn’s leadership, reaching -28 in 2017 and -32 in 2019.
III
How can we explain Labour's policy orientation? The following view frequently appears in academic literature and political media commentary: the reason Labour oscillates between left and right is to manage the inevitable tension between ideology and winning elections.
At its founding, the Labour Party was an ideologically based left-wing party. This is evident in the denunciation of the "degeneration and brutality of capitalism" in Labour and the New Social Order. However, in a country where the majority of voters do not self-identify as left-wing, how to win enough votes to maintain power has been a long-term problem facing the party. This exerts continuous pressure on the Labour leadership, forcing them to compromise with voters and move toward the right to win power.
In academia, the "electoral-ideological" explanation for policy shifts finds its clearest basis in the "median voter theorem" as expounded in Anthony Downs's An Economic Theory of Democracy. It must be emphasized that Downs's analysis of party displacement is more nuanced than is generally believed. In particular, after Downs explains how parties find it in their interest to move toward the median voter, he discusses how different predictions by voters, voting, and parties can lead to different outcomes. In any case, Downs's work and its fundamental discourse on the centripetal forces of party competition remain immensely influential in academia.
Downs’s argument is not the only source of the "electoral-ideological" perspective. Regarding Labour’s positioning, a completely different analytical tradition reaches a very similar explanation. This tradition began with Ralph Miliband’s analysis in Parliamentary Socialism and the contemporary critiques of Tom Nairn and Perry Anderson, whose analysis focused on the conflict between the Labour Party’s early commitment to a parliamentary political strategy and Marxist socialist ideology. For these scholars, and researchers who later followed the same academic tradition, the Labour Party was never, and could never be, a vehicle for socialism. The conservative trade union movement on which it is based, its anti-theoretical philosophical tradition, and its adherence to parliamentary procedures all made it impossible for the party to maintain a radical policy stance. In the work of Adam Przeworski, this point is indeed linked with rational choice theory.
The “election-ideology” version of the explanation can also be found in other analyses. Since World War II, a consistent thread in Labour's ideological debates has been that the sociological composition of the electorate has changed. The number of blue-collar workers in trade unions has gradually declined, while the size of the “aspiring” middle class has continued to expand. Anthony Crosland, Neil Kinnock, and Tony Blair all warned that the Labour Party could no longer rely on traditional working-class voters and socialist traditions. With the continuous decrease in the number of working-class voters, shifting economic policy to the right became Labour's only magic weapon for winning elections.
However, there is a starkly different way of explaining Labour's policy changes, which is to focus on the economic context of policy-making. The Labour Party was founded to better protect the interests of labor and achieve a broader range of economic equality. As previously mentioned, at its inception, the Party believed that achieving these goals required an alternative to the capitalist system, or at least its fundamental transformation. This “democratic socialist” position was reflected in the Party's 1945 program. It was not until the 1950s that Crosland proposed a “revisionist” [4] position, arguing that the Party could achieve its goals of reducing social inequality by raising taxes and increasing spending on public services. Crosland's core argument was that capitalism had changed and was no longer the dysfunctional model of the pre-war era. Future economic growth could now be reasonably expected; corporate ownership and management had separated; managers were willing to negotiate pay with unions; and unemployment could be maintained at low levels through Keynesian demand management. This meant there was no need to replace capitalism or transform it radically. Instead, the Labour Party could redistribute the gains brought by capitalist growth through public spending and taxation.
In the 1980s, Kinnock and his deputy Roy Hattersley shifted back to a revisionist position. Later, Blair described “New Labour” as following a “Third Way” between left and right, a view further developed by Gordon Brown, who defined socialism as equality of opportunity. Brown argued that globalization and the end of the full-time male employment paradigm had changed the nature of the economy. Consequently, he proposed an economic program based on full employment, enhancing labor skills, and reforming the welfare state through progressive taxation, aiming to eventually eliminate poverty.
A key factor in Labour's adoption of revisionist positions was the strong performance of the British economy during each of these periods. The 1983 Labour manifesto was written at the peak of the recession and mass unemployment caused by the early economic policies of the Thatcher government; Kinnock's move to the right occurred after economic growth resumed. As Andrew Thorpe noted, Kinnock's Policy Review was “underpinned by, and even predicated on, the ‘boom’ that was evident by late 1985.” This upward trend ended with the sharp recession between 1990 and 1992. It was not until Blair was elected leader of the Labour Party in 1994 that the era of the “Great Moderation” began. Between 1992 and 2008, there occurred the longest period of sustained economic prosperity in over a century. Low inflation was accompanied by gradually increasing employment levels and rising household incomes. The increase in household income and corporate tax revenue, in turn, made possible the continuous growth of spending on public services and social security benefits. The Labour government did not realize the fragility of the financial model upon which economic growth in the first decade of the 21st century relied, seeing only the explosion in tax revenue brought by the lucrative profits and bonuses of the City of London [5].
