For many of the party’s supporters, Saturday’s result will have been seen as a win for Jeremy Corbyn and a loss for Labour. For them, a resounding endorsement of Corbyn by Labour’s growing membership has cemented the hard left at the heart of the party, and will weaken its appeal to the broader electorate.
A few interesting questions arise from this momentous event. First, how has it happened? Second, is Labour bothered about power? And third, should investors care?
The reasons for Corbyn’s success
There has been much theorising over the reasons for both Corbyn’s surprise election as party leader last year, and his resilience since then, despite lacking the support of the Parliamentary Labour Party (PLP). Part of this is down to a growing sense of inequality in the UK, but it arguably has as much to do with his singular vision.
One of the most challenging aspects of political leadership today is that it is increasingly difficult to peg thoughtful decisions or policies to a single ideology. It is hard for politicians to convey what they “stand for” both in the eyes of the public and their own parties. Those, like Corbyn, who have a clear political viewpoint may gain a greater share of the public’s attention.
And Corbyn’s masterstroke, whether intentional or not, may be that he appears to be a leader with little political ambition, on whom leadership was imposed and who is personally uninterested in power.
Hungry for power?
So does the Labour party care about power today?
One argument is that, as with all opposition parties, its principal goal is to influence the political agenda from the sidelines. The less you have to wrestle with the compromises that come with government, the more you can give voice to unenforceable ideas.
The question of how sustainable this is has also been raised. The unions, for example, may ultimately feel that their interests are in fact not well served by this low power, high influence position. In theory, a more unambiguously left-leaning party should be a welcome development. However, with membership on a long-declining trend and a fading influence outside the public sector, it will require a return to power in a more literal sense for unions to grow their influence in the employment terms that affect their members.
It will be interesting to see if, and in what way, these meaningful perspectives on power shape the Labour party over the coming period, and whether there is a possibility that, in the end, organisations such as Unite will fall behind a more centrist leader with genuine credentials in the eyes of the broader electorate.
The current situation also brings into focus the attitude to power of party moderates who have been more or less entirely displaced by the outcome of Saturday’s election.
For a constituency that generally coalesces behind a view that they are well-qualified to run the country, Labour MPs face a genuine conundrum. Should they bide their time and hope for the emergence of a leader whose message could engage the wider membership and galvanise the PLP? This is something New Labour failed to achieve.
Or should they split away to form a new party, possibly in coalition with the Liberal Democrats? Again, undersigning a decade in opposition and the poor record of such moves – like the founding of the SDP – mean there is little genuine enthusiasm for a split, although that may change.
A concern for investors?
Why should investors care? Politics has moved up as a factor which could affect markets and the economy more broadly, but longer-term empirical evidence still shows that it only impacts at the margin.
It is hard to maintain this “true north” given alarmist headlines which suggest that radical change is around the corner. But Saturday’s events, and in UK politics more generally, suggest that we are in for an extended period where politics’ primary concern is itself.
While the medium-term economic consequences of Brexit remain to be seen, an enormous amount of political energy will go into trying to deliver this complex and unprecedented task.
Business generally operates at a different metabolic rate, and will adapt to the political environment in time, as it has done historically. Other factors, including the rapidly changing technological landscape and shifting consumer preferences, are much more important for investors to engage with.
If, for example, an industry such as financial services or the media looks materially different in five years’ time, it will be technology rather than politics which will have driven the change. There is an increasingly widely-held perspective that scaremongering does little to sway voters away from populist views. In fact, it may unwittingly lend them support. It may similarly prove to be the case that measures to stem globalisation, control technological development and distort markets will ultimately prove fruitless.