The Political Economy of Ed Miliband’s Speech
I’ve argued before that Ed Miliband’s ‘responsible capitalism’/predistribution agenda is a very interesting one. But I also argued last week that more detail was required if it was to succeed.
Today’s speech started to flesh out that detail. We’ve known the broad direction of travel for a while and now we are starting to see some of the specific policies that can help Britain build the kind of new capitalism we need – one where growth is better balanced and more sustainable, rewards are more equally shared and the economy is more resilient and less dependent on a few key sectors or regions.
For all the talk of fiscal and monetary policy (and Ed rightly today had much to say on the Government’s misguided approach to fiscal policy), I’ve long argued that there is more to economic policy than changing tax rates, moving interest rates of the level of government spending.
To understand how the different components of the political economy fit together, I’m keen on the diagram below.
This is what I found interesting about Ed’s speech today – it touched on many of these areas, ones that have for too long been absent from the political debate in Britain. Training policy, product market regulation (especially in rail and utilities), inter-firm relations (e.g. the need to avoid free riding), social protection and corporate governance (especially the bits on short-termism, quarterly reporting and take over rules) all made appearances in the speech. Despite the billingas being a ‘personality-led’ speech it was actually, by the standards of UK politics, fairly policy heavy.
It went further than these areas to talso alk about the need for the reform of banking so that finance supports the real economy (a long running TUC theme – this recent major statement sums it up) and the role of government procurement.
What was missing – a very important point made last week by Nicola Smith – was more on labour relations and the role of unions. If we truly want more balanced growth than is going to mean more collective bargaining and how we achieve that isn’t just a question for unions, there is a vital role for policymakers in examining how this can be supported.
But we can’t expect all the answers or an entire road map to the new capitalism in one speech.
Noteworthy, and in sharp contrast to the business reaction to last year’s speech, the CBI have commented that:
“Business agrees with the importance of building an economy for all. In particular I believe that Ed Miliband was right to put so much emphasis on education for the forgotten 50%. Unless everyone has the skills to contribute to the economy they are unable to benefit from it.”
When both myself and the CBI are inclined to agree on something then I think it deserves serious attention.
This is an agenda that goes beyond the current chronic lack of demand currently holding back the economy and starts to ask deeper questions about longer running problems in our model of capitalism – unfair rewards from growth, the causes of our long running stagnation in median living standards, low investment, short-termism, an unbalanced economy.
The steps in training policy, market interactions, the banking system and procurement all seem modest but added together they sum to more than the total of their components. People have rightly asked what ‘responsible capitalism’ means and now we are starting to see.