Therefore, the contemporary performance of the British economy was an important foundation for the Labour Party's adoption of redistributive economic policies in the latter half of the 1950s, the 1980s, and between 1994 and 2008. Similarly, economic conditions were also key to the Labour Party's shift toward structural reform programs for economic policy in other periods.
In 1945, the new Labour government faced not only a war-ravaged economy and a national debt nearly 250% of GDP but also an economic system that had proven helpless in the face of mass unemployment and poverty during the Great Depression. Therefore, economic intervention policies based on planning, market regulation, and nationalization were not only the ideology of the Labour leadership but were also widely regarded as an economic necessity. Only by restructuring British capitalism could the Labour Party hope to create conditions for sustained economic growth, thereby providing resources for the creation of the National Health Service (NHS) and the implementation of the Beveridge Report, which were the Party’s primary political goals.
While the situation in the early 1980s was different, it was equally crisis-ridden. Following the collapse of the Bretton Woods system, the oil price shocks of the early 1970s, and the subsequent “stagflation,” the Labour governments led by Harold Wilson and James Callaghan failed to stabilize the British economy. Due to a soaring budget deficit, the government was forced to request financial assistance from the International Monetary Fund (IMF) in 1976. Britain was also labeled the “sick man of Europe” due to poor management, underinvestment in state-owned enterprises, weak manufacturing and export performance, and clearly over-powerful trade unions. From 1980 to 1981, the Thatcher government introduced a series of anti-inflation policies such as restricting the money supply, cutting public spending, and increasing VAT. As the exchange rate rose, these policies dealt a severe blow to British competitiveness, leading not only to the most serious post-war recession and a surge in unemployment but also striking the first blow against many of the country's historic industries.
In this context, it is not surprising that the Labour Party turned to a completely different economic policy focused on structural reform. The pivot of the 1983 Labour manifesto was the so-called “Alternative Economic Strategy” (AES), which was the product of a decade of economic reflection by the left. Although there were multiple versions of the AES, its core was an analysis of the two root causes of British economic weakness. One was the historical role of the City of London. The interests of the City lay in global financial transactions rather than investing in British industry, and its threat of capital flight imposed continuous constraints on expansionary monetary policy. Second was the changing character of the modern capitalist economy. Industrial concentration created powerful, near-monopolistic companies, many of which had become multinational, no longer bound by market competition or commitments to invest in Britain. The AES suggested that a policy response was necessary: implementing an industrial strategy based on expanding public ownership, industrial democracy, and reaching planning agreements with individual companies; coordinating national economic planning with expansionary monetary policy to achieve full employment; and regulating prices, imports, and international capital flows. In the 1983 manifesto, this program was largely adopted.
By 2010, the British economy was once again in crisis. The 2008 global financial crisis led to the largest decline in production since the Great Depression and the loss of over a million jobs. Clearly, the seemingly benign growth of the previous decade had been built on high levels of household and commercial debt, and rising asset prices had caused a sharp expansion of wealth inequality. In the following years, as the Coalition government [6] adopted austerity policies of cutting public services and public investment, leading to stagnant productivity and wage levels and a surge in the number of workers on precarious zero-hours contracts, it became clear that the existing growth model was unsustainable. To tackle the crisis at its roots, the Labour Party once again turned to a structural reform position. Under the leadership of Ed Miliband, Labour advocated for an active industrial strategy, which included establishing a new national investment bank, formulating regional economic development policies, re-nationalizing railways, capping prices for energy companies, and electing workers to boards of directors to reform corporate governance. Under Jeremy Corbyn, the Labour Party expanded nationalization plans to many other sectors; its industrial strategy significantly increased public investment, with a particular focus on a “Green Industrial Revolution” to address the worsening climate crisis; the Party also promised to raise corporate taxes and introduce a financial transaction tax.
In each of the aforementioned periods, the Labour Party's policy stance shifted to the left for essentially the same reason. The Labour leadership concluded that economic crises could only be resolved through government-led structural reforms. The redistribution of the fruits of economic growth was not enough to achieve the goals of equality advocated by the Party—moreover, the “cake” available for redistribution was not large enough. Therefore, the deep-seated malaise in the British model of capitalism could only be resolved through systemic government intervention.
