What this Labour conference should be about

The prime issue at Conference this year won’t be the union link, which may well be resolved by negotiation, but rather what is Labour’s core message. It has got to be setting out the alternative to prolonged austerity which will promote real and sustainable growth (not the shallow and over-hyped version currently on offer), cut unemployment sharply, and lay the foundations for fundamental change in our economy to enable the British people to pay their way in the world and have the living standards they aspire to. But it also means going beyond tackling austerity by challenging and replacing Britain’s failed business model – neoliberal capitalism – which has been at the root of this country’s decades-long decline and repeated cycles of boom and bust.

It is difficult for Labour to hammer the manifest failures of Thatcher’s neoliberal programme because it was absorbed and even extended in the Blair-Brown interregnum. But the deeply mistaken New Labour approach sticking to these Tory economic policies cannot now be used as an excuse for not facing up to the fundamentals of Britain’s long decline. Since 1980 neoliberal capitalism – untrammelled markets and deregulated finance – has made Britain’s economic position untenable. Manufacturing was halved by harsh monetarist policies and a grossly over-valued exchange rate, large swathes of the UK industrial base were sold off, the deficit in traded goods reached unsupportable levels (now exceeding £100bn a year), the economy was only kept going on the back of colossal credit and mortgage borrowing, inequality was driven to obscene levels, and finally the out-of-control banks freed of all restraints blew up the system by showering the world with toxic assets which proved worthless.

Osborne has of course made this dreadful record worse by his fetish for austerity, but because he rejects any fiscal stimulus for ideological reasons he can only try to revive the clapped-out economy by monetarist measures – keeping interest rates on the floor and printing money (so-called quantitative easing). Neither has, or can, provide the strong stimulus needed. Business investment has collapsed and the big firms are still hoarding cash because they don’t believe (rightly) that there is a sufficient and growing level of demand in the economy.

This gives Labour the perfect opportunity not only to kill austerity by the big fiscal boost clearly needed (paid for largely by taxing the super-rich), but also to make the case for a new business model – a long-term revival of high-tech manufacturing, a break-up of the biggest banks to ensure that finance gives priority to British industry, a restoration of the money supply and hence of the direction of economic development into public hands so that priority is given to manufacturing and investment and exports over consumption, a re-drawing of the boundaries between markets and the State to repair serious market failure, and an attack on the roots of inequality by whole company pay bargaining. Then at last Britain’s economic future would be set on firm and lasting foundations.