Miliband must be the man for the middle

The very poor and the rich will not lose their homes in the Tory cuts to come — but a safety net is

Ed Miliband doesn't have the luxury of time. He has warned that it could take a while to propose a new programme for government; the party, he told the Labour conference, needs to "go on a journey". It had better be a quick one, because on 20 October voters will be looking to Labour's new leader for his response to the Conservative spending plans. If he doesn't say something clear and positive to them, they may not look again.

Miliband needs to sound as if he is on the side of families that risk losing their livelihoods through unnecessarily harsh Conservative cuts and that have little asset wealth to fall back on. This is the "squeezed middle". The risks are highest in the south, where there are higher house-price-to-earnings ratios, and where inequality is so great that you need a fair amount of asset wealth behind you to avoid the risk of joining the new poor: those who lose their homes due to sudden unemployment, and subsequently cannot afford to get back on the social ladder. If Miliband wants to see an equal society, he should start here.

Baby monitor

Inequality in the south of Britain is now so bad, and life so consequently insecure, that it dominates everything: people's choice of schools, where they live and how unaffordably high their mortgages are. It even affects fertility, as parents must wait longer until they can afford a home in which to have children.

In the north-east, there are 77 births a year per 1,000 women aged 20-24; in the north-west, 81. But in the south-east, that falls to 65. Between the ages of 25 and 35, the south gradually overtakes the north, until among 35- to 39-year-olds there are 64 births per 1,000 women in the south-east, but 44 in the north-east (2008 figures).

Admittedly, slightly more people are working in the south, and there is also known to be a correlation between the age of first giving birth and education - but unless you believe that everyone in the north is uneducated and unemployed, and everyone in the south is jolly clever, this is unlikely to explain such a clear pattern. More likely, women in the south put off having children because both parents need to work in order to buy (or rent) somewhere to live.

The last time I wrote about the squeezed middle classes, a reader wrote a letter to the New Statesman sneering at the notion that they might merit any sympathy. That sneer is a mistake, because there are millions of them, not only in the south - and these are the people who can win Labour the next election. The biggest swings to the Conservatives in 2010 were in the places where the richest live - in southern and eastern England and parts of the Midlands - places where extremes of wealth and poverty are greatest. There are a lot of very socially and financially insecure people in the middle: Broken Britain voted Tory. (It also voted BNP.)

There is plenty of support within Labour for policies that actually might win an election. The younger Miliband told the conference, Blair-like, that they ain't gonna like much of what he's gonna say - but actually it won't be because he's not left-wing enough. Look at the voting figures: the members didn't vote for Ed, they voted for David. They backed the "right-winger". Fortunately, Ed is not as left-wing as he has been portrayed, just as David is not as New Labour as some have painted him.

The growing intergenerational inequality in asset wealth that we have in Britain affects us all; but it affects people struggling in the middle more than it affects those who are entitled to social housing. In more and more areas of southern England, where the very wealthy buy or rent second homes, and no new houses are being built, many working families already know that they won't ever be able to buy their own house.

It's a pattern that began in London, where increasingly you must be very rich or very poor to be housed. Where I live, in the rural south, many families rely on what is basically charity from privately owned country estates. Feeling an obligation to help house poorer local families that are not eligible for social housing, they rent out cottages to them at reasonable, below-market, rates. But the waiting list is long.

Welfare rethink

There is so much space here for Miliband to occupy. It wouldn't be recognised by most of the media, because they inhabit the world of the rich. What Miliband should do is to offer a safety net for the people who are scared for their families under the forthcoming assault by the Conservatives; the current welfare system will not do. Never mind for a moment the level of welfare for the long-term unemployed and incapacitated, there needs to be a proper safety net reintroduced for the threatened middle, the middle poor - whatever you want to call them - to save them from these new social risks.

The Conservative cuts will threaten their livelihoods, plunging families into crisis, and Labour needs to have a response that supports them. It must protect their homes and pay a sufficient level of welfare to see them through to a new job. They manage it in the US. That, after all, is what the welfare state was conceived for, not to subsidise lethargy. At the conference, Miliband cited William Beveridge as a politician he admired; he should start from there.

I see little sign that anyone in the Conser­vative Party is contemplating the fundamental rethink of welfare that we need in Britain (though Nick Clegg has hinted at it). They have nothing to say about the people they are about to hurt - real people with real families that have worked hard. Labour, with its fresh leader and with voters' interested eyes upon him, has a chance to speak to them instead. But it cannot wait or sit out a rambling journey. Ed Miliband has less than three weeks.

