The most important speech by Ed Miliband yet, which almost everyone will ignore


by Sunny Hundal    
4:29 pm - February 13th 2013

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Tomorrow morning Labour leader Ed Miliband will make a key speech on the economy. Unfortunately it is likely that most people, even on the left, will ignore it, despite its significance.

I’ve been briefed on extracts from the speech, along with a few others, but cannot reveal anything until midnight when the embargo can be broken. The speech is important because it lays out the key principles that will guide Labour’s political economy “for the next 30 years”.

The Labour leadership is clear about a few things:

- The last Labour government mistakenly bought into Thatcher’s neo-liberal framework for the economy, and they need to find a new way that genuinely grows real incomes, provides skilled jobs and is not part of a global race to the bottom.

- New Labour were too benign to those at the top and not worried enough about those at the bottom. They recognise their way of distribution did nothing to stem inequality, and that the economy needs fundamental change to stop inequality growing.

As a key advisor told me: “We are taking a shot at the paradigm of the past.” They have a short term challenge, to get demand back into the economy and get growth back, and a longer term challenge to move away from the artificial property-driven boom of the last 20 years.

Anyone who wants to know of Labour’s vision for the biggest political question of this decade (and next) should watch / read it.

But I fear most people will ignore it.

This is partly because it will not contain major policy announcements to fight an election on. Their reasoning for this is simple: the election is still two years away and no one can predict the state of the economy then. Without knowing that, it is difficult to set budgets and make spending plans.

The other problem is that it is simply a speech, not an intervention. And the problem is that most people (including the media and even politicos) ignore speeches unless they involve a stunt or some form of symbolism. For example, Cameron’s 2005 speech backing gay marriage because he was a Conservative was such a symbolic intervention about modernising the party.

Lefties hate such symbolic interventions (so do Ed’s team) but the general public only pay attention when something big happens. Tomorrow’s speech will be a intervention watershed in Labour politics, but I fear it won’t get out to as many people as it should. I’m hoping I am proven wrong.

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About the author
Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
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Reader comments


“Without knowing that, it is difficult to set budgets and make spending plans.”

20 years yes, 2 years not really.

You can predict with reasonable accuracy different scenarios of economic growth and therefore what revenues you have to play with 2,3, 4 or 5 years from now. At least to the extent of of being able to outline scenarios and being able to adopt policies that say ‘we would prioritise X, Y and Z’

2. ApatheticVoter

“The other problem is that it is simply a speech, not an intervention” followed by “Tomorrow’s speech will be a major intervention”

Which is it?

My fingers are crossed too. Ed’s grown loads over the past two years, unlike members of a certain coalition party the greatest impression I’ve been getting from labour, and controversially perhaps, the likes of Ed Balls is learning the lessons of the past. To decry Labour was sucked in by the same principles the tories are still espousing and realising they don’t work for everyone and needing to try again is a brave move and one that can only offer some hope, god knows we need it! I for one am sick of feeling my life is still on hold after 5 years of this crap since the banking crisis. Tory policy for the economy seems to be worse than having done nothing at all!

& the loathsome Balls will remain as Shadow Chancellor ?

Kind regards

Hundal:

Tomorrow morning Labour leader Ed Miliband will make a key speech on the economy. Unfortunately it is likely that most people, even on the left, will ignore it, despite its significance.

That’s probably because every political hack (along with many other people) will be exchanging chocolates and roses with their snookums or cuddlebunnies – unless Ed’s people were after a handy nickname for the speech.

I’ve been briefed on extracts from the speech, along with a few others, but cannot reveal anything until midnight when the embargo can be broken. The speech is important because it lays out the key principles that will guide Labour’s political economy “for the next 30 years”…

This is partly because it will not contain major policy announcements to fight an election on. Their reasoning for this is simple: the election is still two years away and no one can predict the state of the economy then. Without knowing that, it is difficult to set budgets and make spending plans.

So he’s going to outline Labour’s economic policies for the next 30 years when he has no idea what the economy will be like two years from now?

“…is not part of a global race to the bottom.”

Sounds like code for raising taxes. We often hear about this “global race to the bottom” that will impoverish us all. Got any examples?

“They have a short term challenge, to get demand back into the economy and get growth back, and a longer term challenge to move away from the artificial property-driven boom of the last 20 years.”

Stuff like this that everyone thinks to be true and the evidence does not support is misleading.

