A new economic narrative for Labour’s New Generation

October 9, 2010 2:55 pm

doveBy Darrell Goodliffe

Now the dust has settled a little on the various electoral excitements for Labour, it finds itself at a fork in the road. I would argue that there is a real policy divide within the party between deficit ‘hawks’ and ‘doves’.

Rather oddly, given his combative nature, Ed Balls has up to this point been the primary spokesperson of the doves whose basic contention is that Alistair Darling’s deficit reduction programme was too fast, too soon and that money should still be pumped into the economy. Balls himself sees this merely in a Keynesian light but some doves (or maybe I am the only one) would like to see more than investment to buoy the economy and see it used as well to effect radical restructuring. I would like to see a radical overhaul and change of this economy away from corporate enterprise (even of the small business variety) towards co-ops and mutuals and the creation of a new economy from the ashes of the old. However, that makes me a radical, not a mainstream dove.

Hawks by contrast adopt the line that Darling’s deficit reduction program was ‘just about right’ to paraphrase our new shadow chancellor. They oppose the cuts like the doves but do so in more abstract terms arguing instead that Darling’s program was fairer than the ConDem plan, and would lead to economic growth. At this moment the leadership, despite the appointment of a hawk as shadow chancellor, is equivocating between the two positions saying Darling’s proposals represent a ‘starting point’. Logically, of course, Geroge Osborne could say the same thing; he started with Darling’s proposals and took them much, much further. The question is not where you start but where you want to go and this is the central question that now lies before our leadership and our party.

Again, looking at the progression of views I would argue my ‘radical’ stance is only the logical progression of the dove line because the doves, unlike the hawks, see the cause of the crisis not in an unfortunate act of fate but as a result of serious structural imbalance within our economy. Put simply, the financial sector was allowed to grow too high and mighty; furthermore, depression of wages and rampant credit led to the debt crisis. So, increased state spending was not the problem but was made necessary (we forget too easily how much of the deficit arose from bailing out the banks) by wider socio-economic problems. Labour does itself a disservice by accepting the Darling proposals and implicitly conceding the point its ‘profligacy’ was somehow to blame.

‘Sensible’ people will now intervene and say it’s reckless not to deal with the deficit, but the question is not whether we should but how we should. Ed Miliband has talked about the need to tax more and he is absolutely right that we do need to. Labour’s problem was not that it spent too much but that it did not tax enough. In government, Labour spent less than Margaret Thatcher but taxed considerably less as well; receipts under Labour averaged 37.6% compared to 42.4% under Thatcher. So, an alternative way to reduce the deficit does exist. It will be protested that this is not politically palatable but I think when presented with the choices the voters will surprise the cynics.

This would be especially true if they were given hope of something new/better and a stake, through the mutual and co-operative form of ownership in building it. Labour must start doing the ‘vision thing’ again and it’s the doves who have the vision in this instance not the hawks. The comparison with the far-seeing animal only extends to the predatory nature of their policies. Labour’s “New Generation” needs a new economic narrative and this is something the hawks simply cannot provide.

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