Modernising markets

First published on the Huffington Post

Labour is in need of a new political economy. Not socialism with an iPad or a Little Red Book, but a radical, transformational and credible view of markets, wages and the wider economic framework. This has got to be the work of everyone who wants a Labour government again. More than that, at a time like this, getting to grips with the big questions surrounding jobs, business and innovation becomes nothing less than an existential question. Can we in Labour rise to this challenge?

For this reason, December’s Progress magazine – which I edit – is dedicated to the issue of ‘responsible capitalism’ and how we grapple with the politics and policy challenges it throws up.

In it we argue that Ed Miliband was right – and wrong.

The magazine’s editorial makes clear that the ‘rigged market’ Miliband identified is indeed ‘holding back the very people Labour members came into politics to serve.’ The economy gives returns to the wrong people – the City, not manufacturers, the shareholders and top management, not the loyal workforce.

The paradox of Miliband’s tenure as leader is that much of this was also identified by progressive business leaders the world over – even at the World Economic Forum in Davos, by the International Monetary Fund, and within enlightened circles in the City of London.

So why did Miliband’s ideas fall on such deaf ears? Angela Eagle, who this week danced rings around wannabe PM George Osborne, tells Progress quite simply that, ‘No one wants to be called a “predator”.’ Labour under Miliband, she argues, failed to make ‘the distinction between those companies that give back.’

I also argue that Labour’s history in government laid the brittlest of foundations its successors in opposition. Following the Granita deal, the economy was the preserve of a group of ministers in and around the Treasury and became effectively a ‘debate-free zone’ in the Labour party.

When the Labour party loses its ability to talk fluently about the economy, something has gone seriously wrong. This too is where the Anyone But Corbyn candidates were lacking in this year’s leadership election. Without a clear picture of a fairer Britain underpinned by a fairer economy, they struggled to articulate how they would be different from both Jeremy Corbyn and Osborne.

Labour activist Jade Azim recently placed herself firmly in the ‘making it work’ faction of the Labour party, and cites the determined, dogged work done by Stella Creasy to change the rules on payday loans. I hope that all those in the ‘making it work’ part of the party – who want to develop a programme for power in 2020 which genuinely brings about a fairer capitalism – will engage with the thoughtful contributions laid out in this edition of Progress.

Ann Pettifor, who serves on John McDonnell’s economic advisory council, argues that ‘Responsible capitalism requires a government held responsible by the electorate – for managing responsible capitalism.’ Unlike the free-wheeling, free market Tories, Labour’s new political economy must place responsibility for monitoring markets and defending the most vulnerable from their excesses.

Tristram Hunt argues that Labour should re-examine ‘predistribution’, which first surfaced in Labour circles in Progress’ The Purple Book in 2011 and which Miliband initially sought to put at the heart of the party’s programme. Hunt says that the issue is ‘making a big contribution not just to the debate about the future of the centre-left, but also to the economic arguments at the heart of the Democratic presidential nomination race.’ Between 1997-2010, Labour’s redistributive efforts successfully dampened the rising inequality produced by globalisation, but more must be done to ensure workers win a greater share of the fruits of their labour. Equally, in an era of pressures on welfare spending, it will fall to the Labour party to rebuild the arguments for supporting family incomes, an argument the chair of Progress Alison McGovern has begun to make.

Labour people must also properly get their head around how businesses actually work and how decisions made in company boardrooms, pension fund choices and FTSE 100 rules impact on people. Chair of the Common Good Foundation, Ben Andradi, asks the reader to compare the stated purpose of a business from the 1950s with that of today: company chief executive in the 1950s who would have focused on making ‘good great products and services for customers [and only afterwards on] giving the shareholders a decent, competitive return.’ His solutions to this Thatcherite, and highly unsocial, phenomenon has been dubbed ‘patient capital’. We should look to countries such as Germany which enjoy a ‘different institutional framework, [with firms] like BASF and Siemens, [which] have prospered over many decades, across multiple economic cycles, focused on the long term.’

Giving greater voting powers to shareholders who stick with a company for the long haul is one of the many measures we may need to bring about the end to the quick-buck economy identified by senior Labour MP Liam Byrne. The crutial thing, he argues, is for ‘Labour [to] join forces with reform-minded business’, who are not in short supply.

Modern social democracy may be struggling, but Patrick Diamond rightly identifies that there is no alternative to the left being the ones who will tackle these problems. Conservatives – who ultimately prefer wealth and power to accrue to a small elite – will not take on this challenge. So the task falls once more to Labour to fix matters. He argues, ‘Social democrats have to take on private sector vested interests and monopolies that stifle equity and efficiency. The role of a Labour government is to support markets and business; sometimes that means criticising poor behaviour, where necessary employing robust regulatory levers. The financial crisis demonstrated that business does best where government is a critical friend: as Keynes reminded us, the private sector is “a good servant but a bad master”. That should be the central principle of any progressive political economy.

Within Labour, I argue that it is ‘the modernisers – future-focused, pro-business and fiscal realists, enthusiastically grappling with and really understanding business and the economy – to put together a big vision for the economy distinct from the Tories’, one that will deliver for those left behind by globalisation and which a future Labour government will be able to realise.’

This is no mean task. It means wrestling with subject matter that should be bread and butter for Labour people, but which for 20 years we have allowed to fall into disuse. No Labour party is worth the name if it has not cultivated an understanding of how it wants to shape the economy the people it seeks to represent work in. The task of ‘making it work’, whatever other ructions rock the party, begins now.


Richard Angell is director of Progress

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