From the TUC

The emerging shape of Milibandism

11 Oct 2013, by Guest in Economics, Politics

There’s a fascinating interview with Ed Miliband in today’s FT (£).

The interview, taken together with his speeches earlier this year on a new economic model, on social security and at the Labour Party conference, maps out what could be thought of as a distinctly ‘Milibandite’ approach to the economy.

As he says in the interview:

The big divide in Britain is between those who want to fix broken markets and those who want to defend broken markets…

Markets don’t just drop down from outer space, perfectly formed.

Or, as the FT put it:

Labour would also intervene in other areas of “market failure” including training, infrastructure and planning – all with the aim of making capitalism work more effectively

In political economy terms, as Chris Dillow was quick to note last month, this approach as much in common with the work of Karl Polanyi.  As the late Fred Halliday has explained:

[Polanyi] challenges the idea that there is anything “natural” or universal about the modern market; Polanyi emphasises the cultural and political underpinnings of markets, and shows how this complex phenomenon – at once generating wealth and provoking instability and poverty – is the particular outcome of modern industrial society…

…markets are human and contingent entities that have to be regulated, and managed, by states. There is no such thing as a “hidden hand”. A “pure” market unanchored to other social institutions and practices cannot exist. 

Miliband’s notion that markets ‘don’t just drop down from outer space’ has much in common with Polyani’s idea that markets are not  natural phenomenon, they are instead shaped by social, cultural and political factors.

Essentially this is a direct rejection of what can be thought of as neo-liberal approach.  This represents a break not just with the current coalition but also with some aspects of Labour’s last period in office.  As Stewart Wood has argued:

We should be proud that in some ways New Labour acted as a corrective to many of the excesses of neoliberalism – through the minimum wage, tax credits and helping to rebuild the long-neglected fabric of our public services. But too many of the tenets of neoliberalism – the powerlessness of national governments in the face of globalisation, the dependence on under-regulated markets and growing inequality – were accepted, willingly or otherwise. Now that we can see the ideology of neoliberalism for what it is, we should see the challenge for our party in radical and ambitious terms – to rewrite the rules that govern how Britain works.

(Shameless plug alert: I’ve written a long article in the current edition of Renewal on the changing shape of Labour’s political economy over the last 20 years).

Interestingly enough the agenda appears far more radical than Labour’s initial approach after the financial crisis hit. Many assumed in 2008 that the financial crash would signal the death of neoliberalism as a governing agenda – the obvious and spectacular failure of under-regulated financial markets would provide the catalysts for change. This did not occur. But it maybe that the longest squeeze on living standards  in over a hundred years provides a more effective catalyst, opening up the space for a more wide ranging discussion on Britain’s particular model of capitalism.

So, over a year on from the launch of One Nation political project, where does ‘Milibandism’ stand on the economy?

The focus is very much on economic reform – changing and shaping markets to lead to better outcomes. In the cases of energy, banking, housing and training this has been made explicit. 

The approach places a great deal of emphasis on the need for more long-termism – both from government in terms of things like infrastructure investment and from firms in terms of reforming corporate governance so that corporations look beyond short term opportunities for profit and towards their long run strength.

In terms of social security, Miliband has been clear that reform is needed but has correctly realised that the way to bring down the benefit bill in a sustainable manner is to address the root causes of rising spending – unemployment, low wages and a broken housing market.

The lodestar of success in this approach has also been made explicit – rising prosperity for those in the middle and below.  An economic recovery which is not accompanied by rising household incomes for the majority (as currently experienced) should not be seen as a good outcome – but nor should the period of before the crash when the economy kept growing but median real wages barely budged.

Institutions play an important role in Miliband’s approach – a new British Investment Bank, a new energy regulator, reforms to corporate governance, looking at ways to increase the minimum wage and extend the living wage. (Although more needs to be said about our biggest labour market institutions – trade unions – and the crucial role they will play in any successful attempt at predistribution).

The agenda is at once ambitious and realistic – ambitious in that it essentially seeks to reshape how important aspects of British capitalism actually work and realistic in that it recognises that this is a long term project. Thatcherism didn’t happen overnight and nor will its successor be build in one Queen’s Speech or Budget. Undoing the work of decades can’t be in one year or even, probably, one parliamentary term.

In the years after the crash, as Nick Pearce has recently argued, there has been a live debate amongst progressives on the nature of the economic problem Britain faces.

