SOCIALIST UNITY

For the first time ever, construction firms have openly admitted in court that they supplied information to a blacklist file and that the reason they added the information was to penalise the worker because of his trade union activities and because he raised health and safety issues.

The dramatic revelations came during the case of Smith v Carillion at the Central London Employment Tribunal today.

In an unusual legal process, Mr. Smith and the respondent companies Carillion, Carillion (JM) Limited and Schal International Limited agreed a joint statement of facts which was presented to the court. Although couched in legalistic language the agreed statement is the first time ever that any of the mutli-national building firms has admitted blacklisting a union member and the reasons behind it.

In the agreed statement of facts and during Carillion (JM) Limited (previously John Mowlem Limited) and Schal International Limited (a wholly owned subsidiary of Carillion) and Tarmac Construction (the foreunner of Carillion) admit that:

1. They blacklisted Mr.Smith
2. Their managers supplied information to the notorious Consulting Association blacklist about Mr.Smith
3. The Reason was because of Mr.Smith’s trade union activities
4. An additional reason was because Mr. Smith raised concerns about health & safety on building sites.
5. The blacklisting caused Mr. Smith a “detriment”

This is the first time any of the major contractors who subscribed to the Consulting Association blacklist have openly admitted this in court.

In the same statement Mr. Smith agreed that he was not a direct employee of any of the respondent companies but worked via employment agencies (and because only “employees” are protected under current UK law, he should not be able to win his Tribunal)

In a shock turn of events, Carillion then applied for the case to be Struck Out as having no reasonable chance of success but the Tribunal refused the application and the case now continues until Friday.
Dave Renton (barrister for Mr.Smith) is now arguing that because of the scale and nature of the blacklisting scandal, the companies involved had breached the human rights of Mr.Smith and the relevent laws should be re-interpreted to cover all “workers” not just employees. If successful this would set a major precedent for agency workers and other employed via contractors.

In additional uncontested evidence presented to the court:
Sales Book and Invoices disclosed for the first time by the Information Commissoners Office following a Court Order demosntatre the extent of the usage of the Consulting Association blacklist by Carillion. Between 1999 and 2004 Carillion paid £32,145 plus VAT, whilst Mowlem paid a total of £20,444 plus VAT to the Consulting Association. Senior managers from both managers attended regional meetings as part of the blacklisting operation. Invoices indicate that managers from Carillion were attending Consulting Association meetings as late as 2008 (only months before the organisation was closed down).

The case continues tomorrow – a judgement is expected on Friday.

The Employment Tribunal continues tomorrow with evidence from Mr. David Clancy from the Information Commissioners Office (the person who led the raid on the Consulting Association offices which uncovered the illegal building industry blacklist).

Writing in yesterday’s Financial Times, George Parker and Jim Pickard, give expression to the popular idea that Ed Miliband’s confrontation with the unions provides him with the opportunity for a “Clause IV moment”, defining his independence as a potential prime minister from the legacy of labourism.

Like Mr Blair, Mr Miliband is now trying to turn this confrontation with the party’s main source of income – and his most important backers in the leadership contest – into proof that he is prepared to take hard decisions in the face of the most powerful vested interests.

It is not clear whether Mr Miliband was seeking this clash; indeed, the pay restraint policy was announced by Ed Balls, shadow chancellor, last weekend and was not mentioned by the Labour leader when he made his keynote economic speech a few days earlier.

But now that the unions are manning the barricades, Mr Miliband has seized his opportunity, arguing his priority is jobs, not pay rises: “I am changing the Labour party so we can deliver fairness even when there is less money around and that requires tough decisions.”

To contextualise Tony Blair’s victory over Clause IV, perhaps we need to understand the political change represented by New Labour coming to power within the party, and the elements of continuity and discontinuity with the Labour’s own past.

