A rebalanced economy is an issue on which, in their own way, each leader will campaign at the next election. The party which grasps the interconnectedness of this challenge and works with, rather than ignores, the long term but incremental nature of its solutions will be the one which can realise its radicalism.
With the language of responsible capitalism the Labour party is beginning to develop its own agenda here. This current of thought has helped the centre-left coalesce around a response to the unwinding of the UK’s political-economy in 2007. It signals that this event was no ordinary external shock and that the necessary change in perspective will be nothing less than that which occurred during the 1980s and came to form the basis of the political programme we now know as Thatcherism.
The policy levers used execute this vision of a more balanced, equitable and democratic economy will be more mundane than the lofty rhetoric of ‘responsible capitalism’, but they are no less important. A look back at the Labour’s last period in government suggests that unless decisions about the tools available to government are taken early on, a radicalism of intent will not be reflected in action.
New Labour showed that clear and ambitious policy outcomes are of vital importance in government. Not least, by attaching priority to distinct policy issues in the long term they can insure against drift and competing agendas. The 2020 aspiration to eradicate child poverty embedded a commitment to alleviate material deprivation and underscored the link between this and early years’ development. It signalled that after years of under-investment, the new Labour government believed the state had a responsibility to act on this social challenge.
But at the same time ambitious social outcomes should not cloud clarity of thinking about the policy mechanics politicians have to hand. In the case of the 2020 target, the radicalism of this social ambition was out of step with the policies employed to act on child poverty. As such the agenda became constrained by the political limits of redistributive transfers and a lack of coordination between economic and social policy became an effective limit on what the latter was able to achieve.
Where today so much uncertainty surrounds the magnitude of traditional policy interventions, understanding this balance is vital. A commitment to responsible capitalism can continue to serve its purpose of communicating the priority of a more balanced economic model. But to be a programme for government it should extend beyond this function. This requires sincerity and perhaps modesty about the competing priorities for ‘balance’, what policies will be necessary to deliver these outcomes and the medium-term indicators that can track the success of this route map.
A recent report for the TUC by Howard Reed and Stuart Lansley demonstrates why. The report’s four practical proposals for reducing the wage gap (increasing the national minimum wage, introducing the living wage, better collective workplace bargaining and aiming for full employment) would still leave an estimated 75 per cent of this inequality in place. Nor is this an isolated policy challenge. Improving living standards at the median which remain structurally reliant on the social security system is one of the most sought after balances in the economy today. The great policy difficulty is that it interfaces with the spatial distribution of prosperity in the UK, the structure of finance and the decline of institutions aimed at upholding employee power.
Two features mark the Labour party’s current offer at the next election. First, at root it is an interpretation and response to the collapse of 30 years economic orthodoxy. Second, it is a policy programme aimed at refashioning the way the economy distributes outcomes and rewards. Reform of this sort cannot be delivered according to parliamentary cycles. Nor can politicians ask electorates who are feeling the squeeze to wait for a 20 year paradigm shift to occur. Instead, two years out from a general election advocates should begin identifying medium-term goals which can act as progress indicators towards a rebalanced capitalism.