Labour needs a bolder and more coherent economic message – with a commitment to fairness and transparency at its heart

For Labour party members, the reasons to despair continue to mount up. Last year’s general election defeat and this summer’s vote to leave the European Union have left the party demoralised and bewildered. For an organisation that prides itself on being in touch with voters, these results came as a bolt from the blue. The Labour leadership contests triggered by defeat have left the party divided and rancorous. Donald Trump’s election as president of the United States, and the resignation of Matteo Renzi following defeat in the Italian constitutional referendum this month, have only served to reinforce the sense that the left – liberal, rational, internationalist – has no answers to the major challenges of our time.

Not that things would look much rosier if one could somehow wish away the big international events of 2016. The UK’s ageing population gives the Conservatives a natural electoral advantage, because of the propensity of older voters, among whom Conservatives have long enjoyed strong support, to turn out on election day. The proposed constituency boundary changes, slated to reduce the number of MPs from 650 to 600, will hurt Labour more than any other major party. All the while, Labour is yet to decide whether its priority for 2020 is to attempt to claw back lost ground in Scotland, defend against the threat posed by Ukip in its northern heartlands or to seek to persuade southern English floating voters. With Labour polling at less than 30 per cent nationally, it is little wonder that some MPs are losing confidence that Labour can seek to govern as a single party.

Against such a backdrop, Bridget Phillipson’s recent essay in the New Statesman serves as a rallying cry to those Labour members who might consider the task at hand insurmountable. Among a wide-ranging analysis of the reasons behind Labour’s recent decline and how it should approach the 2020 election, Phillipson notes how the collectivist economic traditions – heavy industry, skilled manufacturing, large-scale trade union membership – which underpinned the party’s strength throughout the twentieth century, have all but disappeared. Blithe promises to restore manufacturing jobs are, in practical terms, meaningless – ‘the slogans and solutions of times long past.’ As Labour seeks to adapt to the modern economy and reframe its values so that they resonate in twenty-first century Britain, which developments might it look to as a starting point? To be sure, if Labour is to stand any chance of running a successful campaign in 2020, it will need a more coherent economic message than that which was presented to voters in 2015.[1]

It is already more than a decade since Labour last won a general election. During the intervening period several major developments have transformed the economy. Digitisation and automation have drastically changed the nature of many jobs. A loss of faith in the state has led to a substantial transfer of responsibility for driving social outcomes to the private sector. Related to this, increasing numbers of employees wish for their work to contribute to more than merely improving dividends for company shareholders. In seeking to articulate what the economy under a future Labour government might look like, the party leadership might do well to recognise the threats and opportunities posed by each of these developments.

Some hope is being pinned on Tom Watson’s commission on the future of work, announced during his 2016 conference speech. The array of talent Watson has brought on board means that the commission’s recommendations will be eagerly anticipated. The commission is being co-chaired by employment barrister Helen Mountfield QC. Other participants include Harvard philosopher Michael Sandel, and one of Labour’s most thoughtful MPs, Jon Cruddas. At a time of rising job insecurity, and fears that a wide range of white-collar jobs are threatened by the rise of new technology, Watson’s insistence that “the benefits of this technology should be shared by everyone rather than accruing to those who own or control it” is astute. Watson’s point of departure reveals an optimistic view of how technology could transform the economy. In this, he appears to closely follow Alec Wood, who, in The Industries of the Future, argues that big data will become a widely-available tool that will add value to all existing industries, rather than allowing a small number of companies – those with the fastest servers – to control future economic growth.[2]

The commission will confront a number of challenging questions. How far should a future Labour government seek to ‘pick winners’ among the many nascent industries that might offer opportunities for job creation? How should the reliance on cross-border collaboration, inherent in the modern knowledge-based economy, be reconciled with the desire to move away from partnership with Europe, as expressed by the Brexit vote? Should Labour embrace a universal basic income? Clearly, Labour will need to tread a careful line in each of these areas. Indeed, the very way in which the party talks about “disruptive” industries, at a time when many voters are yearning for reassurance and security, should be given some thought. Yet the fact that Watson is prepared to ask questions like these is reason for encouragement. Setting up the commission is a demonstration that the Labour leadership is clear-eyed about the modern economy, and optimistic about its ability to shape it. It doesn’t require too great a leap of the imagination to hear echoes of Harold Wilson’s rhetoric in the 1960s, even if the circumstances for a Labour victory today are far less propitious.

Labour should also formulate a standpoint on how far social outcomes should be achieved by non-state actors. The last decade has seen a rise of private sector innovations that seek to generate social value alongside financial profit. For example, as state funding has been withdrawn, a number of private sector financial organisations – ranging from small, mission-driven start-ups to departments within major investment banks – have deployed repayable capital to charities and social enterprises. An array of London-based consultancies has sprung up to support the latter in their efforts to become financially sustainable. In the UK, the approach has been extended to some major government contracts: social impact bonds allow for private finance to fund social interventions, a return on which is payable on the successful demonstration of desired outcomes.

