Ed Miliband. Photo: Getty
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While the Tories claim that growth is back, Ed Miliband will seize the Inequality Moment

Discussion of the gap between rich and poor has gone mainstream.

In autumn 2003, a new class called “What’s Left? The Politics of Social Justice” began at Harvard University. The visiting lecturer played a video of a Newsnight interview with Tony Blair in the run-up to the 2001 election. In the clip, Jeremy Paxman asked the then prime minister six times whether the gap between rich and poor mattered – and six times he dodged the question. “It’s not a burning ambition for me to make sure that David Beckham earns less money,” was one response.

The lecturer was Ed Miliband, then a 33-year-old special adviser in Blair’s government, on a sabbatical in the US. Inequality bothered Miliband much more than his boss. In June 2013, the Institute for Fiscal Studies concluded that between 1997 and 2010, “Those right at the top saw their incomes increase very substantially with the result that… overall inequality nudged up slightly.” A friend of Miliband’s from his Harvard days told me that the failure to tackle the gap between the rich and the rest was “a key source of his dissatisfaction with Blair and New Labour” during this period.

More than a decade later, the leader of the Labour Party believes that “tackling inequality is the new centre ground of politics”, to quote from his Hugo Young Lecture on 10 February. His closest adviser, the academic and peer Stewart Wood, leads the charge on inequality inside Miliband’s office. “Ed’s concern to stop Britain continuing down the path of growing inequality, to the detriment of social justice and our economic health, will be central to any government that he leads,” Wood tells me.

But aren’t all Labour leaders – with the exception of Blair and maybe Gordon Brown – concerned with the gap between rich and poor? Perhaps. However, the difference is that inequality is no longer a niche issue.

Forget Occupy Wall Street – how about the new mayor of New York, Bill de Blasio, elected on a populist pledge to tackle the Big Apple’s “tale of two cities”? Or the new darling of the US Democratic Party, Senator Elizabeth Warren of Massachusetts, who has called for a minimum wage hike to “stop income inequality in America”? Or even the US president? In a speech in December, Barack Obama called the income gap “the defining challenge of our time”.

Listen also to the words of the Pope. “While the earnings of a minority are growing exponentially, so, too, is the gap separating the majority from the prosperity enjoyed by the happy few,” the pontiff wrote in November. Then there’s the IMF, which said in February that inequality hinders growth.

Miliband invoked both de Blasio and the Pope in his Hugo Young Lecture; he often cites their names and Warren’s in private as well. “Whose recovery is this?” has replaced “Too far, too fast” as the economic mantra of choice in his office. Miliband believes the paradigm has shifted. The public is fed up with the rise and rise of the super-rich – the 1 percenters – at the expense of everyone else. Consider the polling: 74 per cent of voters believe the gap between rich and poor is widening (ComRes); 60 per cent say the Autumn Statement was good for “rich people”, compared to just 21 per cent who say it was good for “people like me” (Ipsos MORI); and a majority of voters (64 per cent) think company bosses shouldn’t be paid in excess of ten times more than their lowest-paid employees (Survation).

Yet, between 1985 and 2008, the top 10 per cent went from receiving incomes that were eight times higher than the bottom 10 per cent to incomes that were 12 times higher. According to the High Pay Centre, the chief executives of Britain’s biggest companies earned more money in the first three days of the year than the average worker will make over 12 months.

On 10 March, Capital in the 21st Century, by the French economist Thomas Piketty, is published in English. Described as “one of the watershed books in economic thinking” by the World Bank’s Branko Milanovic, it argues that the main driver of soaring inequality – the tendency of returns on capital to exceed the rate of economic growth – is hard-wired into modern capitalism and threatens to undermine modern democracy. The author’s solution? A global wealth tax.

Such utopian thinking won’t help Miliband but to pretend that Labour policies – such as a levy on bankers’ bonuses, a 50p top rate of tax, a mansion tax and a living wage – won’t make a dent in income inequality is disingenuous. Wood, a fan of the book, says: “We must respond to [Piketty’s] challenge with ambition and imagination, not with pessimism.” Labour, he tells me, “needs to set itself the task of reforming the way our economies work so that higher productivity and lower inequality go together”.

This isn’t just about economics. The politics matter, too. Pledging to tackle inequality – within the rubric of “Whose recovery is this?” – helps Labour neutralise the positive Tory narrative of “Growth is back”. Crucially, it offers Miliband his own brand of progressive populism to challenge the right-wing, anti-welfare populism of the Conservatives. This is the Inequality Moment. Yet the Tories, with their historic aversion to any mention of the “I” word, will struggle to answer the question: “Whose recovery is this?” Miliband’s calculation is that voters won’t. 

