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Political strategy for a new economy

Graeme Cooke

 

Ed Miliband’s desire for ‘responsible capitalism’ is not yet attached to a political strategy with the potential to win, govern and change the country.

 

In the aftermath of the financial crisis, it has almost become a cliché for people on the Left to argue that we need a ‘new economy’. The ease with which this claim is made obscures the enormous task of actually achieving it. The fundamental character of British capitalism has shifted in a decisive manner only twice in the last hundred years. In both eras underlying sociological trends created pressures for reform that were harnessed in support of purposeful political action. In the 1940s, a generation of moderate welfare capitalism was spurred on by the legacy of Depression, the fallout of War, and the growing power of organised labour (both in the workplace and at the ballot box). In the 1980s, the foundations for the neo-liberal shift grew from declining domestic competitiveness, an increasingly open international economy, alongside major demographic and occupational trends which undercut both support and legitimacy from the Keynesian settlement.

In each of these periods the underlying economic, social and cultural forces which propelled change forward were real, but their political expression and consequences were not predetermined. Both the Attlee and Thatcher governments transformed the British economy through the mobilisation of substantial state power, allied to rising sources of political energy in society, underpinned by ideological agendas and governing projects which chimed with the spirit of their times. History has shown that such decisive shifts in our political economy are both difficult and disruptive. There are always strong forces acting against change and, if these obstacles can be overcome, significant dislocation is almost inevitably wrought in its wake, as an old order gives way to something new.

In his speech to this year’s Labour Party conference, Ed Miliband pinned his leadership of the Party to the goal of advancing such a paradigm shift. He argued that there are serious and long standing weaknesses in Britain’s current economic model and called for a more ‘responsible capitalism’ in its place. This followed an article by Stewart Wood, a senior adviser to the Labour leader, on the failures of neo-liberalism and the need for a different economic philosophy and approach (Wood, 2011).These moves mark a break from Labour’s recent past and constitute a clear statement of political intent. Subsequent interventions suggest that Miliband intends this agenda to define his leadership (Miliband, 2011, 2012). The scale of ambition is nothing short of achieving in the years ahead for the Left what Mrs Thatcher delivered for the Right in the 1980s.

This argument has divided opinion. Many have welcomed it as a timely re-assertion of social democracy’s historic role in correcting the inherent deficiencies of capitalism. Others have been more critical, pointing to the absence of a substantive policy agenda to deliver a more ‘responsible capitalism’ and questioning whether it is an electorally plausible pitch. In between, some of those sympathetic to the agenda wonder whether it could be expressed in more ‘everyday’ terms, which the focus on living standards for the majority of working people begins to achieve. However, to develop a new line of thinking, this essay sidesteps the debate about whether Ed Miliband is right to argue for a more ‘responsible capitalism’ – or whether he has framed the argument in the best way. Instead, it takes the case made by the Labour leader as given so as to focus on what has received far less attention: the necessary conditions for actually advancing the political change for which he has argued.

Indeed, the contention developed here is that Ed Miliband’s desire for ‘responsible capitalism’ is not yet attached to a political strategy with the potential to win, govern and change the country. Without this, short term steps to fill a policy gap or strengthen a polling position are highly unlikely to hit the target. The economic convulsions of recent years have undoubtedly created new spaces for reform, as the existing settlement fails to deliver for large sections of society. However if the structure and nature of British capitalism is going to be reshaped in the years ahead it will take more than a moral argument, more than ‘vision’ and ‘values’, and certainly more than the occupation of St Paul’s Cathedral to make it happen.

The volatility of the last few years leaves all political parties and ideological traditions struggling to come to terms with the new context. The future direction of British politics is up for grabs in a way that has not been the case for a generation. The political forces which will shape this emerging era – and then prosper in it – will be those which are successful in defining a new common sense and offering plausible way forwards. If the Left is to lead in this period of flux – rather than simply opposing and reacting – it must remember that politics is as much a struggle for power as a battle of ideas. And that means dealing in the currency of political strategy, where it is agency, alliances, institutions and interests that count.

