Monday’s scheduled ‘Movement Matters’ article will appear on Tuesday. It discusses the state of the English left and argues that regroupment attempts between revolutionary groups will be flawed unless they emulate the most successful fusion in Britain so far, the 1987 merger that created the International Socialist Group.
Stuart Holland, who died on 5 November aged 86, was the nearest thing Bennism had to a political economist. Tony Benn could make a hall rise, but Holland wrote the blueprint the hall was cheering. In the 1970s he gave the Labour left a programme that looked coherent, worked out in detail and written in the language of modern economics: public ownership of the leading firms, planning agreements with the rest, and industrial democracy at the base. For a decade that programme was known as the Alternative Economic Strategy (AES), and almost every Labour left argument about the economy started from it.
Benn noted the moment their partnership began. Writing in his diary on 1 March 1973, he described Holland as “a very bright guy” who had worked at No. 10 under Wilson, and added: “He is dissatisfied with Harold and now is attaching himself to me.” What followed shaped the British left for a generation. Its consequences were not what either man intended.
The theory
Holland’s argument started from a real observation, and that was his strength. The Keynesian settlement promised that a government managing total demand could leave supply to private enterprise and still deliver full employment and rising welfare. By the early 1970s that promise had visibly failed. The 1966 deflation had killed the National Plan, and the Heath government had found that demand management could not make industry invest.
Holland’s explanation was the rise of what he called the “mesoeconomic” sector. A hundred or so giant firms, many of them multinational, now sat between the small firm of textbook microeconomics and the national economy that governments steered. In Strategy for Socialism he wrote that the top hundred manufacturers’ share of output had risen from a fifth in 1950 to a half by 1970. Firms of that size set their own prices, moved investment across borders and did not respond to the Treasury’s levers. As he put it in The Socialist Challenge (1975), demand management had not been misapplied so much as eroded by “a new mode of production which has divorced macro policy from micro structure.”
His remedy followed from the diagnosis. Take a “critical minimum” of the leading firms into public ownership, roughly one in four or five of the firms at the top of each major sector: the “20 to 25 companies” of Labour’s 1973 programme. Use those firms as competitive pace-setters to pull the rest into line, and bind every large company into compulsory planning agreements with the state and the unions. Open the books, and open what Holland called the corridors of power to workers in strategic industries. He called the package “revolutionary reforms”.
That was the intellectual core of Labour’s 1973 programme and its February 1974 manifesto. Once Benn was at the Department of Industry it became the National Enterprise Board and the Industry Act 1975. Its rapid emasculation under Wilson, and its burial when Callaghan accepted the IMF terms in December 1976, became the founding grievance of the Bennite revolt after 1979. Phil Hearse’s 1985 history of the Socialist League dates “the first wave of Bennism” to the Heath years, the period when, he wrote, “the first versions of the Alternative Economic Strategy began to be put forward, especially in the work by Stuart Holland.”
How our tradition argued with him
The Fourth International current took Holland more seriously than anyone else on the far left did, and argued with him for the same reason. Alan Freeman’s long critique in International (spring 1980) began from the premise that “any serious critique of the AES … must begin with Holland’s ideas”, because Benn, Sedgemore and Hodgson all drew on him. It is the most thorough engagement with Holland in the archive.
Ernest Mandel had already set out the core objection. Writing in January 1978 on the European workers’ movement and the crisis, he named Holland as “the theoretician of the British Labour Left”. Holland, he wrote, had denied that pump-priming was inevitably inflationary, blaming past inflation on a fiscal crisis of the state and too little nationalisation. Mandel’s answer was that the capitalists’ refusal to pay was not a lapse of civic virtue but the logic of competition. Without destroying the economic and political power of the bourgeoisie, any tax or control would have only marginal or perverse effects. In the Dutch edition of his book on the crisis, Mandel asked the question to which the AES never had an answer: how can capitalist firms be made to behave in a non-capitalist way?
Mandel also placed Holland in company that Holland would not have chosen. He bracketed him with the “more sophisticated left Eurocommunists” of the French Communist Party’s economics section, who had learned from the failure of Keynesianism and were drawing “a step closer to the ‘planism’ of the thirties.” Workers Power put it more bluntly in December 1980, calling Holland “Britain’s own De Man”, after the Belgian socialist whose 1930s Plan du Travail was the model of a planned, non-revolutionary exit from crisis. George Kerevan, reviewing Capital versus the Regions in Scottish Socialist in 1977, noted that Holland praised the French Union of the Left. Kerevan also judged that Holland’s scenario left “the working class in a passive role”, waiting on the National Enterprise Board.
