A new paradigm needed?

The Duncan Weldon Economics Matters column

I missed my usual slot last week – the stress of moving house and office in the same three day period. Not something I’d recommend. This week I thought I might try something a little different. Rather than straight economics, it might be time to talk political economy.

There is a very interesting debate occurring at the moment on the future of progressive politics. Stuart White has a superb, must-read post up over at Next Left on the developing debate between different strains of republicans and communitarians.

Broadly put, he identifies four related, but distinct, schools of thought. As he describes them:

Centre republicanism
Basic idea: “The task of progressive politics is to radically disperse power and opportunity. This requires a restructuring of the state in a much more decentralised direction; individual empowerment in public services; a wider distribution of assets; and a stronger policy of protecting – indeed, expanding – civil liberties and lifestyle freedom. The left should get over its fixation on high taxation of labour income and put more emphasis on taxing unearned wealth and environmental bads.”

Left republicanism
Basic idea: “The task of progressive politics is to radically disperse power and opportunity and to rebuild a deliberative public sphere. This requires restructuring the state in a way that brings individuals into more direct participation in decision-making, e.g., through measures of decentralization and collective co-production. It requires resituating Labour politics in the context of a wider grass-roots social movement politics. It also requires a new politics of ownership, one that seeks both to widen individual asset ownership and democratize the control of capital, e.g., through new social pension funds.”

Left communitarianism
Basic idea: “The task of progressive politics is to fill the moral vacuum of neo-liberalism. To this end, we must articulate a shared account of the good and promote a sense of community based on a recognition of how we are all interdependent in attaining this good – indeed, realizing our interdependency – fellowship – is an integral part of the good. In policy terms, this implies a reassertion of the importance of economic equality and traditional collective action, albeit perhaps with a stronger role than in the past for civil society and forms of solidarity and mutuality that are not mediated through the state. The market must be kept firmly in its place, which is not in the public sector.”

And

Right communitarianism (aka ‘Red Toryism’, which might or might not be the same as ‘Progressive Conservatism’)
Basic idea: “The task of progressive politics – or conservative politics – is to fill the moral vacuum created by a combination of neo-liberalism in the economy and life-style liberalism in society. This requires that we rebuild a strongly moralistic civil society to meet social needs which neither the free market nor the traditional welfare state can meet satisfactorily. To this end, we must build a new political and economic localism. We must ‘recapitalize the poor’ in order to empower them to crawl out from under the welfare state. The welfare state itself must be cut back, with government switching its emphasis radically to assisting independent groups in civil society to carry out welfare functions. State policy will limit market freedoms and will be informed, e.g., in developing a new civil society of welfare, by authoritative accounts of good behaviour. A nihilist liberal politics of arbitrary freedom must be replaced with one of collective morality.”

This political theory debate will shape the future of the party.

But I think that this has to be pushed further. The Left doesn’t simply need a new political ideology it needs a whole new way of thinking about political economy.

The dominant paradigm of neo-liberalism (or new classical economics) has failed. But it can’t simply be torn down, it needs to be replaced. Whilst the Government is enthusiastically embracing an industrial agenda the efforts so far are concentrating on the supply side. We shouldn’t forgot the demand side of the equation.

Post-Keynesian economics, to me at least, offers a way forward. One lesson from this school is that income equality, and redistribution, are economically useful. Simply put, higher earners – especially the uber rich – are likely to save a great deal of their income. This reduces demand in the economy. If incomes were more equal, even given the same size of economy, then growth would be quicker. In a world with less credit availability we need to find a way of plugging the gap left by credit. Paul and Don Paskini are pushing the same issues.

I want to see the fascinating debate on ideology engage with the nitty gritty of economics. I suspect the answer lies with either Left Republicanism or Left Communitarianism guiding a Post-Keynesian economic agenda. Either way the questions of growth, debt and public spending which will dominate the next decade of British politics require answers. The Centre-Left needs to be ready.