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Miliband's manifesto for 'responsible capitalism'

There are people out there who harbour hopes that a future Labour government under Ed Miliband would be a radical administration that responds to ordinary people’s aspirations. Dream on.

What is made clearer each time Miliband or shadow chancellor Ed Balls speaks is that they accept lock, stock and barrel that the first priority will be to reduce the public spending deficit. If elected, Labour would carry on where the Tories leave off.

That was the hardly-disguised implication of Miliband’s speech yesterday at the stock exchange where Labour came down in favour of what is known as “predistribution”. You read that right, not redistribution but predistribution.  

"The redistribution of the last Labour government relied on revenue, at least in part, which the next Labour government will not enjoy," Miliband told his audience ."The option of simply increasing tax credits, for example, in the way we did before will not be open to us … fiscal circumstances will make it harder not easier."

Now, in the dim and distant past, Labour was in principle in favour of redistribution. In fact, that was the raison d’être of voting for Labour in the first place. By way of taxation, housing, education and state-owned utilities, the inequality/wealth gap would at least be held in check, if not narrowed.

That philosophy went out of the window in the 1990s, when New Labour came into existence. As Miliband said: “In the 1990s New Labour rightly embraced markets, most famously in our change to Clause 4. The party embraced the creativity of capitalism.”

In came the love for deregulated market capitalism and so-called trickle-down economics. Except the trickle became a tide heading in the opposite direction. Inequality grew as the better off increased their share of wealth. One report published just before the last general election concluded: “Households in the top tenth have total wealth (including private pension rights) almost 100 times those at the cut-off for the bottom tenth.”

Millions were condemned to low wage, unskilled jobs as the corporations moved skilled manufacturing jobs to Asia. House prices soared out of the reach of most people, while rents in private and social sectors became unaffordable on wages alone. Many households were forced to live in permanent debt, and still do.

Neither the minimum wage – which you cannot live on – nor tax credits made a substantial difference. But even those measures are being abandoned by Miliband in favour of predistribution, a term coined by political economist Jacob S. Hacker who has advised the Democratic Party in the US.

So what does it mean? It is little more than encouraging capitalism to be more “responsible”. As Miliband told his audience: “"Predistribution is about saying, 'We cannot allow ourselves to be stuck with permanently being a low-wage economy and hope that through taxes and benefits we can make up the shortfall. It's not 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, much higher wage economy.”
 
And, pray, who is to achieve this laudable aim? Not the government, not the state. Yes, you’ve guessed it, the employers! Miliband claimed that “the move towards a more responsible capitalism is actually being led by many business people”, by companies who know that firms “flourish best when rewards are fairly shared”.

This will come as news to the vast majority of workers, whose real incomes have fallen sharply since the economic and financial crisis broke five years ago (with much worse to come at the end of this year when food, fuel and transport costs soar).

Just in case his audience was in any doubt, Miliband finished his speech by declaring: “And I believe creating this responsible capitalism will be better for our country. A responsible capitalism is a resilient capitalism.” Vote for that? You are joking!

Paul Feldman
Communications editor
7 September 2012

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