Thursday, 4 December 2008

Mandelson brings the state back in

New Labour is whatever a New Labour government does, as Peter Mandelson's grandfather might have noted during the last few weeks.

But Peter Mandelson's own call in last night's Hugo Young memorial lecture for New Labour to become "a lot more pragmatic in assessing the extent to which markets can and do fail, or at least fail to produce the best outcome for our society and our economy as a whole" was much more than a pragmatic argument for "what works".

Mandelson offered as clear an account of the social democratic argument - "that we have been presented with problems that only government can solve" - as we have heard from a Labour minister since the economic crisis began.

Of course, a certain amount of triangulatory exposition of the limits to government was deemed necessary, to clarify that Mandelson's argument for a more active state is, of course, no return to "Old Labour". (It was a tactical masterstroke to claim the interventionist mantle of Michael Heseltine - reminding us of a significant centre-right political tradition, and yet one which is anathema to this Eurosceptic generation of Tories).


My basic argument tonight is that there are more than two ways of looking at government – being for it or against it. It is not a choice between, on one hand, the post-war, big state as a primary instrument of economic planning and a guarantor of equity; and, on the other, the minimalist view that state intervention simply gets in the way of efficiency and enterprise.

I want to argue for a model that is neither. Not larger government, but a more capable strategic state that works with markets. One that does not try and run everything itself, but which understands how to steer and shape the networks and institutions of a globalised economy and society.


But Mandelson's is an essentially social democratic argument - about the necessary, foundational role of government. Yes, this is pro-market. Social democrats believe in markets. But Mandelson was also clear about the most important philosophical argument between the centre-left and the libertarian, small government right:


Managing a capitalist economy involves pragmatic judgements about what more can be done to enable markets to deliver, and where exactly the roles and responsibilities of governments lie. The state as lender of last resort is an important metaphor: ultimately it is government that keeps the show on the road.


This is to argue that it is not the "free market" which is primordial, with the burden of proof against government interventions in this natural order of things. Rather, markets depend on government for their existence and persistence.Moreover, he noted too that social legitimacy is derived from democratic politics, not unchallengeable market outcomes.


For all their value markets will not necessarily produce all the conditions that maximise our potential to prosper and compete
in a global economy. Those conditions will result from political choices and public debate and will be produced in many cases through the action or influence of government. It is political choices and government that will make sure our society continues to produce the general education, science base, research and development that businesses tap into and build on. It is politics
and government that will determine the infrastructure we develop and on which a successful economy is utterly dependent ...
... We will use the dynamism of markets and myriad decisions taken by private enterprise to deliver many of the goods we need. But our priorities themselves, and the overall frameworks within which private sector decisions are made, will be defined by our democracy and the interaction between government and business.


And maintaining both the efficiency and the legitimacy of markets depends on public spending and redistribution, to ensure the gains of global openness are shared.


In the OECD over the last twenty years, as globalisation has accelerated and Europe as a whole has become progressively more economically productive and more competitive, the proportion of country spending on social transfers and goods provided by public spending has consistently risen. Where this spending has been done right – and it is done right a lot more often than
conservative mythology would have us believe - it has helped boost national income growth and built some of the most open and competitive societies on earth – including in Scandinavia and here in Britain. Basically, strong social welfare systems and redistribution can be contributors to economic growth.


So this was an important speech. Note that Adam Lent of the TUC thinks so too. There was a moment in the last week when the media reaction to the top rate of tax change seemed set to drive the government to be eye-wateringly New Labour, 1997 set in aspic, rather than adapting the social democrat argument to different challenges today.

This speech offers a counterweight, supporting what I feared could be the overoptimistic theory that the founders of New Labour are best placed placed to rethink the role of state and the market, as long as they are prepared to break with some of their own 'red lines'.

In many ways, Peter Mandelson's arguments are simply the common sense of mainstream European politics, on the centre-left and the centre-right.

Yet they still offer a stark philosophical, political and policy differences over the role of government between the two major parties in Britain.

4 comments:

Cristina said...

I recently came across your blog and have been reading along. I thought I would leave my first comment. I dont know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.


Deborah

Term Life Insurance

Robert said...

And of course advertise, nice scam

Robert said...

Good post, and I agree it was an important and promising speech. Blair supposedly cited one of his ambitions as making Labour love Peter Mandelson. That may not have happened, but the vituperation from sections of the party towards its former Communications Director seems to have dissipated. Mind you, there are dissenters - NS political editor Martin Bright told last weekend's Progress conference that Lord Mandelson's return to government was "impressive", but he "could still end up being Labour's Sarah Palin".

Returning to the speech, I applaud the very talk of a renewed industrial policy - and am of the view that a distinctive Labour agenda in this area is AS important as that over public services. It certainly assumed that role in the past, although often unhappily for the party.

The evocation of Lord Heseltine is interesting in another way - and actually reinforces the argument that cold economic reality can play havoc with supposedly fixed political ideologies. Heseltine may have expressed his taste for pre-prandial interventionism, but the defining of his time as President of the Board of Trade after the 92 election was his announcement that - alongside the privatisation of British Coal - 31 collieries were to close .
It was a decision opposed with varying degrees of militancy by the Labour movement. But it also generated a memorable front page in the Sun, which I delivered as a teenage paper-boy. Largely blank, it carried a picture of 'Tarzan' himself in the centre and the words: “This is how much Heseltine understands the suffering he is about to cause”. A threatened rebellion by Tory MPs also led to a slashing of the number of pit closures.

PS - there's some confusion here: There are 2 Roberts commenting on this blog!

Robert Alcock said...

Sorry, must post this again with the hyperlinks working!

Good post, and I agree it was an important and promising speech. Blair supposedly cited one of his ambitions as making Labour love Peter Mandelson. That may not have happened, but the vituperation from sections of the party towards its former Communications Director seems to have dissipated. Mind you, there are dissenters - NS political editor Martin Bright told last weekend's Progress conference that Lord Mandelson's return to government was "impressive", but he "could still end up being Labour's Sarah Palin".
Returning to the speech, I applaud the very talk of a renewed industrial policy - and am of the view that a distinctive Labour agenda in this area is AS important as that over public services. It certainly assumed that role in the past, although often not very happily for the party.

The evocation of Lord Heseltine is interesting in another way - and actually reinforces the argument that cold economic reality can play havoc with supposedly fixed political ideologies. Heseltine may have expressed his taste for pre-prandial interventionism, but the defining of his time as President of the Board of Trade after the 92 election was his announcement that - alongside the privatisation of British Coal - 31 collieries were to close.

It was a decision opposed with varying degrees of militancy by the Labour movement. But it also generated a memorable front page in the Sun
which I delivered as a teenage paper-boy. Largely blank, it carried a picture of 'Tarzan' himself in the centre and the words: “This is how much Heseltine understands the suffering he is about to cause”. A threatened rebellion by Tory MPs also led to a slashing of the number of pit closures.