Labour will never be credible without convincing people of its economic credentials

10th May, 2015 1:58 pm

Possibly the most striking thing about his resignation from the Labour leadership is how easy people have found it to make nice remarks about Ed Miliband without defending Milibandism.

Many have referred, rightly, to his passion and sense of personal conviction and his confident performance once the campaign got underway. Others have talked of the way he kept the party together, on the surface at least, following the leadership battle with his brother in 2010. And it is a commonplace to remark on his amazing resilience to the ugly media attacks made on him.

But, so far, I have not heard any stout defence of his political ‘project’, either from those closest to him who agreed with his determination to reject New Labour or those who were sceptical of what he was doing but nonetheless chose to go along with it.

mandelson_khan_miliband.jpg

Herein lies what, I think, handicapped Miliband’s leadership. He felt intensely lonely, unable to get across his arguments effectively or recruit enough people to help him do so. From the outset, he believed that he could count his real supporters on the fingers of one hand and that even they were prone to doubts. And, as for the erstwhile ‘Blairites’, it was only a matter of time before they came for him in the night.

So, while he insisted that the electorate had moved left following the global financial crisis and were ready for his alternative brand of state-led, interventionist social democracy, this case did not cohere or become a compelling vision of society. He asserted that he would “completely change the way the economy operates” – an appealing thought to those who felt left behind in the rush to globalisation and are giving UKIP a look – but never explained how.

He rightly pointed to the increasing gross inequalities that blight Britain but apart from proposing higher taxes on the top 1% never projected new ideas for spreading wealth, promoting social mobility or radically widening economic and educational opportunity.

Instead, Miliband fell back on a string of financial offers – rail fares, energy prices, housing rents, tuition fees, government-backed minimum and living wages and more money for the NHS – which he believed were enough for a discontented, left-leaning ‘core’ vote to give him victory and which the ‘rich’, stigmatized by his Obama-style rhetoric, would pay for.

This came to sound more like populist, transactional, rather than principled, politics. Not because all his offers were wrong but because, despite Ed Balls’ valiant efforts, they were impossible to fund convincingly and because, apart from a barely explained commitment to a new state-run banking sector, ill-defined commitments on skills and welcome devolution of power to big cities, he chose not to articulate the policies for economic and industrial growth that would pay for his policies.

To me, this vacuum at the heart of Labour’s manifesto is the greatest mystery of the last five years. Why was there not more economic weight in it? Why was Miliband so silent in critiquing George Osborne’s failure to achieve the re-balancing of the economy the Chancellor promised in 2010?

There are three possibilities, none amounting to an adequate explanation. That he wanted to transform the market-friendly ‘industrial activism’ I constructed into a more fully-fledged state-run industrial strategy but feared how this would be perceived and misrepresented. Or that turning this page would get him into a full-scale disavowal of the Labour government’s economic record on which he knew he would not carry his colleagues, in particular Balls. Or that, for all his distrust of business motives and belief that markets are intrinsically inefficient, he had simply not thought through his alternative model of ‘responsible capitalism’.

Whatever the reason, the result was that Miliband fell back on a fairness argument rather than an economic one to carry his whole message, re-distributing the cake without saying or knowing how he would make it bigger.

Interviewed in the early hours of last Friday morning, Neil Kinnock argued that Labour had lost because of the ‘false consciousness’ of economic security that the Conservatives had implanted in voters’ minds. True up to a point but who could blame the voters for deciding that the Conservatives were a safer bet when Labour was saying so little about growing the economy and that Conservative security, essentially, was the only financial security on offer ?

Either way, Labour will never be credible without convincing people of its economic credentials, that the party understands business, that profit is not profiteering but the basis of further investment, and that while markets need a framework of policy to surround them, there is not a practicable alternative to them.

Most thought that the party had crossed this rubicon under New Labour. In reality, it is not contested still by the overwhelming majority who know there are many ways that a capitalist economy can be made more efficient and fairer, and for government to provide incentives for innovation and to restrict unearned rewards.

