Labour’s choices on the economy

By James Valentine

Capitalism is again in crisis as the sovereign debt panic extends from Greece to other southern European countries, and possibly more widely. It seems unlikely that this will lead to a collapse of the Euro but if it did, the result would be catastrophic for the UK and plunge us back into recession.

It’s worth contrasting the behaviour of the new government, which is in strictly “do nothing” mode, with that of Gordon Brown who, right now, would be working with our European partners to head off the cataclysm. For all his mistakes – and there were many – he understood that the recession was a global phenomenon and that markets don’t necessarily work without intervention.

I was surprised that Harriet Harman didn’t mention the economy at PMQs yesterday. We shouldn’t let the Tories’ argument about “debt” be accepted by default. They try to associate high public borrowing with Labour’s policies over its whole term in office, whereas it was actually only ramped up more recently – along with the US and other countries – specifically to rescue the financial system and stop us going into depression. And it worked – hundreds of thousands of jobs were saved and the public accounts have very gradually improved.

But although Brown redeemed himself with his interventions at the end, for too long both he and Blair treated the market economy as if it was the solution to everything, whereas for democratic socialists, the problem is how to make markets work in our favour.

Banking and financial services were let rip and manufacturing was neglected – the most fashionable political tract from the Blair days was Charles Leadbetter’s “Living on Thin Air“. Governments have a duty to promote competition but actually the strongest anti-competitive moves, like Windows Explorer unbundling, came from the EU. In the UK, monopolistic practices extended in areas like the media, where they are most pernicious.

As the economy grew, millions of citizens suffered the misery of monopoly rail franchises and the frustration of trying to deal with impersonal utilities. Public procurement was poor, not just in the MOD where it has always been extravagant, but in newer areas such as IT, the health service and education. It was the era of single sourcing, twenty-five year contracts and penalty clauses that always seemed to be in the suppliers’ favour.

It is curious that Gordon Brown, a man who loves books and is not particularly interested in material possessions, presided for most of the period over an economy where the pursuit of material benefits was the be-all and end-all. Actually what people value most is security, satisfaction at work and the companionship of friends and family.

Equality is a hugely important factor in producing a sense of security and more equal societies are, metaphorically and literally, healthier than less equal ones. Even David Cameron quotes “The Spirit Level”. But we should not let the Tories get away with the idea that they are the party of equality now that they have dropped Labour’s child poverty targets, and we should never let them forget that they opposed the minimum wage.

High pay is inescapably part of the equation, too. As activists, some of us tried to tackle the previous government on the matter of so-called “rewards for failure” – large payoffs for incompetent directors who massively lose shareholder value – but we didn’t get anywhere. I remember being politely told by a senior minister that this issue, like many other that we fought over, was being “parked”.

Finally, the news of the Gulf of Mexico oil spill and new record high temperatures in Asia remind us that sustainability must be the foundation of economic policy in the future. It doesn’t mean dropping economic growth targets but it does entail working out sustainable goals that take account of the environment and our responsibility to Third World countries.

So these choices on the economy must be the first task for our leadership candidates. Ed Miliband has made a tentative start along this road but so far the candidates’ statements have been rather disappointing, and vague exhortations about being more “progressive” don’t get us very far.

It can only get better, and I look forward to being re-inspired at next week’s hustings.