This article first appeared in the 04 October 2010 issue of the New Statesman, Licence to cut

Jeremy Corbyn. Photo: Getty
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Lexit: the EU is a neoliberal project, so let's do something different when we leave it

Brexit affords the British left a historic opportunity for a decisive break with EU market liberalism.

The Brexit vote to leave the European Union has many parents, but "Lexit" – the argument for exiting the EU from the left – remains an orphan. A third of Labour voters backed Leave, but they did so without any significant leadership from the Labour Party. Left-of-centre votes proved decisive in determining the outcome of a referendum that was otherwise framed, shaped, and presented almost exclusively by the right. A proper left discussion of the issues has been, if not entirely absent, then decidedly marginal – part of a more general malaise when it comes to developing left alternatives that has begun to be corrected only recently, under Jeremy Corbyn and John McDonnell.

Ceding Brexit to the right was very nearly the most serious strategic mistake by the British left since the ‘70s. Under successive leaders Labour became so incorporated into the ideology of Europeanism as to preclude any clear-eyed critical analysis of the actually existing EU as a regulatory and trade regime pursuing deep economic integration. The same political journey that carried Labour into its technocratic embrace of the EU also resulted in the abandonment of any form of distinctive economics separate from the orthodoxies of market liberalism.

It’s been astounding to witness so many left-wingers, in meltdown over Brexit, resort to parroting liberal economics. Thus we hear that factor mobility isn’t about labour arbitrage, that public services aren’t under pressure, that we must prioritise foreign direct investment and trade. It’s little wonder Labour became so detached from its base. Such claims do not match the lived experience of ordinary people in regions of the country devastated by deindustrialisation and disinvestment.

Nor should concerns about wage stagnation and bargaining power be met with finger-wagging accusations of racism, as if the manner in which capitalism pits workers against each other hasn’t long been understood. Instead, we should be offering real solutions – including a willingness to rethink capital mobility and trade. This places us in direct conflict with the constitutionalised neoliberalism of the EU.

Only the political savvy of the leadership has enabled Labour to recover from its disastrous positioning post-referendum. Incredibly, what seemed an unbeatable electoral bloc around Theresa May has been deftly prized apart in the course of an extraordinary General Election campaign. To consolidate the political project they have initiated, Corbyn and McDonnell must now follow through with a truly radical economic programme. The place to look for inspiration is precisely the range of instruments and policy options discouraged or outright forbidden by the EU.

A neoliberal project

The fact that right-wing arguments for Leave predominated during the referendum says far more about today’s left than it does about the European Union. There has been a great deal of myth-making concerning the latter –much of it funded, directly or indirectly, by the EU itself.

From its inception, the EU has been a top-down project driven by political and administrative elites, "a protected sphere", in the judgment of the late Peter Mair, "in which policy-making can evade the constraints imposed by representative democracy". To complain about the EU’s "democratic deficit" is to have misunderstood its purpose. The main thrust of European economic policy has been to extend and deepen the market through liberalisation, privatisation, and flexiblisation, subordinating employment and social protection to goals of low inflation, debt reduction, and increased competitiveness.

Prospects for Keynesian reflationary policies, or even for pan-European economic planning – never great – soon gave way to more Hayekian conceptions. Hayek’s original insight, in The Economic Conditions of Interstate Federalism, was that free movement of capital, goods, and labour – a "single market" – among a federation of nations would severely and necessarily restrict the economic policy space available to individual members. Pro-European socialists, whose aim had been to acquire new supranational options for the regulation of capital, found themselves surrendering the tools they already possessed at home. The national road to socialism, or even to social democracy, was closed.

The direction of travel has been singular and unrelenting. To take one example, workers’ rights – a supposed EU strength – are steadily being eroded, as can be seen in landmark judgments by the European Court of Justice (ECJ) in the Viking and Laval cases, among others. In both instances, workers attempting to strike in protest at plans to replace workers from one EU country with lower-wage workers from another, were told their right to strike could not infringe upon the "four freedoms" – free movement of capital, labour, goods, and services – established by the treaties.

More broadly, on trade, financial regulation, state aid, government purchasing, public service delivery, and more, any attempt to create a different kind of economy from inside the EU has largely been forestalled by competition policy or single market regulation.

A new political economy

Given that the UK will soon be escaping the EU, what opportunities might this afford? Three policy directions immediately stand out: public ownership, industrial strategy, and procurement. In each case, EU regulation previously stood in the way of promising left strategies. In each case, the political and economic returns from bold departures from neoliberal orthodoxy after Brexit could be substantial.

