Lord (David) Owen: A life in Politics

The SDP’s Social Market – Slogan or System?

Thank you. It’s a real pleasure to be here today.

‘Our big idea. Our very own idea. If we work it out further we could make it our flagship’.  That was David Owen in 1988 describing The Social Market economy – an idea which was a feature of SDP thinking throughout the 1980s.  Owenites claimed the Social Market as their foundational system, others flirted with it, and many ordinary SDP members felt… ‘If we only knew what it was, we’d be bound to endorse it…’

So what was the Social Market?  Was it a genuinely new and distinctive system of political economy?  Or was it just a useful rhetorical device which helped the SDP define itself?

First, its origins.  The phrase ‘Social Market’ was originally used in Germany in 1946 by Alfred Muller-Armack – a member of the Frieburg School of ordo-liberal economists.  His formulation was more market than social. But importantly, it later fed into the CDU’s political programme which contained pro-competition and strong anti-trust laws against monopoly power.  This is a consistent feature of all forms of ‘Social Market’ theory.  Policy resembling the Social Market was adopted by the West German SPD after it abandoned Marxism in 1959 – although the term itself was not used by them at that stage.

Fast forward to  Britain in 1975 and the term crops up in Keith Joseph’s CPS paper ‘Britain Needs a Social Market’.  But, again, Joseph’s formulation contained a lot of market but relatively little of the social dimension – save for what economic surpluses of the market itself would provide.

Go forward to 1981 and you start to see the evolution of the Social Market concept within the SDP.  It’s worth noting that the term appears neither in the ‘Limehouse Declaration’ nor in the SDP’s initial 12 point plan after its launch.  The mixed econony was mentioned.  The word decentralisation appears.  However, in May 1981 David Owen presented a lecture at Strathclyde University titled ‘The Social Market’.  This contained the seeds but it wasn’t until David became leader of the SDP that the Social Market – as we understand it today – was firmly introduced to the British people.

So what was it?  Well, quote, ‘The social market is itself a vague phrase, though with powerful resonances.’  That’s Robert Skidelsky.  The foundational point I think, is the one that David Owen makes in his 1984 book ‘A Future That Will Work’, namely, that the Social Market is not merely the mixed economy.  Key point.  An adherent of Labour’s Clause 4 could advocate the mixed economy but without any real enthusiasm for the profit motive of the private sector.  Similarly, a free enterprise purist could endorse the mixed economy but without really valuing the central role that government plays in any successful state.

In contrast, advocates of the Social Market understood that the private and public sectors depend on each other and that the frontiers between them must be respected.  Another key point.  Why?  Because the motive force, as David Owen called it, of each sector is different. ‘Profits are the motive force of the private sector, Service is the motive force of the public sector.’  To favour one sector against the other risks harming both.

Did the concept of the Social Market – as the SDP promoted it – change over the years?  Yes it did and again, I’d argue, more on the social side than the market side.  It evolved.

The post-election 1983 version was a combination of dynamic free markets with widespread government intervention.  There were definite signs, I think, of the SDP’s Labour heritage here.  A strong and active state would preside over competition policy but it would also conduct industrial policy, skills training, have an incomes policy, engage in economic planning and wealth redistribution.

Later formulations of the SDP’s Social Market policy would shift away from state planning and intervention towards redistribution as a means of tackling inequality and into franchising as a means of running some services.  Decentralisation remained an important component of Owenite thinking as was industrial democracy and trade union reform.

Intriguingly – despite being championed by David Owen and the SDP – the term Social Market does not appear in the 1987 Alliance Manifesto.  Question…  was the sharpness of the SDP’s Social Market message blunted by the Liberals?  Possibly.  At any event, post-1987 the concept refused to die and came roaring back at the 1988 SDP Conference, where Robert Skidelsky’s Green Paper on the topic was published which, by the way, clarifies a firm limit to the market in the case of natural monopolies.  I’ll return to this.

For 1980s Britain – as in post-war Germany – in all species of Social Market theory the market component of the equation remained stable.  The belief is constant – that competitive markets foster creativity, innovation and efficient production with the state tackling monopoly power.  The means to achieve social aims – like reducing poverty or inequality – were more varied.  Sometimes this was defining strong boundaries to the state’s domain, sometimes it was planning, sometimes redistribution.

