Posts Tagged ‘New Labour’

Weekend reading (special edition): Ed speaks

Friday, October 1st, 2010




Ed Miliband – A New Generation

The younger Miliband brother is now leader of the UK Labour Party and this conference address is his first extended speech in that role.

Some commenters here at Policy Progress haven’t been impressed, but I’ve been reading the text of the speech (my preferred approach to taking in these sorts of things) and, while I can’t comment on his skills as an oratorical “performer”, I thought the content was pretty good. He set some distance between himself and New Labour:

New Labour embraced markets in our economy and was right to do so.

But lets be honest we became naïve about them.

. . . We must shed old thinking and stand up for those who believe there is more to life than the bottom line.

And:

The hard truth for all of us in this hall is that a party that started out taking on old thinking became the prisoner of its own certainties.

The world was changing all around us – from global finance to immigration to terrorism – New Labour, a political force founded on its ability to adapt and change lost its ability to do so.

The reason was that we too often bought old, established ways of thinking and over time we just looked more and more like a new establishment.

Let me say to the country:

You saw the worst financial crisis in a generation, and I understand your anger that Labour hadn’t changed the old ways in the City which said deregulation was the answer.

You wanted your concerns about the impact of immigration on communities to be heard, and I understand your frustration that we didn’t seem to be on your side.

And when you wanted to make it possible for your kids to get on in life, I understand why you felt that we were stuck in old thinking about higher and higher levels of personal debt, including from tuition fees.

That comment about tuition fees is rather intriguing. Like others, I’m a little uncomfortable with this and other comments about immigration in the speech but there’s a difference between validating grassroots concerns and being anti-immigrant, and I think he stops short of crossing that line. The speech also has a strong generational theme:

This generation wants to change our economy so that it works better for working people and doesn’t just serve the needs of the few at the top.

This generation wants to change our society so that it values community and family, not just work, because we understand there is more to life than the bottom line.

This generation wants to change the way government works because it understands the power of the state to change lives but also how frustrating it can be if not reformed.

This generation wants to change our foreign policy so that it’s always based on values, not just alliances.

And this generation knows very profoundly that to change Britain we need a new politics.

Above all, I lead a new generation not bound by the fear or the ghosts of the past.

Miliband also returns to his theme about a renewed focus on inequality:

And we need responsibility at the top of society too. The gap between rich and poor does matter. It doesn’t just harm the poor it harms us all.

What does it say about the values of our society, what have we become, that a banker can earn in a day what the care worker can earn in a year?

I say: responsibility in this country shouldn’t just be about what you can get away with.

And that applies to every chief executive of every major company in this country.

As the Guardian said just ahead of the speech, “Ed Miliband is not expected to make any major policy announcements in his speech; he favours a long-term approach using semi-independent policy commissions.” But there’s some interesting hints there of directions to come.

The state, market and society out of balance [re-post]

Friday, September 3rd, 2010

Originally posted on 6 May 2010.

In the middle of last year, James Purnell almost brought down Gordon Brown.

His resignation as Work and Pensions Secretary and his call for Brown “to stand aside to give Labour a fighting chance of winning the next election” precipitated the nearest thing to a coup that Brown has faced.

Shortly afterwards, Purnell reinvented himself as the head of Open Left, “a project aimed at renewing the thinking and ideas of the political Left”, hosted by the Demos thinktank.

I was in London at the time of Open Left’s launch, and was struck by the fact that at 39 (about the same age as me) Purnell had already worked for a thinktank (ippr), as a Downing Street staffer, and begun and finished a career as a senior Cabinet minister. Now he was off to rethink the progressive movement!

(New Zealand seems quite stately by comparison — here even a politician like Labour MP Grant Robertson can hope for a successful political career, despite being such a late-comer to Parliament!)

When I saw Purnell on the BBC’s Newsnight programme, though, I wasn’t that impressed. He seemed on the back foot, and his call for a focus on pursuing “equality of capability” came across as either incoherent or a way to avoid a commitment to any real redistributive agenda. I wasn’t alone; there were a lot of negative responses.

So, while I was intrigued by the promise of Open Left, when I came across a podcast of Purnell’s lecture at the London School of Economics (LSE) entitled Renewing the Left’s ideology: what should be the principles and goals of the centre-Left today?, I didn’t have high hopes.