Real estate gross value added share of national GDP.

Germany- 11.4%
France- 13.2%
UK- 7.1%

Only one of the above has real estate share of the economy in single figures.
http://epp.eurostat.ec.europa.eu/statistics_explained/index.php?title=File:Gross_value_added_at_basic_prices,_2001_and_2011_%28%25_share_of_total_gross_value_added%29.png&filetimestamp=20121204110809

Finance did not contribute much to UK growth and neither did a property bubble.
http://www.edmundconway.com/wp-content/uploads/2013/01/financeproductivity.jpg

What did contribute to growth.
http://blogs.lse.ac.uk/politicsandpolicy/archives/17297

Why we do not do better.
http://www.edmundconway.com/wp-content/uploads/2013/01/investmentfalling.jpg

Labour can’t raise business investment, but they could come up with some policies that would make BI more likely to happen. I would venture a guess that rhetoric about a global race to the bottom is probably not the way.

“This is partly because it will not contain major policy announcements to fight an election on. Their reasoning for this is simple: the election is still two years away and no one can predict the state of the economy then. Without knowing that, it is difficult to set budgets and make spending plans”.

I’m open to persuasion by Ed, certainly not being one of those who wrote him off for being nerdy. However, this is piffle.

His general vision for the country should not be affected by the exact state of the economy in two years time. Having spent most of his life in politics, he should have a view by now shouldn’t he? That’s what we pay him for isn’t it?

The prevailing view seems to be that having specific policies is dangerous. We know that Blair, Brown and Cameron held this view. The problem is that once through the door of No 10, you don’t know what you’re doing there.

To pick an example off the top of my head: corporate under-payment of taxes should matter regardless of the current economic situation. What’s the policy there?

His general vision for the country should not be affected by the exact state of the economy in two years time.

It isen’t – which is why tomorrow’s speech will be about the guiding principles and what Labour should focus on – rather than specific, costed plans.

corporate under-payment of taxes should matter regardless of the current economic situation. What’s the policy there?

They already regard this as a problem, and will outline policies in the future (tomorrow is about political economy not tax avoidance).

This sounds like a step in the right direction. I’ll be paying it attention, thanks for the tip.

“…is not part of a global race to the bottom.”

As Richard W says ‘We often hear about this “global race to the bottom” that will impoverish us all. Got any examples?’

Rather, what appears to be happening is levelling up, as neo-liberalism in the last three decades has brought the largest reduction in global poverty in human history …

With prevailing relatively low interest rates (because of soft monetary policy) and the big cash balances of large corporates, there is a real puzzle as to why business investment continues to be so low – unless it’s because businesses continue to be pessimistic about whether the market demand will be there to justify increasing investment outlays.

Another possible explanation is that UK productivity tends to lag productivity in other leading G7 national economies according to this:
http://www.ons.gov.uk/ons/dcp171778_299752.pdf

The persistence of reported skill shortages is one explanation for the UK’s productivity gap:

“The UK needs to increase by as much as 50% the number of science, technology, engineering and maths (Stem) graduates it is creating, a report says.” [BBC website October 2012]

Special thanks to Richard W for those illuminating links.

There is a continuing lively debate in America between economist pundits there over whether economic growth in the affluent industrialised economies has more-or-less permanently slowed down – basically because these economies are said to be running out of the capacity for making major technological innovations on the scale which created the industrial revolution around the beginning of the 19th century.

This from BusinessWeek gives a flavour of the debate:

For the past three years, economists have been arguing about whether growth—the way we’ve understood it in developed economies—will ever return to the wonder years of the end of the 20th century. This week, cautiously, quietly, the Congressional Budget Office weighed in: Maybe economic growth is slowing for good.
http://www.businessweek.com/articles/2013-02-07/prepare-for-weaker-economic-growth-budget-office-says

Paul Krugman, if I understand him rightly, is unconvinced and is saying that there are still opportunities for major technological innovations out there. On one aspect there seems to be agreement about is that the initially expected great productivity gains from the innovative Computer and Communications technologies have not materialised – so far. Hence Solow’s quip in 1987 about the Productivity Paradox: “You can see the computer age everywhere but in the productivity statistics.”

With due respect to Ed Miliband, he hasn’t touched on this nor has he explained what is to be done about the increase in the inequality of income distribution.

So to summarise, Ed will be looking to increase the quantity of Good Things, whilst reducing the quantity of Bad Things.

