Douglas Alexander, then international development secretary, and Ed Miliband, then climate change secretary, during their trip to India and Bangladesh in 2009. Photograph: Richard Darlington.
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Labour needs to turn up the volume on international development

Why is Labour not yet talking about responsible capitalism in a global context?

Ed Miliband doesn’t talk about international issues very often. Who can blame him? The perceived wisdom is that there are no votes in foreign affairs. But at times of crisis, opposition politicians can project gravitas and statesmanship, as Miliband did on the vote over military action in Syria. Whatever you think about the issue, that Parliamentary moment turned the political tide at the end of a difficult summer for Labour and cleared the political decks for his successful energy freeze conference speech.

Miliband was due to visit India earlier this year but cancelled his trip because of the flooding of southern England. I was with Miliband the last time he visited India, back in 2009. We visited a slum in West Bengal and flooded villages in Bangladesh. I know he "gets it". But there is a group of progressive activists in development, diplomacy and defence (dubbed "Labour 3D") who are still waiting to hear from him. Their perception is that he hasn’t spoken out since the UK hosted the G8 last year and they feel that he did so then because he had to, rather than because he wanted to. They say none of his party conference speeches have had an international section.

David Cameron also cancelled a trip that week and was forced to respond to a joint Daily Mail-UKIP offensive on the UK aid budget. Rather than defend aid, in its own terms, he made a throw-away remark at a hastily arranged press conference that turned into a hostage to fortune. By saying that "money was no object", he addressed the call for the overseas aid budget to be spent on flood victims at home in a way that turned his austerity narrative on its head. No longer was there "no alternative" and nor were we "all in this together". On the door step, voters contrasted the bedroom tax on "people like us" to a "blank cheque" for people like him.

That domestic political minefield might well be why mainstream politicians steer clear of talking about international aid and why UKIP talk it up endlessly. Last week DFID announced that they had spent 0.72% on aid, but blink and you’d have missed it. The announcement came on the day that the Telegraph described as "a good day to bury bad news".

Yet Labour has a good story to tell about achievements on the global stage, a proud record to defend and an internationalist narrative that would fit comfortably with their domestic one. Tomorrow, the shadow international development secretary, Jim Murphy, speaks at the ONE campaign. It’s another opportunity for Labour to reaffirm their commitment to locking in 0.7, something no Labour politician has done since Ed Balls suggested there was a political consensus on the overall level of aid spending back in 2012.

Labour talks a lot about "responsible capitalism" but activists sometimes feel that is an exclusively domestic agenda, rather than an international one. As well as talking about "One Nation", will Labour also talk about "One World"? It could serve the dual purpose of locking UKIP out of a political consensus on the amount of overseas aid but also give Labour a dividing line with the Tories on the objective of overseas aid.

The policy community’s big critique of Cameron’s contribution to the 2015 Post-Millennium Development Goals framework has been his blind spot on the issue of inequality. There are now more poor people living in countries that are no longer poor. This week Action Aid publish a report warning of the dangers of involving the private sector in development without ensuring that the benefits of growth are shared by the poorest. Why is Labour not yet talking about responsible capitalism in a global context?

The economic development agenda, as advanced by Justine Greening, was brought to DFID by Douglas Alexander before the financial crisis. Again, this is something that the policy community point out. One of the most successful achievements of using UK aid for economic development - access to finance via mobile money (M-Pesa) - featured in the FT and on Newsnight last week. Greening’s embrace of this agenda is an important one because it potentially opens up a wider coalition for the politics of development on the right. But the agenda also carries risks that Labour are perfectly placed to highlight. The risk that a rising economic tide will not necessarily lift all boats. Markets need to be managed if the poor are to prosper.

If there is to be a big tent consensus among the three main parties come election time, they need to start staking out both their common ground and their detailed differences. If the mainstream parties retreat on UK aid, UKIP win by default. But to quote Frankie Goes to Hollywood, when two tribes go to war, a point is all that you can score.

Richard Darlington was Special Adviser at DFID 2009-2010 and is now Head of News at IPPR - follow him on twitter: @RDarlo

Richard Darlington is Head of News at IPPR. Follow him on Twitter @RDarlo.

Photo: Getty
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The Future of the Left: A new start requires a new economy

Creating a "sharing economy" can get the left out of its post-crunch malaise, says Stewart Lansley.

Despite the opportunity created by the 2008 crisis, British social democracy is today largely directionless. Post-2010 governments have filled this political void by imposing policies – from austerity to a shrinking state - that have been as economically damaging as they have been socially divisive.

