C. Lodge (d.1906), Public domain, via Wikimedia Commons
Introduction
In the century since the emergence of socialism as a political force in Britain, its early promises have been cynically distorted by the very institutions it once sought to reform. The struggle for social and economic justice that took root at the peak of the industrial revolution and manifested itself in the Labour movement has long since become a sprawling apparatus of welfarism, funded by debt and maintained by a self-serving bureaucracy.
Early socialist theory
The ideas around socialism pre-date thinkers like Marx and Engels, although they are generally considered to be the two most influential early writers on socialism. Marx wrote three volumes of ‘Das Kapital. Kritik der politischen Ökonomie’, which was in the main a critique of capitalism, rather than an exploration of how socialism would work. The development of a framework for socialism came with the ‘Communist Manifesto’, co-authored by Marx and Engels. The ‘Communist Manifesto’ established the divisive idea of an ‘us’ and ‘them’, the ‘us’ being the poor, downtrodden workers (proletariat) and the ‘them’ being the exploitative and greedy capitalists (bourgeoisie).
The key idea of socialism is that it is the workers alone who provide the ‘surplus value’ to a product. As capitalists increasingly invest in technology, the requirement for labour falls, leading to lower wages and unemployment for the labour and ultimately reduced profits for the capitalists. Marx and Engels therefore argued that the constant seeking of higher profits leads to cycles of economic instability.
Even today, the disciples of Marx and Engels adhere to these ideas. Recently, French economist Thomas Piketty wrote ‘Le Capital au XXIe siècle’, looking at the inequalities arising from capitalism in France.
The post-industrial paradigm
However, post world-war two, the western world has been in industrial decline. Manufacturing has moved to countries which can produce at much lower cost while western countries continue to consume and incur social security costs which far outstrips their ability to pay.
In our post-industrial world, economic growth has become illusory rather than real. (Real wages and productivity have stagnated in the UK since 2007, even as GDP per capita has risen, creating a paradox of rising aggregate living standards but stagnant individual prosperity)1. Production has been outsourced to lower-cost countries which do not have the same social costs imposed on producers. Central banks, those once cautious stewards of monetary stability, have taken on an increasingly activist role, expanding the money supply through mechanisms such as quantitative easing and sustained low interest rates. The effect has been to decouple asset inflation from productive investment, enriching asset holders while doing little to stimulate real industry.
Rather than create wealth through production, we have an economy that is reliant on endless expansion of the money supply. As the primary allocator of capital, government is influenced by special interest groups, lobbyists and activists. The key to achieving personal wealth in the post-industrial world is to find ways to extract money from government and inflate one’s own perceived value. The government serves those who can leverage their social capital and bureaucratic credentials. Hence we see the professional classes, senior civil servants and chief executives of charities, local authorities and NGOs earning way beyond their true worth and prospering in this environment. They are able to command salaries and pensions well beyond the average private sector worker, yet they are shielded from competitive pressures or performance scrutiny. The risk-reward equation has been upended: the risk-taking private sector has little reward while the reward-seeking public sector has little risk.
Redistribution of wealth has therefore become a system of institutional rent-seeking, where wealth flows not from production but from proximity to the state. In this new economic order, bureaucracy replaces enterprise and state-sanctioned redistribution overtakes value creation. As a result, what once passed for socialism now resembles a technocratic lottery—where rewards are less about contribution and more about successful navigation of the system’s internal hierarchies. As the government expands the money supply and shifts economic activity toward redistribution, the ethos of work, productivity and accountability recedes. What remains is a façade of fairness underwritten by mounting debt and political expediency.
Labour’s betrayal of the working class
The Labour Party grew out of the trade union movement of the nineteenth century, its purpose to represent the workers in an industrial Britain, demanding better pay, better working conditions and better public services.
Today, trade union representation in the private sector is around 13% of all workers whereas representation is around 48% in the public sector. Thus, the Labour Party can no longer be said to represent the workers but instead, a feather-bedded public sector which is insulated from economic realities for as long as it can continue to extract money from the government.
The recent humiliation for the government in Parliament over its welfare reform bill was the final nail in the coffin for socialism, certainly in Britain. Some would argue that the welfare system continues to provide a safety net for the elderly and infirm through pensions and disability benefits but there can be no doubt that, in too many cases, it has also become a lifestyle choice. No-one is interested in the workers in the wealth-producing private sector. Who represents the workers in the modern gig economy, the care workers and the delivery drivers? Certainly not the trade unions which represent a mere 13% of private sector workers. Instead, we have a so-called ‘Labour’ government which is only interested in a client state, whether it be public sector workers or benefit claimants.
Conclusion
In conclusion, we have allowed the public sector to build a massive, bloated state with a de facto command and control economy but it is wrong to describe it as socialistic because we no longer have an economy which produces at scale. Rather than socialism leading to a fairer, more equitable society and a more stable economy as those early writers Marx and Engels had hoped, it has morphed into welfarism. The bureaucratic class has become entrenched and we now have statism without accountability and redistribution without productivity. The workers have been left behind. We have yet to see how this will end but the continual expansion of the money supply and the ongoing lack of private sector investment in production will lead inevitably to economic stagnation and decline.
Footnote: 1: The paradox of stagnant real wages yet rising ‘living standards’ in the UK | CEPR
© Paul_Southampton 2025