My mistake – it’s an impressive presentation. Some of the themes are familiar from Newsnight, but not only does Purnell have the scope here to do justice to his borrowings from Richard Tawney and Amartya Sen, he has also learnt from previous missteps and thought carefully about how best to communicate his ideas in crisp and direct terms:

I think a better way of translating [Sen's] ideas is to talk about power. His idea of capability is what most people would understand as having the power to do or be something. His idea of a functioning would be what people actually decide to do with that power.

There follows a rich and inter-connected argument about the need for balance between the state, market and society:

. . . we need to create the conditions for people to take power and for society to be reciprocal . . . With state, society and markets in balance, each is less likely to crowd the other out and then, and only then, can people flourish.

I want to just pick up on a particular strand of this, which is the discussion of a particular way in which things have got out of balance:

If you believe in open markets but are not prepared to tolerate that injustice, you also need a strong state to alleviate the consequences of the market. That is the story of New Labour – trying to harness the best of markets, then correcting their failures through the state.

The consequence of these good intentions is that the state has been too strong in respect of society, and not strong enough in respect of markets. Our unwillingness to be more hands on with the market has required us to be too hands on with the state.

Some of the most interesting points come up in the question and answer segment. However, while the LSE has helpfully provided a transcript of Purnell’s speech, which is a valuable reference, this segment is only found on the audio.

In reply to one question [at 47.19 minutes], Purnell talks about how New Labour fell into this imbalance:

I’d say we came into power actually with a quite bold set of reforms for restructuring market power: trade union legislation, the minimum wage most obviously, four weeks paid leave. But we didn’t actually renew that. So we came in with good democratic reforms, good market reforms, but over time we came to rely more and more on public services and redistribution. And that’s I think because of this point that we became hands off with the market and therefore we had to be too hands on with the state . . . You end up having to put very, very much more pressure on the state and I would say that can be self-defeating.

Purnell traces this [at 103:01 minutes] back to :

. . . what happened to Labour after 1945, that we were sort of the victims of our own success. The creation of the welfare state was so successful, in practice and also in politics, that actually we forgot the other things that we had, and we became to a certain extent sceptical of them . . . Certainly the ‘97 [Blair] government became pretty reluctant to alter market outcomes. It wasn’t impossible, but the starting point was the market outcome, and you then had to prove the case against it. And certainly became less confident about how you could use society to achieve those changes.

(Note the parallels with Kay’s critique of New Labour’s reliance on the ‘market failure doctrine’.)

Against this Purnell argues [102:21]:

. . . that we should recapture that Croslandite idea that inequality is clearly something that undermines people’s ability to be powerful, and our society to be reciprocal . . . but also that, in trying to achieve that, we should not try and do it all through the state nor do it all to people. . . . People can’t just be passively equal, . . . you can’t just do it through redistribution. People have to take their own power if it’s to actually feel real to them and feel just to everybody else.

There’s some really fascinating ideas there (and others I haven’t even touched on here). I’d encourage everybody to read, or listen to, this lecture for themselves. I’m particularly interested by the tension it highlights between redistribution after the fact on the one hand, and intervening to alter the initial market outcomes on the other. In Thursday’s post [published 6 May] I’ll explore how that relates to the New Zealand experience.

In the meantime, what do you think of James Purnell has to say in this lecture, and about the whole Open Left project?

Note – the ideas in Purnell’s lecture are explored further in the Open Left/Demos publication We mean power: ideas for the future of the left.

The state, market and society out of balance

Tuesday, May 4th, 2010

In the middle of last year, James Purnell almost brought down Gordon Brown.

His resignation as Work and Pensions Secretary and his call for Brown “to stand aside to give Labour a fighting chance of winning the next election” precipitated the nearest thing to a coup that Brown has faced.

Shortly afterwards, Purnell reinvented himself as the head of Open Left, “a project aimed at renewing the thinking and ideas of the political Left”, hosted by the Demos thinktank.

I was in London at the time of Open Left’s launch, and was struck by the fact that at 39 (about the same age as me) Purnell had already worked for a thinktank (ippr), as a Downing Street staffer, and begun and finished a career as a senior Cabinet minister. Now he was off to rethink the progressive movement!

(New Zealand seems quite stately by comparison — here even a politician like Labour MP Grant Robertson can hope for a successful political career, despite being such a late-comer to Parliament!)

