Jonathan Todd

I had this on Labour Uncut a few weeks ago.

Tony Blair, according to his economics advisor as prime minister, isn’t much of an economist. In contrast – the only leader to take Labour to three general election victories – Blair is a politician par excellence. While others are better on economics, what Blair says and doesn’t say on the economy is politically insightful.

Let’s take four points made in his speech and the Q&A at a recent Progress event.

First, Labour should focus more on microeconomic debates and less on the macro-economy.

This seems an oddly technocratic point but reminds me of the view of Douglas Alexander and Jim Murphy that “Labour needs a draw on the deficit and a win on growth”. I suspect I took Alexander by surprise when I asked how we achieve this at a CLP dinner earlier this year.

I also suspect that Blair is giving his answer. We get a draw on the deficit by maintaining a strong line that closes it on the trajectory first specified by Alistair Darling. We get a win on growth not by making arguments about the economy as a whole but by crafting a series of bespoke policy offers sector by sector.

The combined impact of these offers would enable a win on growth and creates a series of talking points with business, which, as Blair stressed, matters because we won’t have this win until we have a phalanx of leading business people prepared to back us.

Second, these are distinct questions:

-          How do we make sure the crisis never happens again?

-          How do we get the economy moving again?

Separating these questions misses the golden thread of confidence. The economy won’t be moving again until we have confidence in a brighter future. We won’t have this until steps are seen to have been taken to mitigate the risk of the crisis of recent years repeating. Rock bottom public confidence attests that this isn’t coming from government.

There is opportunity in this for Labour. But we would create problems for ourselves if in reaching for this we undermine our deficit closure strategy or underplay the emphasis placed upon the tailored microeconomic offers suggested above. The priority should be these offers, rather than grasping for an elusive confidence bullet. As we roll out these offers, though, we should be thinking hard about what mix of financial, trade and fiscal policy that bullet might be composed of. We would be better placed to argue that our bullet is real on the back of some winning microeconomic arguments.

Third, the UK should join the euro when the economic conditions are right.

He’s been saying this for years. Yet the euro, at least as currently constituted, seems in contradiction with reality. As Italy looks ever more like a larger Greece, it threatens to make Lehman Brothers look like a tea party.

Blair, nonetheless, maintains that the geo-political clout of the UK would be maximised by euro membership. While this may or may not be true, euro membership now seems so far from the UK’s economic interest as to beg the question: What steps, if any, can a UK that remains outside the euro for at least the foreseeable future take to maximise our geo-political influence?

Targeting euro membership seems as 1990s as Britpop. Redolent of a time when BRICs were things you built housing bubbles with. Labour should, of course, continue to play a constructive role in the EU. However, we should also more strongly stress our support for updating the institutions of the global economy (e.g. the World Bank and IMF, including the global reserve currency advocated by Roger Bootle). Such reform would contribute towards minimising the chances of the crisis of recent years repeating. Labour advocacy would have us be the internationalist, far-sighted party that we should be.

Fourth, he rightly trumpeted his many achievements as prime minister.

While his government was characterised by much needed increases in public spending, unsustainably high tax revenues from the city afforded a large chunk of this. This un-sustainability goes a long way to explaining the deficit. These tax revenues were recycled through tax credits and similar but the distribution before this secondary redistribution was so skewed that many could only have the lives they wanted through accessing easy credit. This built up a stock of private debt that households are now struggling to pay down.

If a more equal distribution of income and wealth could be achieved without resort to secondary redistributions, these problems would be more containable. And Labour would have achieved its historic purpose. To serve this end, though, we need to return to government.

If done properly, thinking through and taking forward the ideas suggested by the economics of Blair can both make ourselves more electable and better able to realise our historic purpose in government.

I had this on Labour Uncut a few weeks ago.

The Labour front bench might not welcome advice from retirees, no matter how dignified. But they’ve got some. “Be a little bit more interesting”, said Peter Mandelson, in response to a question at a recent Progress event. National recovery from the major economic crisis of recent years requires big, bold ideas. He wants Labour to rise to this challenge.