To illuminate this insight, IPPR has spent the last year investigating the ‘political sociology’ of modern Britain, by which we mean the sources of energy in society which shape the context in which politics is contested. In particular, we have been exploring the major shifts in the economy, society and culture since the emergence of New Labour in the mid-1990s (Cooke, 2011). This lens suggests that the most effective political projects are guided neither by the moral superiority of true believers nor the slavish satisfaction of voter preferences. Instead they are rooted in, and draw strength from, the dominant currents of contemporary society and the experience of its people.

This has paradoxical political consequences. On the one hand, attention to political sociology means facing up to unavoidable constraints, whether they are institutional, ideological or electoral. However, on the other, it helps to unearth and alight upon the actually existing possibilities and energies in society that are there to be harnessed. In short, it encourages more honesty and greater ambition. In this spirit, if Ed Miliband wants to place the goal of a more ‘responsible capitalism’ at the heart of his leadership, he urgently needs to consider how his moral argument can be turned into a political strategy capable of achieving it. This means finding routes which are both electorally fruitful and genuinely radical. As a starting point, any plausible strategy must be capable of addressing the following questions: 

  1. Can it lead the national debate about mainstream issues and concerns?
  2. Can it address its own strategic weaknesses (and expose its opponents)?
  3. Can it form the basis of a majoritarian coalition, with the potential to endure?
  4. Can it mobilise an alliance of political forces across society to help advance it?

These are major strategic objectives, which would need to be advanced resolutely and with discipline over the coming months and years. The aim here is simply to shift the focus towards these issues – and to show how strategy must precede policy and polling. What follows is just a brief flavour of what greater attention to such challenges might require; drawing in particular on how forces and energies emerging from the new political sociology of Britain might be harnessed by the Labour leader in support of his project. 

 

Can it lead the national debate about mainstream issues and concerns?

Over the last year, Ed Miliband has shown himself adept at identifying and articulating issues that are bubbling to the surface of mainstream politics, but which have their roots in Britain’s current economic model. In speaking about falling living standards, rising energy prices and irresponsibility among the financial elite, the Labour leader has linked practical concerns that resonate with large sections of the country to his broader argument for a more ‘responsible capitalism’. These issues are politically potent precisely because they emerge from real and profound changes to Britain’s political sociology: the stagnation of wages, the polarisation of the labour market, the plateau of female employment, the financialisation of the economy and so on. Such interventions suggest that a political project for a more ‘responsible capitalism’ can be both radical in challenging the status quo and popular in harnessing mainstream sentiment.

However, it is striking that Ed Miliband has struggled to reap political reward from effectively tapping into these mainstream concerns. Labour’s opinion poll leads remain unspectacular given the economic context, but more significantly Miliband has yet to build political momentum behind the agenda of ‘responsible capitalism’. One common explanation is the absence of clear solutions to the problems identified. That is clearly part of the answer – and the more practical this agenda is the more potent it could be. However, it is also because Labour is largely absent from – let alone leading – the other part of the dominant economic debate. Put crudely, the centrifugal forces shaping British politics are the crisis of capitalism sparked by the banking collapse of 2008, but also the crisis of fiscal sustainability that has emerged in its aftermath (1). Until Labour is competing in the national debate about the public finances there will remain a huge drag on its ability to make advances on other aspects of ‘responsible capitalism’.

So far, this agenda has largely been advanced though Ed Miliband’s speeches, rather than underpinning Labour’s political, policy and communications strategy. And it is not yet routinely attached to everyday issues and popular concerns in ways that would enable it to lead the national debate. In the years before the last election, the Tories were effective at using the themes of Broken Britain, the bureaucratic state and then deficits and debt to shape political discourse – and establish the ground for their political agenda. While there is plenty of anger and many critiques of our current economic model, in the media and across the population, the project of advancing a more ‘responsible capitalism’ is not yet leading the mainstream political debate. It won’t succeed until it is.

 

Can it address its own strategic weaknesses (and expose its opponents)?