Diane Hayter in her partisan but not unreliable book “Fightback!” describes how the traditional revisionist right organised to reverse the gains of the left in the Bennite era, around the issues of One Member One Vote (OMOV) and campaigning for the expulsion of the Militant. The defection of a large section of the party’s centre-right to the Social Democratic Party (SDP, who later became part of the Lib Dems) was a defeat for the traditional revisionists who remained in Labour; but it was also a terrible defeat for the left, whose rising influence was seen by some in the trade unions and the party’s political centre as a threat to the broad coalitional nature of the party, and thus were unjustly regarded by many as being to blame for splitting the organisation.

The party was gripped by two simultaneous political crises. The crisis of the revisionist right was that their radical agenda for combating inequality required economic growth and stability, conditions that no longer prevailed, and which were predicated upon a verion of Keynesianism that had proved unworkable; and the even more acute crisis of the left was that their transformative economic and social agenda was revealed to be connected to too narrow a social base to win elections. It is important to note that both the left and the right were within the envelope of Labourism: the paradoxical expression of trade unionism in the political field, which expresses opposition to manifestations of capitalism, and seeks to transform it without transcending it.

The key transitional figures of Neil Kinnock and John Smith represented complementary shifts: firstly of the Kinnockite left recognising that a General Election could not be won on the basis of the politics of the Labour left alone, and that a more coalitional approach was required; and secondly of Smith, perhaps the most heavyweight traditional revisionist in the party, and who was backed to become leader by some of the left, consolidating the move by the Labour right in the direction of Thatcherite economic policy. Arguably, Neil Kinnock’s 1989 policy statement “Meet the Challenge, Make the Change” approved by party conference was a complete assimilation by a section of the former left of Anthony Crosland’s revisionist agenda. A party that loses four consecutive general elections has considerable motivation for rethinking itself.

The bright and shiny clique of New Labour succeeded in winning the party not by becoming a majority, but by developing a convincing coalitional strategy for winning general elections. This involved both the now famous arts of triangulation and spin, but also hollowing out any distinctive ideological content of labourism. In the absence of any other electorally credible strategy they won over the centre right, and support from the traditionalist trade unions. In contrast, the left lost this battle because they seemed to be refusing to budge on a political programme that was increasingly out of tune with the voters, and were unable to convince the party centre that they represented anything but a one way ticket to oblivion.

Replacing the specific traditional wording of Clause IV of the party’s constitution was symbolic, particularly as it was unfinished business for the right in the party having originally been attempted by Hugh Gaitskell as leader thirty years earlier. But crucially, it was mainly of indirect importance, and therefore to many Labour voters and supporters the defence of the old Clause IV by the left made them seem factional and unconcerned with winning a general election. What is more, Tony Blair used the opportunity of replacing Clause IV to signal his conclusive triumph closing a faction fight, not to start a new one.

In contrast, Ed Miliband has badly misjudged the situation. A pay freeze for public sector workers is far from symbolic, it directly affects the prosperity of millions of hard working voters, and the interests of those public sector voters are represented by powerful trade unions. What is more, until now those unions have been broadly supportive of Ed Miliband, and have exercised self-restraint in the debates within the Labour Party. But the public sector members of UNITE, GMB and UNISON will expect the unions to prosecute their interests in the political arena, and that means Ed Miliband has picked an unnecessary fight with the unions, over an issue where the union leaders have no choice but to stand up to him.

The balance of power is also different: Tony Blair had a credible electoral strategy and was personally popular, so he had a strong hand to play. Ed Miliband is less popular than the party, and there are widespread doubts that he has the personal qualities to win.

But equally ill judged is Miliband’s mistake in conceding the argument that austerity in public sector pay is necessary for deficit reduction, which the Tories spin as proof that the last Labour government’s spending was profligate, and that Labour was therefore to blame for the recession.

Paradoxically therefore, as Owen Jones has observed, it is now the left that is forced to come to the defence of the positive parts of Tony Blair’s legacy, under attack not only from the Tories, but also from the Blairites!

We therefore need to confront the beguiling fallacy that Blairism was simply a continuation of Thatcherism. This is not entirely without foundation, but it is also misleading. Blair and Brown both accept the idea of market efficiency as ideologically neutral; and this therefore represents continuity with the neo-liberalism of Thatcher in further dismantling the capacity of the state to intervene in the economy, and in degrading the traditional social-democratic institutions that produce a public service ethos and sustain communities of solidarity. Privatisation and PFI reduced the public sector, and macro-economic policy privileged the financial sector in London at the expense of perhaps a million private sector manufacturing jobs in Scotland, Wales, Northern Ireland and the English provinces.