This is the stuff of pragmatic radicalism on economic rebalancing. Pragmatism demands workable solutions to national concerns. The support that politicians, of all parties, proclaim for rebalancing the economy indicates that this is such a concern. The persistence of the imbalances in our economy – between domestic consumption and exports; finance and manufacturing; the south east of England and much of the rest of the UK – attest that this support is inadequate to purpose. A dash of radicalism is needed, for not only rebalancing to be achieved, but for Labour’s arguments to cut through the white noise of mainstream politicians professing support and delivering so little.

Many more elected city mayors are the stuff of this radicalism. Our top heavy state is a drag on economic performance. Elected city mayors are the next step on the devolution journey begun by the last government. The centre for cities and the institute of government recently called for their powers to be beefed up – through, amongst other things, chairing integrated transport authorities and co-chairing local enterprise partnerships. The common sense of people in cities voting for their leaders and retaking command of their destinies should be a truth loudly proclaimed by Labour – as should be the common sense of rewarding hard work.

The tax system can further help to make us into a nation of grafters. This means less tax on income and more on wealth. A land tax could form part of this transition. It would do something to dampen the British tendencies towards property speculation and bubbles. It might also form part of a Labour drive towards tax simplification. Because taxation of land is simple, it would be difficult to avoid.

Labour could win friends from UK uncut to the CBI with a considered drive towards tax simplification. UK uncut should appreciate simplifications that make tax harder to avoid and the CBI should value simplifications that support economic growth. A land tax offset by reductions in taxation on employment would reduce the capacity of the rich to avoid taxation and increase the extent to which everyone keeps the fruits of their hard work. Tax simplification should not be owned by the right. Nor should backing for dynamic financiers and entrepreneurs.

Labour should insist that the Vickers review ends with rock solid retail banks. These, and an expansion of our credit unions, are needed to support household saving. This isn’t just important for households themselves, but to generate funds to be recycled by financiers as investment in firms. Alongside this we need a flourishing of nimble financial services firms prepared to provide capital to enterprising SMEs. Such small businesses must be developed in green manufacturing but they will be more likely to do so if a credible price for carbon can be established.

At the moment this price comes from the ineffective EU emissions trading scheme (EU-ETS). Its failure merits much stronger condemnation, which should come from Labour. It either needs meaningful reform or replacement by a carbon tax. Either approach should be taken forward at the EU level, rather than in the form of the cack-handed move towards a carbon price contained in budget 2011. The likes of Bill Cash bar sensible policy from David Cameron on this. The prime minister is unable to lead in Europe but securing a robust carbon price should be part of the more tightly focused Europe that Labour champions.

Most immediately, the eurozone needs to face up to the tough choices of its on-going crisis. The EU also needs to recalibrate itself to our Asian century. The turbocharged development of the BRICs (Brazil, Russia, India and China) and similar does much to explain the expectation of Gerard Lyons, chief economist at standard chartered, that the global economy will at least double in size between now and 2030. Europe, though, will be in the slow lane unless trade links deepen with the rapidly developing world.

This means more EU activity where it can add value – a properly functioning EU-ETS, completion of the single market in energy, and a sticks-and-carrots offer to all Mediterranean countries equivalent in ambition to that given to eastern Europe on its transition from communism – and much less where it provides little but muddle and duplication. Subsidiarity needs to be taken much more seriously. Not just in terms of Brussels deferring to member states, but to regional and local bodies, such as elected mayors, and, in turn, to communities and individuals themselves.

This hard edged devolution would be driven by a sense of mission. This is what fires the best of the private and public sectors. It’s making Apple great that motivates Steve Jobs. The profits are a by-product. The Steve Jobses of a reformed British state have to be Labour politicians. The government are u-turning themselves into an ever decreasing circle of failed reforms and unfulfilled ambitions, and not least among these is their commitment to economic rebalancing.

Labour can do better. And we will be very “interesting” indeed when we do so.

This is a shortened version of an essay that appears in the new Pragmatic Radicalism publication.

Jonathan Todd is Labour Uncut’s economic columnist.

I wrote this for Labour Uncut today.

