The emerging shape of Milibandism
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
[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.
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.