Summer reading list: Five things to read to understand Labour’s economic thinking

A hush settles over Portcullis House. Parliament Square empties of staffers and is refilled with tourists queueing for red phone box selfies. Tumbleweed drifts through the atriums of Westminster tube station. August is the quietest month in politics and the best time for catching up on all the interesting blogs, books, and reports that frankly no one has the time to read in the rest of the year.

A general election is on the horizon and many politicos will be taking time to reflect on quote-un-quote big ideas ahead of a busy year. While the economy may be less turbulent than during the roller-coaster days of the Liz Truss premiership, the forthcoming election is still likely to be fought on economic issues and which party has the most compelling economic vision. So as LabourList readers pack their bags for their summer holidays, what are the essential economics books that they should be taking with them to understand the big ideas in play? Who are the must-read thinkers that are influencing Rachel Reeves? Who are the super-star economists that Keir Starmer will turn to if he is the next occupant of No 10 Downing Street?

Janet Yellen – Speech on “Modern Supply-Side” economics (Jan 2022).

No concept has been more influential on the economic plans of the Labour party than “Bidenomics”. Starmer and Reeves recognise what the Biden administration did when they took power; not just resolve existing problems and spur economic recovery, but also face up to major challenges such as climate change. American economist and US Treasury Secretary Janet Yellen used this speech to define what has since become the basis of an emerging new paradigm. She called it modern supply-side economics and Rachel Reeves was evidently listening. Essentially, this is about scepticism that markets deliver social outcomes, about the need to rebuild the capacity of the state, and then using it strategically to shift the economy. These ideas run through Labour’s thinking like the lettering in a stick of rock.

See also: Those who prefer YouTube over a page-turner can watch a much talked-about speech by Jake Sullivan on the Biden administration’s international economic agenda

Mariana Mazzucato – The Entrepreneurial State: Debunking public vs. private sector myths.

A politician who wants to start talking about a more active, strategic, agile, dare-you-say-it big state, needs cover. For the Labour Party and progressives around the world, that has come from superstar academic Mariana Mazzucato, founding director and professor at UCL’s Institute for Innovation and Public Purpose. Her recent book Mission Economy: A Moonshot Guide to Changing Capitalism persuaded Starmer to announce five national missions, but her earliest and best known work The Entrepreneurial State is the foundational text for policymakers advocating a greater role for the state. Mazzucato confronts myths about the role of the private sector in the development of technologies like the iPhone or GPS. She shows that it is often government that is the biggest risk-taker who has moved earliest to secure success, contrary to stories businesses tell. No one person has done more to reinvigorate the public conversation about the role of the state – and provide intellectual air cover – than Mazzucato.

See also: Concrete Economics: The Hamilton Approach to Economic Growth and Policy by Stephen S. Cohen & J. Bradford DeLong. In the words of one reviewer this book “remed[ies] our national amnesia about how our economy has actually grown and the role government has played in redesigning and reinvigorating it throughout our history”.

Dani Rodrik – On Productivism.

While Dani Rodrik may not have the same name recognition among the general public as Mazzucato, he is one of the most prominent thinkers in academia about how to do industrial strategy successfully, focussing on building institutions and know-how. One of his most influential papers is titled Industrial Policy: Don’t Ask Why, Ask How. Yet over the past year, Rodrik’s work has taken a more political focus, elaborating on a new concept of productivism. Most importantly he recognises that when policy paradigms stick, it tends to be because they are supported and believed on the left and the right. He has crafted a persuasive vision for a strategic state that is as palatable to former Republican presidential candidate Marco Rubio as it is to Ed Miliband.

See also: An easier-reading version of this paper on Project Syndicate (may be behind a paywall for some)

The IPPR Commission on Economic Justice – Prosperity and justice: A plan for the new economy.

Once you have the cover and the vision, you need a plan. Prosperity and justice: A plan for the new economy was the final report of the IPPR Commission on Economic Justice, published in September 2018. With the Archbishop of Canterbury, Justin Welby, among its members and commended by politicians from across the political spectrum, this set out a practical and detailed policy programme for how to “hardwire” the UK economy for fairness. While some of the policies advocated for in its ten-point-plan have been adopted by the current Conservative government, it still offers a cohesive vision for significant economic reform. Five years on, some of its ideas such as a citizens’ wealth fund, closing the non-dom tax loophole, a major rise in public investment, and a mission-oriented industrial strategy have had a lasting impact on Labour thinking.

See also: Influential Financial Times opinion pieces in a similar vein by Andy Haldane, notably two supporting rethinking fiscal rules and a global race to the top on industrial strategy.

Heather Boushey – Unbound: How inequality constricts our economy and what we can do about it.

In 1999 Peter Mandelson told Silicon Valley execs that “[New Labour] are intensely relaxed about people getting filthy rich as long as they pay their taxes”. Since those infamous words, inequality in Britain has sky-rocketed. It is hard today to imagine a Labour Party frontbencher echoing this sentiment. In part, that is because of new economic thinking that has emerged in the intervening quarter of a century on how inequality isn’t just a social issue but an economic one, holding back and constraining our economy. Boushey, now a member of President Biden’s Council of Economic Advisors, wrote the most comprehensive and passionate rebuttal of the idea that we have to choose between equality and prosperity. Her thesis that inequality holds back the economy, making it harder for workers and companies, has supporters on this side of the Atlantic too. Her influence is evident in Starmer’s ‘mission‘ aiming for growth in the economy, jobs and productivity in “every part of the country making everyone, not just a few, better off”.

See also: Raj Chetty, leading Harvard economist and expert on economic opportunity, and now founder of non-profit Opportunity Insights, using big data to improve upward mobility.