Thursday, September 6, 2012

Ed's Clause 4 Moment

 In effect it now reads -

"To secure for the workers by hand or by brain the full fruits of their industry and the most equitable predistribution that may be possible upon the basis of the operation of responsible capitalism."

Below is the relevant extract from Ed Miliband's speech made (appropriately) at the Stock Exchange where he called for "predistribution" under "responsible capitalism" . The full speech can be found here.

"Of course, redistribution will always remain necessary.  But we've learned that it is not sufficient. And fiscal circumstances will make it harder not easier.  The new agenda is that we need to care about the model of the economy we have and the distribution of income it creates.We need to care about predistribution as well as redistribution.

Predistribution is about saying: 'We cannot allow ourselves to be stuck with permanently being a low-wage economy'. It is neither just, nor does it enable us to pay our way in the world. Our aim must be to transform our economy so it is a much higher skill, higher wage economy. Think about somebody working in a call centre, a supermarket, or in an old peoples' home. Redistribution offers a top-up to their wages. Predistribution seeks to offer them more: Higher skills.  With higher wages. An economy that works for working people. Centre-left governments of the past tried to make work pay better by spending more on transfer payments. Centre-left governments of the future will have to also make work pay better by making work itself pay. That is how we are going to build growth based not just on credit, but on real demand. And that is how we are going to help the squeezed middle of this country and, build a better economy when there is less money around."

So what are Eds the first steps in his journey towards predistribution under responsible capitalism?

He went on to say "to tackle the challenge of predistribution...we have made proposals on changing the way the banking system works, and promoted a British Investment Bank...Sir George Cox, formerly Director General of the Institute of Directors, is leading our review on short-termism...We need proper competition in all sectors of the economy so that consumers get a fair deal. That means not allowing any cosy cartels to develop in any sector, from energy to our train network...We also need...all Government departments working together, including through procurement, to support British business...We need a skills system...And we plan to build that new agenda with schools, young people, businesses and trade unions working together to fashion our new vocational training system...We need a special welfare state that encourages people to work, and rewards those who do...the move towards responsible capitalism is actually being led by many business people...A responsible capitalism is a resilient capitalism".

Ed's dream seems to be a belief in the establishment of a system of "perfect competition", whose early advocates claimed would work for the benefit of all - whether they earned their living from their land, their labour or their capital. But it is a long time since this idea was even seen as a dream. We have long since moved into a world dominated by forms of monopoly capitalism, whose interests have themselves come to dominate political activity. An effective move to predistribtion would require measures such as a ceiling for earnings and wealth holdings, as well as improved minimum wages and benefit levels. But that would be called redistribution, rather than predistribution.   


  1. Ed’s Pre-distribution speech supposedly gives the Labour Party and UK economy a new set of ideas. It seems to give mixed messages as though talking to different audiences. This is where in the past New Labour came unstuck i.e. Third Way or Triangulation. Where Labour lost its principles and sold its soul to the Market. If we don’t know what we stand for now – we are lost cause and voters will be confused.
    If we look at some of the “ideas” from the speech we see no definite set of principles just re stating what we know already.

    “We need more change, not less” This sounds like the Progress Group “a party within a party” with a progressive agenda – yes we need new ideas but what?? I thought Refounding Labour and Jon Cruddas was the vehicle for new ideas...

    “Our new agenda must be built around new assumptions” Again what will these new assumptions be – it’s if we don’t know what Labour is about??

    “They include proper financial regulation” Yes New Labour got this wrong and where are Labour’s (Ed Balls) policies to prevent this happening again??

    “And we have inequality that scars our country” It definitely does – from birth, through education and the job you do all prevent the UK from being a fair and equal society.

    “The new agenda is that we need to care about the model of the economy we have and the distribution of income it creates” Of course we what our economy to work correctly and those that benefit the most contribute back to the least fortunate in society through a taxation system that actually works i.e. collects from the rich as it does form the poor i.e. closing tax loopholes. Is this the new agenda??

