Ed Miliband needs a clear economic alternative. His emphasis should not be on regulating business, but on democratising it
When you're in opposition, good news can be bad news. Slightly better figures on growth, on employment and inflation may prove a mirage. But a real recovery has the capacity to transform the terms of political trade. It would make Labour's loudest message – "it isn't working" – immediately redundant.
We know the caveats. This doesn't yet feel like recovery in the real world of family budgets squeezed by rising fuel and food bills, or of high streets with windows boarded up. Everything is fragile. And history offers plenty of examples (John Major) of prime ministers getting recovery without the political credit.
Ed Balls knows all that, and made a shrewd intervention after the latest GDP figures, reminding the Tories that with more tax rises coming, small business lending down and the eurozone still in crisis, David Cameron would be unwise to be complacent. He went on to list Labour ideas on the economy, from the proper reform of the banks to the use of the new mobile spectrum money to build 100,000 affordable homes.
Yet voters hear the big messages only, and Labour hasn't yet got a clear enough, simple enough, big-picture economic alternative. It's still vulnerable to the Tory charge of being the party of splurge. Balls and Ed Miliband have already decided that they can't assume the coalition will lose the next election on the grounds of economic competence. So, what's the story?
There are intriguing hints. Today, Miliband makes his first major speech since the "one nation" clothes-stealing escapade in Manchester. It's on mental health but the underlying theme will be that this is a crisis which cannot be resolved by big government alone, but needs all of society's institutions, from hospitals to companies such as BT (which is taking mental health seriously), to roll up their sleeves. In almost every area, he is repositioning Labour away from statism and Gordon Brown's belief in centralised micro-management.
That may be a vital first step when money is tight, but is it sincere? And how can non-state players be made to work for progressive ends? Going well beyond hints are the new ideas coming out of the Blairite thinktank Progress.
Its Purple Papers argues that pro-jobs policies need to radiate out in every direction, from cutting NI contributions to replacing money spent on family benefits with better childcare and biasing the welfare system towards those who have worked, rather than those who never have or will. There are proposals which will make some traditional Labour supporters very angry, including freezing child benefit and tax credits and ending universal welfare entitlements such as free TV licences, bus passes and winter fuel payments for the elderly. But critics of Progress should remember that such cuts would be balanced by new wealth taxes to fund better childcare to get people into jobs, and, as reported in the Observer, the high cost of childcare today often makes it barely worth taking a full-time job – a major barrier to getting people back to work.
Yet the truth is that repositioning Labour on the role of the state, and producing tough proposals on welfare, don't quite reach the heart of the dilemma, which is how to remake our economy. At present, it's unbalanced, unfair, undemocratic and anaemic. Whether the economy grows in one quarter is hardly the point; the general economic failure is profound. That's where Labour needs to concentrate.
The deepest thinking on this I've come across is published by the IPPR this week, and comes from the most interesting of the newly rising economies, Brazil. A law lecturer and a former economic minister, Tamara Lothian, and Roberto Unger, argue passionately that both market orthodoxy and "vulgar Keynesianism" have failed, and that the left desperately needs a new model.
I won't try to summarise what is a sophisticated argument – read it, please – but Lothian and Unger conclude that healthy economies will have to focus on small- and medium-sized businesses which are "pluralistic, participative and experimental". That means neither hands-off government on the US model, nor imposed bureaucratic government on the Asian model, but nimble, active intervention to ensure access to credit, technology and training.
What makes this politically intriguing is Lothian and Unger's emphasis not on regulating business but on democratising it. The biggest failings of recent times have been those of the corporate giants, which are utterly undemocratic and irresponsible. In politics we take democracy for granted but when it comes to the world of work, somehow it has become a rude word.
The founders of socialism dreamed of an economy in which workers had a sense of ownership and creative involvement. We may be a long way away from the world of Robert Owen or the Chartists, but we are also moving towards an economy less dominated by corporate giants. There is now widespread agreement that an economy of niche companies, constantly innovating, is the way forward for smaller western countries. And it's in smaller companies of skilled people working together – architectural practices, computer start-ups, specialist retailers, high-end engineers – that you tend to find the greatest effective workplace democracy.
It is in this vision of a diverse, democratic economy that Labour will find its best answer to passing economic statistics and the route back not just to power, but to being useful in power.