Responsible Capitalism Takes Shape
I’ve written a long piece for Renewal on the changing shape of Labour’s macroeconomic policy & wider political economy since 1994. It’s available for free online here.
For those who can’t quite face all six thousand words, the conclusion ran as follows:
Over the past twenty years Labour in opposition and government learned to live with capitalism, specifically its British variant. For much of the period in government Labour ran a macroeconomic policy in keeping with the latest economic thinking while questions of political economy were downplayed. In opposition the party is once again placing an important long and short run emphasis on the role of macroeconomic policy to stabilise demand but also critiquing Britain’s economic model. Labour appears to have moved beyond learning to live with capitalism and is now talking about steps actively to reform it. Exactly what steps it would take to achieve this are still unclear but the responsible capitalism agenda may have enough specifics – median wage growth, tackling vested interests, corporate governance and banking reform, active industrial policy – to avoid the fate of the talk of a stakeholder economy in the mid-1990s. It can be more than a rhetorical device.
Following Ed Miliband’s speech on Tuesday, he has been accused by Digby Jones of a ‘return to tribal socialism’. I will admit it has been a while since I last picked up Das Kapital, but I can’t remember the reference to capping energy costs for two years as prelude to full socialism.
Rather than being a ‘return to the 1970s’ the policies outlined in the speech (and alongside the speech in a 60 page economic policy document published by the Labour Party yesterday) struck me as those of someone who undersatands the need for fundamental reform of the UK’s economic model.
[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 (Gavin Kelly and I have addressed that question…). Ed Miliband is in the former camp. He has spent the last three years arguing for a ‘responsible capitalism’. Tellingly, he punctuated his speech this week by drawing the attention of his audience to the fact that the ‘most important thing he would say’ was that the link between growth and rising prosperity for working people had been broken, and that only substantial economic reform could restore it.
Whether one calls it ‘responsible capitalism’, ‘predistribution’, ‘economic reform’ or ‘rebalancing’, they are outlining an agenda that is about fundamentally shifting our national business model towards a higher waged, higher skilled, higher productivity path.
This is an ambitious agenda but perhaps a much harder to explain one.
The tools used – whether through spreading the living wage, reforming training, reforming banking, industrial policy, changes to corporate governance arrangements, better use if public procurement or rebuilding some sector machinery – are more about building institutions than direct intervention. You don’t reverse 30 year trends in one parliament nor can you fundamentally alter how an economy works in one Budget.
Some people seem not to grasp this…
We seem so used to politicians, of all parties, simply papering over the cracks that when one argues we need much bigger reforms then most of us just ignore that.
For what it’s worth I think the economic reform agenda represents the surest, most sustainable way to generate steady growth, to protect and increase living standards and ultimately to deal with the deficit.
Whilst the individual policies outlined at the Labour Conference this year might have been new, there has nothing surprising about the overall tone of the speech. That Ed Miliband believes in serious economic reform has been obvious for some time.
What Labour has achieved this week is turning what can seem like quite an abstract debate around ‘rebalancing’ and ‘responsible capitalism’ into a series of concrete policies.