In short, this is the alternative explanation for the pendulum of Labour policy: the “political economy—policy” approach. Labour's policy positioning changes due to variations in the external economic environment: when the economy performs well, Labour moves to the right and adopts a redistributive economic strategy (emphasizing increased spending on public services and welfare). When the economy performs poorly, Labour moves to the left and proposes structural economic reform programs (emphasizing government intervention in investment and ownership).
It is important to recognize that there is no fixed standard for measuring whether economic performance is good or bad; it is merely a judgment made by comparing recent experience and expectations. In hindsight, the slowdown in economic growth in the early 1960s and the “stagflation” of the 1970s were not as severe as the early 1980s and the Great Recession after 2008. However, at the time, they were undoubtedly treated as disturbing signs of national economic decline, especially when compared with the boom period of the 1950s. In this sense, the perception of economic performance is neither objective nor fixed. Such perception is merely a reflection of current public and political discourse. It is this which determines the economic choices made by politicians. In fact, this discourse is to some extent constructed by politicians themselves, as they attempt to persuade the public that the situation is improving or worsening. Politicians are generally more willing to respond to arguments than to simple data.
IV
The “election-ideology” and “political economy—policy” explanations are not the only interpretations of Labour's policy swings. Different scholars have attempted to explain the ideological positioning of political parties and the relationship between these positions and policy choices influenced by multiple factors. These factors include: changes in voter values, shifts in organizational membership, the decoupling of the party from class, intensifying new policy challenges and the development of new policy ideas, intra-party conflict, the necessity of coalition-building, cognitive capacity, organizational resources and political marketing, and the characteristics of the electoral system.
There are two main reasons why we focus on these two broader research methods. First, as mentioned above, the “election-ideology” explanation is a perennial topic in daily political debates about winning and losing elections. Currently, anyone who has experienced the previous left-right struggles within the Labour Party knows that the claim that elections are won on the “middle ground” [7] is a key feature of the debate over Labour's strategy and electoral prospects. In summary, supporters of “New Labour” insist that Labour's electoral victories in 1997, 2001, and 2005 were the result of moving toward the middle ground, while the electoral losses in 2015, 2017, and 2019 were due to moving away from it.
Second, although both the “election-ideology” and “political economy—policy” explanations fit many facts in the history of Labour's economic policy, this article argues that the latter explains more accurately how policy actually changes.
We will discuss this issue more deeply later. However, before that, it is necessary to examine a period we have carefully avoided until now—1960 to 1975—as this period provides useful clues for our argument. Analysis of the “Manifesto Project” (Figure 1) shows that the positions expressed by Wilson in the 1964, 1966, and 1970 manifestos were all further to the right than those of his predecessors. Even today, Wilson is indeed often regarded as being on the right wing of the Labour Party. This is consistent with the “election-ideology” explanation of Labour's policy positioning. After the defeat in the 1959 general election, the Labour Party moved further to the right to win over voters it had failed to gain in the previous two elections, resulting in victories in 1964 and 1966.
However, this interpretation is barely satisfactory. In 1960, Wilson was not regarded as a figure of the Labour Right. More importantly, in terms of specific economic policies, the 1964 and 1966 manifestos were no more "right-wing" than that of 1959. The 1964 manifesto promised the introduction of "socialist planning," proposed the creation of a new Ministry of Economic Affairs and a Ministry of Technology, the implementation of regional planning, the establishment of a "Charter of Rights" for all employees, stricter controls on monopolies and mergers, and the introduction of a national incomes policy. None of these appeared in the 1959 manifesto, where economic policy was confined to a few vague paragraphs. The 1966 manifesto elaborated on these economic planning commitments in even greater detail, including the nationalization of ports and the use of the newly established Industrial Reorganisation Corporation to rebuild Britain's major industrial sectors.
Why did Wilson propose such a radical economic program? In 1955 and 1959, the Conservatives campaigned on an economic record of "never having had it so good." However, by the early 1960s, the British economy began to falter. The balance of payments surplus of 1958 turned into a massive deficit by 1960—and at that time, a surplus was seen as the symbol and prerequisite of economic prosperity. The British economy fell into recession in late 1961 and contracted further in 1962. From roughly 1960 onward, an increasing share of the public believed that Britain was falling behind other economies, particularly in manufacturing investment and technological research and development. Arguments over Britain's poor economic performance dominated the 1964 election. Consequently, as Wilson's biographer Ben Pimlott noted, by 1964, both political consensus and public sentiment regarding economic policy were pointing toward Labour’s program of planning and reform.