Mehdi Hasan is a contributing writer for the New Statesman and the political director of the Huffington Post UK, where this column is crossposted

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

This article first appeared in the 05 March 2014 issue of the New Statesman, Putin's power game

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Leader: The unresolved Eurozone crisis

The continent that once aspired to be a rival superpower to the US is now a byword for decline, and ethnic nationalism and right-wing populism are thriving.

The eurozone crisis was never resolved. It was merely conveniently forgotten. The vote for Brexit, the terrible war in Syria and Donald Trump’s election as US president all distracted from the single currency’s woes. Yet its contradictions endure, a permanent threat to continental European stability and the future cohesion of the European Union.

The resignation of the Italian prime minister Matteo Renzi, following defeat in a constitutional referendum on 4 December, was the moment at which some believed that Europe would be overwhelmed. Among the champions of the No campaign were the anti-euro Five Star Movement (which has led in some recent opinion polls) and the separatist Lega Nord. Opponents of the EU, such as Nigel Farage, hailed the result as a rejection of the single currency.

An Italian exit, if not unthinkable, is far from inevitable, however. The No campaign comprised not only Eurosceptics but pro-Europeans such as the former prime minister Mario Monti and members of Mr Renzi’s liberal-centrist Democratic Party. Few voters treated the referendum as a judgement on the monetary union.

To achieve withdrawal from the euro, the populist Five Star Movement would need first to form a government (no easy task under Italy’s complex multiparty system), then amend the constitution to allow a public vote on Italy’s membership of the currency. Opinion polls continue to show a majority opposed to the return of the lira.

But Europe faces far more immediate dangers. Italy’s fragile banking system has been imperilled by the referendum result and the accompanying fall in investor confidence. In the absence of state aid, the Banca Monte dei Paschi di Siena, the world’s oldest bank, could soon face ruin. Italy’s national debt stands at 132 per cent of GDP, severely limiting its firepower, and its financial sector has amassed $360bn of bad loans. The risk is of a new financial crisis that spreads across the eurozone.

EU leaders’ record to date does not encourage optimism. Seven years after the Greek crisis began, the German government is continuing to advocate the failed path of austerity. On 4 December, Germany’s finance minister, Wolfgang Schäuble, declared that Greece must choose between unpopular “structural reforms” (a euphemism for austerity) or withdrawal from the euro. He insisted that debt relief “would not help” the immiserated country.

Yet the argument that austerity is unsustainable is now heard far beyond the Syriza government. The International Monetary Fund is among those that have demanded “unconditional” debt relief. Under the current bailout terms, Greece’s interest payments on its debt (roughly €330bn) will continually rise, consuming 60 per cent of its budget by 2060. The IMF has rightly proposed an extended repayment period and a fixed interest rate of 1.5 per cent. Faced with German intransigence, it is refusing to provide further funding.

Ever since the European Central Bank president, Mario Draghi, declared in 2012 that he was prepared to do “whatever it takes” to preserve the single currency, EU member states have relied on monetary policy to contain the crisis. This complacent approach could unravel. From the euro’s inception, economists have warned of the dangers of a monetary union that is unmatched by fiscal and political union. The UK, partly for these reasons, wisely rejected membership, but other states have been condemned to stagnation. As Felix Martin writes on page 15, “Italy today is worse off than it was not just in 2007, but in 1997. National output per head has stagnated for 20 years – an astonishing . . . statistic.”

Germany’s refusal to support demand (having benefited from a fixed exchange rate) undermined the principles of European solidarity and shared prosperity. German unemployment has fallen to 4.1 per cent, the lowest level since 1981, but joblessness is at 23.4 per cent in Greece, 19 per cent in Spain and 11.6 per cent in Italy. The youngest have suffered most. Youth unemployment is 46.5 per cent in Greece, 42.6 per cent in Spain and 36.4 per cent in Italy. No social model should tolerate such waste.

“If the euro fails, then Europe fails,” the German chancellor, Angela Merkel, has often asserted. Yet it does not follow that Europe will succeed if the euro survives. The continent that once aspired to be a rival superpower to the US is now a byword for decline, and ethnic nationalism and right-wing populism are thriving. In these circumstances, the surprise has been not voters’ intemperance, but their patience.

This article first appeared in the 08 December 2016 issue of the New Statesman, Brexit to Trump