The financial crisis was unprecedented and complex. But the left’s interpretation of it tended to be straight-forward. Banks and bankers were bad. Government and politicians were good. Government saved the banks from themselves and would stimulate economies. This enlarged role for government made a “progressive moment” inevitable. Yet government is now being scaled back and the left is out of power across Europe.

The left must move beyond its misconceptions to recover. While Labour’s plans to close the deficit concede limits to government’s size, George Osborne was much quicker than Gordon Brown to acknowledge such limits. The lesson of the debate on the deficit during and after the general election is that the left cannot be abashed by fiscal reality. It must confront it squarely. This is a lesson that Barack Obama might now reflect upon as debate in the US on the size of government moves to a similar place to that in the UK in the six months or so prior to the general election.

Reluctance to acknowledge limits on government’s size indicate how little the third way shifted the left’s gut instincts. The girth of government is still too readily taken as a virility symbol of leftism. This is in spite of government sometimes being a shackle upon the people the left exists to empower. Of course, government isn’t always so. Often it is a saviour and liberator. But to only see these aspects of government is not to see the full picture.

Jim Larkin, a pioneer of the Irish trade union movement, said: “The great only appear great because we are on our knees. Let us rise”. Government keeps people on their knees when it pays people to do nothing while others work ever harder, penalises people for its mistakes in miscalculating tax credits and loses personal data on a grand scale. From the rural payments agency, characterised by late payments, to the learning and skills council, with its abrupt termination of 144 college building contracts, the catalogue of failing public institutions is considerable. It hasn’t gone unnoticed. Almost half the voters in the south believe that public spending under Labour was largely wasted and did not improve services.

They may not be wholly justified in this view, but it forms an important part of the present context. Within which, the notion, taken as given by much of the left, that the public would welcome an expansion of government in a “progressive moment”, was always flawed. The failings of the public sector under the last government, whether perceived or genuine, rolled the pitch for the aggressive bowling with which Osborne has dismissed the “progressive moment”.

The MPs expenses scandal, by encouraging cynicism about public service, also assisted this pitch rolling. No appeal to a revitalised Keynesianism or other reasoned argument could hope to override the emotional resistance to an argument from politicians in the aftermath of this scandal, and the long-term decline in trust that the scandal compounded, that said “let us have more of your money and control of your lives”. Which is what the argument for a bigger role for government within the “progressive moment” amounted to.

This isn’t to say that the public didn’t feel, and do feel, disgusted by bankers and let down by banks. It is to say that the left needs to acknowledge that people feel similarly about politicians and government. And understand why people feel so and act upon this understanding.

These feelings about banks and government seem consistent with the argument of a Labour party discussion booklet, Small Man, Big World, written by Michael Young in 1949. This was, as his later collaborator Peter Willmott summarised, that the large institutions of modern society tended to ignore the interests of ordinary people, who suffered collectively as a result. Ordinary people see banks and government, for the most part, as such large institutions. Fred the shed and an MP’s subsidised moat are closer in the public mind than the political class might like to admit.

The left’s recovery in the UK depends upon Labour’s ability to disassociate ourselves with these large institutions and to become realigned with ordinary people. This emphasis should be central to our attitude to banking reform. It should also be so fundamental to our approach to government that Labour comes to be synonymous not with more government, as in the flawed “progressive moment” thesis, but with a wholly different kind of government. This requires, as Patrick Diamond argues, moving beyond the Westminster model to change the state and citizenship.

Young wrote his pamphlet four years after drafting the most celebrated manifesto in Labour’s history. However, the enactment of this manifesto made him concerned about the implications of a centralising bureaucratic state. The left’s failure to grasp this insight, even after 60 years, explains the faulty expectation of a “progressive moment”. Our ability to now run with this insight will determine the strength and speed of our recovery.

I had this on Labour Uncut last week.

There is a piece of land registered on Landshare in every postcode in the UK. If you stacked every film shipped weekly by Netflix in a single pile, it would be taller than Mount Everest. The value of goods traded annually on ebay is more than the GDP of 125 countries. Bike sharing is the fastest-growing form of transportation in the world.