At the same time, major corporations have transformed their approach to environmental, social and governance (ESG) measures. Recently, some companies appear to be incorporating ESG measures as central components of their business, rather than burdensome add-ons. Unilever, for example, has publicised plans to halve its environmental footprint and source all of its agricultural raw materials sustainably by 2020.[3] Meanwhile, Pepsi’s CEO Indra Nooyi lauded her company’s second Performance with Purpose manifesto as not only a good example of corporate responsibility, but an essential element for the future success of the business.

If the efforts of altruistic finance professionals and enlightened CEOs are heartening and impressive, it is far from clear that their example should inform a new Labour economic model. The (partial) transfer of responsibility for driving social outcomes to the private sector has accompanied the triumph of the liberal conception of social value, in which government action is limited to empowering individuals to take action for themselves. [4] Yet events of 2016 have represented, among other things, a lament against the lack of control people feel they have over their own lives. Jeremy Corbyn’s assertion that Trump’s election represented a “rejection of… an economic system that simply isn’t working for most people” is hard to refute. Falling back on a model which relies on a few entrepreneurs and chief executives to assume responsibility for generating social good, rather than attempting to bring far larger numbers of people into this process, no longer seems a plausible option.

Mariana Mazzucato and Michael Jacobs have highlighted the vital role played by governments in providing the funding for major transformative innovations over the decades – not only the welfare state of the post-war years, but also the IT revolution and, most recently, new clean technologies.[5] They argue that the time is ripe for governments to “tilt the playing field” towards publicly chosen goals as a way of driving economic growth that will be more widely shared than has been the case in the past three decades. If the Conservatives prove open to an activist approach to generating jobs and growth, Labour’s task to present a compelling economic alternative will become that much more difficult.

Another, and arguably a more promising, model Labour can learn from is the UK’s community organising movement. In particular, Labour should pay heed to those advocating the development of a ‘civil economy’. This idea, which seeks to promote an economic counterpart to the varied institutions that make up a civil society, was developed principally by the 2006 work The New Capitalists. Published only a few months before the onset of the global financial crisis, its descriptions of accountable corporations, activist shareowners and transparent investment practices initially failed to gain much traction. More recently, however, its influence appears to be on the increase. In particular, citizen groups have adopted many of the attributes and techniques advocated by The New Capitalists in order to influence businesses to operate in a more equitable manner. The best known example in the UK is the Living Wage Foundation, which has achieved great success campaigning for employers to provide a wage that better reflects the real costs of living than the government’s ‘national living wage.’

This model of economic activism should appeal to Labour for several reasons. First, it challenges big business directly, pushing them to bring about more meaningful changes than if left to their own devices, but without resorting to Milibandite categorisations of ‘good’ and ‘bad’ companies. Second, it offers up the prospect of developing a truly national movement. Most social innovators and large corporations in the UK have headquarters in London. By contrast, the Living Wage Foundation, and Citizens UK, the umbrella organisation from which it developed, have secured successes across the length and breadth of the country. Likewise, ShareAction, an organisation which seeks to change governance and environmental practices in major corporations through shareholder activism, recently hosted an event in parliament which was attended by activist pension fund trustees from many regions of the UK. Third, at its most basic level, the civil economy offers the prospect of empowering large numbers of people to bring about transformative economic change. If the traditional statist approach to achieving social outcomes has been long abandoned, and the subsequent liberal model has been exposed as providing people with little genuine control over their lives, a system based on transparency, accountability and democratic consent appears very promising. If the Living Wage Foundation has successfully shifted public opinion around the idea of fair pay, activists should be confident about introducing minimum standards for pay ratios, ethical investment practices, corporate governance and security of contracts.

One of the central arguments of Phillipson’s article in the New Statesman is that, in order to stand a chance of governing again, Labour must unite ‘Hull and Hampstead’, the coalition of left-leaning voters that threatens to split apart as a result of very different experiences of and reactions to globalisation. An ambitious, thoroughly modern programme for regeneration, if correctly targeted, and if grounded in the economic realities of today, could rebuild the coalition and allow Labour to develop the kind of compelling national narrative it had in 1945, 1964 and 1997.

To the extent that Hampstead has benefited far more than Hull from UK government policy (not to mention the trajectory of globalisation) since the 1980s, so now the reverse should be the case. Labour should be bold and unapologetic about “tilting the playing field” so that investment in skills and training for new industries and jobs is focused on former areas of manufacturing and heavy industry. Bolder still would be to commit to the construction of a world-leading green economy. This would build on the skills bases that exist in many towns and cities, giving the UK a good chance of becoming a world leader in the field. (By contrast, a strategic focus on robotics, for example, would leave the UK playing ‘catch-up’ with countries like Japan and Germany, who are currently the global commercial leaders). Politically, a commitment to decarbonising the economy would play very well with Labour’s ‘Hampstead’ voters, for whom global warming is an increasingly pressing concern. In the intervening years while Labour is out of power, a commitment to building a civil economy, through which activist citizens are empowered to bring about meaningful changes to the way the economy operates, could go some way to demonstrating that Labour is in touch with the modern demand for individuals to shape the economy in which they work and the society in which they live.