So was the SDP’s Social Market merely a political tool?  A slogan? A ploy?  Well, there’s no doubt that concept was very useful in sharpening the SDP’s political identity and its general appeal.  The phrase, in retail British politics, was new – introduced by David Owen.  And I was useful. The word ‘social’ distiguished the SDP from the harshness of the Thatcherite new right.  The term ‘market’ differentiated the party from the anti-market hard left.  It was, in that sense, ideal.  It had reach on both sides of the traditional left/right political divide.

The public facing message – Tough and Tender – was clear enough to explain and to understand.  However,  it’s fair to say that the Social Market concept landed more within the academic, journalistic and political classes than it did the general British voter.  Was it ever ‘cashed out’ into votes?  Probably not.  Since it was never in a 1980s general election manifesto it’s difficult to se how it could have been.  And if some SDP members struggled to understand it voters probably had similar difficulties.

So was the Social Market a political tool?  Yes, I think it was.  Does that mean it wasn’t a distinctive and coherent political system in itself?  Not at all.

As might be expected, its critics were not persuaded.  To the Liberal grandee Malcolm Bruce, quote:  ‘Social Market economics seemed to me to be no different from liberal economic pragmatism’.  SDP biographers Crewe and King opined: “The notion that capitalism could be combined with redistribution and the welfare state was not new… elements of it can be traced back to Ian Macleod’s One Nation Conservatism and Tony Crosland’s revisionist socialism.”  I have to say, I think Crewe and King get this wrong – which is curious, particularly when you write a book with over a third of a million words in it.  In confusing it with High Toryism or the simply the mixed economy they totally misunderstand what the Social Market actually was.

The sagacity of David Owen’s Social Market ideas are proved, I think, in retrospect.  In the counterfactual.  We’d have been better off had they been adopted.  I’ll give you three examples.

First, housing. The housing crisis of today has been decades in the making and has one primary cause, namely, the deliberate destruction of state sector house building capacity.  Both the ’83 and ’87 Alliance manifestos proposed a large expansion of state house building programmes.  This didn’t happen.  Instead, council house completions in the 80s collapsed under the Tories and New Labour killed the sector off altogether. My point is, our most serious domestic macroeconomic problem wouldn’t exist at the scale it does today if a Social Market approach had been adopted.  Why? Because the state would’ve built some houses.

Second, utilities.  The experiment in privatising our water industry has been a disastrous failure.  We’ve ended up with a foreign-owned, poorly regulated industry characterised by low investment, profits siphoned off abroad with the companies themselves being used as debt mules by the banks.  A frontiers variant of the Social Market – which grasps that natural monopolies, as Skidelsky recognised, can’t be marketised – would have avoided all of this.

Third, industrial policy.  David consistently opposed the overnight and brutal de-industralisation of the Thatcher years proposing, instead, an industrial policy with phased economic adjustments cushioned – in his words – by government intervention. Alas, we all know what happened. Factories closed, drug dealers moved in and family life – whose very foundation was the industrial wage – has never recovered.  Whatever gains the new right imagined they’d get via this ‘creative destruction’ have been more than outweighed by the social consequences and in particular, the emergence of a jobless underclass.  Neoliberalism has been self-defeating.  As John Gray wrote in last week’s New Statesman, ‘The combination of unfettered markets with “traditional values” imagined by latter-day disciples of Margaret Thatcher and Ronald Reagan is utopian fantasy.’

True.  We could have done with an industrial policy.

After 1990 Social Market ideas lived on in the former social democrats – Danny Finkelstein, Greg Clark and others – who, like Lucretian atoms, made new alliances with other parties.  And to this day its core concepts are still promoted by the Social Market Foundation and the resurgent SDP.

So, to conclude.  The SDP’s Social Market – Slogan or System?  I think both.  The term served as a neat parable of what the SDP was about and enabled it to carve out a distinctive identity which could reach across the political divide.  The Social Market also gave an intellectual underpinning to the SDP – a prerequisite to any serious political movement. There’s no doubt that the Social Market was and remains a coherent system of political economy.  In the 80s many of its critics failed to recognise two things. First, its revolutionary nature, and secondly, its fit with David Owen’s own anti-establishment streak.  The fact is, Social Market ran totally contra to the interest-based politics of the day.  That was the difference.  That made it subversive.

The great pity is that while these ideas took hold in Singapore – arguably the Social Market’s favourite child –  its precepts have never been fully applied in Britain.  Perhaps there’s still time…