Labour Party front-benchers with Treasury or industry briefs seem to spend most of their time these days assuring us that, under a Labour government, there would be no massive increase in public ownership, no explosion in public expenditure, no return to corporatist prices and incomes policy, no large increases in taxation and no dramatic devaluation of the currency.
The implication is that, although Labour might adopt slightly different economic tactics from those of the Tories (allowing sterling to enter the exchange rate mechanism of the European Monetary System at a marginally lower level and easing interest rates less slowly, for example), the short-term priorities of a Labour government would be pretty much unchanged from those of the current government. Keeping inflation down would remain top of the agenda, and the main means of keeping it down – interest rates and control of public expenditure – would stay the same, even if they were less savagely applied and were augmented1 by credit.controls.
This is hardly such stuff as socialist dreams are made on, but it is difficult to envisage any alternative that would not frighten away capital from Britain. Increases in pay and public expenditure must be paid for by leaps in productivity or investors will simply go elsewhere. At least in the short term, there seems to be no feasible and desirable alternative to tight monetary and fiscal policy (perhaps with mini-booms as an occasional pleasant surprise, particularly before elections).
So is there nothing to choose between Labour and the Tories on economic policy? Not quite, Even if nationalisation and boosting public spending are no longer Labour policy, Labour still thinks that the state should have a rather more active economic role than most Tories want. Labour would regulate where the Tories would not (on health and safety, consumer rights and the environment, for example) and it would intervene to secure the long-term performance of the economy, both by improving education and health provision and by more direct economic measures.
How far it should or could intervene directly is still a matter for debate, however. A New Economic Policy for Britain, a collection of essays by economists close to Bryan Gould (who contributes an introduction), presents the case for what might be described as the most interventionist programme that Labour could conceivably adopt.
Essentially a deepening of proposals in Labour's policy review, its core argument is that Britain needs a wide-ranging industrial strategy, based on something like the Japanese Ministry of International Trade and Industry (MITI), to counter the "short-termism" of the City, the increasing economic dominance of transnational corporations, and the economic decline of "peripheral" regions.
A reformed Department of Trade and Industry would be given massively increased powers. But its planning would be neither comprehensive nor centralised; rather, it would be "polycentric" and carefully targeted on key industries (particularly communications) and regions. "We will need to identify strategic industries which require nurturing in order to create a more dynamic industrial economy," writes Keith Cowling in his overview essay. "This is essentially a matter of creating winners, rather than picking them. There will be no vast bureaucratic machinery; the approach will be entrepreneurial." Mergers would be stringently controlled, measures introduced to encourage pension fund investment in British industry, a new Company Act passed which used worker-participation to encourage companies to think long-term.
The traditional pro-nationalisation left will doubtless denounce this package as insufficiently interventionist (pointing, quite correctly, to the absence of any credible means of controlling transnational capital). But the decisive opposition in terms of realpolitik will come from those for whom it is still too interventionist, despite its jettisoning of public ownership and high public expenditure. Such critics, increasingly the dominant force in the Labour leadership, will point to the reduction of MITI's role in Japan and the failures of the French planning system, and they will make much of the disastrous British experience of politicians and civil servants making detailed economic decision in the sixties and seventies. Unless the advocates of interventionist industrial strategy can provide convincing reasons for believing that it will all be different this time, I have a feeling that much of the work that has gone into this volume will be in vain.