    “And that is how we are going to help the squeezed middle of this country and, build a better economy when there is less money around.” What is the squeezed middle, what kind of person does this include? Does it include low paid part time workers, single parents, unemployed and disabled? This is a catch all phrase for middle class people in the South of the UK who maybe worried about voting for Labour. What it should say is how
    we are going to help working class people.

    “Today, clear about the role of markets, we can more confidently be the people who set out how the rules need to change.” The Market is another fuzzy word nobody is sure what it means, who it is and how it affects the working classes. Words that are never explained for fear of what they actually mean. The Market is big foreign Hedge Funds residing offshore that along with the
    Establishment run our country.

    “We need to tackle the short-termism that has characterised Britain for so many decades” and “We also need companies that reflect the values of our society” Definitely yes – businesses are run over a 12 months reporting to shareholders what dividend they will get. We should be planning over 5-10 year period using local banks that will invest in socially responsible companies that understand their place in the community.

    “A responsible capitalism is a resilient capitalism.” This is another short statement of intention with nothing to back it up and how it will be achieved.

    I would be surprised if 5% of the population was aware of this speech and what it was supposed to achieve. Did it encourage lost Labour voters to come back to the party? Where are the policies to achieve these aims? What was the overriding message from this speech – “Pre-distribution”? These are old tired words that have connotations from a past era that nobody wants to bring back.
    Where is the modern party that talks about new technology that will reinvigorate our manufacturing processes so we can sell to the world and reduce our debt? What about the Green sector that will create new jobs and save the environment. What about our leading Scientists and Engineers – we should be investing in their futures not talking about redistribution – we need to create things first so we can become a fair and equal society in both public and private arenas.
    Yes some good ideas without specific detail – but I don’t think this will be Ed’s Clause 4 moment!! Regards Jon Williams

  2. Jon: Whilst I accept that much of Ed's speech was vacuous, the direction he generally pointed us towards was something I found to be really worrying. Let me explain why I called it his Clause 4 moment. The original Clause 4 was adopted in 1918 and drafted by Sidney Webb. It gave the Labour Party a commitment to work for a democratic socialist society. It wasn't handled in a revolutionary way, but rather in the fashion Webb himself believed in when he talked about the "inevitability of gradualism". This was not an unproblematic approach, but its greatest achievement was under the Labour Government of 1945 in establishing a period dominated by the welfare state, the mixed economy and full employment. The first thing that Blair announced on his election as Leader of the Labour Party was his intention to re-write Clause 4. In the new Clause he sort to further what was termed a "dynamic" economy. This was clearly to be a system in which Capitalism would be assisted in playing a key role; rather than being something that would be gradually replaced. Yet Blair's New Labour philosophy did not just rely on benefits trickling down from a growing capitalist economy to the rest of society, but it saw a certain need for re-distributive policies such as the mimimum wage, school building programmes and Sure Start. In his speech to the Stock Exchange, Ed seems to move Labour further into the capitalist camp; building upon what he had earlier said about a need for "responsible capitalism". Without Ed indicating how irresponsible capitalism could be restrained, this sounded merely like asking capitalists to be good boys and girls. And it did not recognise that even nicely disposed capitalists are obliged to buy their labour and the like in the cheapest market and to sell their products in the dearest market, unless they were prepared to go out of business and not be capitalists any more. To this notion of his support for "nice" capitalism, Ed has now added the notion of "predistribution". E ssentially he wishes to work with capitalists to help ensure that people gain the skills they need in the modern world. He does not dismiss, at least, in the short term still using some redistrbutive techniques. But what he looks towards is, instead, pre-distribution in which capitalists provide good conditions for workers who will in turn provide capitalists with their productive skills. Redistribution will then seemingly wither away.

    I share you concern about his use of the term "the squeezed middle". If you are squeezed in the middle, you are being squeezed from both sides. So presumeably, it isn't just the rich and powerful who squeeze the middle, it is the poor and the weak who do it also. That sounds as if Ed wants to take the poor's welfare rights and benefits away from them.

    I am worried, that Ed is taking us into territory that is ever worse than that which New Labour moved us into. Blair did his new Clause 4 up front in the Labour Party. Ed is slipping it in bit by bit - and keenly using the Stock Exchange in the process.