Boris Johnson’s government is working hard to close down the political space Labour successfully opened up after a decade of austerity. In a nice historical irony, the party’s devastating defeat means we now face an administration committed to stealing a fair chunk of Jeremy Corbyn’s economic programme. We have seen the renationalisation of rail services, wealth taxes floated, promises of additional spending on health and the police, subsidies for a troubled regional airline, and, running through it all, the incessant claim that this government will be “levelling up” those parts of the country crying out for spending. Labour will need reconsider its economic approach if it is to take the necessary steps back to government.
There are grave dangers for the party in this because adapting to the new world will involve a shift not only in how Labour operates, but in how it thinks. And the problem at present is that two apparently opposing poles on the economy in the leadership debate – harking back to 1990s-era New Labour, or ploughing on with the 2019 manifesto – share far more in common than they would like to admit. Both are squarely drawn from the state-led and centralising tradition in Labour: New Labour was significantly redistributive via the tax system; 2019 Corbynism prioritised nationalisation and a grand central plan to reduce carbon emissions.
Since at least the 1940s, the idea that a strong centralised state could take from richer people and richer areas, and redistribute to poorer people usually in poorer areas has formed a centrepiece of Labour’s “social-democratic” economic programme – whether delivered through the tax system or, more subtly, nationalised enterprises. But the sheer scale of the inequalities now present in Britain means that the tax system has to work harder and harder to secure even minimal redistribution, quite probably beyond the limits the electorate will tolerate, whilst (as NIESR have pointed out) capital investment in the places outside London and the south-east is unlikely to meaningfully close the gaps in prosperity by itself.
Worse, the legitimacy of the centralised British state itself has been thrown open to question: most obviously in the movement for Scottish independence, now reasserting itself, but similarly in the anti-Westminster tone of the referendum vote to leave the European Union. Take both parts together – the scale of inequality and the creeping illegitimacy of the British state itself – and it should be clear that the traditional programme of social democracy, dependent on the central state to redistribute income and deliver services, is approaching its limits.
Both poles fail to take full account of how the last 40 years have reshaped capitalism. Globally, capitalism has become increasingly effective at producing cheap and largely disposable products, from the extraordinary decline in the price (and rise in quality) of electronic goods, to, today, the proliferation of digital content. And where some goods remain expensive, the expansion of consumer debt has helped them circulate more widely, as record car sales in recent years show.
But just as this consumer bonanza has opened up, so, too, has it become harder for capitalism to produce goods and services that add meaning and value to people’s lives. The boom in consumer goods came, initially, at the expense of more secure and better-paid manufacturing jobs as production shifted to lower-cost zones. That shift helped wreck labour movement institutions and break up communities.
Today, the continued expansion of consumer choice – strikingly through shifting consumption into the online world – is leaving high streets bereft, even as ever more of us are pushed into poorly-paid and insecure work and the provision of public services withers. Redistribution alone may alleviate some of the worst impacts of free-market capitalism, but (perhaps especially in Labour’s one-time heartlands) it leaves its beneficiaries without what US philosopher Nancy Fraser calls “recognition”. Social justice can no longer only be about having more things, more fairly distributed. It has to provide the sense of purpose, security and power for the majority that capitalism alone cannot.
The Tories are ahead of Labour on this, and today are presenting an economic amalgam, previously unfamiliar in this country, in which “Keynesian” government spending is paired with targeted deregulation, larded over with variants on a theme of national renewal. It is intended to secure their new coalition of support, and to use an authoritarian and centralising government to do so.
To build the coalition it needs to win against this, Labour must return to the open and decentralising traditions of the labour movement, foregrounded initially by Corbyn and John McDonnell, but underplayed in the 2019 manifesto. To secure social justice, we need to move economic policy into the deeper issues of power and, ultimately, the purpose of economics. This is the point at which Labour’s new heartlands in our cities and larger towns can meet its old.
The next four years at least allow the space for this reformulation to happen. There are three steps required. First, Labour’s language on economics needs to subtly shift from a technocratic focus on inputs and outputs – how much money is being spent?; how much will GDP rise? – to a narrative focus on outcomes: how will this improve people’s lives? How will this move us towards net-zero carbon emissions? This is harder, but necessary against a government now seemingly keen to talk up the amount it will be spending.
Second, we need an economic programme that can be built from the ground upwards. Calls for greater powers for mayors and local authorities should be supported. But this also means getting into the detail of what the Tories are doing on the ground. If additional capital spending occurs, it has to be mercilessly scrutinised. It means hunting down the details where corners are cut and petty corruption starts to seep out. There’s a reason Dominic Cummings is trying to ban cosy paid-for lunches and other perks for ministers and advisers, and it’s because he knows the whiff of sleaze is a killer when cynical Tories start splashing the cash around.
But to do this properly means Labour should give its local councillors and activists the tools needed to dig in to the local scandals: if local and regional press no longer have the resources to do investigative work, Labour needs to find a way to research and magnify what is happening on the ground.
Third, we need to begin to demonstrate we are serious about redistributing ownership, building on the emerging party consensus. Overwhelmingly, people want to own their homes: Labour should say, loudly and clearly, it will support them doing so and create viable ways for it to happen.
Small business ownership is at record levels: Labour should tell a story about how this fits into its vision of the economy, as a viable means to break up concentrations of power and support local communities, as well as to promote worker ownership. The much-cited Preston model is an example here, and local interventions can start to build a broader social movement. Local communities and local authorities are setting up their own renewable generation companies: these should be central to a green industrial revolution. And as the threats to the value of our collective data becomes more apparent, Labour needs a serious programme to create new forms of ownership for this critical resource.