If you wanted to wind up someone named in tribute to the first leader of the Labour Party, you couldn’t do better than compare them to its first secretary. Keir Hardie sits on the inaugural plinth in the pantheon of the Labour imagination, whereas Ramsay MacDonald was knocked off his and banished from memory 90 years ago. His indelible sin was to break with his party and the unions after he became Labour’s first prime minister, when his movement refused to back him on deep benefit cuts during the Depression.
To be clear, despite Keir Starmer’s apparent acceptance of deepening welfare cuts for poor families under the “two-child” benefit limit, I see zero chance of him doing the same. While jettisoning many past policies, and now even reportedly diluting his flagship employment rights proposals, he has hung onto enough of the latter to keep the more moderate unions on board. And he uses the phrase “working people” almost as often as he waves the Union Jack. In personal style, the two men are worlds apart: MacDonald specialised in dreamy, romantic and suspiciously vague rhetoric, whereas Starmer reaches for such business-school phrases as “mission-driven.”
Then and now
But despite these differences, there are many reasons it’s worth trawling over the trials of the Labour Party a century ago to find clues regarding its prospects today.
First, it’s always good to break with the tendency of most MPs and lobby journalists to compare political events only to others they can directly remember. This narrowness leads to a kind of commentary that only asks questions like “is this a 1992 or a 1997 election?”, when the more instructive comparison might be with (say) 1960s West Germany, 1980s France—or indeed 1930s Britain.
Second, and more particularly, Britain’s interwar years resemble our own times in that an old order was visibly crumbling while the new struggled to be born. Labour looks likely to cash in on the “time for a change” mood, just as it did then, but doubts linger as to whether it is any clearer about what it really wants than it was in MacDonald’s day. The broad, post-Thatcher political economy has been convulsing with increasing regularity since the financial crisis—just think of the never-ending “emergency” central bank interventions, the very fact of Brexit, and the big spending improvisations of the pandemic. While Tony Blair’s big win in 1997 remains the inspiration for the Labour right, it didn’t disturb that order, rendering it an unreliable guide for navigating power in these more tumultuous times.
Insofar as others in the party look for inspiration further back, it’s normally to old Labour’s high noon in the 1940s, building the welfare state that William Beveridge had designed during the war. But as my Joseph Rowntree Foundation colleague Paul Kissack put it in Prospect last year, there is no point demanding a neat “new Beveridge” blueprint to solve every problem when so much is up in the air: “We are not at a 1942 moment; we haven’t done the work… we are closer to the place society was at in 1932, or 1922—still searching for the threads to pull together, feeling our way towards solutions.”
I agree, which makes the long and often bewildering years of MacDonald—who was in Number 10 for all or part of eight of the 12 years 1924–35—worth another look. It was during 1931 that MacDonald effectively swapped sides to head a Tory-dominated national government, a very different endgame to the Labour majority administration that Starmer is desperately hoping for. Nonetheless, there are striking similarities in the earlier trajectory of Labour’s first prime minister and the man who hopes to be its seventh.
Rhyming rises
On the positive side, Starmer follows MacDonald in having advanced Labour’s electoral prospects with remarkable speed. MacDonald’s contribution here had several chapters, the first way back in 1903 when he negotiated a secret pact with the Liberals which afforded enough candidates a clear run at the Tories to secure Labour’s first big breakthrough in 1906. Some might hear an echo of that in Starmer’s equally covert and shrewd decision to throw the kitchen sink at certain byelections (Selby, Wakefield) while effectively letting the Lib Dems steal a march in others (Shropshire North, Somerton & Frome).
Later, as party leader, MacDonald added to Labour’s vote share in three successive elections in 1923, 1924 and 1929, chalking up a cumulative advance from 30 per cent of the ballot in 1922 to 37 per cent which, despite some setbacks from the electoral system along the way, was sufficient to finally make Labour the largest party in parliament in the last of these contests. We wait to see how Starmer will fare in terms of seats, but in support, he can boast of moving further and faster—from polling not far above 30 per cent after his first grim year in charge, to something like 45 per cent today.
Another thing the pair have in common is that, despite their obvious ambition, both took a principled stand in their younger days to oppose a damaging conflict.
MacDonald split paths from the jingoistic Labour mainstream during the First World War, and even though he initially did so in painstakingly cautious terms, he was temporarily marginalised by the top. But he also earned respect on the fringes, which would prove important when, a few years later, radical Clydesider MPs played a pivotal role in raising him to the leadership.