The next election is very likely to be dominated by the nation’s finances and families’ finances, with the health of both depending on the level of the deficit and the nature of contemporary capitalism. When asked recently who they trusted most to run the economy, voters chose Cameron and Osborne over Miliband and Balls by 12 percentage points (57 per cent to 43 per cent). When asked who they blame for Britain’s economic woes, 40 per cent say the last Labour government and just 14 per cent say the Coalition (Ashcroft, 2011). Despite Osborne having to downgrade Britain’s growth forecasts (again) and admit he would have to borrow over £100 billion more than planned in March, polls carried out since the Autumn Statement suggest the gap between Labour and the Tories on economic credibility has actually increased.

It is very hard to win a general election without being seen by voters as the party most trusted to successfully marshal the economy. And the last few months have shown that Labour will not automatically regain its economic reputation purely from relying on George Osborne’s failures. If the agenda for ‘responsible capitalism’ is to succeed it must directly address its strategic weaknesses, with credibility on the public finances and a perception that its statecraft became exhausted in government both certainly near the top of the list. Step one should be to integrate fiscal responsibility at the centre of its political strategy, a move which is both essential and advantageous for a number of reasons.

First, the intellectual case for greater responsibility in both the public finances and across the wider economy are two sides of the same coin: resting on the need for more balance, sustainability and long-termism in British capitalism. Running large deficits for long periods is not responsible – just like asset stripping, power hoarding or low wages. As well as an intellectual coherence in aligning these agendas, it would also help to address the perception that the last Labour government was too reliant on public spending and too reticent to confront market outcomes. Instead, to demonstrate that social democracy has something distinctive to offer in an era of fiscal constraint, ‘responsible capitalism’ must be used to reverse that previous formulation (2). Labour should be clear that it will advance its goals through a combination of fiscal conservatism and economic radicalism.

Secondly, by competing on the territory of fiscal responsibility, Labour would expose the Tories’ own strategic weaknesses. Faced with a crisis of capitalism, the Right has only been able to respond with a narrative of state failure, falling back on the same remedies it offered in the 1980s, when the causes of Britain’s economic problems were quite different. The last few years have revealed the limits of the Tories’ intellectual resources when faced with profound market failures – which could become a political vulnerability (3). If Labour’s commitment to fiscal responsibility were taken seriously, it could expose the flimsiness of David Cameron’s occasional genuflections in the direction of ‘markets with morals’ or ‘rebalancing the economy’ (4).

Third, embedding fiscal responsibility throughout Labour’s economic agenda would broaden the electoral purchase of ‘responsible capitalism’ – and its critique of the current government. Paradoxically, radical plans to shift the nature of British capitalism need to be built on a foundation of reassurance about the nation’s finances. This mix would help to reach out to voters (many perhaps not natural Labour supporters) who are angry about aspects of contemporary capitalism but also worried about the implications of deficits and debt, for instance on interest rates and the cost of living. This would help to draw more people into a potential electoral coalition in support of a more ‘responsible capitalism’.

 

Can it form the basis of a majoritarian coalition, with the potential to endure?

The goal of a more ‘responsible capitalism’ gives Ed Miliband an organising argument, but it is not yet attached to an electoral strategy capable of winning majority support at the ballot box. At its most basic, this means thinking through how it might be able to reach out to those groups of voters who have left Labour over the last fifteen years – especially those most decisive in determining the outcome of general elections. Whether pursuing a more ‘responsible capitalism’ can propel a more substantial shift in British politics, both ideologically and electorally, depends on whether the Left can use the emerging political landscape to forge new strategic relationships with rising and non-aligned segments of the population around this agenda .

Opinion polls suggest the only major shift in voting intentions since the 2010 election has been a switch of 10-12 per cent of voters from the Liberal Democrats to Labour (with Tory support broadly stable). This is highly likely to represent a change in where centre-Left voters are placing their support, rather than an increase in the share of centre-Left votes overall. The machinations of coalition politics will continue to throw up tough tactical questions for all the parties in the coming years. In particular, the fortunes of the Liberal Democrats and their electoral stance in relation to both Labour and the Conservatives (and vice versa). However, the main strategic challenge for advocates of a more ‘responsible capitalism’, across the centre-Left, is how it can extend its electoral reach and potential. This is a huge and complex task, but three priorities stand out.

