After watching Ed Miliband’s recent talk in Bedford, on how many are worried “we’ll never have it so good” and the related crisis of living standards, it got me thinking about how what he was saying relates to an analysis of the weak state of the real economy – especially after the extensive growth of the financial sector since the 70s/80s. Miliband argues that “economic recovery shall be made by the many, not just the few at the top”; which again for me relates to criticism of our highly leveraged financial sector and the increasing instability such a system has created especially since the 70s/80s onwards with floating currencies, transnational capital insecurity and the dominance of neoliberal globalisation ideology.
Ed Miliband referred to the failure of big businesses making it without working people. Such an argument relates to the critique of the creation of asset bubbles especially since the 70s/80s where credit, debt and consumption alongside increasing unemployment and decreasing wages accompanying a falling rate of profit actually undermines the economy and makes it more systematically unstable. After the housing bubble, some theorists find it hard to know what asset bubble is going to ensure the next round of financialisation and financial sector growth of a private sector already 450% in debt.
Private sector debt is neoliberal’s blind spot. There is ideological focus upon public sector debt, debt that historically is not that unprecedented and also in terms of the UK is comparatively small. This relates to the change of economic doctrines since the 70s/80s where restricting the supply of money to control inflation has become the accepted ideal and this has undermined chance and potential for Keynesian economics. Keynesian economics however, maintained a stable system after the 1940s and if the Bretton Woods System had been constructed more in line with Keynes’ views, such as his idea of an International Clearing Union and the Bancor, we wouldn’t have experienced the problems the dollar being the reserve currency has created.
Essentially, focusing on working people and our importance for social development and economic success relates to the significance of a strong real economy, and the need to bolster such an economy in the face of a financial market that has too much power over people’s lives and money. Ed Miliband refers to the idea of working people not only making products but also being able to buy the products they make that was central to successful eras of economic and industrial development: this relates to one of the central tenants of Fordism that was again undermined through the rise of neoliberalism and free markets in the 70s/80s as the non-unionised, service sector-based, low paid insecure jobs rose.
This was an encouraging talk regarding the state of the economy, the historical context alongside moving towards a new economic narrative that borrows from Keynesian economics and social democratic ideas. As neoliberalism is in a state of crisis, this narrative needs to be championed and furthered. The idea of a strong real economy, a scaled down financial sector and the many, not the few, controlling and benefiting from our economy and being rewarded for their work instead of it being sucked out to make bigger profits is essential. The need for new modes of organisation through more communal relations, the need for small organisations to be able to get access to credit given their importance for a changing economy and the need to stop speculative credit alongside the need for a living wage are all things that Miliband emphasised and all things we should be encouraging as a new economic narrative.