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Chile ’09

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James Purnell: The new egalitarian capitalism

Posted by progressivegovernance09 on March 30, 2009

James Purnell, UK Secretary of State for Work and Pensions, addressed the plenary session on progressive politics after the financial crisis. His speech has been posted below:

I keep on hearing that this is a centre left moment. I hope so. But we don’t know yet – the financial crisis of the 1930s looked like a centre left moment for a while and then turned in to a very nasty far right moment.Whether it is a centre left moment depends on the decisions we take. But the really important decision is never when you are in the eye of the storm. It is the moment after. The action that you take, in immediate response and then later, on reflection, are the truly defining moments. The Depression of the 1930s was not made inevitable by the Wall Street Crash of 1929 but by the immediate retreat behind tariff walls.

We are still dealing with the aftershock of a very severe banking crisis, the consequences of which have spilled over into the rest of our economies. The immediate policy response has, in my view, averted a comprehensive disaster. It is important too that we follow the admirable determination of the British Prime Minister not to allow the crisis to be a pretext for protectionism.

But the crucial decisions come next. This crisis has melted away the political certainties. It has melted many things we thought were solid into air. It makes us all think again about the arguments we use. It makes us search for the things that we must do differently as a result of the crisis.

The current economic problems have the neo-liberal intellectuals on the run. But that doesn’t mean voters will inevitably turn to the Left for answers.

We need to show that we can not just diagnose the roots of this problem but provide the right answers. As Kevin Rudd has said, this is the traditional role of social democracy to save capitalism from itself.

We need to do so without over-reacting. We come neither to praise capitalism nor to bury it. We want to change it, by reforming it, and I want to argue to make it into a more egalitarian capitalism. That means that, coming out of the crisis, the progressive political project needs to be both more confident and more radical.

Globalization is not a force of nature. It is a man-made phenomenon which, on balance because of the opportunities it offers, is a good thing. But it shifts the burden of risk, it creates uncertainty and insecurity along with prosperity and riches.

The purpose of the Left in politics has always been opportunity and security. Those twin beliefs are more necessary now than ever. People are worried about the extraordinary instability that was bubbling below the long boom of the last two decades.

We can’t promise to end instability. But the crisis does reinforce three key progressive arguments of the last decade. They should give us confidence that our political thought is a good guide to recovery.

The first is the need to invest in human capital. Over the last decade the British government has done more redistribution than any other developed nation. It has been possible because of the growth in the economy. And that growth, in a nation trading on its skill in high value-added occupations, requires a well-educated workforce. The threat to growth means we need to redouble our efforts to educate our workforce, from universal childcare to globally competitive universities.

Then there is another side to falling growth. Human capital policy equips people for the future. A supportive welfare state equips them for the present. The people who lose their livelihoods are the victims of instability. They do not deserve their unfortunate fate. And, because of that, they deserve public support.

There will be a distinction between Left and Right on this point. The Right will, in due course, use the downturn as their pretext for reducing the generosity of the welfare state. Where they think the welfare state is the problem, we know it is part of the solution. That support needs to be matched with responsibility – we need active welfare not passive welfare. But it is in the troubled times that you truly realize the value of that support.

The third point that is becoming clear is that the years of rapidly expanding spending on public services are over. The continuous improvement to public services which we have seen for a decade now cannot stop. But more money will not be its motor force. We will be forced, by sheer weight of necessity, to get more for each pound. That means the debate about how to reinvent public services, how to improve outcomes through reform, is an urgent necessity. In a world of change, we cannot promise people a quiet life.

So, our beliefs in education, a supportive welfare state and the courage to reform public services grow in strength from the current situation. But in other areas we need to change.

We do not yet know for certain that we are at a historic inflection point. But we may be. 2009 may turn out to be a revolution. But whereas 1989 was a revolution against the consequences of arbitrary state power, the anger of 2009 is against the consequences of arbitrary market power.

The question now is how to help people protect themselves when markets go wrong? How do we replace the rapacious aspects of financial capitalism, in which too many of the spoils went to the undeserving, with a capitalism that is in tune with basic fairness?

In ten years time, we will all still live in capitalist societies. But it needs to be a more egalitarian capitalism, both because it is fairer and because it will grow quicker.

What would egalitarian capitalism mean for policy?

It means the left no longer needs to be shy about equality. But we should be smart about it. We can’t create equality in the old way. We can’t simply take money from one set of people and give it to another, and call that equality. That is a palliative. It is trying to compensate for an unequal society not trying to tackle its causes.

Instead, the left needs to remember that it started off as a movement about power. We need to recognise that income inequality is just part of a wider struggle against the inequality of power. The greatest injustice is when people cannot achieve their goals because someone else with power stops them.

The credit crunch was a power failure. Too much power was invested in bankers and too little in regulators. Too much power went to the market and too little to democracy. We had the power all in the wrong place – too concentrated, too many bankers with monopoly power. So disperse the power and don’t allow one interest to predominate.

This simple idea will serve us well in policy: get power down to the lowest possible level. And don’t let too much power gather anywhere. Power needs to flow.

Give people power over public services so that the services they receive become the services they need. If they are not happy with their hospital or school, let them choose another one.

Give people power over politicians. Progressives should care as much about choice in democracy as choice in public services.

Make sure people have assets they can fall back on in times of difficulty, or use to get on, in times of opportunity.

Abolish child poverty and make sure that no one who works full time is below a country’s poverty line.

Make sure that nobody gets trapped in a life of benefits, dependent on others, deprived of the nobility of labour.

Never stop inquiring into whether inequalities are merited. Too many inequalities are written off as just the way of the world. But we have a hand in making the world. Inequality has to be justified as the fair rewards of effort and creativity within a fair system, not the consequences of unchallenged privilege.

And then, way beyond the street and the neighbourhood, beyond local and national government, starting at the G20, get power in the right places, with the right nations round the table, to fix supra-national problems.

Through all of this, in policy that runs from the street you live in to the world you work in, we can see a thread. We want power to be spread and spread equally. The case for capitalism is that it spreads power. The case against is that it does so unequally. The case for government is to close that gap.

We are not yet into the light of day in this crisis and a clear road ahead is not yet obvious. But I do think we can pick out the outlines of the future from the gloom. Be confident that our investment in people is critical. That a supportive welfare state is indispensable. And that active government is the only way to provide both.

And then focus on the mission of the left not just for this generation but for every generation – to take power and multiply it by releasing it. This is the lesson of the centre-left moment – not that we, the politicians acting as the state, take more power for ourselves. Quite the opposite – we let it go.

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