But unless we are explicit about what we believe, voters cannot be forgiven for their ‘false consciousness’, leaving us unelectable.

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  • Andy Harvey

    Why do you frame it in terms of pro or anti-business Is it really too difficult to say we are resolutely for businesses that make profits to invest and pay their workers a living wage and employ them on secure contracts, but we are against those that employ people on minimum wage zero hour contracts and pay no corporation tax?

    • liversedge

      where was it framed as pro/anti business?
      I didn’t read it that way at all.

      • Andy Harvey

        I meant to say but somehow it got cut off, that it seems Mandelson thinks all business is the same – i.e. good, while Miliband ‘stigmatized’ the rich, which I read as being he was anti-business.. Overall, I thought the piece is a good analysis but not all businesses make profit to invest – many asset strip and others exploit. We have to be able to differentiate between them. Setting up a business panel of ‘good’ business people to advise the Party would be a good idea.,

        • liversedge

          I would certainly have preferred “that not all profit is profiteering” instead of “that profit is not profiteering”

        • Dave Postles

          Just bring back Neddy in a more informal way.

  • Dave Postles

    Miliband was correct about differentiating companies into ‘predatory’ and ‘productive’. Lord Turner argued as much (part of the City as ‘socially useless’). Here’s an example. After the result of the election, the shares in SportsDirect increased by 2.5%. Three-quarters of the employees of SportsDirect are on ZHCs – not by their own volition – and do not have any stake in the benefits. Ashley is a multimillionaire. The people who shop at SportsDirect are the poorest. So we have the richest increasing their wealth by the poorest exploiting the poorest to the advantage of the richest. We had the prospect of Beecroft, an investor in Wonga, drafting employment law for the Tories. We had the exhibition of Ashley’s football team sponsored by Wonga. Despite the critiques of GirlGuide, people like Miliband and myself do not despise business. I exhort people to buy JLR if they can afford it or other marques made in the UK. The point is that parts of the business world are ‘predatory’. For its own sake, business needs to denounce those parts and recognize that some businesses are ‘predatory’.

  • Jonathan morse

    Is there something wrong with the way we elect our leaders if the eventual leader can only count on less than 5 supporters? Or does he mean the rest of those who voted for him, and the trade unions don’t count? Or that trade union leaders couldn’t be trusted anyhow?

    • Gary P

      The system of election was changed to be more democratic

    • g978

      Remember that the majority of Labour MPs and Labour memebrs wanted David M. They should be the voters, not the Unions.

  • Jonathan morse

    People talk about New and Old Labour but Blairites argue their case Brown and Ed M seem to behave like being PM is their right, just don’t upset the applecart, whoever’s leader of the Labour Party will win the most seats in 2015 just as Brown won in 2010. Neither Ed said loudly enough that Major was spending a lot in relation to GDP in 1997, that after thst Brown cut back a lot and was better at it than Osbourne, just when he wanted to win a GE he was less disciplined than when Blair was running to win a GE, but, IIRC, better than Major. These things argued early enough might have won it for Labour.

  • Dave Postles

    Yes, you did introduce (latterly) a strategic vision for industry (by viring £1bn, if I remember correctly, from the HE funds). Miliband similarly proposed a functional investment bank, not the stupid Funding for Lending Scheme which was appropriated by mortgages rather than SMEs. Some of us here have been indicating the failure to rebalance, that manufacturing is below its pre-crisis levels, that the current account deficit is 5.5% of GDP (worse than ever), and that productivity is dire, partly because industry has not reinvested. How would you rectify the productivity issue? Where are the serious criticisms of low private sector productivity when the public sector was castigated over ideas of productivity? Why has the private sector been on an investment strike for the last five years? When we raise these issues, our voices are condemned as anti-business.