Nevertheless, there were policies directly to benefit trade unions – such as union learning, and rights to recognition; these were the result of the coalitional social nature of the Labour Party. But Blairism was also founded on the idea of creating a fairer, more harmonious society through an empowering partner state that provides conditions for individuals to help themselves.

Some gains were indeed realised, for example, when Labour took power in 1997, NHS spending was at around 5% of GDP, and the conditions had been created by the Tories for an expansion of insurance based private sector; instead NHS spending rose to be around 10% of GDP in 2010. Early years intervention, such as SureStart centres for the parents of potentially disadvantaged young children has been a great success; and working tax credit has enormously increased prosperity and independence of parents in work. Labour repealed Clause 28, and introduced civil partnerships

None of these policies could have come from the Tories, and many are under threat from David Cameron. By seemingly endorsing the narative that the current government deficit was caused by profligate spending under the Labour government, and that cuts are necessary, the Blairites in the party are threatening the positive aspects of Tony Blair’s legacy. It is a tragedy therefore that Ed Miliband and Ed Balls have retreated in that direction as well.

What Ed Miliband should reflect upon is that Hugh Gaitskell’s “Clause IV moments” caused that former Labour leader to be seen as divisive and out of touch with Labour voters and the unions, and Gaitskell never won a general election despite challenging an unpopular and manifestly failing Tory government.

It is a paradox that the coalition building skills necessary to be a successful party leader are often not the skills of persuasive and decisive determination necessary to be a successful prime minister. Sadly, it seems that Ed Miliband may not have the attributes to be succesful in either role. Miliband is certainly ill-served by his advisors, because the 2012 pay negotiations for public sector workers are of the absolutely highest importance for the key union leaders of UNITE, GMB and UNISON. Yet these pillars of his own support are the very people that Ed Miliband and Ed Balls have sought a confrontation with.

So how did we end up where we are?

An objective observer over the last few weeks would have looked at Ed Ball’s economic policy, and thought that the relatively cautious five point plan was sufficiently differentiated from Osborne’s austerity measures that Labour could electorally benefit over the medium term from the failure of Osborne’s economic incompetance. The same objective observer would look at Labour’s standing in the polls and conclude that while not exactly dynamic, Ed Miliband was quietly bringing home the bacon.

At one level, the economic policy remains in place; but in politics presentation and content are not so easily seperated. Although Ed Balls continues to say that the coalition’s austerity programme is cutting too far and too fast, he effectively surrendered his position, by conceding  that the government’s policy of pay restraint in the public sector is justified. As this will be popularly understood, this means Labour is joining the chorus that the deficit is caused by profligate public spending.

In fact of course, the deficit was not caused by excessive spending, as I have argued before the deficit was caused by falling tax income. Figures from HM Treasury clearly shows that over the last ten years government spending and income have both risen together, due to economic growth and inflation. The increasing deficit (gap between income and expenditure) since 2007 has not been due to an increase in public spending, but due to a decrease in tax receipts due to the recession, resulting from a vicious circle of increasing benefit payments, increased debt servicing requirements, and reduced economic activity. The record of the last Labour government was not profligate, and the global recession has impacted the economies of both high spending and low spending nations.

This was an argument that the Labour Party, aided by the wider Labour movement could have won through persistance; combined with patient advocacy of government action to nurture a recovery, especially by encouraging productive investment.

Instead, we have faced weeks of sniping from the Blairites. As Owen Jones reports:

Arch-Blairite Jim Murphy – who harbours ambitions to stand for leadership should Ed Miliband fail – began rolling out the new strategy earlier in the month by calling for Labour to avoid ‘shallow and temporary’ populism over spending cuts, setting out his own proposed cuts as an example to his colleagues. The equally devout Blairite shadow education secretary Stephen Twigg has partly endorsed Michael Gove’s attacks on the scrapped Building Schools for Future programme, and has outlined £2bn of his own cuts. And Liam Byrne has committed Labour to a renewed attack on the welfare state, currently being hacked to pieces by the Government. I bet the word ‘vindicated’ will be used liberally around the corridors of Conservative Campaign Headquarters next week.