When I saw Purnell on the BBC’s Newsnight programme, though, I wasn’t that impressed. He seemed on the back foot, and his call for a focus on pursuing “equality of capability” came across as either incoherent or a way to avoid a commitment to any real redistributive agenda. I wasn’t alone; there were a lot of negative responses.

So, while I was intrigued by the promise of Open Left, when I came across a podcast of Purnell’s lecture at the London School of Economics (LSE) entitled Renewing the Left’s ideology: what should be the principles and goals of the centre-Left today?, I didn’t have high hopes.

My mistake – it’s an impressive presentation. Some of the themes are familiar from Newsnight, but not only does Purnell have the scope here to do justice to his borrowings from Richard Tawney and Amartya Sen, he has also learnt from previous missteps and thought carefully about how best to communicate his ideas in crisp and direct terms:

I think a better way of translating [Sen's] ideas is to talk about power. His idea of capability is what most people would understand as having the power to do or be something. His idea of a functioning would be what people actually decide to do with that power.

There follows a rich and inter-connected argument about the need for balance between the state, market and society:

. . . we need to create the conditions for people to take power and for society to be reciprocal . . . With state, society and markets in balance, each is less likely to crowd the other out and then, and only then, can people flourish.

I want to just pick up on a particular strand of this, which is the discussion of a particular way in which things have got out of balance:

If you believe in open markets but are not prepared to tolerate that injustice, you also need a strong state to alleviate the consequences of the market. That is the story of New Labour – trying to harness the best of markets, then correcting their failures through the state.

The consequence of these good intentions is that the state has been too strong in respect of society, and not strong enough in respect of markets. Our unwillingness to be more hands on with the market has required us to be too hands on with the state.

Some of the most interesting points come up in the question and answer segment. However, while the LSE has helpfully provided a transcript of Purnell’s speech, which is a valuable reference, this segment is only found on the audio.

In reply to one question [at 47.19 minutes], Purnell talks about how New Labour fell into this imbalance:

I’d say we came into power actually with a quite bold set of reforms for restructuring market power: trade union legislation, the minimum wage most obviously, four weeks paid leave. But we didn’t actually renew that. So we came in with good democratic reforms, good market reforms, but over time we came to rely more and more on public services and redistribution. And that’s I think because of this point that we became hands off with the market and therefore we had to be too hands on with the state . . . You end up having to put very, very much more pressure on the state and I would say that can be self-defeating.

Purnell traces this [at 103:01 minutes] back to :

. . . what happened to Labour after 1945, that we were sort of the victims of our own success. The creation of the welfare state was so successful, in practice and also in politics, that actually we forgot the other things that we had, and we became to a certain extent sceptical of them . . . Certainly the ‘97 [Blair] government became pretty reluctant to alter market outcomes. It wasn’t impossible, but the starting point was the market outcome, and you then had to prove the case against it. And certainly became less confident about how you could use society to achieve those changes.

(Note the parallels with Kay’s critique of New Labour’s reliance on the ‘market failure doctrine’.)

Against this Purnell argues [102:21]:

. . . that we should recapture that Croslandite idea that inequality is clearly something that undermines people’s ability to be powerful, and our society to be reciprocal . . . but also that, in trying to achieve that, we should not try and do it all through the state nor do it all to people. . . . People can’t just be passively equal, . . . you can’t just do it through redistribution. People have to take their own power if it’s to actually feel real to them and feel just to everybody else.

There’s some really fascinating ideas there (and others I haven’t even touched on here). I’d encourage everybody to read, or listen to, this lecture for themselves. I’m particularly interested by the tension it highlights between redistribution after the fact on the one hand, and intervening to alter the initial market outcomes on the other. In Thursday’s post I’ll explore how that relates to the New Zealand experience.

In the meantime, what do you think of James Purnell has to say in this lecture, and about the whole Open Left project?

Note – the ideas in Purnell’s lecture are explored further in the Open Left/Demos publication We mean power: ideas for the future of the left.

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The Failure of Market Failure

Thursday, April 8th, 2010

The idea for the Theoretical Foundations work programme topic came from reading John Kay.

John Kay is a British economist and writer. He has been director of the Institute for Fiscal Studies and a columnist for the Financial Times. His most famous book is probably The Truth about Markets (2003), which I haven’t yet read.

But I have read “Market Failure”, a chapter in a book called Beyond New Labour: The future of social democracy in Britain edited by our old friends Patrick Diamond and Roger Liddle, that covers some of the same ground.