The two men debated in person. On Sunday 30 October 1983, at Socialist Action’s “Facing 1984” weekend of debate, Holland and Mandel shared a three-hour session on “Economic strategy for European Labour”, with John Palmer as the third speaker. The programme lists the session, and the paper’s advertisement billed it as “Stuart Holland MP debates Ernest Mandel”. The paper’s own readers did not all welcome the guest. When Socialist Action ran a long Holland article on a European road out of the crisis in April 1983, one comrade, Mick Gosling, wrote in to call it “incomprehensible waffle”.
The turn to Europe
In the early 1980s Holland’s thinking changed direction, and that change matters most for what came after. The original AES was a national programme of import controls, withdrawal from the EEC and reflation in one country. His critics on the left called it the “siege economy”. After Mitterrand’s turn to austerity in 1982–83 showed how little room one country had to reflate alone, Holland moved to a European version. Out of Crisis: a project for European recovery (Spokesman, 1983) was a coordinated reflation drawn up by socialist economists, trade unionists and politicians from a dozen countries. The Next Step reviewed it sceptically. Socialist Organiser noted in June 1983 that Holland still formally called for British withdrawal from the EEC. But Socialist Organiser argued that the progressive core of the Euro-AES, a common European labour-movement strategy, contradicted his own case for “regaining autonomy”.
That contradiction was resolved in favour of Europe. Holland served on Kinnock’s front bench: as shadow minister for overseas development from 1983 to 1987, then as shadow financial secretary to the Treasury. In May 1989 he resigned the Vauxhall seat he had held since 1979 to take the chair in economics at the European University Institute in Florence. The Next Step called him “an experienced frontbencher” and read his departure as a measure of how little a career in “Kinnock’s party” now offered. For the Delors Commission he wrote the 1993 report on economic and social cohesion, published by Spokesman as The European Imperative, with a foreword by Delors. It proposed a European Investment Fund that would issue bonds to finance investment and regional development: the ancestor of every later eurobond argument. With Ken Coates he produced Full Employment for Europe (Spokesman, 1995), and he spent his last years in Coimbra, attached to the university’s economics faculty. From November 2010 he and Yanis Varoufakis put forward “A Modest Proposal” for the euro crisis, with James K. Galbraith joining them for the 2013 version. It was a three-part package: debt restructuring, recapitalisation of the banks through the European rescue funds in exchange for equity, and an investment-led recovery funded by European Investment Bank bonds and eurobonds.
The argument about Eurocommunism
The thesis of this appreciation is that Holland popularised a Eurocommunist approach on the British left, and that in doing so he eased the passage of those ideas into the layers around Kinnock and then Blair. The archive supports that thesis, with one qualification.
Holland was not a Eurocommunist. He came out of the Wilson office and the Labour right’s economic establishment, not the Communist Party, and he stayed on the Labour left to the end. In 2019 Labour Briefing was still citing his work in The Spokesman. But the structure of his programme was the Eurocommunist structure. It assumed that the existing state could be democratised and used, that capital could be pulled into planning agreements rather than expropriated, and that the main obstacle was a monopoly fraction rather than the capitalist class as a whole. It sought cross-class alliances with “progressive” sections of national capital, and it treated the workers’ movement as pressure and supervision from below rather than as the agent that takes power. This was the PCF’s “advanced democracy” and the CPGB’s 1977 British Road to Socialism in Labour-left clothes. Freeman noted that the Communist Party’s influence ran through the Conference of Socialist Economists’ version of the AES. Mandel grouped Holland with the PCF economists for exactly that reason.
Holland made these ideas respectable in the Labour Party. They carried a Labour MP’s name and an economist’s footnotes, not the Communist Party’s label. So when the Eurocommunist current broke up in the mid-1980s, its ideas did not need to cross a party boundary to reach Labour’s leadership. They were already there, in the AES, filed under Holland. What the Kinnock leadership kept from that inheritance is telling. It kept the European frame and dropped the national import controls. It kept the language of partnership with industry and dropped compulsory planning agreements and the 25 companies. It kept “supply-side socialism” and dropped the class-struggle rhetoric. From there, each step was short: to Delors’s social Europe, which won over the TUC at the end of the 1980s; to the “stakeholder” capitalism of the mid-1990s; and finally to New Labour’s claim that a modernised state could steer globalised capital without challenging its ownership.
That is the sense in which Holland enabled the integration. He did not cause it, and he opposed most of where it ended. But the bridge he built from the Bennite left to European social democracy was open to traffic in both directions, and most of the traffic went right.
