What does a left-wing 'rebalancing' look like?

To stand apart from Cameron and Clegg, Miliband needs a radical agenda for the bottom half of the labour market.

With a little over two years until the next general election, Labour's objectives for economic reform feel ambitious yet vague. We can all sign up to the UK being a bit less reliant on the financial sector, but then what? When people on the left talk about rebalancing the economy we need to understand what it is we are trying to rebalance and how - and say loud and clear why the right's version of rebalancing will fail. This weekend Ed Miliband needs to respond to this challenge, when he addresses the Fabian New Year Conference on his plans for 'one nation' Britain.

In his recent speeches, Miliband has used words like "responsibility" and "rebalancing" a lot, but they raise as many questions as they answer. Economic rebalancing can’t be achieved by a few eye-catching attacks on gas companies or millionaires’ pension funds. Reforming capitalism so that it works in everyone’s interests, which is what ‘one nation’ must mean, implies the UK turning its back on its 30-year mid-Atlantic experiment and transforming itself into a mainstream north European economy.

The coalition loves to talk about our unbalanced public finances but every pound borrowed is a pound lent, so Miliband must retort that excessive saving by companies is the flip-side of excessive public borrowing. Labour should promise to unwind the economic forces which have led companies to accumulate and lend so much cash, by creating the conditions in which firms want to investment for the long-term. This will mean sweeping reforms to the financial system whose short-termism has incentivised corporate executives to deliver fast profits not long-term value.

Labour also needs to expose the coalition’s ill-disguised plot to turn temporary deficit reduction into a permanent contraction of the state. Rather than aiming for public spending to return to the long-term average of 42 to 43 per cent of GDP, the chancellor plans a retreat from the crisis peak of 47 per cent all the way down to 39 per cent. Miliband has little choice but to argue for a different path because he believes that public spending matters for economic growth as well as social justice. For George Osborne’s cuts make it almost impossible to spend decent amounts on infrastructure, housing, science or skills.

The coalition has set the terms of the debate so well that retaining public spending at more than 40 pence in the pound has become a controversial proposition. But with Obama-style tax rises for the rich, Labour can set out an alternative route to sound public finances that avoids ’overshooting’ Britain’s historic levels of spending.

This is not to say that Miliband should defend every corner of public spending. This week’s debate on benefit uprating focused on how many working families receive tax credits, but it dwelt little on why so much money needs to be spent topping up low pay in the first place. The truth is that Britain has the highest share of low paid workers in any EU country outside eastern Europe. The Treasury would save huge sums on in-work benefits if rather than having 21 per cent of workers on low pay we could match Finland’s eight per cent.

So Labour’s next priority for a rebalanced economy must be a radical agenda for the bottom half of the labour market. Jobs need to be designed and people trained so work is more productive and secure, which in turn can bring about better pay and progression. This is about culture not just economics, because there are huge disparities in the pay, status and value of low earning  ’women’s work’ across Europe.

Labour must accept that transforming the bottom of the labour market will take change within companies, including laws to require greater worker representation and ownership. And Miliband should say that if industrial sectors and supply-chains do not work together to improve conditions he will impose new public solutions like wage councils or training levies.

But he also needs to promise a decent floor on low pay for everyone. Miliband has talked a lot about the ‘living wage’ but has never quite embraced it as a national policy.  This week he should promise an ‘escalator’ to take the minimum wage, in small increments over five years, to the level of the living wage, which is £7.45 per hour today. Even for the worst hit sector, hospitality, this would mean an increase in payroll costs of a little more than one per cent per year.

If Labour’s ‘one nation’ version of economic rebalancing is to mean anything, it must be about reducing the entrenched inequality of the British labour market and making it harder for employers to make a profit through public subsidies on poverty pay. To stand apart from Cameron and Clegg, this should be Miliband’s first step in a concrete plan to change the character of British capitalism and take the country towards the mainstream of northern European economies.

Andrew Harrop is general secretary of the Fabian Society and editor of the Fabians’ new pamphlet The Great Rebalancing: how to fix the broken economy

"We can all sign up to the UK being a bit less reliant on the financial sector, but then what?" Photograph: Getty Images.

Andrew Harrop is general secretary of the Fabian Society.

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Erdogan’s purge was too big and too organised to be a mere reaction to the failed coup

There is a specific word for the melancholy of Istanbul. The city is suffering a mighty bout of something like hüzün at the moment. 

Even at the worst of times Istanbul is a beautiful city, and the Bosphorus is a remarkable stretch of sea. Turks get very irritated if you call it a river. They are right. The Bosphorus has a life and energy that a river could never equal. Spend five minutes watching the Bosphorus and you can understand why Orhan Pamuk, Turkey’s Nobel laureate for literature, became fixated by it as he grew up, tracking the movements of the ocean-going vessels, the warships and the freighters as they steamed between Asia and Europe.