    • UK business has always underinvested. A couple of years ago I read a headline that stated that Singapore wanted to increase its R&D spending to 3.6% of GDP in order to be technologically competitive internationally. The global benchmark is generally considered to be 2.5%. In the UK the we rarely get above 1.5%.

      If the private sector cannot be relied on to perform then the State has to intervene in the national interest. That means “nationalising” investment by allowing the State to fund additional R&D and making the private sector pay for it through taxation.

      As for productivity, if you base your economy on low wages then there is no incentive to invest. Why buy a tractor if it is cheaper to employ 20 peasants to pull your plough?

      • ArmouredApple

        Absolutely agree with Dave Postles that we need an answer to the productivity question. Cantab83, I’d like to hear more about this idea of nationalised investment. Would it be State-directed? This worries me, because it means we’re trying to run the search for new ideas centrally, and so will inevitably miss out, the search will be distorted by standard problems of bureaucracy, etc.

        Or do you mean that there would be a fund that innovators outside established companies could apply to?

  • Jonathan morse

    I want whoever wins the leadership campaignto be an arguer for Labour which neither Ed nor Brown were.

  • Forlornehope

    “He felt intensely lonely” – the poor boy, my heart goes out to him. Leadership is lonely, if you cannot cope with it don’t put yourself forward. Now it is clear that he was driven by little more than vanity and personal ambition and the Labour Party has paid the price for it.

    • Dave Postles

      That is Mandelson’s rhetoric – i.e. he excluded us, the Blairites, and suspected that they would come out to get him ‘in the night’. Personally, I do believe that Miliband sincerely wished to make changes for the common and social good. Equally, he honourably fell on his sword.

  • Kenneth Watson

    very slick presentation as one would expect from PM and with some deep insights.Certainly leadership is lonely and made much more so , or at least most ordinary compassionate humans believe,by back-biting and feuding.Real people seeking genuine alternatives to improve lives would have supported and encouraged or walked away if in disagreement.Have they in huge selfishness now destroyed Labours last gasp is a question only history will answer.?

    Certainly the trust issue was vital especially on the economy but PM is disingeneous in his interpretation.Browns errors were minimal when compared to his huge success internationally celebrated at the London Conference where he commanded a world stage to seeks answers to a world problem.That PM like the Tory Party and the MSM allows,indeed encourages, this problem to be distilled and misrepresented again into a UK one and then served up into perverse self-justifications for his own lifes view is equally self-congratulatory and misguided. PM= HEADED BACKWARDS,ARSE OVER TIT

  • carlton temple-powell

    The more wealth is concentrated in the hands of the few the bigger the welfare state and punitive wealth distribution taxation has to be, just to make society work. Otherwise we could easily slip back to Victorian levels of destitution. As for aspiration, for working people, aspiration can only be achieved through access to credit and a lifetime of debt. One doesn’t need a Marxist analysis to work out that out problems in the UK are class based and cannot be bridged without a fundamental shift in thinking. The fact that the Labour party still supports the concept of Monarchy and Aristocracy tells us much. We need to disinherit the obscenely wealthy and put that money into the betterment of society, How we do that is the true debate. We can’t simply aspire for people to be a little better off while the top 5% live in obscene opulence. Politics shouldn’t just be about getting elected or letting the print media frame the rules for debate.

    • Patrick Nelson

      I trust the Queen, Prince Charles or Prince William over the likes of Bush, Clinton, Berlusconi or Sarkozy or the various others power hungry money grabbers who tend to be attracted to the presidency of Republican states.

      Our Constitutional Monarchy has created a political stability in this country many European Republics could only dream of. Belief in Socialism is not incompatible with Monarchism, whilst (at the moment at least) Republicanism is incompatible with winning elections in this country.

    • AdamB

      I just checked the IFS website calculator for UK income distribution. A couple who each earn £43k (so not quite into 40% tax) e.g. a senior nurse and a primary deputy head, assuming they pay £1800 in council tax, and have 2 pre-teen children, have a higher income than 94% of the population. So they’re a hair’s breadth from your top 5% who live in”obscene opulence”. What do you think should be done to people like this?

