Wednesday 5 January 2011

How can we live with markets?

The new year gets under way with Labour hunkering down to begin work on its policy review in earnest. The latest Fabian Review is published today – that’s the cover above – and says Labour doesn’t need to have all the right answers now, but needs to make sure it is asking the right questions.

As Next Left reported back in October, Liam Byrne is the man tasked with leading Labour’s rethink and he writes in the magazine that the biggest challenge is to put Labour’s political economy on the table. Byrne has been chipping away at this theme since the election, and here he asks: “how is Britain going to make its fortune in the world that is coming?”

Globalisation shifted gear and direction whilst Labour was in office and the party needs to come to terms with this new world:

“The American consumer – once 25 per cent of US GDP – isn’t going to be the same force he or she once was: $8 trillion of US wealth has been destroyed and returning to sustainable levels of debt after a financial crash takes a good six or seven years. You can’t write off an American recovery, but you can’t bet on it either.”

The stark reality of American fallibility means “global growth will be increasingly about the ‘rise of the rest’. Brazil, Russia, India and China will be four out of the five largest economies by 2050. They can go it alone now, whether we like it or not”.

This means a huge task for Labour’s policy review will be reassessing markets and working out how to make them operate more fairly, after years of letting them run pretty much how they please. As Byrne puts it, “how we bend global growth so it works for us.”

This develops his – and Labour’s – current theme of the ‘squeezed middle’: Labour didn’t do enough in power to recognise the destabilising forces that globalization unleashed across society. “We need to show how globalisation can help finance a rising quality of life and not be a constant worry,” he writes.
“We can’t all ride on the back of a few global winners as perhaps we did a little too much in the past. We do need a new ‘bargain with business’ where we help business succeed but, in return, if workers make businesses more profitable they need to get a pay rise … We have to construct a political economy in which everyone can prosper in an increasingly interdependent Britain where people, migration and capital move ever faster.”

This idea of 'fair shares from a return to growth' is one of the most fertile strands of Labour's post-election thinking. You can read the full article here and there are more details about this New Year Conference special issue of the Fabian Review here.

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