There were always two aspects to Blairism. One was a strategy for winning elections based upon triangulating around contentious issues to appeal to swing voters in marginal constituencies; but the other was a genuine commitment to improving public services, and seeking to address social exclusion, through emphasis on mutuality and community. Nothwithstanding the criticisms that we on the left would have of the Blair years, there was a massive expansion of spending in education and health, to take just two examples. However, in the face of a recession there is no room for triangulating around the austerity consensus of the Tories and the Liberal allies, it needs to be opposed; otherwise Labour is forced to abandon its own commitment to a better society, and decent pubic services.

The clever wheeze of the Blairites is to seek to win an election against the Tories by agreeing with them! Unfortunately, not only has Ed Miliband faced a right wing majority in the parliamentary party, but also in the shadow cabinet, and he is increasingly opposed by the Guardian. What is more the shadowy party within the party, Progress, extensively lobbies to destabilise Ed Miliband, seeking to steer the party back to a Blairite agenda.

What is lacking is any organised counterbalance, especially since Compass effectively discredited itself by issuing a fudged endorsement of tactical voting for the Lib Dems in the 2010 general election, which reduced their credibility on the centre left. all the pressure on Ed Miliband has come from one direction.

That is why the forthright comments from Paul Kenny and Len Macluskey are to be welcomed, and I understand that Dave Prentis has also gone to consult the UNISON Labour Link committee.

Unfortunately an opportunity has been missed. Up until this weekend it would still have been posible to build a centre left coalition within the party, including key trade union leaders, around the project of shoring Ed Miliband up against his Blairite detractors. That chance has now been missed.

So why didn’t that happen? Perhaps due to accident: that such a coalition would require a figurehead MP who is both acceptable to the left, and also credibly committed to pursuing a mainstream electoral victory. The obvious contender would be Jon Trickett, except that he is in the shadow cabinet, and thus ruled out from such a role. Perhaps also because the unions have been circumspect at not being seen to indulge in damaging factionalism.

However, the challenge is greater than ever. The centre left and the trade unions need to push back against the Blairites, and that means providing some organisational form to counterbalance Progress. The left needs to define our own economic and political narrative, that is both unifying for the party and electorally credible; then we need to fight for those ideas in the party.

by Michael Meacher, from Left Futures

There is no doubt this is a defining moment for the Labour Party. No-one questions that Ed Balls cannot, with 3 years or more to go to the next election, promise to reverse this or that particular cut, because nobody can anticipate in this exceptionally fluid and febrile situation what will be the state of the economy so far ahead.

But it is a totally different matter to say, as Ed Balls did at the weekend: “the starting point….is we’re going to have to keep all these cuts”. It is also a totally different matter to say that Labour is signing up wholesale to the government’s present pay freeze and future pay cuts. So why has he done it? Not a single argument has been used to justify it except “Labour must be seen to be making tough choices”, which is simply a parroted mantra, not an explanation.

I attended the PLP last night and spoke along the lines I had already posted yesterday, reflecting precisely the same case set out by Len McCluskey, though additionally I also raised the objection that the change of policy let the super-rich off the hook completely.

Last year the lowest tenth of the population had a pay increase of 0.1%, while the FTSE-100 directors took home an increase of 49%, that is 500 times as much. I concluded that that fact provided the link to what our policy clearly ought to be: the promotion of a growth policy by creating jobs funded by taxing the ultra-rich whose gains in the last two years alone were enough (£137bn to be precise) to pay off the entire budget deficit.

So what is Ed Balls’ defence? Extraordinarily, that jobs must be the priority! But benefit cuts, public expenditure cuts and pay restraint are all going to do the exact opposite – squeeze demand even further, discourage private investment, intensify austerity, and ratchet up unemployment. If that is his only argument, why is Balls, an intelligent and competent man, taking a position so obviously feeble and patently false?

