Ed Miliband's challenge

Shifting economic paradigms won't be easy.

Ed Miliband told us in his speech to the Labour Party conference earlier this week that he wants to see a new type of economy: one with different aims and values from those that prevailed during much of the last 30 years. Bringing about such change will not be easy. In a new IPPR paper, David Nash and I show how resistant to change economic paradigms can be.

As Martin Kettle argues, if Ed Miliband wants a new type of economy in Britain, he will have to argue long and hard for it. He will have to continually highlight the flaws in the existing model and he will need to make a persuasive case for the alternative. This week his framing of this important argument was not strong enough and as a consequence, it has been more easily criticised and caricatured than it might have been.

Distinguishing between "predators" and "producers" was an unnecessary hostage to fortune as the shadow cabinet discovered when defending the speech to the national media. The arguments of thinkers such as Will Hutton, Anatole Kaletsky and William Baumol over different models of capitalism got obscured as Andy Burnham and Sadiq Khan resisted the temptation to list good and bad businesses. And without a stage managed letter to the Financial Times from company CEOs calling for a level playing field on apprenticeships or placing workers on remuneration committees, the new policy nuggets were easily picked off by a hostile media.

Nonetheless, Miliband's analysis of the flaws in the existing economic model was sound as the Telegraph's Peter Oborne has recognised. After all, it allowed the worst financial crisis since the 1930s to develop and this was followed by the deepest recession in the post-war era, both in the UK and globally. There is also a growing recognition that, even in the good times before the financial crisis, the economy was only delivering for the wealthiest in society. In the UK, living standards for those on median incomes stopped improving after 2003 - a full four years before the crisis.

And yet there is nothing to suggest that a paradigm change is imminent. Indeed, apart from some toughening of the regulations covering the banking sector (and then less than might have been expected three years ago), it is largely business as usual. There has been no great change in the way economic policy is designed and implemented, no change in the objectives of economic policy and no change the dominant strands of academic economic thinking.

Perhaps, things have not been bad enough for paradigm change to occur. Unemployment has increased sharply, but at around 8 per cent it is considerably below the 20 per cent plus levels seen in the Great Depression: levels that eventually helped create the conditions for the Keynesian Revolution in economic thinking and policymaking. Nor does the combination of 5 per cent inflation and 8 per cent unemployment feel as bad as the 27 per cent inflation and 6 per cent unemployment that were experienced in 1975.

More importantly, there are not enough new economic ideas waiting in the wings to coalesce into a new economic paradigm. Keynes said that it takes a theory to kill a theory and Kuhn argued that a paradigm cannot be displaced by anomalies, only by another paradigm. But the economics profession continues to resist change because it has invested so much intellectual capital in the wrong models and is reluctant to admit its mistakes.

In the 1970s, Margaret Thatcher, Keith Joseph and others in the Conservative Party were able to work with critics of Keynesian thinking, such as think tanks like the Institute for Economic Affairs and the Centre for Policy Studies, to develop the ideas of the Chicago monetarist school into policies that could be implemented in the UK. The politicians helped give support and credibility to the new way of thinking, and in return benefited from appearing more up-to-date in their ideas than their political rivals in government.

Ed Miliband's primary problem is that there is no new well-developed economic model - comparable to monetarism in the 1970s - sitting on the shelf waiting for him to pick it up and champion it. He therefore faces a tough decision. Does he want to tinker at the edges with the existing model - a bit more banking regulation here, an employee representative on a company board there? In some ways, that would be the easy option. But it will hardly distinguish him from David Cameron and George Osborne.

Or is he prepared to make the case for more radical change and to champion those independent voices in economics that are not heard enough? This might involve rethinking the objectives of macroeconomic policy, for example by giving the Monetary Policy Committee a dual mandate to target inflation and full employment (in line with the US Federal Reserve's mandate), or requiring explicit targeting of asset prices. It might involve developing new objectives for economic policy that take account of the distribution of income; of non-monetary measures of progress such as wellbeing; or of future resource constraints. Or it might involve abandoning altogether the solutions proposed by traditional economics in favour of new ways of economic thinking, which better describe the real word, such as complexity economics.

Such an approach would be riskier. It would be a real call for a new economic paradigm and shifting economic paradigms is not easy. There would be an inevitable backlash from beneficiaries of the status quo - the wealthy and the right-wing press.