      • PATRICKNEWMAN

        Fair point but you are replying about the position of income whereas (I think) Temple Powell is referring to wealth where there is much “obscene opulence”.

      • MrSauce

        If you factor-in the value of their generous pensions, they’ll probably get into that ‘obscene opulence’ bracket.

  • There is very little in Peter Mandelson’s article that I can disagree with. He is right to point out that for Labour to succeed it needs to have a credible economic model thoroughly worked out and meticulously thought through. The irony, though, is that the criticisms he makes of Ed Miliband’s leadership can also be made about the entire Blairite New Labour project. New Labour ran out of steam and ideas because it too failed to articulate a credible economic philosophy. As a result it allowed the neo-classical synthesis to continue unchecked with disastrous consequences.

    The blame for this though, should not be shouldered by our politicians alone. The greater failure is amongst economists who have failed to even attempt to construct the type of social market model that Labour (New or otherwise) is looking for. The only economist who has come remotely close in my opinion was Hyman Minsky, and he died twenty years ago. Yet his name is probably unrecognisable to most in the Labour leadership over the last twenty years, let alone the Labour movement as a whole.

    There is, however, a second major problem that also remains unaddressed and barely acknowledged: voter turnout. The more this falls, the more Labour is forced to turn to the right in search of extra votes. The more it turns to the right, the more it loses votes, either to fringe parties or to apathy. It is a downward spiral. Until this is reversed the prospects of a Labour government will become more and more remote over time. That is the real challenge, so why not use economics to solve it? Why not pay people to vote! (see my blog on Blogspot for more)

  • Judo Rick

    I worked for 25 years as a Field Service Engineer travelling the world installing high value machinery in various types of manufacturing industries from jam making, to timber preparation, printing, electricity generation and food packaging. These were good jobs involving a high level of skill in mechanical engineering, project management and so on. Unfortunately for me I was a victim of the Credit Crunch and have not managed to get another job in my field.

    In all this time, everywhere I went there were German engineers installing German built machines everywhere. You will know some of the names like Dewalt and Siemens but there are literally hundreds of others. They are vast numbers of high tech markets from medical imaging to welding, construction, heavy plant and all manner of other high value manufactured products – some of the components alone in printing machinery can cost millions.

    There are huge markets out there all over the world and there is absolutely no reason why the UK cannot be taking a huge chunk of this trade. In doing so this would provide lots of well paid jobs and that raises vast amounts of Tax Revenue.

    So, my suggestion is to take a leaf out of the German manufacturing model and offer that as part of the economic strategy.

    Instead of Neoliberal spivvy speculation based get rich schemes backed by QE that just make the rich richer

    combined with a Scandinavian style social democratic model (excellent free childcare, massive house building to make accommodation massively cheaper so people can keep more of their wages) this could be a very attractive package to appeal to voters

    and it’s highly aspirational as it requires us to train and educate huge numbers through quality apprenticeships & degree courses

    • Bill Filey

      We don’t even have much in the way of industrial production downstream from our oil and gas industries. We import most of our tyres, plastic products etc. Crazy. I have three wheelie bins. One is British, two are German. My kitchen plastic containers are Swiss, Italian and American. When I mentioned on a Labour Party site that my plastic containers were foreign I was told that was because they were made in low wage economies!

    • El_Sid

      There are huge markets out there all over the world and there is
      absolutely no reason why the UK cannot be taking a huge chunk of this
      trade. In doing so this would provide lots of well paid jobs and that
      raises vast amounts of Tax Revenue.

      So how do you make that happen? Creating a Siemens or DeWalt requires individuals to invest capital and take a risk that they can develop a business to exploit those markets. They won’t do that in a country that calls them “predators” like some dangerous animal that needs to be shot to protect the community. They won’t risk their capital in a country that taxes them excessively if they are successful.