First, this agenda must appeal to the interests and values of those groups who dominate the electorate, but who disproportionately support the Tories. For example, nearly 80 per cent of employees work in the private sector, but can ‘responsible capitalism’ help this constituency to improve their wages and treatment at work, strengthen their pension provision and welfare protection and offer them a better deal as consumers? Similarly, nearly 70 per cent of households are homeowners and by 2016 a third of the adult population will be over 55. Any viable electoral coalition must include significant numbers of both these groups too, though of course their politics will not be entirely defined by their age or housing tenure.

Second, Labour must regain the support of voters who have rejected the party over the last two decades. This debate is usually conducted through a class lens. However, forthcoming IPPR research analysing the values of voters suggests that Labour has lost support among those with attachments to both liberal and conservative sentiment (cutting across the conventional ‘Left/Right’ spectrum). This requires a delicate balancing act to broaden the Left’s electoral coalition, not least by showing greater attentiveness to issues of culture, identity, relationships and recognition in its argument about ‘responsible capitalism’; reaching beyond the traditional terrain of rights and redistribution (Kenny, 2012). In particular, there is a premium on a statecraft which defends personal freedoms and an open society, but which take seriously small ‘c’ conservative concerns of various hues (which have often been co-opted by the Right despite containing real intellectual and political resources for the Left) (5).

The third priority in building a majority coalition is to expand the electorate, by getting groups who are currently much less likely to participate in formal democracy to vote. In particular, this means younger people and those from lower social class groups, who are least likely to support the Conservatives (6). However, the longer term prospects of advancing a more ‘responsible capitalism’ rest on cultivating political alliances with rising voter groups, such as graduates (as higher university entrance rates feed through to the population), renters (as homeownership levels fall) and non-traditional family types (as the male breadwinner model becomes an ever smaller minority). The Left is well placed to prosper among all these voter groups, but entrenching their support will not happen by accident.

The Thatcher and Attlee governments not only changed the country but actively built new voting blocks and coalitions of support for their parties among substantial electoral groups. Nationalisation and the establishment of the welfare state in the 1940s created a powerful coalition of beneficiaries which provided the backbone of Labour’s support in the post-war era. Similarly, the Conservative government’s assault on the union movement and its restructuring of the British economy in the 1980s cut away the foundations of the labour movement (from which it took almost two decades to recover). More proactively, council house sales bolstered the ranks of working class Tories, while privatisations created a new constituency with a stake in an asset owning democracy.

Neither Cameron’s early ‘detoxification’ strategy, nor the establishment of the Coalition government, have marked a modern equivalent of these shifts; structurally expanding the reach of the Right into the natural territory of the Left. In fact, austerity has left the Tories with a narrow path to a majority at the next election, given their high negatives among young people, public sector workers and voters in the North and Scotland. The opportunity for Labour is to be the only genuinely ‘national’ party. To succeed, an agenda for ‘responsible capitalism’ would need to be capable of forging alliances between established Labour voters and those less traditionally aligned with the party (especially voters in the South, older people and those in social class ABC1). Seeking to unite working and middle class Britain against the top one per cent is a good place to start – as well as avoiding Labour being attached exclusively to electoral enclaves, such as public sector workers, ethnic minorities, the metropolitan elite or those on benefits.

 

Can it mobilise an alliance of political forces across society to help advance it?

Advancing a more ‘responsible capitalism’ will require more than electing a government committed to using the levers of state power to help bring it about. Labour – and the broader centre-Left – need to not only construct a majority coalition of voters but also build relationships with those sources of political agency that could be partners in a shared endeavour. That, in turn, means recognising that neither the state nor one political party alone has the sole ability to bring about change. In fact, steps towards a more ‘responsible capitalism’ are likely to be most effective and enduring when the broadest possible range of individuals, interests and institutions are engaged in bringing them about. That does not mean that the state – or the Labour Party – have no role to play. But any political strategy which invests all power and responsibility in these sources of agency will be unlikely to succeed.

