The Shape of Things to Come

After the 1970s it was inevitable that the Conservative party would move away from the tight relationship between business, state and unions of the postwar consensus, but it was Margaret Thatcher who made it Thatcherite. In the 1990s Labour was bound to be centrist; but Blair and Brown gave New Labour its distinctive shape.

After the banking crisis Labour was bound to reflect a public mood more critical of neo-liberal economics, and less confident about big state spending, but Labour in 2012 will also be shaped by the particular politics and personality of Ed Miliband.

Since becoming Labour leader Ed Miliband has successfully opened several new national political debates. Initially derided, ‘squeezed middle’ became the OED’s word of the year. Equally scorned at first, all parties now claim to support ‘responsible capitalism’. Ed has articulated widespread concerns about diminishing opportunities for the rising generation.

Some of his key aims and values are clear. He wants to be a ‘reformer of markets and a reformer of the state’ and to build a society with ‘responsibility at the top and the bottom’. He believes that social mobility is harder in an unequal country where ‘the rungs are too far apart’, but he also knows that the popular idea of fairness demands responsibilities as well as rights.

At the heart of our new publication “The Shape of Things to Come: Labour’s New Thinking” is the recognition that our economy must and can be reshaped to deliver the responsible capitalism Ed Miliband has advocated.

In place of neo-liberal pessimism is the confidence that an active state can create the best conditions for business success. A more dynamic, competitive and fairer economy can reduce the public costs of failing markets and help deliver public spending discipline.

For the past few decades ‘pro-market’ policies have delivered neither the competitive economy we need nor the social benefits we want and all too often it was failing market policies that forced up Labour’s spending. A poor private rental market drove up the cost of housing benefits; it took spiralling tax credits to protect families from their low skilled and unproductive jobs; pensions credits were needed because long-term savings were low.

Tight money is already showing that neither marketisation nor centralisation can deliver the best public services. Further improvements will only come if individual choice is complemented by the public’s ability to hold services directly and democratically to account. New forms of mutual ownership will transform the relationship between providers and users.

In part Ed Miliband is drawing on older Labour traditions and values.

Labour has not always left markets to themselves, or identified the state with the public good. He knows that the good society we seek is shaped ultimately by the way that people live their lives, work together and the values they share.

And this new thinking will inform a huge range of Labour policy.

A better welfare bargain would bring rights to training and fair pay and ask claimants to plan their own route back to work. Those who work and contribute should get more support than the long-term unemployed so the contributory principle needs to be reinvigorated in new ways and in the short term, ‘flexicurity’ would give time-limited income related benefit.

Active government policies can support a more dynamic, innovative and competitive private sector with strengths across the different sectors of the economy. Government should work with business to agree the strategic direction for the economy, to fund early stage fundamental research, to shape and create new markets through policy and regulation, and to create the institutions for co-ordination, applied research and state-backed finance seen in more successful economics.

And these key changes might inform foreign policy as David Clark looks forward to a Labour foreign policy that is values-based, multilaterally engaged, positive and reformist on the EU, and strong on the defence of human rights.

Above all, it’s Labour’s democratic and social, co-operative traditions that are shaping the new approach. New markets and old states can both feel like “human institutions which do not seem to under the control of people” as Helen Goodman writes. The good society depends not just on either markets or the state, but how people with shared values live their lives and work together.

Ed Milband has made a good start on this agenda. The next three years will determine whether he and Labour can convey the optimism about Britain, and what the British people can achieve, that runs through his politics.