The most likely explanation is that he’s done some deal with the Blairites who remain in a majority both in the PLP and in the Shadow Cabinet. A full-scale barrage of Blairite propaganda against the party’s economic policy, starting immediately after Xmas, with contributions from Jim Murphy, Liam Byrne and Stephen Twigg, has now culminated in a confessional turnaround from Ed Balls. This repositioning on his part may secure his prospects for the moment, but at a price for the party which is irredeemable.

Today is the 70th birthday of Muhammad Ali. Sadly, it will probably be his last.

‘Why should they ask me to put on a uniform and go ten thousand miles from home and drop bombs and bullets on brown people in Vietnam while so-called Negro people in Louisville are treated like dogs and denied simple human rights?’

Ed Ball’s recent speech to the Fabians on the economy, and the attendant press coverage, is illustrative of the difficulties of economic debate in a democracy and a market economy; where messages are spun for electoral considerations, and fears about market confidence supress any instincts towards even modest radicalism.

Ball’s fairly nuanced argument is that the failure of the Tory Chancellor George Osborne to encourage economic growth has reduced tax revenue and thus increased the government’s deficit between income and outgoings. As a result the balance of deficit reduction has inevitably shifted from increasing revenue to reducing expenditure, and therefore in the public sector this raises a choice between reducing pay rises, or cutting jobs and services. Any government – of the right or left – is forced to manage the economy as they find it, and inheriting an economy damaged by Osborne’s mismanagement will constrain the options of a future Labour government.

However, in the hands of a BBC interviewer this was whittled down to a statement that Labour would oppose public sector pay rises; and Labour’s statement that they did not know whether economic circumstances when they regain power would allow them to reverse cuts is misrepresented as support for Tory cuts now. This was of course exacerbated by trade unionists, like RMT President Alex Gordon, who are predisposed to attack the Labour Party, as Alex says:

“What Ed Balls is announcing is that Labour’s given up on opposing those policies,” he said. “I think from the trade unions’ point of view, what we’re going to be asking is if Labour doesn’t want to be the opposition, then where is the opposition going to come from to this government? Our members aren’t going to stand by and take another two years of this kind of punishment and then turn out at the ballot box in 2014 and meekly vote for a Labour opposition that has supported these punishing cuts.”

Michael Meacher points out that Ed Balls’s opposition to public sector pay rises has indeed unnecessarily damaged Labour’s credibility with trade unionists, and the broader constituency of Labour voters:

At a time when the central economic problem is febrile growth because of lack of demand, it is wholly unacceptable for several reasons:
1. It would gratuitously weaken demand even further when low-paid public sector workers have a higher propensity to spend – exactly what the economy now needs – than better-off sections of the population.
2. It is grossly unfair to inflict a wage freeze for this year and next year, and then a flat 1% rise in the next two years (still a wage cut in real terms because inflation is expected to be rising at 2% a year), when 1% for a female local government worker represents less than £3 a week while for a doctor it represents £19 a week.
3. It lets the rich and particularly the ultra-rich off the hook completely, continuing to get gargantuan pay packets and bonuses hardly touched.
Why did Balls say this anyway? He didn’t have to make any such statement at all. The alleged reason – that it’s necessary to swallow the entire Tory scorched earth policy in order to gain credibility – is absurd. In fact the exact opposite is true – the Labour Party will never gain credibility whilst it continues robotically to parrot the Tory line.

Writing on this website, John Wight. eloquently expounds the type of left alternative that should command widespread support across the unions, and with the left: a clearer differentiation between Labour and the Tories over the narrative of austerity, a programme of public investment to boost demand, a shift away from economic dependence upon the finance sector, greater state intervention, and supporting wage rises for lower paid public sector workers while holding back the highest paid executives.

However, it is premature to expect that such a programme could be adopted by the Labour Party, when the left have not yet won the argument for such a strategy in the trade unions, and when we have not managed to develop a convincing political narrative that can win the middle ground in order to make such a radical stance electorally credible. That is the task ahead of us.

