Towards “no alternative”: the rejection of proposals for the socialisation of investment in Western Europe, and paths not taken before neoliberalism

The 1970s and 1980s are widely regarded as a turning point in politics and economic policy in Western Europe and much of the rest of the world. From this period, economic policies became increasingly directed towards removing constraints on business and wealth owners, and catering to their interests at the expense of workers. This shift, which resulted in rising inequalities, took place even in governments run by political parties that were connected to labour movements and identified as ‘social democratic’ or ‘socialist’. Explanations for this shift, commonly referred to as ‘neoliberalism’, frequently focus on economic crises in the 1970s and 1980s. These crises exposed tensions between policies that sought to redistribute power and wealth away from business and wealth owners, and dependence on business and wealth owners for investment. However, as this project shows, neoliberalism was not the only solution proposed for this problem.
There were many policies, which were particularly popular in labour movements and socialist parties, that instead sought to challenge control over investment by business and wealth owners. They sought to expand control over investment by either the state or workers as a collective. This project is focused on explaining why these alternatives were widely rejected by socialist parties in Western Europe, which instead turned towards neoliberal policies.
The project looks at three examples of these alternative policies. It firstly looks at the UK Labour Party in the 1970s, which discussed but rejected proposals that would have extended state and workers’ control over large companies and the financial system. Instead, the 1974-79 Labour government sought to boost investment through policies that supported higher profits while suppressing wages and cutting government spending. Secondly, it looks at France, where left governments in the early 1980s abandoned plans to extend state control and ‘democratic planning’ of the financial system and instead turned to financial deregulation. Thirdly, it looks at Sweden, where the Social Democrats rejected ambitious trade union proposals that would have seen ownership of Swedish companies gradually transferred to funds controlled by the unions. Instead, they pursued policies that sought to boost profits while suppressing wages and cutting government spending.
The research finds that, in each example, alternative policies were rejected because they were seen as too distant from the everyday priorities of social democratic politicians, voters, and workers. By contrast, many owners of wealth and businesses saw them as an existential threat and treated opposing them as a major priority. These differences in priorities can be connected to the different economic positions of these groups, and the different everyday concerns that resulted from these positions. While decisions about investment were a central preoccupation for business and wealth owners, they were distant from the everyday activities of other groups. Politicians were more concerned with managing personal relations, internal party divisions, and their electoral prospects, while their voters were more preoccupied with issues that more directly connected to incomes, prices, and workplace conditions. The result was that opponents of the proposals were more active and vocal than supporters, which led to their defeat in each example.
With the defeat of these alternative policies, the argument for neoliberalism that, as Margaret Thatcher put it, ‘there is no alternative’, became stronger, including within these socialist parties that turned in a neoliberal direction.