Therefore, the "political economy-policy" explanation should not be understood simply as Labour shifting left whenever an economic crisis is perceived or actually occurs. Rather, it is that Labour can win during such shifts only when policy changes synchronize with shifts in public sentiment, and when voters are more inclined to support structural economic reforms. This point is crucial because it challenges the core assumption of the "election-ideology" model—namely, that radical economic policies always alienate the majority of voters. This is not the case. Labour won the 1945, 1964, and 1966 elections with a center-left program of structural economic reform precisely because this program led the majority of voters to recognize that such reforms were appropriate and necessary during a period of economic crisis. Mrs. Thatcher also won the 1983 and 1987 elections on a relatively radical right-wing reform program. In this regard, public opinion and its relationship with political parties are far more fluid than the "election-ideology" approach suggests. Parties do not simply and passively cater to fixed electoral preferences. Preferences change constantly, and parties are capable of shaping them.
V
The importance of the Wilson era for this article's argument lies in reminding us that anchoring an economic stance in the "center" does not guarantee that Labour will always win. However, the validity of the "political economy-policy" approach also rests on other reasons. Parties do not simply calculate and forecast to identify the median voter and then move toward them. Parties adopt and change policies based on a rational consideration of the effectiveness of different policy options in achieving party goals—a consideration that depends on the economic context of policy construction and thus changes according to the economic situation.
Like other rational choice approaches, Anthony Downs's theory of party competition clearly ignores the capacity of practitioners to judge their own situation and adopt corresponding countermeasures. Starting from its assumptions, the theory concludes that party positioning must inevitably tend toward the median voter. Some later models are less rigid than the original, offering more complex interpretations of political goals, including policy orientation, ideological coherence, and political survival. But even so, the trade-offs between goals are treated mechanically, leading to an optimal, complex, and utility-maximizing choice. Rational choice models of party competition can accurately predict party positioning only because the theory effectively excludes any form of inference that is indirect or external to voter preferences.
More importantly, rational choice models ignore the development of policy ideas and the winning or losing of arguments. In practice, all political parties engage in "policy maturation" [8]: substantive debates over the merits of alternative policies and whether they can successfully achieve party goals. Such debates are the lifeblood of all ideological parties.
Furthermore, such debates help explain why specific factions within a party prevail at different times. It is not merely a matter of which faction has more supporters, but whether a faction’s perspective can win over the "undecideds," whether they be leadership figures with decision-making power or ordinary members. Effective policy maturation requires at least some of the debaters not to be ideologically rigid on policy lines; their views should be adaptable.
In debates over economic policy, the economic environment is paramount. Economic policy debates always have a historical context: what kind of policy should be introduced given the economic conditions of the time. It is this point that explains not only why Labour shifts between the left and right poles, but also when these shifts occur. When the economy is functioning well, with sustained growth, high employment, and increasing public revenue, arguments for pure redistribution are more likely to be accepted. At such times, implementing structural reform is difficult, as it requires new state capacities to tax vested interests and time to implement. When economic performance is good, structural reform is not only difficult but unnecessary. Conversely, it is when the economy falls into crisis or stagnation—reflecting deep-seated flaws—that structural reform comes to the fore.
This process of policy maturation is clearly revealed in accounts of Labour policy-making, which cite contemporary policy documents and memoirs of key participants. These show that vivid policy debates focused not only on winning elections but also on which policies could more effectively solve the economic problems of the day and achieve Labour's egalitarian goals. Three examples support this.
The first example relates to the formulation of Labour's 1973 program, which formed the basis of the 1974 manifesto. The program promised to create a National Enterprise Board to hold strategic stakes in major firms and to sign "planning agreements" with these and other companies, in exchange for public investment and other support. These proposals represented a significant leftward shift from the position of the 1970 manifesto. Detailed, personal narratives of Labour’s internal policy-making process show that the new policy originated from an analysis by Wilson’s former economic advisor, Stuart Holland, regarding the weaknesses of British industry, the growth of multinational corporations, and the reasons for the government’s failures between 1964 and 1970. The Labour Right believed that simply formulating a broad national economic plan, supplemented by prices and incomes policies, would stimulate sufficient growth. Holland’s prescription differed from both. Research into these debates shows that many key figures in the party changed their views in response. Tony Crosland was Holland’s primary opponent. Although Crosland maintained that Holland’s claims would be difficult to sell to voters, it was the policy maturation within the core decision-making circle, rather than electoral considerations, that determined Labour's shift in position.
