I’m really glad to see Ed talking so much about the Living Wage in his speech.
From the NPEN ebook (page 44):
In the 1920s much of Labour’s economic thinking was rooted in
theories of under-consumption. The argument was that as one
becomes wealthier, one tends to save a greater proportion of one’s
income; so that vast disparities in wealth lead to too much saving in
the economy as a whole, and not enough demand. Social liberal and
liberal socialist thinkers such as J.A Hobson, E.F Wise and J.
Strachey, associated with the Independent Labour Party, made the
case for a more equal distribution of income not only on moral
grounds, but also on economic grounds. A redistribution of the
economy’s wealth towards the working class would lead to higher
consumption and hence higher employment.
This insight still holds true. As we argued at the beginning of this
e-book, the impact of rising inequality has been masked for the past
three decades by increased borrowing by those further down the
income scale. But increased personal indebtedness has proved
unsustainable, and, given this difficulty, if living standards are to be
maintained a solution will have to be found in greater wealth
equality. Government intervention will be required – whether
through increasing the minimum wage or using the power of public
sector procurement to enforce a living wage – as will changes in the
tax system to reduce taxes on low earners.
There has been an awful lot of debate on the Shadow Chancellorship over the past 48 hours. All of the three leading candidates have strengths.
Ed Balls is an obvious choice – I’ve outlined the case before.
David Miliband, as I’ve argued, has outlined a policy-heavy, detailed alternative Social Democratic model of political economy for Labour.
Yvette Cooper is another strong contender – an excellent economist, possessing relevant experience and a strong media and Parliamentary performer. On Budget day, back in June, she was very impressive – actually sitting down with a copy of the Red Book and helping party staff go through it.
Aside from these three, we shouldn’t forget Liam Byrne who is, yet another, strong media performer with an excellent knowledge of the economic brief. (And that note was clearly a joke – move on).
As I argued yesterday, I think the extent of division on deficit reduction has been overplayed. That makes sense in the context of a leadership election, but now is time to unite around what we all agree on – Osborne is cutting too fast, too much and is a danger to growth.
But in all this talk of the Shadow Chancellorship, we seem to be forgetting the over big economic role – BIS.
I’d like to see a “big name” getting that brief – in many ways outlining Labour’s growth strategy is going to be more important than the traditional job of the Shadow Chancellor. And it will require a great deal of political skill – shadowing Cable is a lot more complex than shadowing Osborne. We need someone in this role who can both develop a pro-growth strategy and has the ability to critically engage with Cable, rather than blindly opposing him – supporting him at times and backing him against the rest of the Cabinet.
With one of the four above at the Exchequer and another at BIS, together with a fresh face as Shadow Chief Secretary, Labour would have a very credible economic team in place. But whoever is in that team, we need to learn from the experience of the Blair/Brown years – economic policy shouldn’t be he intellectual reserve of the Shadow Treasury team, the entire party (not least the Leader!) need to be kept closely involved.