Ed Balls makes the point well in his Fabian speech that political debate about economics in a democracy tends to polarise around symbolic caracatures of complex arguments. Debate is further constrained by the circumspection required for parties in government, or aspiring to government, who need to maintain business confidence, especially in periods of currency exchange rate volatility.

Over the economy, Labour faces what might be called the Marks and Spencer dilemma. The chain store struggles to prosper based upon its existing customer base, but if it moves away from its frumpy image in pursuit of new customers, it may lose the ones it has got. If Labour can’t win an election, then whatever economic policy we advocate is irrelevant; so it does need to be cogniscent of the need to pitch its economic message to engage with the prevailing consensus of public opinion.

Labour hasn’t in fact endorsed the coalition’s economic policy, but in order to appease those on the right of the party who have been running a campaign to destablise Ed Miliband, this weekend the two Eds gave the impression that they have. Carl Packham accurately assesses the real problem with Ed Ball’s approach:

What Ed Balls is really to blame for is talking about this in a kind of quasi-managerial way, rather than talking about this in a way that says the coalition government are making a set of irreversible mistakes. Oddly, in an attempt to make the party’s economic message credible, they are allowing the press – from the right wingers to the left – to paint them as supportive of austerity measures that aren’t working.

Ed Balls’s five point economic plan is to nurture economic recovery, thus reducing the deficit through increased tax revenues, and for fewer spending cuts than the Tories, Boosting tax receipts through economic growth mitigates the requirement to reduce spending.

However, it is worth unpacking Balls’s argument when he says:

Of course, there will be naïve ‘Keynesians’ who will think it is always a special case – time to let rip and just ‘tax, spend and borrow’ in the hope that will deliver full employment – people who think we are always in 1930s-style depression and more borrowing is always the solution to unemployment. And that is what gave Keynesianism a bad name in the 1970s.
It is why Labour leader Jim Callaghan was right to tell the Labour Party Conference in 1976 that that you can’t just spend your way to full employment. But, as I argued well over a year ago now in my Bloomberg speech, the reason why the real Keynes is so relevant today is that the global economy has been sliding into that rare and dangerous ‘special case’ that Keynes identified in the 1930s and Japan suffered in the 1990s.

What led the paradigm shift away from Keynesianism in the 1970s was not its naïve over use, but that shifts in the structure of international capitalism had reduced the effectiveness of the conventional Keynesian mechanisms. Neither the deflationary package of July 1966 nor the Heath government’s attempt to stimulate investment supply through a Keynesian management of demand resulted in the expected outcomes.

The Labour Party’s programme of 1973, which resulted in the 1974 manifesto, was predicated upon a number of observations about Keynesianism, as operated in the post war period by British governments who had used control of interest rates to manage demand through raising or lowering the cost of credit borrowing. Although full employment could lead to a worsening balance of payments, this could theoretically be mitigated through devaluation, but political considerations acted as a constraint upon this option (the more presidential style of French government, had allowed them more freedom for devaluation). The state could also combat under-consumptionism through boosting demand. In the General Theory Keynes argues for both direct state expenditure to increase demand as well as indirect stimulus.

However, there were a number of changes that undermined the effectiveness of such measures. Firstly, there was a vicious circle that sustained slow growth rates combined with an increased organic composition of capital, which meant that the leading managers of private firms were unconvinced that costs could be recovered over the lifetime of a major investment project. This lack of confidence meant that private corporations were unresponsive to increase in demand.

What is more, the increasingly multi-national nature of capital meant that corporations were able to avoid any government attempts to restrict credit, by international transfers within their firms; and transfer pricing within corporations prevented any government price controls; and moving profits across borders allowed corporations to avoid taxation. The increasingly global nature of manufacturing meant that government stimulus for investment would be ineffective compared to the advantages of moving manufacturing to other states.