This insight focuses attention on the potential for alliances to be built across society, reaching out to a broad range of constituencies with political agency. Crucially, these should be those who could not only support economic reform, but be active participants in advancing it. Ideally, such partnerships would be forged among institutions and interests on the rise, with momentum behind them – particularly in British business. This could include alliances of non-financial sector, non-London industries. It could also harness the growing significance of the ‘social economy’ (or mutuals and co-ops) and ‘small economy’ (of freelancers, the self-employed, and small and medium enterprises).

In addition, trade unions interested in social partnership; ‘patient’ investors seeking long term returns (like pension funds); local and city governments seeking to spread growth and prosperity across the country; groups advocating consumer protections; and universities and colleges committed to education could all be other elements of a powerful coalition for a more ‘responsible capitalism’. Relationships among these organisations and institutions would have to be built over time, with each playing their part in advancing a different sort of economy. This can be started now, for example, through the ways firms treat their workers, investors deploy their capital, unions choose to organise, colleges design their courses and so on. Such an alliance should also seek to harness energy from outside formal politics, such as the Occupy movement, but in ways which build links to mainstream concerns and practical actions.

 

Conclusion: Thatcherism or Big Society?

Ed Miliband’s party conference speech provided an answer to critics who had said they didn’t know what he stood for. This essay has tried to show some of the steps needed to turn that moral argument for a more ‘responsible capitalism’ into a political strategy capable of actually achieving it. Advancing a paradigm shift in the structure and character of the British economy is a monumental task. For it to have a chance of succeeding, the Left must construct an agenda which: speaks to and leads the central political debates of the age; addresses its own strategic weaknesses and exposes those of its opponents; forms the basis for a majoritarian coalition of voters; and can mobilise an alliance of political forces prepared not only to support change but be active partners in bringing it about.

This is a very demanding and paradoxical set of conditions, combining reassurance and radicalism; with firm roots in the mainstream and the courage to challenge the status quo. It rests on much more than an argument about ‘values’ – and requires a focus primarily on strategy, rather than policy or polling. In thinking about this task, the experience of the Right offers instructive examples. Thatcherism achieved ideological and electoral hegemony, embedding dramatic and lasting change in the economic fabric of Britain, while building a Conservative majority which lasted for nearly two decades. By contrast, the Big Society has inspired some notable speeches and a well-tuned critique of New Labour’s statecraft, but (so far) no prospect of intellectual dominance, electoral purchase or a governing agenda. In the end, the quality and execution of political strategy will significantly determine which of these paths Ed Miliband’s argument for a more ‘responsible capitalism’ will turn out to emulate.

 

References

Ashcroft, Lord (2011) The ChEx Factor: Economic Leadership in Hard Times, at http://lordashcroft.com/pdf/27112011_thechexfactor.pdf.

Cooke, G. (2011) Still Partying Like it’s 1995 – How the Centre-Left Can Grasp the New Sources of Energy in Society to Transform Politics, London, IPPR.

Kenny, M. (2012) Identity, Community and the Politics of Recognition, London, Policy Network.

Miliband, E. (2011) speech to the Social Market Foundation, 17.11.2011, at http://www.smf.co.uk/assets/files/resources/Ed%20Miliband%20speech%20to%20Social%20Market%20Foundation.pdf.

Miliband, E. (2012) speech at the Oxo Tower, London, 10.1.2012, at http://www.newstatesman.com/uk-politics/2012/01/labour-government-money.

Wood, S. (2011) ‘The God that failed’, New Statesman 29.9.2011.

 

Notes

1. There is also probably a third – related to culture, identity and nationality – but for reasons of space and clarity, this essay focuses on the economy.

2. George Osborne’s economic failures mean that the need for action to reduce the deficit is almost certain to extent into the next Parliament. 

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