But the prospect of a decade of stagnating living standards for the bulk of the population suggests a big change in thinking is required. History suggests a shift in the economic paradigm requires political support and if Ed Miliband is prepared to take up the challenge, he could help to forge a new approach to economic policymaking in the UK. The added bonus for him would be greater differentiation between current Labour Party thinking and both its own past and the government's approach.

Tony Dolphin is Chief Economist at IPPR

Tony Dolphin is chief economist at IPPR

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How the Standing Rock fight will continue

Bureaucratic ability to hold corporate interest account will be more necessary now than ever.

Fireworks lit up the sky in rural North Dakota on Sunday night, as protestors celebrated at what is being widely hailed as a major victory for rights activism.

After months spent encamped in tee-pees and tents on the banks of the Canonball river, supporters of the Standing Rock Sioux Tribe finally received the news they’d been waiting for: the US Army Corps has not issued the Dakota Access pipeline with the permit it requires to drill under Lake Oahe.

“We […] commend with the utmost gratitude the courage it took on the part of President Obama, the Army Corps, the Department of Justice and the Department of the Interior to take steps to correct the course of history and to do the right thing" said a statement released by the Standing Rock Sioux tribe’s chairman, Dave Archambault II.

With the camp’s epic setting, social-media fame, and echoes of wider injustice towards Native Americans, the movement has already earned a place in the history books. You can almost hear the Hollywood scriptwriters tapping away.

But as the smoke settles and the snow thickens around the thinning campsite, what will be Standing Rock’s lasting legacy?

I’ve written before about the solidarity, social justice and environmental awareness that I think make this anti-pipeline movement such an important symbol for the world today.

But perhaps its most influential consequence may also be its least glamorous: an insistence on a fully-functioning and accountable bureaucratic process.

According to a statement from the US Army’s Assistant Secretary of Civil Words, the Dakota Access project must “explore alternate routes”, through the aid of “an Environmental Impact Statement with full public input and analysis”.

This emphasis on consultation and review is not big-statement politics from the Obama administration. In fact it is a far cry from his outright rejection of the Keystone Pipeline project in 2015. Yet it may set an even more enduring example.

The use of presidential power to reject Keystone, was justified on the grounds that America needed to maintain its reputation as a “global leader” on climate change. This certainly sent a clear message to the world that support from Canadian tar-sands oil deposits was environmentally unacceptable.

But it also failed to close the issue. TransCanada, the company behind Keystone, has remained “committed” to the project and has embroiled the government in a lengthy legal challenge. Unsurprisingly, they now hope to “convince” Donald Trump to overturn Obama’s position.

In contrast, the apparently modest nature of the government’s response to Dakota Access Pipeline may yet prove environmental justice’s biggest boon. It may even help Trump-proof the environment.

“Although we have had continuing discussion and exchanges of new information with the Standing Rock Sioux and Dakota Access, it’s clear that there’s more work to do”, said the Jo-Ellen Darcy, the Army’s Assistant Secretary for Civil Works.

Back in July, the same Army Corps of Engineers (which has jurisdiction over domestic pipelines crossing major waterways) waved through an environmental assessment prepared by the pipeline’s developer and approved the project. The Standing Rock Sioux Tribe subsequently complained that the threat to its water supply and cultural heritage had not been duly considered. This month’s about-turn is thus vital recognition of the importance of careful and extensive public consultation. And if ever such recognition was needed it is now.

Not only does Donald Trump have a financial tie to the Energy Transfer Partners but the wider oil and gas industry also invested millions into other Republican candidate nominees. On top of this, Trump has already announced that Myron Ebell, a well known climate sceptic, will be in charge of leading the transition team for the Environmental Protection Agency.

Maintaining the level of scrutiny finally granted for Standing Rock may not be easy under the new administration. Jennifer Baker, an attorney who has worked with tribes in South Dakota on pipeline issues for several years, fears that the ground gained may not last long. But while the camp at Standing Rock may be disbanding, the movement is not.

This Friday, the three tribes who have sued the Corps (the Yankont, Cheyenne River, and Standing Rock Sioux Tribes) will head to a hearing before the Inter-American Commission on Human Rights, seeking to increase pressure on the government to comply with both domestic and international law as it pertains to human rights and indigenous soveriegnty. 

What the anti-pipeline struggle has shown - and will continue to show - is that a fully accountable and transparent bureaucratic process could yet become the environment's best line of defence. That – and hope.

India Bourke is an environment writer and editorial assistant at the New Statesman.