What he got right
Holland’s first strength was that he took the economics seriously. He made the Labour left argue about investment, the structure of industry and the multinationals, rather than only about leadership and betrayal, and a generation of activists learned political economy from The Socialist Challenge, including many who later rejected its conclusions.
His diagnosis, moreover, was largely right. The growing weight of giant transnational firms, their ability to escape national policy, and the failure of demand management to secure investment were all real. Freeman, his sharpest critic, conceded what he called the “rational kernel” of Holland’s case, and fifty years of globalisation have confirmed it. Because the diagnosis was sound, the AES could give the 1979–81 Bennite upsurge something positive to fight for, not just a list of complaints. Without Holland, Benn would have had oratory without a programme.
Holland also saw, earlier than most of the Labour left, that the nation-state was too small a frame for any serious alternative. His move from the siege economy to a European strategy anticipated the wall that Mitterrand hit in 1983, that Syriza hit in 2015 and that every left government since has run into. The Modest Proposal was the last serious attempt from the reformist left to find a European answer to the euro crisis. Through all of this he stayed engaged and consistent. He shared platforms with Mandel, wrote for Socialist Action, and kept arguing on the left long after his parliamentary career ended. He did not take the road his ideas were taken down.
Where he went wrong
The weakness that Mandel, Freeman, Kerevan and Workers Power each identified, in their own words, was the missing question of power. The AES assumed that capital would accept being planned. It made no provision for an investment strike, capital flight or sabotage, and it had no answer to the experience of Chile in 1973. The 1974–79 government proved the point without any coup: the Treasury, the Bank of England and the IMF were enough.
Behind that lay a mistaken theory of the crisis. Holland blamed monopoly rather than profitability, and so the AES promised that public leadership and reflation could restore growth without any attack on profits. But the crisis of the 1970s was a crisis of profitability, which is why the ruling class’s answer to it was Thatcher, not planning agreements.
The same reasoning gave the working class only a supporting role. Industrial democracy, in Holland’s scheme, was a means of supervising a programme carried out from Whitehall. The Lucas Aerospace stewards showed in 1976 what workers’ own planning could look like; their plan was rejected by Lucas management and left without support by the very government the AES was meant to guide.
His language made matters worse, because it could be stretched in either direction. “Revolutionary reforms”, “transformation of the mode of production in the mesoeconomic sector”, planning “more than indicative but less than imperative”: these phrases could be read from the left in 1980 and from the right in 1990. A programme that does not settle who owns and who decides will have those questions settled for it by whoever holds office.
Finally, when Holland turned to Europe, he took its institutions at their word. The turn was right as strategy and wrong as method. It looked to Brussels summits, to Delors and to social-democratic premiers, rather than to coordinated action by European workers. The leaders his 1983 article addressed were, as Gosling’s letter pointed out, at that very moment imposing austerity on their own working classes.
What his success teaches
The first lesson of Holland’s career is that ideas outlive the movements that carry them, and can change sides. The AES was the programme of the Labour left at its high point. Stripped of its compulsory and class elements, its European and partnership components became the furniture of Kinnock’s party and then Blair’s. The left should expect its most sophisticated ideas to be borrowed by its opponents, and should write them so that they cannot be lifted out of context.
That points to the second lesson: a programme has to say who owns and who decides. Planning agreements without ownership, and ownership of a minority of firms without control of finance, will be emptied out as soon as the political pressure eases. The method of the Transitional Programme still applies: demands that start from real needs and lead towards workers’ control and expropriation, not demands designed to fit within a “mixed economy”.
The third concerns how revolutionaries dealt with him. Our current both engaged Holland and argued with him. It debated him at Socialist Action’s weekend, printed his articles, and published the most serious critique of his work. That combination of common work with open argument proved more productive than dismissal on one side, or the uncritical cheering for the AES among parts of the Labour left on the other.
The fourth is that the question of Britain and Europe has to be answered from below. Holland was right that the siege economy was a dead end, and right that the answer had to be European. He was wrong to look for that answer among Europe’s governments. A European workers’ strategy has to be built in the European workers’ movement.
And the last is that expertise cuts both ways. Holland’s authority as an economist made the AES credible to Labour members. The same authority, attached to a programme that had dropped its class content, made “supply-side socialism” credible to people who would later abandon socialism altogether. The left needs its own economists, accountable to its own movement.
Holland deserves to be remembered as a serious opponent of capitalism’s postwar settlement and an honest man of the left. He tried, harder than almost anyone in the Labour Party, to give reformism a scientific basis. That he failed is the best evidence we have that the task cannot be done.
An important and balanced assessment of a honest & key figure of the Labour Left which draws out key lessons for today.