It’s the economy, stupid!’ The slogan that propelled Bill Clinton to the presidency was backed up by a clear plan for America’s economic future. In the 1990s New Labour drew heavily on its promise of stability and fiscal responsibility; ‘welfare to work’; ‘fair taxes’ and increased public investment. The 1990s focus was domestic, assuring voters that New Labour would not repeat the disastrous mismanagement of its Conservative – and Labour – predecessors. This 90s approach now needs a thorough rethink: not to ‘throw the baby out with the bathwater’, but to adjust to the global age.
At Policy Network’s Progressive Governance Conference in April, Gordon Brown demonstrated his personal mastery over the banking crisis, rising energy and food prices, the new inequalities that globalisation accentuates, and the looming threat of climate change. However, to transform this policy richness into effective politics requires demonstrating both a clearer connectedness between global issues and everyday voter concerns, and the solidity of Labour’s answers as opposed to the shallowness of our opponents.
Take the present financial market crisis, now spilling over into housing and consumer spending. The Conservatives will blame Brown for the failings of our domestic regulatory system. But the much bigger failure is international. International banks trade across borders in securities they imperfectly understand, incentivised to take unacceptable risks by salaries and bonuses of gross unregulated excess: that’s not just my view, it’s the governor of the Bank of England’s.
Britain should propose a bold European plan: not just better Europe-wide regulation of markets, bankers’ bonuses included, but also promoting new global solutions that a new US president could back. This plan should address the interrelationships between global imbalances generated by the dramatic shift in global economic power to Asia; the maintenance of open trade through a Doha deal that is presently on its last gasp; and ‘post-sovereign state’ financial rules.
At the same time Europe should propose reshaping the anachronistic international financial institutions on the basis of a new Bretton Woods and a new G7 of the US, China, India, Japan, Brazil, South Africa – and Europe – acting as one. Such a bold plan anticipates the new global realities and would, at a stroke, make Britain a force to be reckoned with in Europe. It would leave our ‘little England’ Conservatives standing helpless at the starting gate.
As problems in credit markets threaten recession, the upsurge in commodity prices heightens risks of inflation. International pressure on oil producers may succeed in easing prices somewhat. But big structural shifts are underway in the world economy, principally as a result of rising Asian demand. Higher oil prices are here to stay. The government cannot give in to ‘fuel protesters’ or expect the Bank of England to go easy on inflation – and as inflation hurts the poor most, every social democrat should agree.
Rather, Brown should take a lead in launching a national energy security programme: immediate help with cutting power use and power bills with generous incentives for conservation and an extension of winter fuel payments to poor families as well as pensioners; improving access to cheap public transport as an alternative to the car; and a return to national planning of energy schemes that enhance both security and climate change sustainability like tidal barrages, nuclear new build and carbon capture from coal-fired power stations. Labour should stand up to Conservative opportunism that opposes ‘green’ taxes, but ‘hypothecate’ the increased revenues to kickstart this programme.
But to tackle climate change, high energy prices will need to go still higher. The government should present a 2020 fiscal plan showing how the revenues from green taxes, auctioned emissions permits, and road pricing will be used to promote long-term sustainability. In the next couple of years the plan should allow borrowing to rise as the economy slows and permit more immediate help to the badly off. However, rising revenues over a 10-year period should be used, first, to curb borrowing as the economy recovers from the present slowdown and restore the damaged credibility of the ‘Golden Rule’; second, to build a carbon-reducing national network of high-speed trains; and, third, to implement a radical tax reform that channels tax cuts to the lower paid who stand to lose most from higher energy prices and the inequalities of globalisation.
Such an agenda would require courage – but when you’re in a hole, honesty in facing up to the long-term challenges is far better than fingers crossed, ‘a week is a long time in politics’!