I went to an Ottoman palace on the Asian side of the Bosphorus, waiting to interview the former prime minister Ahmet Davu­toglu. He was pushed out of office two months ago by President Recep Tayyip Erdogan when he appeared to be too wedded to the clauses in the Turkish constitution which say that the prime minister is the head of government and the president is a ceremonial head of state. Erdogan was happy with that when he was prime minister. But now he’s president, he wants to change the constitution. If Erdogan can win the vote in parliament he will, in effect, be rubber-stamping the reality he has created since he became president. In the days since the attempted coup, no one has had any doubt about who is the power in the land.

 

City of melancholy

The view from the Ottoman palace was magnificent. Beneath a luscious, pine-shaded garden an oil tanker plied its way towards the Black Sea. Small ferries dodged across the sea lanes. It was not, I hasten to add, Davutoglu’s private residence. It had just been borrowed, for the backdrop. But it reminded a Turkish friend of something she had heard once from the AKP, Erdogan’s ruling party: that they would not rest until they were living in the apartments with balconies and gardens overlooking the Bosphorus that had always been the preserve of the secular elite they wanted to replace.

Pamuk also writes about hüzün, the melancholy that afflicts the citizens of Istanbul. It comes, he says, from the city’s history and its decline, the foghorns on the Bosphorus, from tumbledown walls that have been ruins since the fall of the Byzantine empire, unemployed men in tea houses, covered women waiting for buses that never come, pelting rain and dark evenings: the city’s whole fabric and all the lives within it. “My starting point,” Pamuk wrote, “was the emotion that a child might feel while looking through a steamy window.”

Istanbul is suffering a mighty bout of something like hüzün at the moment. In Pamuk’s work the citizens of Istanbul take a perverse pride in hüzün. No one in Istanbul, or elsewhere in Turkey, can draw comfort from what is happening now. Erdogan’s opponents wonder what kind of future they can have in his Turkey. I think I sensed it, too, in the triumphalist crowds of Erdogan supporters that have been gathering day after day since the coup was defeated.

 

Down with the generals

Erdogan’s opponents are not downcast because the coup failed; a big reason why it did was that it had no public support. Turks know way too much about the authoritarian ways of military rule to want it back. The melancholy is because Erdogan is using the coup to entrench himself even more deeply in power. The purge looks too far-reaching, too organised and too big to have been a quick reaction to the attempt on his power. Instead it seems to be a plan that was waiting to be used.

Turkey is a deeply unhappy country. It is hard to imagine now, but when the Arab uprisings happened in 2011 it seemed to be a model for the Middle East. It had elections and an economy that worked and grew. When I asked Davutoglu around that time whether there would be a new Ottoman sphere of influence for the 21st century, he smiled modestly, denied any such ambition and went on to explain that the 2011 uprisings were the true succession to the Ottoman empire. A century of European, and then American, domination was ending. It had been a false start in Middle Eastern history. Now it was back on track. The people of the region were deciding their futures, and perhaps Turkey would have a role, almost like a big brother.

Turkey’s position – straddling east and west, facing Europe and Asia – is the key to its history and its future. It could be, should be, a rock of stability in a desperately un­stable part of the world. But it isn’t, and that is a problem for all of us.

 

Contagion of war

The coup did not come out of a clear sky. Turkey was in deep crisis before the attempt was made. Part of the problem has come from Erdogan’s divisive policies. He has led the AKP to successive election victories since it first won in 2002. But the policies of his governments have not been inclusive. As long as his supporters are happy, the president seems unconcerned about the resentment and opposition he is generating on the other side of politics.

Perhaps that was inevitable. His mission, as a political Islamist, was to change the country, to end the power of secular elites, including the army, which had been dominant since Mustafa Kemal Atatürk created modern Turkey after the collapse of the Ottoman empire. And there is also the influence of chaos and war in the Middle East. Turkey has borders with Iraq and Syria, and is deeply involved in their wars. The borders do not stop the contagion of violence. Hundreds of people have died in the past year in bomb attacks in Turkish cities, some carried out by the jihadists of so-called Islamic State, and some sent by Kurdish separatists working under the PKK.

It is a horrible mix. Erdogan might be able to deal with it better if he had used the attempted coup to try to unite Turkey. All the parliamentary parties condemned it. But instead, he has turned the power of the state against his opponents. More rough times lie ahead.

Jeremy Bowen is the BBC’s Middle East editor. He tweets @bowenbbc

This article first appeared in the 28 July 2016 issue of the New Statesman, Summer Double Issue