In his pre-political life as a barrister back in 2003, Keir Starmer wrote—in a clear if carefully measured tone—that the looming George Bush-Tony Blair invasion of Iraq was likely unlawful. He, too, earned credit on the Left as a result, which proved mightily useful during his own rise through the parliamentary ranks and eventual leadership run.
The parallels deepen after both men reached the leadership, disdained those who had been left-wing allies during their ascent, and plumped for a strategy of respectability over radicalism.
After the election that first propelled him to No 10, MacDonald apologised to the King for the violent language of the Red Flag, which was sung by excited supporters at a victory rally; soon afterwards, he announced a competition to come up with a replacement song. In 2022, Starmer saw to it that the Labour conference was for the first time opened with a rendition of God Save the King. A prominent, staunchly left-wing London pacifist, George Lansbury, was pointedly excluded from the first Labour government in 1924. Starmer went one step further with Jeremy Corbyn, kicking him out of the parliamentary party altogether.
MacDonald also had it in mind to omit Arthur Henderson, the embodiment of working-class Labour, from his top team, until Henderson pushed back, MacDonald rethought, and appointed him home secretary. Reading biographer Kevin Morgan tell that tale of the perils of brittle command brought to mind Starmer’s 2021 briefing that he was about to sack Angela Rayner as party chair, before she resisted and he ended up promoting her. During the 1920s, the membership ranks of the emerging constituency parties provided a route up for the type of moderate middle-class candidates that MacDonald wanted to see replace the old union hands and socialist dreamers. In the 2020s, Starmer’s machine has exerted an extraordinarily tight grip on local selections in order to exclude the left.
Following the money
But the parallel that is surely of most interest to the country, as opposed to warring Labour factions, concerns economic policy. This is not as hostile a comparison to Starmer as it may sound. Despite the prominence of the hunger marches in popular—and especially Labour—memories of the 1930s, the record of the MacDonald years is far from an unmitigated disaster.
By comparison with the infamous ruin of both Germany and the United States, Britain’s Great Depression was relatively shorter and shallower, with the first green shoots of recovery appearing soon after MacDonald’s national government had done what his Labour government had failed to comprehend it could do, and suspended the pound from the deflationary gold standard in 1931. The fact that it ultimately required Liberals and Conservatives to acquiesce in breaking from a damaging orthodoxy underlines just how imprisoning respectability-first economics can sometimes be for the Labour Party.
Unemployment was certainly dreadful, and spelt stubborn suffering in Wales and the industrial north. But the 1930s were also years of burgeoning service industries and light manufacturing in the south, as well as witnessing something Starmer is especially keen to engineer—a house-building boom.
Overall, economic historian Angus Maddison’s tables suggest, UK GDP per head grew faster than that of most continental economies over the 1930s, and we achieved productivity growth of 18 per cent between 1929 and 1938—years in which France, Canada and the US all slipped backwards on this measure. If MacDonald had been pursuing Starmer’s goal of the “highest sustained growth in the G7”, the emerging Axis powers would have given him trouble, but not the democracies.
And a lot of this growth did trickle into wages, with the late great historian Charles Feinstein calculating that these advanced by about 1.2 per cent a year annually in real terms over 1924–38. This was obscured by the fact that these were years of deflation, so both prices and nominal wages were generally falling. But prices fell more, with the effect that a typical worker’s living standards would have risen by something like a third over those 15 years.
That is the sort of progress that Starmer would surely settle for today. Despite wages finally edging ahead of prices in the August data, the longer recent story on pay has been appalling: in mid-summer this year, the official figures recorded real wages that hadn’t advanced a jot since November 2005. So what sort of policies was MacDonald following when that interwar wage growth was achieved? Here the parallels truly proliferate.
On commercial policy MacDonald, like all the early Labourites, had started out as a committed free-trader, but found himself carried by political circumstances on a remarkable journey. In 1923, Labour’s dogged opposition to Stanley Baldwin’s protectionist tariff reform proposals powered MacDonald’s breakthrough election. But within a decade, he would find himself running a government with Baldwin, in which Conservative dominance made protection inevitable. The 1932 Ottawa conference created “imperial preference” in trade across the Empire, and—as a corollary—increased trade barriers with the continent. Before the last election, Starmer was one of the most ardent Labour voices for an EU referendum rerun to save the country from hard Brexit. Today, he finds himself committed to opposing membership of the European single market and even the customs union. He might draw comfort from the fact that MacDonald oversaw a recovery despite Britain having to live with self-imposed trade barriers.
