The Economics of Starmerism
Exploring the vision behind Starmer’s economics
For much of Keir Starmer’s premiership, Labour’s economic ideas have been rather unclear. Many have repeated the claim Labour have no policies, and many have refuted this claim – including this writer. Since last September’s conference, it has been clearly wrong. However, this perception of a policy ‘gap’ has obscured attempts to outline the ideas underlying what policies Labour do have, and have had, resulting in lazy analysis of Starmer as Blair without the charisma. In endeavouring to counter this ‘gap’ argument, and hopefully fill it, this piece fleshes out a version of economic ‘Starmerism’, defined principally through three economic ideas:
State partnership with business
A strong emphasis on green investment
A belief in building an economy from the ‘bottom-up and middle out’, reversing ‘trickle-down’.
Each of these ideas has their own history and influence, but the primary factors in Labour’s strategy can be boiled down to three things:
1980s Labour politics
Social democratic success abroad
The crisis of the last decade, and the new tide in British politics
What is Labour’s Economic Ideology?
First, proof that Labour’s economic ideology is defined by partnership with business, green investment and reversing ‘trickle down’. In seeking to take ownership of ‘growth’, the issue in British politics having been largely left by the Tories after Truss’s implosion, Starmer and Rachel Reeves have pledged to generate the ‘highest sustained growth in the G7’. To do this, at a recent speech at UK Finance, the two leaders outlined their collective belief in the state working in creating ‘good jobs [and] productivity growth in every part of the country, growth which makes everyone, not just a few, better off’, with a particular focus on ‘green prosperity’ through state investment, business rate reform, drawing closer to Europe, devolved political power and reformed education (especially in skills). These policies mark the origins of Labour thinking in three places: the lessons they can take from their own history of electoral downfall in the 1980s, the many crises of the 2010s and 2020s, and the success of sister parties abroad.
The 1980s - Neoradicalism and Neosocialism
In the strife of 1970s and 1980s Labour politics, the party split. With the ‘Gang of Four’ (Shirley Williams, Roy Jenkins, Bill Rodgers and David Owens) leaving to form the Social Democratic Party (SDP), two significant alternatives to Thatcher’s small-state conservatism formed. Samuel Beer has described these as ‘neoradicalism’ and ‘neosocialism’. As the remaining Labour Party were left with leading figures like Tony Benn and Michael Foot, seeking to expand an already large state and leave Europe (neosocialism), the SDP stayed the liberal course. In response to the crisis of identity after Corbyn’s leadership, whose premiership was influenced by the Bennite politics of his first years as an MP, Starmer’s Labour has moved towards this liberal alternative.
Taking Shirley Williams’ ‘Politics is for People’ (1981) as a lead, we can define ‘neoradicalism’, by decentralisation of power, constitutional reform, embracing new technology, especially in renewable energy, and expanding educational opportunities while maintaining the welfare state. This is perhaps the clearest indication of what became the SDP’s guiding ideology. We can see clear parallels with Starmer’s Labour. The party has rejected the more Eurosceptic, large-scale spending and state emphasis of Corbyn (‘Lexit’), who was often accused of being a throwback to Bennite socialism. Starmer, in contrast, has placed an emphasis on devolution and constitutional reform in commissioning Gordon Brown’s report, showing the influence of neoradicalism, particularly in relying on decentralisation to create economic growth. State investment in new green technology through a nationalised renewable energy company, as well as the geopolitical and economic benefits of restoring the 0.7% GDP spent on international aid through a re-established Department for International Development and a focus on climate spending, reflecting an internationalist policy of which the SDP would be proud of. Education policy throughout life has been emphasised, especially in skills for a new economy. Starmer has rejected Corbyn/Benn and embraced the liberal Labour tradition.
There are, however, notable exceptions in Labour policy from this liberal ideology, particularly in Starmer’s willingness to articulate policy on worker’s rights and in distancing himself from European integration. These are responses to the crises of the past decade.
