Business Policy Divides Socialists in Britain, France

Socialists split on whether to be for or against business.

Socialists in France and the United Kingdom are struggling with the same problem: how to mix their left-wing instincts with a program that does not scare businesses.

Britain’s Labour Party leader, Ed Miliband, tried to woo business leaders on Monday, saying the ruling Conservative Party’s proposed referendum on European Union membership was a greater threat to enterprise than his regulation and spending plans.

Bosses were not convinced. Some told the Financial Times a Labour government would a “nightmare” and “drive fear and shockwaves through the business community.”

Although polls show Britons prefer the Conservatives’ David Cameron over Miliband as prime minister, the Labour Party could win more seats in May’s election and form a minority government with support from the left-wing Scottish National Party.

Miliband’s constant excoriations of Cameron as a friend of big business and his laments in 2011 that “asset strippers” and “predatory” enterprises were “scooping up” the gains of Britain’s economic recovery alarmed many. Their anxiety was stoked when Labour proposed a two-year freeze in energy rates, a renationalization of railways and profit caps for National Health Service contractors.

The party also advocates a minimum wage increase from £6.50 to £8 per hour and a ban on “exploitive” zero-hours contracts. Finally, it wants to force companies with government contracts to provide apprenticeships.

Labour is not united behind this anti-business plan. Whereas Miliband and leftwingers felt vindicated by the 2008 financial crisis, centrists in the party caution against a break with the more business-friendly New Labour of the late 1990s and early 2000s. An election defeat in May might tilt the balance of power in the party back in their favor.

That is what’s happened in France. While François Hollande was elected president in 2012 on a tax-the-rich platform, his Socialist Party government has turned more pro-business after losing the European Parliament and municipal elections in 2014 and elections for the départements last week. Hollande installed the reformist Manuel Valls as prime minister in April last year and later replaced the far-left firebrand Arnaud Montebourg as economy minister with Emmanuel Macron, a former banker.

The duo has set out to “unblock the economy, liberate energies, lift constraints,” as the premier put it, and enacted reforms that allow businesses to operate on more Sundays, shorten labor arbitration procedures and open up protected professions such as pharmacists and notaries.

Hollande also unveiled tax cuts worth €40 billion by 2017 that should help companies reduce labor costs.

Although a majority of the French support the measures, the more sensible economic policy has come at the expense of left-wing unity. The Greens left Hollande’s coalition last year. Montebourg is harboring presidential ambitions. Far-left parties refused to back the Socialists in the most recent elections, allowing the conservatives to take over control of 28 départements.

The Socialist Party itself is divided as well. Macron and Valls had to bypass parliament for their reforms because a sizable minority of their own lawmakers would have voted against them.

A more liberal economic policy should help France reduce unemployment which may ultimately vindicate Hollande’s U-turn. If he manages to transform his into a normal social democratic party, it may not even have to wait another twenty years before winning a presidential election.

Labour was similarly kept out of power for almost two decades after Margaret Thatcher won the 1979 election on a promise to reverse its disastrous economic policy. It wasn’t until Tony Blair reinvented the party as pro-business and pro-middle class that it won an election again.

That should stand out as a clear enough warning to Miliband. It is not by accident that Labour’s popularity has dropped from a 43 percent high four years ago to 32 percent today. Many Britons may share his dislike of the big banks and high train fares but they are not convinced that a return to the big-government interventionist policies of the 1970s is the only and best solution.

Should he nevertheless win the election, the threat of a party split will loom large. Miliband’s lurch to the left dismayed New Labourites from the start but they have largely kept silent, knowing they cozied up with big business more than the Conservatives have and that their agenda of financial deregulation at the very least contributed to the 2008 crash. Should Labour enter into a pact with the Scottish nationalists and possibly even the Greens — who are totally ignorant of business — after the election, however, their patience may be stretched to the limit.