There may be a few warnings about pay, and the inevitable references to the ‘black hole’ that has mysteriously appeared in the government’s finances since Labour won the election in July. And yet despite that, the Prime Minister Sir Keir Starmer will deliver the most positive speech a Labour leader has delivered to the Trades Union Congress in more than half a century later today. ‘I call now, as before the election, for the politics of partnership. With us in government, with business, and most importantly of all, with working people… the mood is for partnership,’ he will tell the comrades. ‘And not just on pay – on everything.’ In effect, Starmer is pledging a revival of the Social Contract of the 1970s. There are just a couple of snags. The world has changed dramatically since then, and it didn’t work anyway.
The Social Contract may be little remembered now, but it was the high-water mark of the corporatist approach to political management. Launched by Harold Wilson, who Starmer takes as his inspiration, in 1973 it attempted to manage the economy in a partnership with the trade unions and big business, cutting deals on wages and investment in return for employment and social reforms. The ‘partnership’ that Starmer describes as the solution to all the country’s problems was tried out, with constant agreements between different parties.
There are, however, two big problems with trying to revive that in the 2020s. To start with, that style of corporatism was designed for the old world of big manufacturing industries, which no longer exists. In 1973 more than 300,000 people worked in coal mining compared with almost none today. Almost 350,000 people worked in the steel industry compared with fewer than 50,000 now. Almost all of them were in trade unions, and employed either by nationalised companies or by a handful of businesses. That is hardly true today. In reality, the ‘partnership’ that Starmer speaks of is almost entirely with the public sector, given that only 12 per cent of private sector workers belong to a union.
Next, it didn’t work even then. There were some modest successes in wage restraint that managed to tame inflation briefly, but the higher investment and improved productivity that the ‘social contract’ was meant to deliver never materialised. Instead, British industry became even less efficient, and less innovative, until much of it was hopelessly uncompetitive on the global markets, and was swept away in the Thatcher reforms of the 1980s. It just led to the chaos of declining productivity and endless strikes. In reality, it was always doomed to fail – and so will Starmer’s attempt to revive it in the 2020s.
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