Excellent.

How he’s going to outline guiding principles without mentioning how he wishes to structure corporate and personal taxation, amongst many other things, is beyond me.

Seriously, our politicians need to up their game rather.

15. Sandra Crawford

I am very pleased.
I left the Labour Party because of it’s commitment to neoliberalism. I came back when I heard Ed Miliband giving one of his televised speeches when he was contesting the leadership.
What struck me was his observation that the big society was some sort of euphemism for abandonment.
I knew that the Tories would continue Thatchers project – and abandonment was the central theme – small government, corporatocracy, support for the rentier classes.
Government evolved in history to support all those suppressed and exploited by monarchs and rentier classes. The acceptance of neolibealism is therefore abandonment of those who need the protection of government, and an acceptance of plutocracy.
If the prediction of tomorrows speech is that Ed Miliband is rejecting neoliberalism, then I am hopeful of a decent future for this country.
I just hope he can find a way of putting it into practice by reforming the process of the creation of money which is the route of the property boom and the financial crisis.
Also work is needed to reform the tax system.

Without wishing to offend anyone, we need rather less about “-isms” and rather more about specific policy reforms.

The inescapable trouble about “-isms” is that their connotations are seldom clear so we have little idea about what exactly is being condemned or promoted.

That’s one of the reasons why Richard W’s links @7 are so welcome. Specifics are so much more challenging than cheering on the virtuous and disparaging the bad. New Labour wasn’t wholly to blame for neo-liberal tendencies – or “light-touch regulation”.

The facts are that pundits still dispute over whether we had a house-price bubble and the Financial Services Authority has admitted to falling down on its statutory responsibilities for financial regulation – see the Turner Review of 2009. As mentioned umpteen times before, Warren Buffett was really on the ball in 2003 when signaled alarms about the lack of transparency about some financial derivatives:

“The rapidly growing trade in derivatives poses a ‘mega-catastrophic risk’ for the economy and most shares are still ‘too expensive’, legendary investor Warren Buffett has warned.”
http://news.bbc.co.uk/1/hi/business/2817995.stm

I really wonder how many Treasury ministers and officials understood the issues at stake or knew what to do. Complacency was fostered by the credit rating agencies issuing 3-star ratings for secutities that were later shown to be worthless. And back in 2006/07, RBS was one of the biggest banks in the world.

Doing or saying anything which might have suggested that RBS was likely to fail as the result of the bank’s ill-considered acquisition of ABN Amro would have brought the wrath of the Scots down upon the government as well as starting a confidence crisis and, very likely, a domino collapse of the banking system. The cost to British taxpayers of bailing out RBS was very high.

Interesting re your first point that although the influence of Thatcher is still very much alive in both Tory and Labour constituencies, she was absent from the BBC’s 100 Most Powerful Women.

And to suggest that Blair’s “buying into” neo-liberalism was a mistake will fool no one. Blair went into it with his eyes wide open and the rest of the Labour Party followed like sheep.

More importantly there is nothing in your clips that couldn’t be taken up by the Coalition. Indeed all them have been.

@Bitethehand – Thatcher is no longer PM, so is no longer in a position to wield any actual power, just as Christianity has it supporters but Jesus – being dead – doesn’t have power.

19. Richard Carey

This is a major turning point? A Labour leader giving the post-Blair boiler-plate speech about the last Labour government going too far, and calling a new direction, which on examination turns out to be the usual mishmash of Keynesian pseudo-economics and leftie faux-compassion, with a little class hatred for the 1% thrown in.

@ 12 Bob B

I can go some way to explaining why companies are reluctant to invest at the moment.

Partly, it is as you mention – bunsinesses are worried that there will simply not be the demand to meet any investment or expansion. Yet this is not always the case and plenty of companies have significantly expanded since the crisis began.

A lot of it is to do with the shareholders and their demands on a company.

In simple terms, shareholders want a return from their investment. This can be in the form of dividends or growth in the share price. Growth in the share price (certianly above the index) normally is from growth in the company, through investment.

With high corporation tax rates it makes more sense for a company to keep it’s shareholders happy by paying out better dividends – not least because disbursments like dividends come from the pre-tax revenues. With lower corporation tax it makes more sense for companies to go alll out for growth and use money which would have otherwise been used for dividends to invest and expand. It’s a Laffer-curve type scenario.