In other words, the Labour Party programme of 1973 recognised that while Keynesianism relied upon macroeconomic measures by government to create the context where private corporations would respond in a way virtuous to national economic development, the actual decisions were still left in the hands of the private sector managers of major corporations, who had institutional reasons for resisting such government intentions; and the multi-national nature and increasing size of corporations provided them with the mechanisms to avoid responding to Keynesian stimuli. Hence the commitment to undertake strategic nationalisations in profitable industries like pharmaceutical manufacturing, to allow direct government intervention at the level of corporate decision making.

This understanding that private ownership of corporations was an impediment to government intervention in the economy was fiercely resisted by the right in the party, for example in Anthony Crosland’s 1974 article “Socialism Now” he argued both that the left was wrong in identifying increased globalisation, which he argued had reached its maximum point; and also that there were no conflicts between private corporations and the public interest.

Both the left and the right in the party had in fact reached the conclusion (whether consciously articulated or not) that Keynesianism, as it was being operated by successive post-war British governments, had run its course. So Callaghan’s speech to the 1976 conference was not an attempt to defend Keynesianism from naïve over-use, as Ed Balls implies, but a deliberate signalling that Keynesianism was being abandoned in favour of allowing unemployment to rise in an attempt to curb wage-push inflation; and a rejection by the government of the 1974 manifesto commitments to nationalise sufficient leading companies to allow the government to directly intervene in the economy.

Of course, the constraint imposed by the multi-national nature of modern day capitalism is now well understood by neo-Keynesian economists, hence the enormous effort to coordinate international management of credit supply; and for international banking regulation; but the problem remains that the key decisions of whether to pursue investment are left in private hands.

These disputes are not of just historical interest as the economy which has best weathered the current recession is that of the People’s Republic of China, where a genuinely mixed economy gives the government direct access to the levers of investment and finance. There is limited possibility of really gaining popular and democratic control of the economy until we have reversed the consensus against public ownership. It is arguable that while Labour’s Five Point plan is far better than the austerity of the current government, it cannot lead to sustained prosperity in the interests of working people until the state has the capablity to directly stimulate productive investment.

by Rt Hon Ed Balls, Shadow Chancellor

[This] conference – … to debate The Economic Alternative – is, without doubt, being held in the shadow of [great] events:

- political deadlock and an abject failure of economic leadership in the Euro area, Britain and the US Congress;
- following on from the biggest global financial crisis of the last century.

A toxic combination of grossly irresponsible bank lending, poor governance and weak regulation round the world which in its aftermath poses – as I have argued consistently over the last eighteen months – a threat to the world economy as grave as that which we faced in the depression of the 1930s.

So this is my starting point for today’s Conference.

If Britain and the world are to avoid repeating the mistakes of that 1930s ‘lost decade’ and the 2008 global crisis, then we badly needs political leadership in Britain, Europe and the world to meet two great challenges:

The Growth Challenge – to stop the aftermath of the financial crisis turning into years of slow growth, high unemployment and rising debts – leaving a permanent dent in our prosperity;

and,

The Reform Challenge – long-term reform to make sure such a financial crisis on this scale can never happen again and to build a stronger and fairer economic model for the future – what Ed Miliband has called a more responsible capitalism – which can, even in tougher times, meet our aspirations for social justice and strong public services.

LABOUR’S POLITICAL SHADOW

But of course, there is another shadow which casts itself across this Conference today – a political shadow which presents a particular challenge to Labour.

I believe we are right to resist the ideological and ahistorical Tory analysis which tries to pin the blame for a global financial crisis on Labour’s approach to public spending – when it is clear that the global financial crisis bankrupted banks and pushed up deficits in high spending and low spending countries alike.

But it is a fact that this financial crisis did happen on Labour’s watch – and that Labour lost the subsequent General Election.

We have never denied that a plan is needed to get the deficit down, and that it would mean tough decisions on tax and public spending. Before the election, I set out £1 billion of cuts to education.

But as a party and a leadership, I said then and I still believe now that Labour should have been clearer before the election that if we had been re-elected there would have been spending cuts as well as tax rises.

And I have no illusions that there is a big task to turn round Labour’s economic credibility and show – even as George Osborne’s plans deliver unemployment rising, growth stagnating and long-term reform stalling – that Labour can be trusted again. (more…)