[There is] an intellectual tension on the left between those who argue that the British economy is structurally weak and in need of radical surgery, and those who think that its pre-crash performance was fundamentally sound and that an expansive macro-stance will put it back on track…

I’ve often caricatured this debate as, ‘is stimulus alone enough?’ – i.e. if we could have a large enough fiscal stimulus to boost demand and return the economy to growth, would the economic problems be solved?

Ed Miliband has answered that question with a resounding ‘no’. ‘Milibandism’, as I see it, is not about getting Britain back to where it was in 2006 (or, despite what you might read in the Mail, 1975 either!), it is instead about addressing the structural failings of British capitalism and ensuring that we have an economy that works for ordinary people.

10 Responses to The emerging shape of Milibandism

  1. heather Wakefield
    Oct 12th 2013, 6:52 am

    Really interesting post Duncan. Thanks. I like the idea of Milibandism creating space for creative trade unionism.

  2. Mark Hughes
    Oct 12th 2013, 11:09 am

    Yes, agree that one thing we have learnt is that markets are not perfect but does Milibandism have space for the idea that markets are not always the answer to every problem and that there is space for the idea of nationalised industries?

    The idea that some industries lend themselves to be identified as natural monopolies is another consequence of the recent examination of the efficacy of markets. So does Milibandism have space for the re-nationalisation of the railways and energy companies? A commitment towards developing a mixed economy!

  3. Strategist
    Oct 12th 2013, 3:30 pm

    It’s Polanyi

    Hungarian.

  4. mitch
    Oct 13th 2013, 5:51 pm

    So headlong rush back to the 70s with a shiny new wrapper….what a crock.

  5. Duncan Weldon

    Duncan Weldon
    Oct 14th 2013, 9:08 am

    @Strategist:

    Silly typo from me – corrected. Thanks.

    @Heather:

    Agreed!

    @Mark:

    I can see space for a greater state role through out this.

  6. Roger Rees
    Oct 14th 2013, 9:34 am

    Wake up Mitch. Forget the 1970s.

    It’s not even a matter in capitalist terms, of state control vs private sector. It’s a matter of government taking a strategic approach to national economic planning, within which nationalisation is an appropriate tool in the face of let-it-rip, short-term,looting capitalism (predatory capitalism, anyone?). What we have seen and are seeing, is actual(re)-nationalisation taking place RIGHT NOW.

    Apart from the bank bailout (and sadly a Labour government at the time attaching few strings to that massive provision of taxpayers ‘hard working’ cash) look at the buying up of UK utilities by state energy organisations from across the Channel and beyond. And only a few weeks ago I read that Deutsche Bahn, the German state railway, ALREADY runs several rail franchises in the UK and is well placed to sweep up the East Coast franchise when that is taken away from the state organisation that effectively saved it after private-sector Stagecoach threw their toys out of the pram.

    I’m more than happy to bet you £20 that within 3-4 years, the Royal Mail will be controlled by a foreign state mail delivery organisation – Deutsche Post??? And this is NOT an anti-foreign point. It’s a reminder that other countries just haven’t been mad enough to go as far down the suicidal ‘Anglo-‘Saxon’, neo-liberal road as the Loony Right UK government has. Flog it off. Let’s make some cash today and to hell with tomorrow. Steve Bell’s and martin Rowson’s ‘Fat Cats’ aren’t just cartoon characters….they are the reality of British capitalism today.

  7. Mark Hughes
    Oct 14th 2013, 10:39 am

    Mitch’s argument makes a lot sense, it should also be read in the knowledge that Germany has a stronger economy than Britain and is more responsive to the opportunities that new and emerging markets create, such as their commitment towards the manufactoring of P.V solar panels.

    Is this because Germany has more of a democratic ethos within their industrial relations process?

    It definitely shows how Germany’s government recognises its responsibility to manage the economy whilst Britain’s has negated its responsibility by relying on the superstitious belief in the ‘invisible hand’. It is irresponsible of any government in the face of mounting evidence, to believe that markets will regulate themselves and produce outcomes which serve the interests of the majority of its citizens. It is time for a change!

  8. Roger Rees
    Oct 17th 2013, 10:24 am

    You’ve lost me Mark. “Mitch’s argument makes a lot of sense”???? Really??? Mitch’s argument is –

    “So headlong rush back to the 70s with a shiny new wrapper….what a crock.”

    THAT’S an argument?

  9. Civilising business | Tangle Media
    Nov 6th 2013, 1:39 pm

    […] with vested interests need reminding that markets are shaped by the context in which they operate. Duncan Weldon says, on the ToUChstone blog, ‘Miliband’s notion that markets ‘don’t just drop down from outer space’ has much in […]