There is nothing quite like a party leader unveiling a shiny new neologism to set off Westminster’s chattering classes. On Thursday, at a Policy Network conference at the London Stock Exchange, Ed Miliband did just that, unveiling the concept of ‘predistribution’ to a gathered audience of academics, economists and journalists.

In truth, it is a word that has been on the tips of Labour thinkers’ tongues for a while. In my contribution to Progress’ Purple Book I used it to describe how we might distribute economic power more evenly, while Rachel Reeves has also used it in an excellent recent essay for the Fabian Society. Meanwhile, earlier this year Stewart Wood flagged it up in an article for the Guardian, demonstrating that it has been on Ed’s radar for some time too.

Unlike most political neologisms, such as the ‘big society’ or Nick Clegg’s comical ‘Alarm Clock Britain’, ‘predistribution’ does not try to describe a present or future society.  More political methodology than grand vision, it is, in the words of Joseph S Hacker, the Yale professor of political science who first coined it, ‘the way in which the market distributes its rewards in the first place’. Whether through excessive financial deregulation or the weakening of employment legislation, the contemporary policy trend, he argues, has shifted this distribution decisively towards those at the top. Our destination remains the fairer, more responsible capitalism that Ed articulated in his conference speech last year. What predistribution provides is the roadmap for getting there. It means ensuring that economic power and the proceeds of growth are more evenly spread throughout the economy before redistribution; about reform of the underlying structure of the economy rather than its amelioration. Redistribution tops up low wages with tax credits. Predistribution provides higher wages in the first place.

Of course this does not mark the end of the Labour party as a party of redistribution. Any sober assessment of tax credits must take account of the fact that between 2003 and 2008 only tax credits prevented the total stagnation of disposable income levels for the ‘squeezed middle’ of low to median earners, despite overall GDP growth. But if anything this disconnection between growth and living standards only strengthens the case for a change in our approach. Globalisation has rendered our previous agnosticism to the way in which wealth is created hopelessly redundant and the state should not need to paper over the cracks in an economy that is failing to generate inclusive growth.

There are three other reasons why an emphasis on predistribution is preferable. First, while Labour did not lose the last election because of our record on redistribution, there is a danger that too much redistributive zeal might hamper our ability to win the next one. When the moment comes, there is no doubt that the Tories will deploy their usual array of populist arguments on ‘welfare recipients’ and ‘tax and spend’. And, worryingly, more reactionary attitudes to redistribution do appear to be on the rise. A focus on predistribution will open up new battle-lines, such as the proper role of government in the economy. But we will at least be able to avoid some of our perennial pitfalls.

Second, strategies that rely too heavily on redistribution often fail to capture the central importance of power: that without the power to use them, resources are useless. To characterise, crudely, there is no point showering people with benefits if they lack the capability to access basic services or if they feel completely disengaged from society.

Third, and perhaps most importantly, our traditional approach is simply no longer economically viable.  The unfortunate history of the Labour party is that when it acquires access to the levers of state, it forgets about all other apparatus of engendering change.  In 2015, a comprehensive statist approach, in terms of redistribution and public sector investment, will not be fiscally possible even if promising it did not undermine our economic credibility (which it does).  This does not mean that state action has no place on the predistribution policy menu – far from it. However, it must be focused on smart, inexpensive interventions that have the power to reshape the existing rules of the market. For example, a network of regional investment banks, underwritten by the state, could provide the access to finance currently lacking for SMEs to ground a shift to a more sustainable, rebalanced economy. Yet we must also become far more adept at harnessing the power of other institutions that can create change, such as cooperatives, trade unions, civil society organisations and even the Labour movement itself.

If Ed is right – and I believe he is – that 2008 represents a 1945 or 1979 moment, when the hegemonic political economic order collapses in the face of new challenges, then the Labour party too must change. Old answers will not be enough and the truth is that we face an almighty intellectual crisis. Our dominant ‘Croslandite’ political economy, of acquiescing to market outcomes in exchange for redistributing the proceeds of its ‘perpetual growth’, has run its course, unable to answer the question ‘how do we change society in a restricted economic environment .’  To convince the electorate we have answer to that question will not be easy. And of course ‘predistribution’ is not doorstep-friendly phrase. Yet in committing to it, Ed has shown that the party is ready to begin that difficult journey.

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Tristram Hunt is Labour MP for Stoke-on-Trent Central, a historian, and author of a chapter of The Purple Book Reviving our sense of mission: designing a new political economy

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Photo: David Sim