The formation of "New Labour" economic policy in the 1990s followed a clearly similar process. After the 1992 defeat, Blair, Brown, and their advisors were determined to shed Labour's image among voters as a high-tax party. But Labour's economic revisionism went much further. In speeches and pamphlets, party leaders argued that contemporary capitalism had undergone fundamental changes. Globalization meant it was no longer possible to regulate firms within national borders. To promote growth and distribute gains more fairly, the primary task of a Labour government was to provide conditions for economic stability, particularly by controlling inflation; the second was to develop the supply side of the economy, especially in education and skills. The strong economic growth following "Black Wednesday" [9] in 1992, and the policy consensus formed by macroeconomic theorists on both sides of the Atlantic—based on the new endogenous growth theory and central bank inflation targeting—all provided support for their arguments. In putting forward these arguments, Blair and Brown engaged with and defeated opponents within the party who sought more active Keynesian fiscal policies aimed at full employment. There is no doubt that electoral considerations played a major role in Labour’s shift to the right during this period. However, a debate based on policy maturation also won out within the party, the theme of which was the nature of the economy and how it could best be managed.
The third case comes from after the Labour government left office. Superficially, it was Ed Miliband who led Labour to the left after the 2010 defeat, but in reality, it was one of the architects of "New Labour," Peter Mandelson, who first revived an industrial strategy of government intervention during his tenure as Business Secretary from 2008 to 2010. As his advisor Roger Liddle noted, the financial crisis and the subsequent sharp drop in investment and output convinced Mandelson that for British industry to revive, the government had to act. Brown and Chancellor Alistair Darling were initially skeptical but were eventually persuaded; thus, Labour's 2010 manifesto proposed an active industrial strategy. This shift in policy positioning was driven by three "New Labour" members who had resolutely opposed industrial strategy ten years earlier, precisely because economic conditions had changed and policy maturation had prevailed. Similarly, Miliband was persuaded by arguments among his shadow cabinet members and advisors that the failure of austerity and persistent weakness in production meant that post-financial crisis Labour had to implement more government intervention.
Not only do parties engage in this kind of policy maturation, but public opinion also changes with economic conditions. When economic performance is poor, more people naturally lean toward more radical economic policies—various structural reform measures. For example, in 2017, public support for increased public spending and higher taxes rose to its highest point in 15 years, just as Labour held the same position. Between 2017 and 2019, public support for the re-nationalization of railways, the Royal Mail, water, and energy companies also rose. There is indeed a mutual causality here: Labour both responds to and shapes public opinion. It is for this reason that Labour’s structural reformers can insist that a leftward shift is not the "electoral suicide" claimed by the Right, but on the contrary, may be more popular with the public. This strategy was reflected both in Wilson’s 1964 and 1966 rhetoric regarding technological progress and in Corbyn’s 2017 anti-austerity stance.
Voters do not necessarily perceive their own positions as having shifted. Many might still consider themselves to be in the "center" because they attribute their changes to political moderation and a sense of pragmatism. The political center-ground is neither fixed nor exogenous; it is constructed. New Labour's effort to persuade voters that policies like the minimum wage and the windfall tax on utilities were not typical "old-style socialism" was often very successful. As Corbyn said at the 2017 Labour Party Conference: it is often said that elections can only be won from the center-ground. In a sense, that is not wrong—so long as one understands that the political center-ground is not a fixed or immovable point, nor is it what establishment experts take it for granted to be.
Rational choice literature on party competition suggests that the strategy of shaping preferences (rather than merely catering to them) can be used as a means of winning votes. William Riker’s concept of "heresthetics" [10] further emphasizes that the selection and framing of issues can create a competitive advantage. This suggests an intersection between the "election-ideology" and "political economy-policy" models. If preference-shaping is successful enough, the median voter may join forces with radical reformers. In any case, the core insight of the "political economy-policy" model remains vital: the policy ideas that can potentially win an election are at all times dependent upon and constrained by the economic conditions of the moment, and by the ability to provide a compelling case for policies that can promote economic development.
