The Progress editorial this month has correctly identified that the absence of a distinctive Labour project for the British economy has made it difficult for us to re-establish our credibility and take George Osborne successfully to task. All politicians claim to be concerned about the United Kingdom’s productivity problem and even the Tories would not wish to be associated with the unacceptable face of capitalism. There is a rich agenda here and the political territory is vacant. Osbornomics remains a curious cocktail of milder austerity, shrinking the state, low taxes, deregulation and a shifting of social objectives from the public to the private sector. None of these policies will solve the nation’s deepest problems.

The task of rebuilding a credible Labour prospectus depends on our willingness to recognise the errors we made in government. It is easy to say that we got it wrong on financial market regulation, but a bit of banker-bashing plus a return to the pre-crisis policy mix is unlikely to do the trick either. This is just as flawed as the government’s approach.

Yes, the Labour government looked credible until the crisis hit, but throughout this period leading members of the cabinet were in thrall to the conventional wisdom. Labour’s policies owed more the International Monetary Fund and the Organisation for Economic Cooperation and Development than to anything distinctively social democratic. Essentially conservative Treasury officials would have confirmed the message: don’t tinker with the UK’s economic model, don’t kill the goose laying the golden eggs funding Labour’s anti-poverty programme as well as the extra spending on education and health.

It did not have to be like this, of course. In the early period of Tony Blair’s leadership there was some innovative thinking taking place about how to make British capitalism more productive and responsible. His speech on the stakeholder economy, delivered in Singapore in 1996, promised much but delivered little once the extent of business opposition became clear. It is true of course that Labour instituted a major review of company law, which included some consideration of the stakeholder argument, but ended up endorsing the notion of ‘enlightened shareholder value’, with some minor changes to directors’ duties and the continuation of the status quo. In practice, Labour was managing the post-Thatcher economic policy settlement and undertaking redistribution by stealth.

More seriously perhaps, the party went through an incomplete process of modernising its principal goals. The revision of Clause IV in 1995 is better remembered for what was dropped – the commitment to rising levels of public ownership as a proxy for socialist advance – than for the communitarian commitment it now contains. One could say that the party was left with a slightly inaccurate ideological compass, the weaknesses of which became clear when the crisis hit. It is all very well to say that ‘the enterprise of the market and the rigour of competition’ must be allied with ‘partnership and cooperation’, but this offers little guidance when the economic model on which it rests collapses. The need for a fundamental rethink should be clear.

An obvious answer from enthusiasts for Jeremy Corbyn’s leadership is that the work of reconstruction was initiated in the leadership campaign. Anti-austerity, anti-privatisation, ‘quantitative easing for the people’ and a commitment to greater income equality offer us all the guidance needed for the future. I am not so sure. What is most striking about the Corbyn project as it is unfolding today is the absence of an economic policy project. The focus appears to be as much on foreign and defence questions as it does on the economy, which is something of a historical curiosity for the left. When Tony Benn and his supporters held the levers of policymaking in the party in the 1970s and early 1980s they did have a clear vision and programme. This included: a critique of the machinery of the state, which meant that both parliament and the civil service had to be reformed; a critique of British capitalism (you could not trust British business to make the long-term investments that were necessary to secure the national interest); and a critique of the Labour party itself. Labour governments had failed because the wrong people were in control. Deselecting the dead wood and ensuring that good socialists were in the House of Commons would usher in the new dawn. Corbynism conspicuously lacks this comprehensive narrative and is apparently focused on ‘reforming’ the party. Bennery may have been taken out of the deep freeze in which it has languished for the last 30 years but the most interesting ingredients have disappeared.

Of course, the left’s policy menu in the 1970s and early 1980s only made sense if you accepted its initial premises. As we learned to our cost in 1983, these premises were either off-beam, fundamentally wrong-headed or electorally unpopular. Returning to this mental model for the development of economic policy would be a catastrophic mistake.

The intellectual heavy-lifting will need to be done by Labour moderates. Both Tristram Hunt and Liam Byrne have recently delivered speeches setting out some initial thoughts, which offer a critical assessment of what Labour got wrong in government and what needs to be done today – including, in Byrne’s case, a comprehensive recasting of Clause IV.

Nonetheless, really interesting thinking about the thorny problems of macro-economic policy is still more likely to be found outside the party than within. Both John Kay and Adair Turner have just published major pieces setting out genuinely radical thoughts about the role of financial services in the British economy, a new regulatory architecture and (in Turner’s case) some very challenging ideas about the conduct of monetary policy, moving beyond the narrow notion of inflation targeting. If Labour is looking for some inspiration it need look no further. Not all of Kay and Turner’s ideas are politically practical but they at least give us a place to start.

The task may be difficult but the challenge is not insurmountable. The best approach, perhaps, is to draw on that current of revisionism in Labour’s tradition exemplified by Anthony Crosland, Roy Hattersley and the early period of New Labour. Crosland identified the following ethical foundations of Labour’s message:

• A protest against material poverty and physical squalor.
• A wider concern for social welfare – for the interests of those in need or oppressed.
• A belief in equality and a classless society, particularly the desire to give workers their just deserts and responsible status at work.
• A rejection of ‘competitive antagonism’ exemplified by an ideal of fraternity and cooperation.
• A protest against the inefficiencies of capitalism as an economic system, notably its tendency to mass unemployment.

 
 
He believed that the first and fifth problems had been solved by the creation of the welfare state and the commitment of all governments to full employment. We might be a little less sanguine today, not least because poverty and inequality will almost certainly rise over the next five years. Moreover, while the British economy has a proven ability to create lots of jobs, recent experience (and robust social science) shows that we should be profoundly concerned about the quality of employment. Capitalism in its current incarnation remains ‘inefficient’; it is hard to view the global crisis as anything less than a complete system failure. The essential message remains correct, however. We should be unsparing in our willingness to look hard facts in the face, draw a clear distinction between the means we use (which can change) and the ends we seek (which remain consistent) and recognise the need for political flexibility in response to developing economic and social realities. It is the cast of mind that is most important. Labour has to be open, questing and genetically dissatisfied with the status quo. This should be the frame that shapes the development of a distinctively Labour economic policy project in the future.

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David Coats is visiting professor at the Centre for Sustainable Work and Employment Futures, University of Leicester

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Photo: Dominic Campbell