Something is going on here. And Rachel Botsman and Roo Rogers think they know what it is: collaborative consumption. Defenders of the big society have latched on to the decentralised, networked mega-trend that Botsman and Rogers describe in their book, “what’s mine is yours – how collaborative consumption is changing the way we live.”

After Botsman gave a version of her stump speech at the RSA last month, I asked whether this trend contains any lessons for Labour. She was, understandably, reticent to politicise her baby. The big society shouldn’t be owned by any political party, nor should collaborative consumption, she told me.

Of course, she’s right. The civic institutions that are supposed to make up the big society were around long before David Cameron tried to destroy them. And collaborative consumption is too nebulous a concept for any politician to convincingly declare it their passion. I’m not even sure that it adds up to a unified idea. There are, however, elements of Botsman and Rogers’ argument that hit upon some truths that Labour should absorb.

They claim that people are sharing again and creating three distinct kinds of consumption: product service systems (PSS), redistribution markets and collaborative lifestyles. Both what we consume and how we consume are changed by these systems. But do not worry. We are not all turning into hippies. Self-interest remains the prime driver, with improved social outcomes a mere by by-product.

Netflix is a popular PSS model because people want to watch films, not collect DVD boxes. Access is the privilege; ownership is the burden. As Robin Chase, founder of Zipcar, another PSS variant, says: “It’s the car your mother said you could never have. When you are not using it, it is someone else’s problem, and who cares”. As well as being more fun, access tends to reduce carbon emissions. Think of the carbon saved from all the DVD boxes not manufactured for Netflixites and cars un-owned by Zipsters.

Ebay, freecycle and craigslist are well-known illustrations of redistribution markets. It is the desire to buy, sell and swap used goods which creates these markets. But, as this occurs, carbon is saved that would otherwise be emitted in manufacturing new goods. These markets also build trust amongst strangers, because market participants know that their behaviour today will affect their ability to trade tomorrow. Ebay buyers, for example, want to buy from sellers with positive feedback ratings, so negative ratings limit the ability of sellers to trade.

TimeBanks USA, an enabler of collaborative lifestyles, has been described by its founder as “a time machine taking us back to an age when we knew each other and trusted one another”. Time banks exist all over the world and all apply the same principle. For every hour you spend doing something valued by someone in your community (cleaning their gutters)  you earn a credit to be banked at an online portal and spent on things you value (Spanish lessons). Participants are incentivised by accessing something they want. But 72% of time bankers report that participation gives them a stronger sense of community.

Irrespective of the collaborative consumption model, people are sharing because it serves their self-interest. Our bread should never depend on the benevolence of bakers. Enhanced sustainability, trust and community spirit can, however, be achieved, as people follow their self-interests through consuming collaboratively. This isn’t to say that people are completely uninterested in these social outcomes, as the MyBO activity tracker illustrates.

This tracker was designed by Chris Hughes, a co-founder of Facebook. He only works on projects that will have “far-reaching social and life-changing impact but that are also fun, modern and smart”. Those who opened trackers shared a belief in a particular outcome: the election of Obama as US President. But they also wanted the fun of the interactive game that was enabled by the tracker. The more fun they had the more campaigning they did. If we want to change the world, we may not succeed unless we make the journey fun, modern and smart (does this sound like your latest Labour party meeting)? Total abstinence and a good filing system were never the right signposts.

Labour is increasingly winning the argument that the big society cannot fill the gaps left by the government’s cuts. We are right to stress that it isn’t an either-or choice between state and society, but a question of what state and society can achieve together. However, to fully win this argument we need to paint a more vivid picture of the kind of reformed state we favour.

Such a state would harness the tools of collaborative consumption and direct them towards our Labour goals. Libraries could incorporate hubs for time banks. Transport authority websites might put driving commuters in touch with others making the same commute and interested in car sharing. Sure starts could host markets for exchanging used children’s clothes and toys. Local authorities might open up public land to community groups through Landshare.

Many small changes of this sort will be required to make the state fun, modern and smart.

I had this on Labour Uncut yesterday.

