Ed Miliband must trust his instincts and stand up for real change

If Ed Miliband is to seize the initiative in 2012, this has to be a year of surprises. He should jet

On the face of it, these look like bad times for Labour and for Ed Miliband's leadership. There seems to be no strategy, no narrative and little energy. Old faces from the Brown era still dominate the shadow cabinet and they seem stuck in defending Labour's record in all the wrong ways - we didn't spend too much money, we'll cut less fast and less far, but we can't tell you how.

Labour is apparently pursuing a sectional agenda based on the idea that disaffected Liberal Democrats and public-sector employees will give Labour a majority next time around. But we have not won, and show no signs of winning, the economic argument. We have not articulated a constructive alternative capable of recognising our weaknesses in government and taking the argument to the coalition. We show no relish for reconfiguring the relationship between the state, the market and society. The world is on the turn, yet we do not seem equal to the challenge.

Shock of the new

That is how it looks: Labour stranded in a Keynesian orthodoxy, with no language to talk straight to people. As Gramsci said of the 1920s, the old is dead and the new is not yet born, and in the meantime all kinds of morbid symptoms emerge, including the fraternisation of impossibles. I am aware that Blue Labour is seen in that light by many, a symptom of malaise rather than a strategy of renewal. But if Ed is going to offer the possibility of a transformational Labour government, then he is going to have to break the grip of progressive policy rationalism and grasp a bigger political change. He is going to have to be both insurgent and establishment, conservative and radical, democratic and competent, patriotic and internationalist.

In other words, 2012 must be a year of surprises, of engagement with the people and their concerns. Ed is going to have to show some leadership and courage if the political dynamics of this year are to be different.

The good news is that he has. Ed built his leadership bid around the campaign for a living wage, and has not renounced it. The logic of the living wage is that workers should earn enough to feed their families. It is an alternative to tax credits and welfare. It recognises the importance of work, family life and relationships. It is a change within the economy and not a transfer outside of it. This has been built upon in suggestive and interesting ways. The representation of workers on renumeration committees must be the start of a fundamental change in corporate governance.

The biggest problems with New Labour's inheritance were an excessive reliance on managerialism in both the public and the private sectors, a disregard for the workforce and an unhappy and abusive relationship with the unions. These things need to change. We will get out of this mess only by establishing relationships, reciprocity and responsibility in what Marc Stears calls "everyday democracy". Ed understands this.

He was right, too, to distinguish between predatory and productive capital. Finance capital, outside of all relationships and calling the shots, is by nature promiscuous and exploitative. We need to call time on its nasty ways. The problem with Brownite political economy is that, even though it was true that a 3 per cent deficit was not excessive in the context of economic growth, it was debt that was growing at the time, rather than the real economy. A vast, sustained expansion in private debt fuelled the financial sector throughout Brown's tenure as chancellor and then prime minister. There was not enough investment in the productive economy, not enough private-sector growth.

The financial sector and the welfare state were the public-private partnership that underwrote the wealth of the nation, and this needs to change. The heavy reliance on tax receipts from the City of London was not accidental, but spoke of a fundamental dependency on invisible earnings that was only exacerbated by the growth of the virtual economy.

Courage of convictions

Endogenous growth, flexible labour-market reform, free movement of labour, the dominance of the City of London - it was all crap, and we need to say so. Stanley Baldwin had a far more robust industrial growth strategy than Brown and Mandelson could conceive of, let alone Cable and Osborne.

The endowment of local banks constrained not to lend beyond county borders and able to provide support for local businesses is an important part of leaving this toxic legacy behind. So is a central role for the vocational economy, though this will require hard choices in higher education. An integrated approach to economic renewal is also about democratic renewal, a redistribution of power and an investment of trust in the people. Ed needs to break out of internal party discussions and address the issue of national decline and how to reverse it. A balance of interests in corporate governance, a vocational economy, regional banks and fiscal discipline offer a platform for growth.

In 2011 Ed kept the Labour Party together, avoiding the splits it suffered in 1931, 1951 and 1979. However, he has not broken through. He has flickered rather than shone, nudged not led. It is time for him to bring the gifts that only he can bring. He should leave behind stale orthodoxies and trust his instinct that change is essential. He must show the kind of courage needed to steer the ship of state through uncharted waters. Now is the time for leadership and action. So far Ed has honoured his responsibilities but has not exerted his power. It is time that he did so. And we all need to show him love and support in return. I'm backing Ed Miliband.

Maurice Glasman is a Labour peer and co-editor of "The Labour Tradition and the Politics of Paradox"