Yes, Labour must change

Tony Blair's speech this week, paradoxically, reminded us of the need for new, radical economic policies. He said:

The most important characteristic of this world is: the scope, scale and speed of change. Change defines it.

Let's leave aside the obvious snark that one thing that hasn't changed is Blair's talk of change. He was talking about the "breathtaking pace of change" 20 years ago*. As Alan Finlayson wrote (pdf), the rhetoric of modernization has been a key element of Blairism.

Instead, my point is that it is because the world has changed that New Labour is no longer relevant. For example:

 - New Labour worried that the "bond market vigilantes" constrained fiscal policy. That was a reasonable concern when real interest rates were four per cent. But now they are negative a loose fiscal policy is more feasible.

 - New Labour thought that if governments could provide the right conditions - such as macroeconomic stability - then businesses would invest. But (nominal) investment-GDP ratios have fallen since then. This suggests governments need some other policies to raise investment - perhaps more more interventionist ones.

 - In the 90s, labour productivity was growing nicely. Now it's not. Productivity policy is thus more important.

 - The sort of inequality that troubled New Labour was the gap between the moderately well-off and the poor; it thought increased education was one way of tackling this. This gap, however, has declined recently. Instead, the most salient inequality is now the income share of the top 1%. This requires different policies.   

 - The productivity slowdown might be evidence that managerialism and the target culture have limits. Perhaps a better way to raise productivity is to increase worker control.

 - The Great Recession has reminded us that recessions are unpredictable. This means that macro policy cannot adequately stabilize the economy and that we need instead a generous welfare state as an automatic stabilizer. As Blair says, it is a means to protect those "disadvantaged by the changes whirling round them."

However, party politics has changed as well as the economy. The left-centre-right dichotomy might no longer be so important. Ukippers, for example, want immigration controls but also nationalization and price controls: are they rightists or leftists, or do the old labels no longer apply? And the wipe-out of Lib Dems and rise of Ukip and SNP might suggest that those who claim to be centrists fare badly against those who attack, or pretend to attack, the centre.

Now, I'll concede that Blair might have a point when he says that some forms of radical leftism can be reactionary. Sometimes, I fear that some leftists' demands for high corporate taxes and nationalization are a relic of the 1970s beliefs that capital is immobile and top-down hierarchy desirable and feasible.

There is, though, another form of leftist policy - one that recognizes the need for a generous welfare state, worker empowerment and well-functioning markets. This requires that Labour abandons not just relics of the 1970s, but relics of the 1990s too.

* New Britain: My vision of a young country, p203

Comments

[Matt Moore]

Hi Chris - do you have any links to info on why you find inequality so objectionable?

[Ben]

They tripled house prices to print money via land. The recession and the drop in productivity are and were entirely predictable. Pre 2008 productivity wasn't even real. What's real about piling on private debt so everyone can party?

I feel like this blog is the online equivalent of watching Gordon Brown spending over an hour cleaning his belly-button.

[Broilster]

You say that 'high corporate taxes' are reactionary. Firstly exactly what do you mean by 'high corporate taxes'? Does this mean that the the UK should race Ireland etc to the bottom and perhaps have corporate taxes at say 10%?

[Laban]

You can't simultaneously have "worker empowerment" and "mass immigration". A little known economic concept called supply and demand.

"The main purpose of the bourgeois in relation to the worker is, of course, to have the commodity labour as cheaply as possible, which is only possible when the supply of this commodity is as large as possible in relation to the demand for it"

[David]

It seems though, (with any luck), that we will have no need of the Labour Party....
http://www.theguardian.com/books/2015/jul/17/postcapitalism-end-of-capitalism-begun
David

[Matthew Maloney]

Its funny. There is always a philosophical problem to me when a person can have a view that is so wrong and jarring on one issue and then expect his views on other topics to be received with care and respect.

Broken clocks and all that maybe.

I suffer from this too by the way.

But Blair's opinion on the Iraq War, which he STILL thinks was a good idea (?!), perhaps renders all his opinions on every other topic null and void. It raises questions about his motivations and judgement.

Hitler's holocaust programme will be remembered more than his achievement of full employment in Germany in the late 30s and a miracle comeback from the depression using more or less autarky policies. Likewise Blair will always be remembered for the Iraq War, not the strong economic performance of the late 90s (not saying the two things are as bad, however).

And thats the way it should be. He's a disgrace and the financial presses' adulation of this shyster who was ironically made a 'peace envoy' to the Middle East whilst taking a retainer at JPM, Zurich and UI for bullshit 'environmental consultancy' and being confused about his make belief religious affiliations is bemusing.

[Bob]

"That was a reasonable concern when real interest rates were four per cent."
No it wasn't. It was never reasonable except under gold standard/fixed exchange rate regimes. The government doesn't have to issue debt at all. The corporate welfare they pay is voluntary.

[chris]

@ Matt. Yes. Here:
http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2013/05/why-pre-tax-inequality-matters.html
http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2014/12/inequality-productivity.html
http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2014/02/why-inequality-matters-.html
http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2015/06/inequality-the-rights-problem.html
http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2013/12/respect.html

[Laban]

That's a shame, Chris, as I can only see UK inequality growing. As Peter Frost puts it :

"In late capitalism, the elites are no longer restrained by ties of national identity and are thus freer to enrich themselves at the expense of their host society. This clash of interests lies at the heart of the globalist project: on the one hand, jobs are outsourced to low-wage countries; on the other, low-wage labor is insourced for jobs that cannot be relocated, such as in the construction and service industries.

This two-way movement redistributes wealth from owners of labor to owners of capital. Business people benefit from access to lower-paid workers and weaker labor and environmental standards. Working people are meanwhile thrown into competition with these other workers. As a result, the top 10% (I'd say less than that - LT) of society is pulling farther and farther ahead of everyone else, and this trend is taking place throughout the developed world. The rich are getting richer … not by making a better product but by making the same product with cheaper and less troublesome inputs of labor."

[Ben]

Great posts from Laban and M Maloney.

Can you guys start a blog?

[Guano]

What has changed is the landscape after the financial crisis. New Labour pre-2007 could offer something to various sections of society, and that isn't possible post-2007. So "reform" has morphed from updating the welfare system (for example) into shrinking it. And there is no mention of lessons learnt from the financial crisis and how to manage the financial speculation economy.