While not banned outright by EU law, public ownership is severely discouraged and disadvantaged by it. ECJ interpretation of Article 106 of the Treaty on the Functioning of the European Union (TFEU) has steadily eroded public ownership options. "The ECJ", argues law professor Danny Nicol, "appears to have constructed a one-way street in favour of private-sector provision: nationalised services are prima facie suspect and must be analysed for their necessity". Sure enough, the EU has been a significant driver of privatisation, functioning like a ratchet. It’s much easier for a member state to pursue the liberalisation of sectors than to secure their (re)nationalisation. Article 59 (TFEU) specifically allows the European Council and Parliament to liberalise services. Since the ‘80s, there have been single market programmes in energy, transport, postal services, telecommunications, education, and health.

Britain has long been an extreme outlier on privatisation, responsible for 40 per cent of the total assets privatised across the OECD between 1980 and 1996. Today, however, increasing inequality, poverty, environmental degradation and the general sense of an impoverished public sphere are leading to growing calls for renewed public ownership (albeit in new, more democratic forms). Soon to be free of EU constraints, it’s time to explore an expanded and fundamentally reimagined UK public sector.

Next, Britain’s industrial production has been virtually flat since the late 1990s, with a yawning trade deficit in industrial goods. Any serious industrial strategy to address the structural weaknesses of UK manufacturing will rely on "state aid" – the nurturing of a next generation of companies through grants, interest and tax relief, guarantees, government holdings, and the provision of goods and services on a preferential basis.

Article 107 TFEU allows for state aid only if it is compatible with the internal market and does not distort competition, laying out the specific circumstances in which it could be lawful. Whether or not state aid meets these criteria is at the sole discretion of the Commission – and courts in member states are obligated to enforce the commission’s decisions. The Commission has adopted an approach that considers, among other things, the existence of market failure, the effectiveness of other options, and the impact on the market and competition, thereby allowing state aid only in exceptional circumstances.

For many parts of the UK, the challenges of industrial decline remain starkly present – entire communities are thrown on the scrap heap, with all the associated capital and carbon costs and wasted lives. It’s high time the left returned to the possibilities inherent in a proactive industrial strategy. A true community-sustaining industrial strategy would consist of the deliberate direction of capital to sectors, localities, and regions, so as to balance out market trends and prevent communities from falling into decay, while also ensuring the investment in research and development necessary to maintain a highly productive economy. Policy, in this vision, would function to re-deploy infrastructure, production facilities, and workers left unemployed because of a shutdown or increased automation.

In some cases, this might mean assistance to workers or localities to buy up facilities and keep them running under worker or community ownership. In other cases it might involve re-training workers for new skills and re-fitting facilities. A regional approach might help launch new enterprises that would eventually be spun off as worker or local community-owned firms, supporting the development of strong and vibrant network economies, perhaps on the basis of a Green New Deal. All of this will be possible post-Brexit, under a Corbyn government.

Lastly, there is procurement. Under EU law, explicitly linking public procurement to local entities or social needs is difficult. The ECJ has ruled that, even if there is no specific legislation, procurement activity must "comply with the fundamental rules of the Treaty, in particular the principle of non-discrimination on grounds of nationality". This means that all procurement contracts must be open to all bidders across the EU, and public authorities must advertise contracts widely in other EU countries. In 2004, the European Parliament and Council issued two directives establishing the criteria governing such contracts: "lowest price only" and "most economically advantageous tender".

Unleashed from EU constraints, there are major opportunities for targeting large-scale public procurement to rebuild and transform communities, cities, and regions. The vision behind the celebrated Preston Model of community wealth building – inspired by the work of our own organisation, The Democracy Collaborative, in Cleveland, Ohio – leverages public procurement and the stabilising power of place-based anchor institutions (governments, hospitals, universities) to support rooted, participatory, democratic local economies built around multipliers. In this way, public funds can be made to do "double duty"; anchoring jobs and building community wealth, reversing long-term economic decline. This suggests the viability of a very different economic approach and potential for a winning political coalition, building support for a new socialist economics from the ground up.

With the prospect of a Corbyn government now tantalisingly close, it’s imperative that Labour reconciles its policy objectives in the Brexit negotiations with its plans for a radical economic transformation and redistribution of power and wealth. Only by pursuing strategies capable of re-establishing broad control over the national economy can Labour hope to manage the coming period of pain and dislocation following Brexit. Based on new institutions and approaches and the centrality of ownership and control, democracy, and participation, we should be busy assembling the tools and strategies that will allow departure from the EU to open up new political-economic horizons in Britain and bring about the profound transformation the country so desperately wants and needs.

Joe Guinan is executive director of the Next System Project at The Democracy Collaborative. Thomas M. Hanna is research director at The Democracy Collaborative.

This is an extract from a longer essay which appears in the inaugural edition of the IPPR Progressive Review.

 

 

This article first appeared in the 04 October 2010 issue of the New Statesman, Licence to cut