In respect of industrial policy, the second MacDonald government tinkered with rights and responsibilities in coal mines, but did not fundamentally alter the industry’s structure, just as today’s Labour Party hints at all sorts of new duties on water companies—and stops pointedly short of calling time on privatisation. Starmer’s party also displays a touch of the corporatism that started to develop in the interwar years. MacDonald’s second Labour administration introduced agricultural marketing boards, prefiguring all sorts of national government schemes for industrial coordination. MacDonald obviously didn’t need to worry about the green transition which looms so large in contemporary Labour policy, but many of the other buzzwords in the party’s current plans—“partnerships,” “strategy councils,” “advisory boards”—would not have seemed so out of place in the interwar world.
On tax, a “capital levy” was one of the most distinctive Labour ideas ahead of the formation of MacDonald’s first government, but he soon ditched the thought. Only two years ago, Starmer was suggesting that “people who earn their money from property, dividends, stocks, shares—capital gains tax, these should all be looked at as a broader, fairer way of raising taxes.” This year, his chancellor signalled there were no plans for taxing wealth.
On government borrowing, MacDonald was zealous in his commitment to the same sort of principles that Starmer now refers to as his “iron” fiscal rules. This demand for retrenchment broke the second Labour government in 1931. But MacDonald’s national government successfully tightened the purse strings. Unemployment obviously inflated headline borrowing, but the cyclically adjusted budget was in surplus, and increasingly so, during the trough of the slump.
That might have snuffed out all growth. It didn’t because, over the first half of 1932, interest rates were rapidly brought down from 6 per cent to the then joint-record low of 2 per cent, a great boost to indebted firms or industries looking to invest in the future. Rates are currently back up above 5 per cent, and nobody knows how long they will stay high. If they remain so when Starmer takes up the reins, he would surely love to be able to offer some 1932-style relief. Ironically, although the Bank of England was still technically privately owned in MacDonald’s day, it was actually easier for the Treasury to steer back then that it will be for an incoming Starmer government under the current independence regime—a regime his party is staunchly committed to. Should the Bank prove more interested in its own credibility on inflation than the viability of a new growth-hungry government, that commitment could be sorely tested.
Homing in
Either way, the more one listens to all the century-long echoes between the ages of MacDonald and today, the more one can see why Starmer has in the last 18 months gradually shifted from mild interest to frenetic agitation for housebuilding. Reforms to housing are arguably the only really distinct domestic achievement of MacDonald’s two Labour governments: council housebuilding under the Wheatley Act for the first, slum clearance for the second. Then, under the national government, a general building boom powered the recovery: economic historian Barry Eichengreen reports that residential construction was directly responsible for 17 per cent of the increase in national income in the later MacDonald years and, once allowance is made for knock-on industries like brickmaking, up to 30 per cent of new jobs.
Even if interest rates aren’t guaranteed to kickstart a building boom in the way they did in the 1930s, Starmer thinks an overhaul of planning rules can be relied on to do the job. His obsessive caution goes out the half-built window here. In a metaphor likely to find its way onto many Conservative leaflets in the coming election, he recently vowed to “bulldoze” through the planning laws.
If he wins big, Starmer might be in a position to force through building to compare with the mid-1930s peak of 350,000 homes a year. As well as getting the economy moving, this eased the terrible housing shortage that had lingered since the First World War. But it also created the urban sprawl that stirred Orwell’s George Bowling to rage against the ruin of the natural playground of his childhood in Coming Up for Air (1939), and in due course inspired the Attlee government to create the National Parks and pass the legislation under which the Green Belt was given the very protection that Starmer is now keen to dilute.
To see the double-think that always runs through the housebuilding question, just look at the verdict of the great homebuilding premier of the 1930s on an earlier wave of building near his Scottish childhood home: MacDonald bemoaned “ugly little bungalow[s]” bespoiling beautiful hilltops by “creations of no design nor feeling.” Bulldozers may be necessary, but—by God—wise politicians will drive them with care.
If that is one cautionary note to emerge from remembering the prime minister that Labour would rather forget, the more general lesson is not to allow caution to imprison you. MacDonald remade his party but, despite some limited successes, proved unequal to remaking his country. The moral of his story is simple. Make damn sure you know what you want to do with power before you get there. Britain must wait to see whether it is a lesson that Starmer has grasped.
