How to build a one nation economy

When Ed Miliband unveiled ‘One Nation Labour’ it was much more than a daring rhetorical land-grab. For One Nation is an organizing concept that can breathe fresh life into social democracy in an age where class defines and divides us less but inequalities are greater than ever.

Today egalitarian politics cannot be sectional, if it ever could. The aim of social democracy is not to advance the interests of ‘labour’, ‘working people’, ‘the poor’ or whatever code-word you wish to use. It must be a politics for the whole nation, for the vast majority, but one which remains true to our enduring values. Social democratic politics should seek to achieve an economy, society and state that works for everyone, building unity in our diverse nation.

One Nation is a response from the mainstream Left to the Occupy Movement’s call for a politics of ‘the 99 per cent’. By defining himself against elites and vested interests, Ed Miliband is seeking to create a broad and inclusive version of Labour’s goal of placing economic power into the hands of the many. Creating a political dividing-line between the vast majority and the elite is possible because it is underpinned by economic reality.

One Nation Labour is a reflection of the polarizing structural shifts in the economy which took place over the last 30 years. Even during the New Labour era wages fell and profits increased as a proportion of GDP; median earnings stagnated; pay and wealth differentials accelerated; and households became more indebted as companies piled up huge surpluses. The rewards were amassed disproportionately by a small economic elite, who drew further away from the rest of society.

To Labour’s credit the remainder of the economic pie was actually shared by everyone else pretty evenly. Inequality did not widen between the 10th and 98th percentiles of the income distribution, as a result of redistribution plus successful labour market policies. Gordon Brown used buoyant tax revenues to top-up the incomes of people who would otherwise be falling behind, particularly poorer families and older people.

The story was similar with education, where the gap between top and bottom closed a little. This was a New Labour version of Croslandism, founded on the presumption of growth and an unchanging economic structure, where equality was to be achieved through the distribution of resources by the state.

Yet even in the good times inequality grew worse within the mainstream with respect to health and wealth. Then there was the financial crisis: past indifference to the superrich evaporated; the tax revenues to pay for redistribution collapsed; and the Left remembered that the nature of economic growth matters for the wide distribution of prosperity.

In response social democratic thinking has shifted from an emphasis on distribution after the event to the forging of a new political economy: to reforming both the rules of the game and the spirit in which people play.

It is a vindication of the path set out by Will Hutton and others in the early 1990s which new Labour chose to ignore. So far much of the debate has been organized around ugly terms such as ‘the squeezed middle’, ‘pre-distribution’ and ‘responsible capitalism’, which play well in the seminar room but don’t cut it with the public.

The language of One Nation changes that. It reflects the simplest of propositions; that economic growth must benefit the vast majority not just the elites.

So far the diagnosis has been far better than the prescription, perhaps because the mainstream Left is only slowly coming to terms with the radical implications of moving beyond Croslandite redistribution. Without new public funds Ed Miliband’s pledge to stop inequality rising requires a fundamental reordering to turn the UK into a more mainstream Northern European economy.

Merely saying ‘thus far and no further’ on income inequality may sound very timid, when looking across the broad sweep of socialist history; but the policy solutions imply a radical rupture from the rules and norms of the last three decades, on the scale of 1945.

So building a One Nation economy has implications that stretch far beyond the ‘one per cent’. It means tilting the balance in favour of northern Britain; low and middle earners; long-term investment; and manufacturing.

But the language of One Nation is an attempt to say you can be ‘for’ one group without being against another.

It is an argument that rebalances matters for the long-term prosperity and welfare of both rich and poor; that after the crisis, the claim of the Spirit Level cannot be ignored.

Take the example Ed Miliband alighted on when he launched ‘One Nation Labour’ in 2012, the case of the technical education for ‘the forgotten 50 per cent’.  He presented this as a prerequisite for long-term economic sustainability, not just a question of social justice. University graduates should care as much as those left behind by education today, because the nation’s future will depend on mid-level skills.

One Nation is an economic and a moral case for attending to the needs of everyone in society.