Globalisation poses an existential question for Labour
Progressive parties across Europe are battling to adapt to globalisation. Open markets and technological change create huge opportunities for consumers but they also shake up industries and bring deep insecurity to employees.
For the left, one possible response is to raise the drawbridge. This is the politics of trade barriers at the border, tougher regulation at home, plus a heavy dose of technological Luddism. When it is tried it usually ends up hurting the poor the hardest.
Here in Britain New Labour offered a different answer. Instead of rejecting globalisation, it was argued that we should embrace it while putting our efforts into giving British workers the right skills to attract the best jobs in the ‘new economy’.
This is an appealing idea – and a Labour government should always have a strong focus on skills. But changes in the global economy mean that improving skills, on its own, will not create enough high-quality jobs for everyone who wants one.
First, only a small proportion of jobs are actually in sectors that are internationally competitive. As Adair Turner points out, fewer than 100,000 people work for Microsoft, while more than a million work for Walmart. Most people work in sectors such as retail or leisure where it is unlikely or impossible that skilling up the workforce in one country will enable jobs to be attracted from elsewhere.
Second, newly industrialising countries are fast churning out highly qualified employees at a lower cost than in the west. The social scientist John Goldthorpe has argued that even where jobs are in tradable sectors we cannot expect unlimited numbers to be attracted into Britain.
For progressives this poses a challenge to both our values and our politics. It is a moral affront that people should be denied the dignity of labour, or condemned to work that fails to utilise their talents.
The political challenge is that if ‘our people’ are the losers from globalisation, and we offer solutions that are unrealistic or counterproductive, they will have precious little incentive to vote Labour in the years to come. The risk is that they are tempted into the false but welcoming embrace of populists on the left or the right.
The progressive response to this scenario must have three broad elements. First, macroeconomic policy should aim for as close to full employment as possible. George Osborne told us that this was unrealistic because government investment would simply crowd out private investment and the long-term effect would not be to reduce unemployment sustainably but instead to increase inflation. That may be true in boom times but, as Ed Balls argued back in 2010, if the government pulls back hard at the same time as the private sector fails to invest, the consequence will be stagnation or recession. Subsequent economic performance across Europe has proved Balls right.
Second, smart industrial activism can make Britain – and especially those areas of higher unemployment – a more attractive place in which to invest. For example, Andrew Adonis recommended in his growth review that local enterprise partnerships could be empowered with larger devolved budgets to promote infrastructure and economic development, in return for credible growth plans. Independent thinkers on the right such as Michael Heseltine have also taken this view but have been rebuffed by David Cameron.
Even with these actions, however, many people will find that their working lives are characterised by a degree of insecurity unknown to their parents or grandparents. This is where the third element comes in. Progressive governments must help their citizens, especially the vulnerable, to navigate the manifold challenges of the new economy. This includes the building-up of child trust funds in their youth; the availability of learning and retraining throughout their working lives rather than just in their teens; the portability of pensions between jobs to enable them to save for retirement; and a ‘national care service’ to guarantee the nursing and personal care they will need as our population ages.
It is beyond the wit of governments to stop globalisation – and it should be beyond their wisdom to try. We need an approach that is rooted in our values and genuinely suited to addressing the challenge of our changing global economy.
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Stuart Hudson is a former adviser to Gordon Brown
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