      It’s easy to want the “nice” bits of the Nordic model whilst ignoring the fact that the Nordic model is aggressively free trade and against red tape, with a laissez-faire attitude to the survival/sale of iconic companies like Saab and Volvo and much of public education in the hands of profit-making companies. It is particularly easy to get sacked in Denmark, whilst Swedes support TTIP 61%:20% according to a poll last year, even the Swedish trade unions support TTIP. And even the Scandinavians have recognised the model of the 1980s is unsustainable, they’ve been cutting taxes and public expenditure of late.

  • swatnan

    Too right, PM. We must win the confidence of Business, otherwise Labour is finished.

  • Timmy

    It is a tragedy of epic proportions that anyone needs to write this statement of the bleeding obvious and another that there are party members dissenting from it. I have just been reading Douglas Carswell’s blog. Make no mistake, UKIP will be coming after Labour with a message of modernism, optimism and self-reliance. If the tone of the response is negative, dogmatic and defensive…. (finish the sentence yourselves)

  • Andy Harvey

    Does anyone know of a register or directory of ‘progressive’ businesses or, even better, Labour supporting businesses? It would be useful to have at hand when making purchases as well as providing a base to establish our pro-business credentials.

  • PATRICKNEWMAN

    There is extensive value in Mr Mandelson’s analysis but the problem is what policies to adopt that would make a credible industrial and economic strategy. There was not much in that department during the 2005 – 10 Labour government and nothing in the 2010-15 Coalition. Osborne’s “long term economic plan” was nothing more than cuts to welfare and public services whilst serious issues like a raging balance of payments problem and poor productivity were passively viewed – not God will provide but the ‘Market’ will provide!

    • Bill Filey

      Wealth creation is not a topic with which LabourList contributors are familiar. They are all from the party of spend.

  • MrSauce

    The next election will be far enough away from the Great Crash for it not to matter too much.
    What Labour really needs is to have the Chilcot Report published asap.
    The more time between that and the next election the better for Labour.

  • Judo Rick

    I see, I post a well reasoned argument about industrial policy and it doesn’t chime with the party line so it gets taken down

    great way to debate

    • Michael Worcester

      they haven’t updates the election advice which ‘suggests ‘moving the conversation on’

  • Bill Filey

    Excellent post. The analysis is correct and expressed in a kindly way. I would go for the ”stupid policies” line. Mr Mandelson should contribute more often.

  • bikerboy

    Christ what is all this tosh? Bit of a change from “nothing wrong with getting rich”

    Anyway: Labour will never be credible without convincing people of its economic credentials It doesn’t have any.

  • EM

    The worrying part about siren calls to row back to the centre – code for a return to the past and ‘New’ Labour, is that, if followed, it stands to acheive the opposite of what its prononents claim. I wonder how long it has been since Lord Mandelsen has been on the doorstep. Aside from being seriously outflanked on the left by both Green and SNP, the legacy of New Labour on the working class housing estates is one of disconnection, disillusion and desertion to UKIP. Thousands of erstwhile Labour voters went for UKIP in this and, no doubt, in many other constituencies, in the Midlands and the North, costing Labour many seats. Labour hasn’t spoken to people, hasn’t listened to people; it is a waste of time supporting it because it does nothing for ‘people like us, since Tony Blair.’ This is the message we all had time and again, canvassing in the recent election. And all this to pursue votes on the centre right, abandoning both principle and people. New Labour won because of the serious unpopularity of the Tories in the nineties and noughties and a more radical approach would no doubt have won, just the same, with far more beneficial effect. The attempts to revivify the corpse Lord Mandelsen is trying to disinter, would be serious enough if they were a mere distraction from the real task ahead. As it is they represent a real danger as UKIP now looks set to make a real play for traditional Labour voters. They have already met with too much success as a result of New Labour’s last distancing from core voters. A renewed helping hand now would border on the suicidal.

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