The chair of last Thursday’s annual Compass lecture, Neal Lawson, closed proceedings by asking the speaker, David Marquand, to return in 10 years time, when Marquand will be 86 years old, to reflect upon developments in the intervening period. He also expressed the hope that at this time the respondents to Marquand’s address would be the most powerful people in the land: Ed Miliband as prime minister; Caroline Lucas as chancellor; Francesca Klug as home secretary; and Evan Harris as health secretary.

Earlier, Lawson had praised Marquand for arguing that, as social democracy will never reach its final terminus, the journey towards social democracy is more important than conceiving of its end. “The goal is nothing; the movement everything”, quipped Eduard Bernstein, the grandfather of social democracy, over 100 years ago.

Lawson would doubtless claim that much more openness and collaboration between parties of the left is part of this journey. But his imaging of the 2021 cabinet indicated where he wants this to be heading. It may cause people to wonder what exactly the parties of Miliband, Lucas, Klug and Harris stand for if they agree on as much as Lawson believes.

Marquand’s lecture title spoke of a realignment of the mind. It remains to be seen whether the likely opening of Compass to members of parties other than Labour, which Miliband said he was relaxed about, will lead to the political realignment that Lawson desires. Marquand was, however, excited enough by the potential suggested by the event to say at its close that he was drunk with happiness.

The realignment that he argued for is a transition from a culture in which “the holy trinity of choice, freedom and the individual” give way to “the human trinity of imagination, empathy and critical thinking”. He sees compass, London citizens and protests against library closures and the forests sell-off as steps in this direction and, although he sees the language of the common good as having dropped out of our politics, evidence that this notion still exists.

He appeared delighted at the persistence of this notion, not least given what he perceives as a 30 year campaign against the public realm that was initiated by Margaret Thatcher and continued by subsequent prime ministers. This campaign, he argues, now reaches its zenith with the present government’s reforms to the NHS, schools and universities. There is much to critique in these reforms. But Marquand’s conception of the public realm seemed a blunt instrument to expose these weaknesses.

He appeared to claim, for example, that university education is a public good. In its purest sense such a good requires non-excludability. The benefit that I derive, for example, from the defence of our state provided by the armed forces does not exclude any other British citizen from this benefit. I have, however, enjoyed a career that I would not have been able to enjoy were I a non-graduate. The salaried benefits of this career derive exclusively to me. Non-graduates shouldn’t subsidise such benefits through general taxation, which would be the consequence of graduates making no contribution to their tuition costs.

General taxation should, however, fund university education to an extent proportionate to the benefits to society from this education. This benefit is real and part of the public realm. The government has done violence to it by scrapping the higher education grant for arts and social sciences teaching. Are we really to believe that society would be no worse off if it contained no arts or social science graduates? That is the absurd implication of government policy. Higher education in arts and social sciences, nonetheless, are not pure public goods and it is to imply poor policy so to conceive of them.

Marquand seems to see the public realm as always good, the market realm as universally bad and the former as inevitably corroded the later. However, often these realms by necessity co-exist. The higher earnings of graduates are part of the market realm and the benefits to society of university teaching are of the public realm.

When millions in the rapidly developing world have recently been lifted from extreme poverty by markets, it also seems crass to dismiss this realm as wholly wretched. As is the idea, conveyed by the claim that the public realm is always good, that only markets fail and that state agents are incapable of doing so.

Radicalism now begins by accepting that neither the public nor market realms have monopolies on wisdom, virtue or effectiveness. True political leadership applies whatever combination of them best achieves the desired ends. Such leadership may be undermined by a lack of clarity over desired ends. In this sense, Bernstein is wrong. The goal is far from nothing. Even if the ends are never perfectly realised, the direction of travel ensures that people don’t forget why they join and vote for political parties.

While Labour’s authenticity matters greatly, and is bound up with the ends which we pursue, tribalism unable to honestly acknowledge policy agreement between parties is unhelpful. And, maybe, compass is as good a place as any for these agreements to be uncovered.

But there are more urgent tasks for Labour than any which can be achieved with members of other parties. We must re-conceptualise and articulate our own timeless social democratic ends (justice and equality) and develop innovative, realistic and compelling means of shaping the public and market realms to advance them. Perhaps, then, Ed Balls, Yvette Cooper and John Healey will get to serve at the top of Miliband’s government.