First published in the Guardian, ‘Comment is Free’, 28 September 2011
Ed Balls’s assessment of the current economic situation in his speech at the Labour party conference wasn’t exactly upbeat: “These are the darkest, most dangerous times for the global economy in my lifetime.” Few can doubt that Balls is right to be extremely worried – we are facing a severe crisis of capitalism. In fact, if anything, his speech underplayed the severity of the current situation. It’s not just that we face years of stagnation, it’s that we are, again, on the edge of economic meltdown as the eurozone crisis threatens to tip the world into a 1930s style crash.
Nevertheless, Balls’s assessment of the danger that confronts us was terrifying enough. Given his account of the bleakness of our predicament you would be forgiven for thinking that he might have used the rest of his speech to set out an appropriately radical and bold series of measures. The policies he actually went on to outline, however, were laughably tame: his key proposals were for cuts in VAT and a national insurance “holiday” for small firms talking on extra employees. This certainly came as a bit of an anticlimax after all that rather dramatic talk of darkness and danger.
The pitiful inadequacy of Balls’s proposals is entirely in keeping with the general timidity of Labour’s response to the crisis. The seriousness of the economic situation demands radical measures. Yet serious, ambitious thinking in relation to economic policy is nowhere to be seen within Labour. The intellectual energies of the party are currently confined to the rather depressing debate between Blue Labour’s “faith, family and flag” approach and Purple Labour’s warmed-over Blairism. Neither faction has very much to say about economic strategy.
As David Osler has pointed out, it is interesting to contrast the timidity and poverty of Labour’s response to the economic crisis today with the relative vitality, creativity and ambition of Labour thinking during the last period of major economic downturn. During the crisis of the 1970s, a collection of figures and organisations clustered around the left of Labour formulated a radical set of policies for economic recovery. This set of interlocking policies was collectively termed the Alternative Economic Strategy (AES). In fact, several distinct versions of the AES were produced over several years by different groups. One of the most remarkable things about the AES project was its democratic pluralism and openness – it drew on the creative energies of a wide range of people within the labour movement. Almost like a piece of open-source software today, the AES was taken up, tweaked and adapted by different groups and organisations. Among the most influential AES variants were those developed by Stuart Holland (a close ally of Tony Benn) and Sam Aaronovitch. All variants were rooted in the view that the economic crisis could and should be resolved in such way that produced a more egalitarian and democratic society.
At the core of the AES strategy was the idea that the state should organise a major programme of investment to stimulate growth. This would be combined with a broad programme of public ownership (including nationalisation of major financial institutions). Nationalisation of banks and key firms would allow the government to directly channel and target investment in line with strategic economic priorities and to restructure the economy in favour of the productive sector. The programme of investment in publicly owned enterprises would be supported with a system of planning agreements between major private firms and the state. Furthermore, capital controls would be introduced to prevent capital flight and minimise speculative transactions. Some AES variants also envisaged the setting up of import controls to protect the balance of payments.
There were frequent disagreements among AES proponents – many criticised the idea of import controls, arguing that they would export unemployment and provoke international retaliation. Many others were critical of the degree of state centralisation that the plan seemed to involve. In response to this problem more radical versions of the AES incorporated plans for industrial democracy and workers’ control in the nationalised industries and advocated the democratisation of the planning process so that the national plan would reflect democratically determined priorities.
The AES had a major impact on the Labour party – no version of it was ever adopted wholesale – but elements of it were incorporated into official party policy. It is easy to find fault with much AES thinking, but looking back at discussion of the AES you are struck by the impressive ambition and willingness to “think big” that characterised this debate. It is certainly striking how timid current Labour thinking is by comparison.
Some elements of the AES, perhaps, provide useful resources to draw upon today. For sure, any serious strategy of recovery must centre on a major programme of government investment and perhaps this will require, along the lines of the AES, an extensive programme of public ownership. A strategy for growth certainly requires more than the sort of minor fiddling about with VAT and national insurance Balls is proposing.