Return to basics is needed to lift troubled left from crisis

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Socialists must find a way to reconcile their commitment to the poor with efficient methods of redistribution

AFTER a series of electoral losses around the world, the left is in crisis. To restore it to health, some on the left argue for a return to their parties' historical roots. Others argue that the old myths should be abandoned in favour of a bold move forward.

This debate is occurring not only in France after the defeat of the Socialists last April. It also characterises the political situation in the US after the defeat of the Democrats in last November's mid-term elections. Both parties face the same dilemma, and this is precisely my point: that the crisis confronting the left is a deep and fundamental one.

In the past, the left was equipped with its own ideology, its own economic theory. The fundamental economic mechanism that determined how the world worked was the struggle for rents between workers and capitalists. With this "us versus them" view of the world, it was not hard to rally voters, from the most disenfranchised all the way up to the salaried middle class more than enough for the left to secure electoral majorities.

But the world has changed, and the left's old view simply no longer applies. More intense competition, within and across countries, has decreased the available rents. Financial capital can cross borders far more easily, and physical capital can relocate almost as quickly. The limits on redistribution through the market are tighter: trying to appropriate the rents may lead firms to move to emerging countries, or else to go bankrupt.

This reality has taken a while to sink in, and a number of parties on the left still cannot bring themselves to acknowledge the constraints imposed by market forces. Some do, of course, none more explicitly than the UK's Labour Party, led by Tony Blair.

Others, typically old-line communist parties, have retained much of their traditional rhetoric, but this is largely for electoral consumption. They know all too well that the old nemesis, "capital", has become difficult or impossible to expropriate, yet they remain unready or unwilling to deliver the news to their constituency.

The same tension exists within parties themselves. Witness the muddled debate within the French Socialist party in the aftermath of its defeat, with the "left of the left" and the "right of the left" in a fight for control both of the party and the route by which it should eventually return to power.

And yet both available strategies doing nothing or attempting to modernise have obvious pitfalls. The old rhetoric, after all, still resonates powerfully with the most destitute parts of the electorate: minimum wage workers, the long-term unemployed and all those who feel that anything would be better than what they have now.

It also allows easier contact with fringe groups, such as antiglobalisation protesters and the most zealous greens. But while the old religion still mobilises the left, it makes it difficult to hold the centre. The middle class has lost its faith in the old rhetoric, and wherever the left comes to power, reality quickly sinks in.

Modernisation runs into the opposite problems. Public discussion of new ways to finance retirement pension plans, or of introducing a negative income tax, sounds sweet to economists of all stripes, but it does not exactly mobilise public opinion. The poor don't care. The extreme left becomes disenfranchised. The middle class likes the tone, but wonders how different the programme is from what they hear from the neoliberal right.

As the events of the French elections last spring demonstrated, when this dynamic prevails, the left loses the elections.

Shift everything I just said regarding this strategic dilemma to the right and you arrive at the problems of the US Democrats. The choice of a candidate for the next elections is about this choice, not about personalities.

Shift everything a bit to the left, and you arrive at the problems facing President Lula Ignacio da Silva in Brazil. Should he return to the old Lula rhetoric and watch capital flee the country, or try "modernity" and disappoint many of those who voted for him? With minor adjustments, the left in Germany, Italy, Spain, Portugal, and so on faces the same Hobson's choice.

So damned if you do, damned if you don't? No, or at least not quite. The feature that must distinguish the left and the right is not their respective views on the economy, but rather their stances regarding redistribution.

One of the first lessons of economics is that there is a trade-off between efficiency and redistribution. The right focuses on efficiency. The left emphasises redistribution.

A clear commitment to the poor, the sick, and the unfortunate must be the message of the left. And the means must be appropriate to realising this commitment: a combination of sustainable retirement systems, better designed unemployment benefit systems, negative income taxes, training programmes, and the like. Only by employing the rhetoric of commitment to mobilise the troops while devoting careful attention to the centre's concern with methods can the left hope to return to power.

Blanchard is chairman of the department of economics at MIT.

Feb 03 2003 12:00:00:000AM Olivier Blanchard Business Day 1st Edition Sunday 09 February 2003 BDFM Publishers (Pty) Ltd disclaims all liability for any loss, damage, injury or expense however caused, arising from the use of or reliance upon, in any manner, the information provided through this service and does not warrant the truth, accuracy or completeness of the information provided. BDFM Publishers 2002