Recognizing the role of policy reasoning brings a new perspective to understanding several important debates in the history of the Labour Party. For instance, in the late 1990s, Mark Wickham-Jones and Colin Hay engaged in a significant debate regarding the economic stance of "New Labour." In brief, Wickham-Jones argued that given the finance-dominated structure of British capitalism and its weak labor market mechanisms, it was to some extent inevitable that Blair and Brown would adopt a neoliberal attitude toward globalization and the role of government. Hay disagreed, arguing that Labour had choices, and that an investment-led industrial strategy was a realistic and preferable option.
Looking back at the British and global economic context at the time of this debate, it may now be acknowledged that there was a third option: as Hay claimed, Labour indeed had choices, but under the prevailing circumstances, the "New Labour" path was in fact entirely rational. By the late 1990s, the UK economy had experienced a long period of growth. At that time, few economists pointed out the unsustainable nature of its foundations, which only became apparent ten years later. Who would have asked then: why not adopt a redistributive strategy?
Therefore, understanding the role of policy reasoning provides a richer perspective for explaining how and when a political party changes its policy stance, and offers new ideas for recognizing shifts in individual positions. Much political analysis assumes that political actors, whether politicians or party members, have fixed positions on the left-right spectrum. They are either "on the left" or "on the right" and remain so permanently. However, the policy reasoning model shies away from such a static view. When economic conditions change, there is no reason for politicians, party members, or the public not to change their minds. In fact, this is highly logical. In their view, a policy that was correct under the virtuous conditions of economic growth and increasing public revenue will appear completely inappropriate when the economy suffers a downturn or exposes major structural flaws. In other words, it is entirely possible for someone to be a Blairite in the 2000s and a Corbynite in the 2010s. Under different economic conditions, those who uphold egalitarian goals have every reason to support two vastly different sets of policies across two different periods to achieve the same objective.
VI
The "political economy-policy" approach to the displacement [11] of Labour's position brings a new perspective to understanding the party's current predicament. Since the party's crushing defeat in the 2019 general election, it has been widely believed that the new leader, Keir Starmer, must push Labour to the right and return to the political middle ground. Under the influence of the "electoral-ideological" narrative, media commentary suggests it is almost self-evident that Starmer can only win back voters by doing so. Starmer’s speech at the 2021 Party Conference seemed to indicate his endorsement of this view.
The "political economy-policy" analysis takes a different view, arguing that the economic conditions that led the party to shift to the left after 2010 have not disappeared. In fact, the COVID-19 pandemic has further worsened the economy. The British economy is still characterized by low investment, low output, and low wages. Millions of workers are flooding into an increasingly precarious labor market, including self-employment, "gig" work, and part-time contracts. Serious regional disparities persist across the UK. The British banking system remains unreformed, real estate investment proportions are unbalanced, and companies focus more on short-term profits and shareholder dividends. The "cost-of-living crisis" caused by high inflation is likely to dominate domestic politics from 2022 to 2023, and there is reason to believe that the solution should move beyond centrist "plasters" [12] toward deeper structural reforms.
Clearly, compared to the 2019 manifesto, Labour’s next manifesto will move closer to the center. But this by no means says the next manifesto must be, or will be, closer to Blair than to Corbyn. Scarcely any economic commentator believes that would be appropriate. Regarding economic policy, public opinion remains quite far to the left, supporting many of the policy propositions put forward by Labour in 2017 and 2019. In fact, Shadow Chancellor Rachel Reeves proposed various structural reforms in 2021, ranging from industrial and procurement policies aimed at revitalizing British industry to collective wage bargaining and corporate governance reform.
Of course, since 2024 is the UK general election year, it would be unwise to predict the economic conditions or Labour's economic policy stance at that time. However, the kind of policy reasoning upon which the party has based its policy-making in the past—and which has more than once persuaded the public to follow suit—suggests that the outcome remains to be seen.
( Authors: Michael Jacobs, Andrew Hindmoor, Department of Politics and International Relations, University of Sheffield, UK; Translators: Ma Xinru, School of Political Science and Public Administration, Shandong University; Li Hong, Institute of Contemporary Socialism, Shandong University. ) Web Editor: Tong Xin Source: Global Theoretical Trends (《国外理论动态》), 2023, No. 4. This article was originally published in the online edition of The British Journal of Politics and International Relations, June 20, 2022. The original title was “Labour, Left and Right: On Party Positioning and Policy Reasoning.” The Chinese translation has been abridged. This translation is a phased achievement of the National Social Science Fund General Project "Research on the Dysfunction of Center-Left Parties in Western Europe."