People think that low corporation tax rates help to attract inward investment to a country – which is true. Low rates also have the secondary effect of promoting investment and growth over disbursment of cash. Given also that we know that corporation tax is not ultimately paid by corporations, but instead by the employees, investors and consumers, it truly is a wonder to me why so many keep harping on about lowering the corporation tax rate – in a sensible world it should be zero. Any profits a company makes will after all be paid as taxes through other sources (income tax, cap gains tax, or taxes through other proceeds of growth or investment).

Richard Carey: “Keynesian pseudo-economics”

The keynesian analysis of our current economic malaise has proved to be a good deal more dependable than George Osborne’s diagnosis.

The fact is that government borrowing has been rising, not falling, and Britain’s economy is teetering on the edge of a triple-dip recession.

UK economy set for feeble growth in 2013, says NIESR
http://www.independent.co.uk/news/business/news/uk-economy-set-for-feeble-growth-in-2013-says-niesr-8480827.html

22. Richard Carey

@ Bob b,

“The keynesian analysis of our current economic malaise has proved to be a good deal more dependable than George Osborne’s diagnosis.”

Keynesianism is an intellectual fig-leaf to cover rampant deficit spending, which is what this government is doing, the same as the last. There are only nuances between Tory and Labour, although the rhetoric is different.

Richard Carey: “Keynesianism is an intellectual fig-leaf to cover rampant deficit spending”

That is unmitigated rubbish. Keynes set out to create a theoretical model to explain how a capitalist market economy could get stuck with a persistently high level of unemployment such as that of the inter-war years. In the depth of the depression in the American economy c. 1933, a quarter of the workforce were unemployed.

The inherited convential orthodoxies of those times regarded that persisting unemployment as just a temporary departure from an equilibrium in which any who wanted to work could find a job – hence Keynes’s acerbic comment: In the long-run, we are all dead.

“..it is an outstanding characteristic of the economic system in which we live that, whilst it is subject to severe fluctuations in respect of output and employment, it is not violently unstable. Indeed it seems capable of remaining in a chronic condition of sub-normal activity for a considerable period without any marked tendency either towards recovery or towards complete collapse. ” General Theory (1936), p.249.

Debate has continued since over whether Keynes’s model does effectively explain persistently depressed market economies – but the model doesn’t provide a rationale for continued fiscal deficit spending. For a basic but critical survey of economic modelling – which is critical of the keynesian model – try Roger Farmer on: How the economy works (Part 1 of 5): http://www.youtube.com/watch?v=mXxp4WO4cTw

Prof Farmer is a Brit who is the chair of the economics department at the University of California LA.

24. Richard Carey

@ Bob b,

Keynes was wrong. Get over it. Learn some proper economics – you know, that stuff your arrogant snobbish hero dismissed as “orthodoxy”.

Richard Carey

You really don’t know what you are talking about so it’s not worth my while debating with you. The Keynesian revolution had a pervasive and profound influence on modern economics texts such as Olivier Blanchard: Macroeconomics (Financial Times). Blanchard is the present chief economist at the IMF.

For starters, try the lecture series by Roger Farmer on YouTube about: How the economy works – which is critical of Keynes and keynesianism while still focusing on aggregate demand as the key determinant of what is happening to GDP, output and jobs.

In America, the Clinton administration left a budget in surplus, which the Bush administration promptly turned into a budget deficit in order to fund tax cuts which mainly benefited the better off.

Just to recap, this was the piece in the NYT in 2011 about the taxes Warren Buffett is paying:

“Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.”
http://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html?_r=1

Warren Buffett is reckoned to be the third richest man in the world.

26. Richard Carey

@ Bob b,

“You really don’t know what you are talking about so it’s not worth my while debating with you”

I think the same about your head set. In the past I have suggested writers and books which contradict your opinion, and you have refused to even acknowledge them, such as Henry Hazlitt’s ‘The Failure of the New Economics’,

http://mises.org/books/failureofneweconomics.pdf

The main difference is you pride yourself on a willful ignorance of dissenting opinion, enjoying some kind of vicarious superiority complex from your arrogant hero. The only ones you will listen to are those within the Keynesian framework. You seem to think that nothing of value was achieved before Keynes and nothing outside of Keynes, which makes your views on economic science seem irrational and more akin to a religious conviction. Strangely perhaps, you remind me of a hardcore Ayn Rand fan, who thinks she invented philosophy.


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