Excessive freedom for markets has brought a society ever more divided between super-affluence and impoverishment, but also an increasingly fragile economy, and too often, as in housing, complete dysfunction.   Productivity is stagnating, undermined by a model of capitalism that can make big money for its owners and managers without the wealth creation essential for future economic health. The lessons of the meltdown have too often been ignored, with the balance of power – economic and political – even more entrenched in favour of a small, unaccountable and self-serving financial elite.

In response, the left should be building an alliance for a new political economy, with new goals and instruments that provide an alternative to austerity, that tackle the root causes of ever-growing inequality and poverty and strengthen a weakening productive base. Central to this strategy should be the idea of a “sharing economy”, one that disperses capital ownership, power and wealth, and ensures that the fruits of growth are more equally divided. This is not just a matter of fairness, it is an economic imperative. The evidence is clear: allowing the fruits of growth to be colonised by the few has weakened growth and made the economy much more prone to crisis.

To deliver a new sharing political economy, major shifts in direction are needed. First, with measures that tackle, directly, the over-dominance of private capital. This could best be achieved by the creation of one or more social wealth funds, collectively held financial funds, created from the pooling of existing resources and fully owned by the public. Such funds are a potentially powerful new tool in the progressive policy armoury and would ensure that a higher proportion of the national wealth is held in common and used for public benefit and not for the interests of the few.

Britain’s first social wealth fund should be created by pooling all publicly owned assets,  including land and property , estimated to be worth some £1.2 trillion, into a single ring-fenced fund to form a giant pool of commonly held wealth. This move - offering a compromise between nationalisation and privatization - would bring an end to today’s politically expedient sell-off of public assets, preserve what remains of the family silver and ensure that the revenue from the better management of such assets is used to boost essential economic and social investment.

A new book, A Sharing Economy, shows how such funds could reduce inequality, tackle austerity and, by strengthening the public asset base, rebalance the public finances.

Secondly, we need a new fail safe system of social security with a guaranteed income floor in an age of deepening economic and job insecurity. A universal basic income, a guaranteed weekly, unconditional income for all as a right of citizenship, would replace much of the existing and increasingly means-tested, punitive and authoritarian model of income support. . By restoring universality as a core principle, such a scheme would offer much greater security in what is set to become an increasingly fragile labour market. A basic income, buttressed by a social wealth fund, would be key instruments for ensuring that the potential productivity gains from the gathering automation revolution, with machines displacing jobs, are shared by all.  

Thirdly, a new political economy needs a radical shift in wider economic management. The mix of monetary expansion and fiscal contraction has proved a blunderbuss strategy that has missed its target while benefitting the rich and affluent at the expense of the poor. By failing to tackle the central problem  – a gaping deficit of demand (one inflamed by the long wage squeeze and sliding investment)  - the strategy has slowed recovery.  The mass printing of money (quantitative easing) may have helped prevent a second great depression, but has also  created new and unsustainable asset bubbles, while austerity has added to the drag on the economy. Meanwhile, record low interest rates have failed to boost private investment and productivity, but by hiking house prices, have handed a great bonanza to home owners at the expense of renters.

Building economic resilience will require a more central role for the state in boosting and steering investment programmes, in part through the creation of a state investment bank (which could be partially financed from the proposed new social wealth fund) aimed at steering more resources into the wealth creating activities private capital has failed to fund.

With too much private credit used for financial speculation and property, and too little to small companies and infrastructure, government needs to play a much more direct role in creating credit, while restricting the almost total freedom currently handed to private banks.  Tackling the next downturn, widely predicted to land within the next 2-3 years, will need a very different approach, including a more active fiscal policy. To ensure a speedier recovery from recessions, future rounds of quantitative easing should, within clear constraints, boost the economy directly by financing public investment programmes and cash handouts (‘helicopter money’).  Such a police mix – on investment, credit and stimulus - would be more effective in boosting the real economic base, and would be much less pro-rich and anti-poor in its consequences.

These core changes would greatly reform the existing Anglo-Saxon model of capitalism and provide the foundations for building support for a new direction for progressive politics. They would pioneer new tools for building a fairer, more dynamic and more stable economy. They could draw on experience elsewhere such as the Alaskan annual citizen’s dividend (financed by a sovereign wealth fund) and the pilot basic income schemes launching in the Netherlands, Finland and France.  Even mainstream economists, including Adair Turner, former chairman of the Financial Services Authority, are now talking up the principle of ‘helicopter money’. For these reasons, parts of the package are likely to prove publicly popular and command support across the political divide. Together they would contribute to a more stable economy, less inequality, and a more even balance of power and opportunity.

 

Stewart Lansley is the author of A Sharing Economy, published in March by Policy Press and of Breadline Britain, The Rise of Mass Impoverishment (with Joanna Mack).