Much derided at the time, the phrase ‘squeezed middle’ became the Oxford English Dictionary’s ‘Word of the Year 2011’. Having enabled Labour’s new leader to sculpt a narrative that the vaguely-defined ‘middle’ were bearing a disproportionate burden amidst the wreckage of the financial crisis, it no longer encapsulates what is turning out to be a deeper, more profound crisis than initially imagined. There now exists a ‘squeezed society’ and ‘squeezed economy’ likely to persist for years if not decades. Labour’s ideals, while important during the time of plenty, are now essential as we enter what may be a period of relative decline, both to ensure fairness and to map out new and better concept of a successful economy and society.
This is not doom-mongering, but hard-headed realism of the kind lacking since the financial crisis began, when the elite was unable to contemplate that the order it had built up was not only under threat, but might be swept away. What was initially described as little local difficulty at the Northern Rock was in reality Act One of a tragedy threatening the entire economy. At each stage of this escalating crisis, politicians played down the risks, drip-fed the truth and attempted to convince us they can lead us back to ‘normality’. Yet as with a train station display board which flashes up a delay of 10 minutes, before gradually revising it sharply upwards, though we fear that some unmentionable horror is being concealed, we crave the truth in order to plot a safe onward journey. We need to accept some of these hitherto unmentionable truths about our economy and society, in order to build a path to better economic future based on more than blind optimism.
Yet even as the pillars of its strategy crumble, the Government clings to the belief that ‘normality’ can be restored. What was to be a mild recession followed by strong growth has morphed into a deep recession followed by either a ‘double dip’ or a long period of stagnation. From the eye of the storm, our leaders are still at risk of mistaking an epoch-changing financial and economic crisis for a recession. ‘Normality’ is taking such a battering that the current generation may be the first since the 1950s unable hold out any hope of their children reaching or exceeding their standard of living and range of life-chances. This is hardly the utopia that politicians of all political hues promised would flow from free markets and globalisation. With IFS data showing that spendable incomes will not return to 2006 levels until 2016 it is not exaggeration to suggest this lost decade may become a lost generation and that a paradigm shift in our economy and society is underway. It is slowly dawning on the West that the boom years from the mid-1990s were sustained not by increasing efficiency or thrift, but by an explosion of debt, fuelled by vast international trade imbalances and the misguided view that growth could be eternal and risk mitigated through complex financial instruments. This masked the emperor’s new clothes – that our economy was incapable of sustaining the kind of growth rates necessary to sustain good public services, high levels of employment and high standards of living?
We must start adapting to a train station noticeboard now reading: ‘All trains to your destination cancelled…please seek alternative methods of transport.’ In short, it is not possible or even desirable to chart a route back to the status quo circa August 2007. Our alternative should be positive, heralding new and better ways of working, living and conducting business. Ed Miliband has started along this track but the rest of the party must embolden him to go further. Rather than accepting declining living standards as a latter-day ‘price worth paying’ of austerity, we must show how it is possible to ‘unsqueeze’ both the ‘middle’ and society itself, even without GDP growth. We must break the mindset of old: a worship of the totem of growth and a small ‘c’ conservative defence of the ossified structures of privilege and power in our economy and society. Labour must set out the radical policies which might ensure that the new economic paradigm is not one of rising inequality and unfairness, as it will surely be under the Conservatives. These straitened times require a more sophisticated and radical policy toolkit, moving beyond the ‘third way’ made possible by the falsely benign environment of ‘boom and growth’. The vested interests which stand in the way of the better society must now be challenged with pragmatic, radical policies rather than the obsequious mollycoddling deemed, perhaps understandably, to be necessary to achieve progressive outcomes in the past.
Housing provides a glimpse into the radical form that this new economy and society might take. The housing crisis is essentially caused by a lack of supply and resolution of the problem is inhibited by the vested interests of those who currently own property, who rent it out and who oppose the building of houses in their neighbourhoods. Yet if the Government built enough new houses to ensure a policy objective of markedly reduced prices, workers would find declining wages more manageable. This could be achieved by establishing new towns and cities built in carefully selected areas of the green belt as done post-war, funded by Citizens’ QE (detractors need only be reminded that £275bn has already been printed and resides in bank vaults being of no economic use at all) and a new tax on land value. The knock on effects would tackle other problems caused of low growth: fewer hours would need to be worked and parents could therefore share child-rearing.
We are potentially entering not merely a new economic paradigm but a period of profound crisis as a restive population realises the full extent of the continuing economic crisis and that them that things may never be the same again. To suggest that a dose of patrician Toryism can return the country to its former glory or that the received wisdom of the boom years merely needs tweaking is at best wishful thinking and at worst, dissembling. Labour must explain how this new economy and society will be reformed to work in the interests of the ordinary people rather than the elites whose wealth and influence has increased during the boom years and whose political allies would curtail steps to ensure a more equitable society in the future. The centre-left must begin the thinking necessary to navigate what was once regarded as a worst case scenario, but is now becoming a reality. All needn’t be lost in the lost decade(s).
John Slinger is a member of the Labour Party and Editor of Pragmatic Radicalism