Labour needs to learn the right lessons from Harold Wilson

If a few years ago you had put money on the Labour Party looking to Harold Wilson for ideas of how to bounce back from three successive election defeats, I reckon you would have got good odds. And here we are in 2021, 58 years after Wilson was elected leader doing exactly that. His legacy has become important not only because he managed to find a way to beat a Conservative government that had been in power for over a decade, but the manner of his victory. Wilson managed to do that very rare thing and not only win an election, but to capture the spirit of the age.

As Rachel Reeves rightly said in her recent speech, Wilson took aim at cosy, elitist old boys club that holding the country back and the public responded to that. A new age required new leadership. He used the coming scientific revolution to push the need for change. The Conservatives could not be trusted to utilise the technological tools of the future because they were too busy looking back to the past. Only Labour could be relied upon to deploy new science to ‘reforge’ Britain and make a success of the 20th century.

We are on the cusp of another major technological revolution where we can see the faint outlines of an economy transformed by data, automation and artificial intelligence. All this has made Wilson’s legacy and strategy as relevant as ever. But the risk with any look back into the past is that you might learn the wrong lessons. Wilson was right to see the need for institutional reform to unleash the potential of technology. The problem was that he thought that the state alone could overcome the failures of business.

Wilson’s argument was clear that British business was the problem. At the Scarborough conference in 1963 Wilson took aim at the “commanding heights of British industry” that were controlled by the “power of inherited wealth” and “speculative finance”. Wilson joked that “[at] the very time that even the MCC has abolished the distinction between amateurs and professionals, in science and industry we are content to remain a nation of gentlemen in a world of players”.

The solution was bringing all the powers of ‘democratic planning’ to bear on the problem, with the state coordinating, convening and investing to make up for deficiencies in the market. Wilson wanted a partnership with industry and business, much as Keir Starmer has spoken about in his speeches since becoming leader.

A number of interventions, from the 1965 national plan to the national enterprise board, were put in place to create the ‘framework’ that would enable Britain to exploit the gains from technology. In hindsight, we can see that these efforts were more successful than critics claimed – but not sustainable. The UK economy did expand and living standards improved significantly, but there were numerous failures along the way that damaged the confidence of the public in the capacity of government. All this paved the way for Thatcherism.

We do need reform to make our economy competitive and to spread the gains of technology fairly across society. But Labour is at risk of making the same mistake as Wilson in believing that state intervention alone is the solution. We can see more frameworks, more strategies, more big state-funded investment funds.

Labour needs to take a step back. Governments of all sorts since Wilson’s time have wanted to create a ‘partnership’ with business and have tried various approaches. Yet over this time we have seen a consistent lack of investment, slowing productivity and stagnating living standards for the poorest in society. We’ve had Wilson’s democratic planning, neo-liberalism under Margaret Thatcher, major investments in public services from Tony Blair and Gordon Brown and major business tax cuts with public austerity under David Cameron and George Osborne – and the results are always the same. As Wilson saw and Reeves herself noted earlier this month, Britain is a scientific superpower but we’ve not been able to consistently translate that into economic success.

It is tempting when you’ve been in opposition for over a decade to see all the problems as being centred in government, as Wilson did. Business leaders will always tell any opposition that with the right ‘backing’ from the state, it can achieve anything. We should look at the facts, not the rhetoric. Business itself has to take some responsibility for why we haven’t exploited the gains of technology to boost productivity, wages and living standards. The culture and structure of British business is more of a problem than the state. Even the British Academy has noted that we have a “particularly extreme form of capitalism”. Labour needs to reform business, not work around it.

The politics is also important. The Conservatives will go into the next election promising a partnership with business. So will the Labour Party. Facing the choice between two parties promising to ‘back’ business, what will the electorate do? Will it go with the devil they know, or hope that Labour can do the same thing better? Labour needs a comprehensive vision, like Wilson had. But it needs to go beyond Wilson and do what he failed to do, and reform business itself. British business is still based on the Victorian principles of shareholder primacy, which are holding back the creativity of our entrepreneurs and workforce.

Labour must back new and alternative models of business for the economy, such as social enterprise, which hold the promise of higher levels of productivity and better living standards for workers. The advantage of this approach would not only be to show to the public that Labour can see the future better than the Conservatives, as Wilson did, but it has the chance to create a sustainable legacy that would not be undone by future governments. This is surely a prize worth fighting for.