Friday 1 January 1993

NEW ECONOMICS: INTERVIEW WITH GORDON BROWN

Tribune, 1 January 1993

The shadow chancellor talks to Paul Anderson about what he wants to do about Labour's economic policy


"The crude free-market dogma of the eighties has failed," says Gordon Brown. "But the answer is not to go back to the policies of the fifties or sixties. We need a new economics for the nineties." Brown has a difficult task as shadow chancellor — nothing less than the production of an economic policy that wins the next election, in a world in which many of the left's traditional policy recipes have been ruled out as impractical. What makes that task doubly difficult is that the Tory government, faced with what appears to be an endless recession, has stolen many of the ideas on which Labour fought and lost the last election.

Norman Lamont's autumn statement in November promised a raft of measures that Brown and his colleagues had been pressing on the Government for ages: tax-breaks for industrial investment, an end to car tax, lease-buying of trains, relaxation of constraints on use of receipts from council house sales, easing of Treasury rules on capital spending, direct intervention in the housing market.

Brown welcomes the government's change of tack, which he sees as an opportunity for Labour.
"The Tories are having continuously to move to our ground now. They've had to admit that crude freemarket dogma cannot bring us industrial success that investment won't recover by itself, that the housing market won't recover by itself, that industry won't recover by itself, that special measures have got to be taken. What they haven't got, of course, is the courage of our convictions. Nothing they've done measures up to the scale of the problem." Nevertheless, he is more than aware that Labour needs to come up with some new ideas in response to Lamont's big steal. In the past couple of months, he has been taking soundings among left-leaning economists with a view to launching a major policy package early this year.

At this stage, says Brown, details are less crucial than big ideas. "The important thing is that we lay down the principles that guide our future policy." Then Labour has to do something like what Bill Clinton did in the United States last year: hammer away relentlessly on the economy. Brown visited America during the Presidential campaign and was impressed by the Democrats.

"Clinton found an echo throughout America for his central idea that government had responsibilities to the whole community to deal with the huge problems of unemployment, the weakness of the American manufacturing sector and training in skills and, of course, for the argument that there were entrenched economic interests, privileged elites in American society, that were denying people opportunity."

The most important thing that Labour's new economic policy will have to take into account is the globalisation of the economy, says Brown. "We're living in an increasingly global economy. There's global sourcing of companies, a global capital market, 24-hour speculative activity." Although he doesn't say as much, the implications are clear: there are limits on what the government of a single, medium-sized nation-state can do on its own.

The second major challenge, he says, is the change in the nature of economy as a result of the application of information technology. "The microelectronics revolution is affecting every industry and every service, changing the way the economy works." Britain must have a high-technology economy if it is to flourish.

Taken together, the globalisation of the economy and IT mean that the most telling way in which government can intervene`in the economy is by ensuring that the workforce is highly skilled, argues Brown. "Increasingly, the most important thing about national economic strength is the level of skill in the economy. Government has a responsibility to ensure that training, education and investment are maintained at a satisfactory level."

Beyond this, the key long-term tasks are to integrate environmental concerns into economic policy and to push the argument that social justice is essential for economic efficiency. "Prosperity requires a just society. Individuals must be given the opportunity to realise their potential to the full," says Brown.

In the short term, however, the main problem facing Britain is recession. In November, Brown launched a policy document, Labour's Campaign for Recovery, calling for an emergency employment programme and co-ordinated international action, particularly by the European Community countries, to stimulate the economy.

"Action on unemployment is not just in the interest of the unemployed, it's in the interest of the whole country," says Brown. "People's fear of unemployment is preventing them from spending, moving home, investing, taking on new commitments.

In many areas it is paralysing the economy." One of Labour's priorities in the next few weeks will be to put together a "budget for jobs" to emphasise the government's failures.

Another immediate project is development of the ideas of co-ordinated international action against recession. "I was pushing very hard before the Edinburgh summit for a co-operative growth strategy," says Brown. "The credibility of Europe depends on the ability of Governments to act together to deal with the problems of the economy.

"There are a huge number of people in Europe around 17 million — out of work, particularly young people. Europe-wide measures are an essential part of any recovery programme. What happens in one country affects what happens in another. Yet in Edinburgh the needs of the unemployed were considered between courses at a lunch."

Unsurprisingly, Brown has no time for those who argue that the events of September 16 last year, Black Wednesday, when massive speculation against sterling led to British abandonment of the exchange rate mechanism and then devaluation, show the limits to international economic co-operation. Rather the reverse: Black Wednesday, he says, shows that more co-ordination of economic policy is required, including international action to curb speculation as well as a system of managed exchange rates. The implication is that Labour should get back into the ERM and push for reform.

During September's orgy of currency speculation, Brown came under fire from many on the Labour Left for not coming out publicly for devaluation of sterling, even appearing to rule out a general realignment of the ERM's currencies.

He still defends his stance: there was no way that Labour could have kept its credibility if he had come out in favour of devaluation, he says. Moreover, much of the criticism of his stance was motivated by antipathy to the EC rather than any consideration of economic policy options. But, he goes on: "It is now quite clear that the government could have asked the German authorities in particular to consider the question of realignment.

"All the information that has now become available shows that there was a far more comprehensive realignment possible and that the government ruled that out without discussing it in detail. Faced with the choice between realignment within the ERM and leaving the ERM in order to devalue outside it, many of the difficulties could have been avoided with a realignment. The British government could have asked at any time for that to be considered."

Even such a clear statement will do little to placate Brown's left-wing critics, however. For them, Brown proved himself too cautious by half during the sterling crisis, and they accuse him of harbouring dangerously revisionist pro-establishment ambitions for party policy.

His political friends counter such charges vehemently, saying that his intentions, while modernising, are entirely radical-populist in orientation. Let's hope his friends are right.