Eighteen months ago the Washington-based Center for American Progress convened a formidable array of global policymakers and handed them a brief to investigate one of the central problems of our time: why many developed economies are suffering low growth and rising inequality.

Shadow chancellor Ed Balls and former United States Treasury secretary Larry Summers were appointed co-chairs. Senior economists, former finance ministers and business leaders took part. They were also supported by a talented staff, including IPPR’s Will Straw who is fighting the key seat of Rossendale and Darwen for Labour in May.

Today saw the United Kingdom launch of the Inclusive Prosperity commission’s report, and at its heart is a simple premise: ‘Nations need to ensure both that economic growth takes place and that it is broadly shared.’

The historic flaw of the free-market right was to put all the emphasis on the first half of that sentence, seeking growth but doubting the efficacy or the desirability of action to ensure its proceeds were fairly distributed. The left occasionally succumbed to the opposite danger, with all the focus on redistributing wealth but less on creating it in the first place.

Bill Clinton in the US and Tony Blair in the UK sought to address those weaknesses through a ‘third way’ which recognised the benefits of open markets and also emphasised the role of education in equalising opportunity and of tax transfers in ensuring that work pays.

But in recent decades the economy has changed in ways that make it harder to achieve the objective of inclusive prosperity.

Technological change has made many skilled manual and clerical jobs obsolete. Many who are in work find that their employment is insecure, with short-term or zero-hours contracts. The share of national income going to employees in wages has declined while the proportion going to shareholders in dividends and share-price increases has risen.

The commission puts forward five principles which it argues should underpin policymakers’ response to these trends.

First, wage growth in a full employment economy must be a priority. For example, by removing barriers to women’s participation in the labour market and enabling workers to benefit from productivity gains through share ownership.

Second, the level of skills must be raised, with improvements to early childhood and school education and reduced financial barriers to higher education.

Third, governments should support innovation, with cities given the tools to create clusters for growing industries.

Fourth, corporate long-termism should be encouraged, with executive pay aligned to fostering productive capital investment and long-term profitability.

Fifth, international action is required on the issues that cross borders, from immigration to tax avoidance.

There will be broad support for these principles but there will be real challenges in putting them into effect.

For a start, achieving sustainable growth today is made harder by the possibility of ‘secular stagnation’. Summers has argued elsewhere that there may have been a long-term fall in the level of economic growth that can be combined with full employment in the absence of a credit bubble. If that is the case, governments will receive no helping hand from conventional monetary policy.

At the other extreme, there is a danger of declaring victory too quickly. George Osborne hailed last month’s inflation figures as suggesting the cost of living crisis may be over. But the drop in inflation is mainly due to the global fall in oil prices and does not therefore vindicate the chancellor’s domestic economic strategy. Indeed, wages are still lower in real terms than they were five years ago, so ordinary families remain vulnerable in the event that prices rise as suddenly as they have fallen.

All this suggests that the long-term challenges facing developed economies are as deep as they were when Ed Miliband first began highlighting them.

In this report, Balls and Summers offer a compelling diagnosis and a persuasive prescription. If Labour wins the election in May, the task of administering it will fall to Balls himself, and we must all hope that he succeeds.

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Stuart Hudson is a former Downing Street adviser and is now a director at the corporate communications firm Brunswick

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