Ed Miliband at the CBI: why we still need a responsible capitalism

The coalition has lost all interest in any sort of economic rebalancing in its dash for short-term growth.

The coalition has lost all interest in any sort of economic rebalancing in its dash for short-term growth

Notwithstanding the hot air this week surrounding Ed Miliband for ‘not looking prime-ministerial’, there is a real problem at the heart of his leadership: the inability to find a theme and stick to it.

Thus far we’ve had One Nation Labour, predistribution, responsible capitalism and the ‘cost of living crisis’.

Almost as soon as each of these ideas has been announced it’s been dropped. Labour’s fleeting attachment to each is evident in the fact that the public appears to have very little idea as to what any of it actually means – apart from the ‘cost of living crisis’ which – even worse – has now turned into a cliché.

In the same way the Conservatives have dropped all talk of rebalancing the economy in their dash for growth, Labour appears to have side-lined big ideas in favour of a handful of policy offerings.

And therein lies Ed’s problem: Labour has no big narrative as to how it plans to make Britain better. It all feels a bit ‘our cuts will be a little nicer than the Tory cuts’.

Considering Ed is speaking at the Confederation of British Industry today (CBI), it seems a pertinent time to ask: what happened to the responsible capitalism agenda?

The Berlin Wall commemorations this week should act as a reminder that capitalism is still the only show in town. That need not oblige one to accept utopian formulations about an ‘end of history’, but it does mean accepting the obvious: whether one favours social democracy or its neo-liberal counterpart there really isn’t another economic option on the table.

The Soviet Union fell because Mikhail Gorbachev tried to reform it. But Gorbachev tried to reform it because the Soviet economy was by the early 1980s bankrupt, just at today the economies of Cuba and North Korea are bankrupt. Economic planning could produce vast numbers of armaments, but it was unable to deal with the complexities of a modern economy anywhere near as well as the market.

With this in mind there are two options open to the left: to try and temper the neo-liberal settlement or to embrace the right’s free-market utopianism and seek to roll back the state even further.

Despite my striking a fairly pessimistic note thus far, all is not lost. Utopianism may have run out of road, but considering the damage it inflicted during the previous century that really isn’t such a bad thing. This is part of what makes Russell Brand’s ‘pitch’ so tedious: with his talk of ‘revolution’ he’s about a century too late. In future meaningful reform will be gradual, unglamorous and will require compromise – anathema to the adolescent mind-set.

On the back of the financial crash – a savage indictment of neo-liberal finance capitalism if ever there was one – Labour still has a real chance to make the case for a more responsible capitalism. The idea is a simple one: capitalism is the best system in terms of creating wealth but it also creates inequalities. The role of the state is to mitigate against that but also to ensure that business as well as the citizenry behave responsibly.

That means being anti-bad business, rather than anti-business. Against wild profiteering and burgeoning inequality, but not opposed to capitalism as an economic system.

It’s worth quoting a former director-general of the CBI, Sir Richard Lambert, on why both the neo-liberals and those who are nostalgic for some kind of state-dominated economy are wrong:

“We have learnt two big economic lessons over the past 30 years. The first is that markets do better than governments at increasing living standards. The Soviet empire was brought down by economic, not military, failure. China’s dramatic rise came about when its government let markets engage in its development. But markets can also get things badly wrong, as we saw in the banking crash. The second lesson is the need for responsibility in capitalism to justify the freedoms on which markets thrive. Key here is ‘sustainability’ – building businesses for the long term, rather than maximising today’s profits.”

This ought to encourage rather than breed despondency on the left. It confirms Miliband’s central argument: that the financial crash should have killed the blind adherence to Thatcherite dogma much as the fall of the Berlin Wall freed the left from its bondage to planning.

So while Ed will today focus on some of the micro economic issues – he will call it “a joyless [economic] recovery for so many because it is a pay-less recovery for so many: a recovery without wage growth” – he would do well to link it back to previous efforts to start a dialogue on responsible capitalism.

The coalition has lost all interest in any sort of economic rebalancing in its dash for short-term growth. But the issue isn’t going to go away. As this week’s Berlin Wall commemorations remind us, capitalism is the only show in town. Better, then, to focus on ensuring it works for the greatest number possible.

James Bloodworth is the editor of Left Foot Forward. Follow him on Twitter

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