In this chapter, Kay discusses how modern progressives – he is focussing on New Labour in the UK but the lessons go wider – have embraced the doctrine of ‘market failure’ as a way of squaring an acceptance of a market economy with a continued desire to address inequality. This, he says, has been a mistake.

Under the market failure doctrine, effective market outcomes rely upon the following four conditions, and there is an ‘efficiency justification’ for state intervention if any of them are breached:

  1. A competitive environment
  2. Consumers have good information about their needs and the services available
  3. No ‘externalities’ (the good or service affects only the producer and the consumer, not any third parties)
  4. No ‘public goods’ (producers can identify the consumers of the service, and can quantify the consumption and charge for it).

We can probably all think of instances where such breaches occur. A number of environmental issues for instance, including the climate challenge, are situations where condition 3 does not hold.

The market failure doctrine therefore seems to offer plenty of scope for progressive action, while also feeling quite prudent and economically literate. It is understandable that it would have seemed an attractive approach for modernising progressive parties.

But, according to Kay, market failure is a bad argument for progressives to buy into. “By conceding too much to market fundamentalists it loses both intellectual coherence and political resonance.” (p. 74)

Kay mounts a comprehensive critique of the market failure doctrine thoughout his chapter, but the theoretical core of his argument can be found in the following paragraph (p. 76):

The basic philosophical differences that divide left and right concern the priority that should be given to claims of individual rights and private property relative to those of solidarity and social justice. The left insists, and the right denies, that the public interest is more than an aggregation of private interests. The model that underpins the market failure doctrine answers these questions, and others, in the right’s favour. A particular philosophy is inherent in the mathematics. The model takes individual preferences as given, along with personal resources and property rights, and sees social welfare as an aggregation of individual preferences. The primacy of material incentives as determinants of economic behaviour is not a prediction of the model, but an assumption.

Moreover, because the modern left has invested so much in market failure as its rationale for action, there is a temptation to frame everything they want to do as a response to market failure, however tenuous the basis for this may be. Kay cites the example of health, where Gordon Brown insisted on explaining his commitment to a tax-financed National Health Service by reference to market failures that, while real, did not actually justify the particular model he supports.

“More importantly, they have nothing to do with the real reasons why most people – including Brown – support a publicly funded NHS. These reasons begin from ethical concepts such as compassion and fairness rather than economic concepts such as information asymmetry.” (p. 76)

And this is the crux of the problem. “The notion that some economic choices are essentially collective, and cannot be described as a summation of personal of personal preferences, strikes at the heart of the market failure doctrine.” (p. 77)

I can relate to this. Back when I worked for NZUSA in the late 1990s there was a lot of debate about the extent to which tertiary education was a private good and should be privately funded through student fees. The students wanted to maintain that tertiary education was a public good and should be fully publicly funded. I was keen to dissuade them from this – while they had good arguments against particular claims about the private benefits from tertiary study, by buying into the public/private benefit argument, they undermined their own position. There is clearly some private benefit from study so you couldn’t argue for free education on public/private benefit terms.

Instead, I argued, they should seek to frame tertiary education as a collective good, i.e. one which society should agree to fund collectively as it does for school education.

John Kay makes a similar point: “The majority of contested economic policy issues reflect disputes about the nature of entitlements, or they occur when parties look to the government to fill in the implicit terms of imperfectly specified contracts.” (p. 81)

And, indeed, first amongst his list of illustrative recent policy issues is tertiary fees, framed not as public/private benefit or as (market failure) barriers to participation, but as “What rights of access do individuals have to higher education, and on what terms?”

Progressives in New Zealand have not made as extensive or explicit use of market failure as a theoretical framework as appears to have been the case in the UK. Nevertheless, these and other market-oriented economic concepts have permeated policy discussion pretty thoroughly in this country for the last twenty-five years, and to a large extent progressive policy thinking has accommodated itself within that discourse.

In the Theoretical Foundations work programme topic, I want to take a step back from that and have a look at the theoretical arguments we progressives rely upon to justify our actions and initiatives. Are they fit for purpose, or, like the market failure doctrine, do we end up either making tenuous linkages and/or conceding significant intellectual terrain to our opponents?

In Tuesday’s post, I’ll survey Kay’s proposed alternative to the market failure doctrine.