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Social democracy in a digital era

The digital revolution presents an opportunity for the left.

The shadow business secretary, Chuka Umunna, made headlines recently by highlighting that employees in France and Germany completed work by Thursday afternoon that would take the entire working week in Britain.  The purpose was to underline one of the UK’s chief economic weaknesses – its poor productivity performance – and to attack the current government’s approach to long-term investment and inclusive growth.

As a new Policy Network and ITIF book on Sharing in the Success of the Digital Economy shows, improving the adoption of ICT across the UK economy can drive-up productivity. The US has been more successful at adopting ICT than Europe, to the extent that if the EU-15 and US had swapped productivity growth rates from 1995 to 2013, it is estimated that GDP would be €2.2 trillion larger than the United States, instead of €1.6 trillion smaller.

The economic evidence shows that ICT-induced innovation – the development and adoption of new products, services, processes and business models – is vital to support rising living standards. But making the political case for the progressive power of innovation, and the digital economy, can be more challenging. The forces of “creative destruction” threaten incumbent firms, jobs, and the way people work and live, creating strong incentives to oppose change.

Confronting these hard realities is one of the defining challenges for progressive politics in the 21st century as we enter a “high opportunity, high risk society”. The danger is that under the short-term pressures of the election cycle, and at a time of widespread economic insecurity, progressives will shirk long-term decisions that will support and shape the environment for radical innovation and thus reinforce the low-growth, low-productivity cycle that consumes many European economies. If stuck defending the status quo, votes will continue to leak to new political competitors and populist insurgents. Electoral coalitions risk being further splintered by those who feel they benefit from technological change and those who do not. 

Voters may, of course, hanker for quick fixes if that is all that is offered to them. But, equally, as voters’ livelihoods become increasingly risky they may value new institutions that provide them with greater security and the means to succeed. The big policy responses to the industrial revolution – welfare states, public health services and education – developed into institutions with widespread public support, albeit challenged somewhat in recent times. Similarly, new institutions that reflect the new political realities – not least a more individualistic society and one less trusting in the state to spend taxpayers’ money – can flourish.

So how should progressives respond? First, all of the above opportunities and risks underline the need for progressive politics and a rethinking of the role of the state. There is a new purpose in navigating and supporting capitalist models through their next phase of creative destruction and in leveraging technology to tackle the great societal challenges of our times.

Second, progressives need to embrace the potential of innovation and technological change to reduce the number of low-wage, unsafe and unsatisfying jobs and transform public services. Promoting innovation by investing in science and R&D is the easy part politically but dealing with the impact of innovation on specific industries and local communities is more challenging, not least for the left when this impacts on the jobs and practices of public sector workers. The short-term “losers” from change are typically easier to identify and louder, but the benefits can be spread across society and over time. Politicians need to be straight with voters that these headwinds will have both positive and negative consequences, and be careful not to champion incumbents and rent-seekers in the name of social justice.

Third, a radically new concept of social investment is required which renews welfare edifices for the 21st century. Gone are the days of a job, or even a career, for life. Government, trades unions and businesses need to collaborate on new forms of protection, investment and flexibility, as well as on lifelong learning. People from all backgrounds need to be enabled to harness technology and meet the demands of rapidly changing labour markets, whether they work for themselves or for someone else.

Fourth, progressives need to work together to forge a European innovation agenda, built around an EU digital single market, and make the case for international cooperation to develop new institutions, regulatory approaches and tax systems that are fit for the digital age.

Innovation is about the constant transformation of an economy and its institutions. By its nature some industries and firms will lose out to new challengers. Rather than trying to stop this perennial gale, managing the transition into new work and creating new forms of social investment should be the key mission of progressive politicians in the 21st century. Labour should be the party concentrating on how to make these changes work for the population as a whole and thinking about how they can be directed to tackle structures of inequality.

Michael McTernan is acting director of Policy Network and Alastair Reed is a researcher at Policy Network.

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Donald Trump promises quick Brexit trade deal - but the pound still falls

The incoming President was talking to cast out Brexiteer, Michael Gove. 

The incoming President, Donald Trump, told the Brexiteer Michael Gove he would come up with a UK-US trade deal that was "good for both sides".

The man who styled himself "Mr Brexit" praised the vote in an interview for The Times

His belief that Britain is "doing great" is in marked contrast to the warning of current President, Barack Obama, that Brexit would put the country "at the back of the queue" for trade deals.

But while Brexiteers may be chuffed to have a friend in the White House, the markets think somewhat differently.

Over the past few days, reports emerged that the Prime Minister, Theresa May, is to outline plans for a "hard Brexit" with no guaranteed access to the single market in a speech on Tuesday.

The pound slipped to its lowest level against the dollar in three months, below $1.20, before creeping up slightly on Monday.

Nigel Green, founder and chief executive of the financial planners deVere Group, said on Friday: "A hard Brexit can be expected to significantly change the financial landscape. As such, people should start preparing for the shifting environment sooner rather than later."

It's hard to know the exact economic impact of Brexit, because Brexit - officially leaving the EU - hasn't happened yet. Brexiteers like Gove have attacked "experts" who they claim are simply talking down the economy. It is true that because of the slump in sterling, Britain's most international companies in the FTSE 100 are thriving. 

But the more that the government is forced to explain what it is hoping for, the better sense traders have of whether it will involve staying in the single market. And it seems that whatever the President-Elect says, they're not buying it.


 

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.