Labour's energy price freeze must be the start of a wider battle with organised capital – but the party can't win on its own
If you don't allow us to put up the bills, the lights will go out. That essentially was the message on BBC Panorama this week from Paul Massara, chief executive of Npower. Agreeing long-term contracts to increase supply capacity, he explained, "may be very, very good deals for us if gas prices dramatically increase". But not, he continued, if they "stay where they are or fall". We have heard similar warnings from the heads of other energy companies since Ed Miliband announced plans for a price freeze in September.
In the 1970s the lights frequently went out because of strikes. The workers – sometimes miners, sometimes power workers – wanted higher wages. Today, the threat comes from a strike of a different sort: a strike by investors who want higher profits (or at least profits no lower than now). Forty years ago workers were accused of greed and holding the country to ransom. The same words are sometimes used today of energy bosses. But in both cases, the strikers were or are seeking what they believe to be a fair return – on their labour, or on their capital.
The difference now is that organised capital has become more powerful than organised labour. The former can make more credible strike threats than the latter. That is why wages, which took over 65% of GDP in the mid-1970s, now take only 53%.
That will be the big challenge for Miliband as he develops his campaign to ensure that the large majority of Britons once more enjoy rising living standards. The clash with the energy companies is (or ought to be) just the first skirmish in a wider battle. Reports this week from two thinktanks, the New Economics Foundation (commissioned by the trade union Unison) and the Joseph Rowntree Foundation, provide further evidence of how rising prices and stagnant or falling wages have damaged living standards, and not just (or even mainly) for those on the social margins: for the first time, more than half the 13 million UK citizens who live in poverty are members of working families; and working people on low and middle incomes are experiencing the biggest decline in living standards since reliable records began in the mid-19th century.
The slide in living standards started before the recession and will continue far beyond it. Despite George Osborne's claims, there is no guarantee that economic growth will lead to higher average wages. Wage stagnation in Britain began in 2003-4 with the economy still motoring; in the US real wages have barely improved since the 1970s.
Rising prices and falling wages are attributable to the same economic forces. Thanks to the global loosening of capital controls over the past 40 years, investors can take their money where they like. They seek the highest returns. The more that costs such as wages and taxes can be forced down and prices pushed up, the higher the profits and the happier the investors. If they are not happy, the investors will take their money elsewhere.
That is the dilemma that parties of all political colours have faced for several decades. Strong trade unions, high wages, high taxes and price controls frighten investors away. All western governments live in terror of capital flight. They tremble before multinational companies that may close factories or offices or decline to open new ones. All centre-left parties now aspire to run "business-friendly" governments. The best they can manage is a few symbolic gestures, such as the Blair-Brown windfall tax in 1997 on the privatised utilities. Can Miliband's price freeze be more than that? Does he have a wider plan to take on organised capital and significantly improve the lot of wage-earners?
As Boris Johnson gleefully noted in his lecture to the Centre for Policy Studies last month, the left missed its cue after the 2008 crash: "Political history reached a turning point and failed to turn." Johnson pointed out that, no matter how badly capitalism had failed, the left didn't have another answer. "The free market," he gloated, "is the only show in town." The demands of "an increasingly impatient and globalised economy" would dictate Britain's future.
If Miliband has an answer to that, it isn't clear what it is. His energy price freeze may help get him elected, but can he make it stick? More important, given that the freeze will be worth less than £200 to the average family, does he have more wide-ranging ideas for improving living standards? The Nef-Unison report proposes that the government "ensure the living wage is paid by employers across public service supply chains". This is more affordable than it looks since about half the £1.1bn cost of higher wages would be offset by a reduced need to pay benefits and tax credits. Private sector employers might then pay higher wages to compete in the labour market. But how long before we start hearing that British jobs are draining away because of high labour costs deterring investors?
Whatever Miliband does, he will be boxed in by grim economic realities. Every government in Europe faces the same dilemmas. Greece, Spain and Portugal, forced to accept draconian cuts in wages and public services, are the most dramatic examples, but Germany too has experienced depressed wages and reduced benefits. Miliband has only one way to prove Johnson wrong, defy bosses such as Massara, and create a fairer Britain with a better balance between the returns to capital and labour. That is to work with European centre-left allies to build a common alternative to "the free market show" and to consider how the EU, currently a tool of international capital, can be turned into something better.
Those who hope for red-blooded socialism from Miliband will be disappointed. Even if that is what he wants, he will be frustrated by how ruthlessly big business and international capital will use the strike weapon. It needs more than a single nation-state leader to create a left alternative. It needs a continental movement and, for that reason, Miliband should turn himself into Westminster's most ardent European.
EconomicsEd MilibandEuropean UnionEuropePeter Wilbytheguardian.com © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds |
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