Crises Manifest
As in the 1980s, Britain faces, and has faced, numerous crises in the last decade and a half. This is well-trodden territory, both on TPI (see PE#5) and from other political sources, so I’ll keep it brief – but, between the 2008 Financial Crash and the 2022 Ukraine/Energy Crisis, the past years have been full of political and economic turmoil, some of it external and some of it self-inflicted. This is the political context in which Labour’s economic plans are being formed. This is what explains their emphasis on ‘partnership with business’, in particular. Years of poor economic performance and decisions have, in theirs, the public’s, the media’s and the market’s eyes, tightened the public purse strings, limiting what Labour feel they can pledge in terms of spending. The legacy of the Corbyn years, in itself the party’s own crisis of the last decade, has influenced this thinking too – it is more vital than ever that Labour be seen as economically competent. Not only did this affect the 2019 loss under Corbyn, but the 1983 loss under Foot, too. Moving away from this perception is key to Starmer, as it was to Neil Kinnock as leader post-1983 (see Philip Gould’s Unfinished Revolution, 1998). An emphasis on private economic growth to fund spending and job growth, acknowledging the private sector's role in generating good jobs for workers, is key to Labour’s plans and will continue to be for the foreseeable future – at least until the global economic forecast looks a bit sunnier.
There are caveats to this, however. The next tide of British politics will see an expansion of the state, including decentralised, devolved bodies, in reaction to these numerous crises – there is a growing acceptance that the private sphere cannot provide everything. That there is, in fact, such a thing as society. We can see this in Labour’s, albeit far more limited, continuation of nationalisation pledges from the Corbyn era. ‘Great British Energy’, a nationalised renewable energy company, will be the funnel through which Labour ‘greens’ the economy, responding to the climate crisis. Not only is this one of the few truly transformational pledge so far on the Party’s platform, indicating its importance, but something that Tony Blair would never have countenanced. The man who kept Conservative fiscal plans for the first two years of his term and removed the focus on nationalisation from the party’s constitution would not have pledged nationalisation – another indication of Brown’s influence and Starmer’s less-than-centrist ideology. Lack of borrowing power, due to high interest rates and the waste of Truss’s government, will limit public spending and result in greater focus on private capital, distributing economic power through devolution, and reforming institutions rather than pumping money in. But even in pandering to the business world and the media in a rather Blair-like way with their emphasis on private growth, Labour continues to tie these themes to worker’s rights and fairer taxation, taking the lessons from the working-class anger that has fuelled Brexit and the current waves of industrial action. This is being done through an alternative, un-Blairite rhetoric, one imported from overseas and influenced by Blair’s successors.
Lessons Abroad
Labour has not only taken its education in Britain’s past few decades. The recent success of social democratic parties in America, Germany and Australia, too, has influenced the party’s most recent pledges, as well as Starmer’s rhetoric for the past few years, in fact.
At almost every opportunity, Joe Biden repeats his mantra. Growth in the American economy must come from ‘the bottom-up and the middle out’. Not only is he right, as this creates an economy better able to stand up to global shocks and actually creates wealth for ordinary people, he has also attracted the far left’s support as a result. Bernie Sanders, the democratic socialist, was and still is a key ally of the President’s, persuaded in large part by this emphasis on a functioning economy being a moral one. ‘Underconsumption’, where ordinary people don’t have enough money to spend and, therefore, support the economy, has long been a key tenet of the left-wing economic argument.
This is clearly influencing Labour thinking. In past weeks, Starmer and Reeves have repeatedly set out similar thinking, even using the same phrase at times. This is not surprising given Biden’s success, particularly on economic issues in a divided America experiencing its own, more severe, culture war. Though clearly less concerned with bringing in the left than his American counterpart, Starmer’s use of Biden’s ‘bottom-up’ phrase, and the policies to back it up in pledges to strengthen worker’s rights and repeal repressive union legislation, invalidates the idea that Starmer seeks a return to the trickle down of the 90s and 2000s, or even that his rhetoric on public spending is an indication of a return to austerity. In learning from abroad, therefore, Labour has responded to the failures of the past two decades, beginning to craft a narrative focused on moving British politics away from small-state trickle down and towards a stronger working class and more interventionist state.
Much has been made of Starmer’s move to the centre and, while true to an extent, the influence of Brown and Miliband, as seen in the emphasis on economic devolution and ‘predistributionism’ (‘bottom-up and middle-out’), has helped keep Starmer’s Labour further to the left – to Blairites’ dismay, as seen in complaints by them in the Sunday Times over Christmas (2022) that “Gordon [Brown] is never off the phone to Keir”.
Conclusion
The Labour Party is not returning to the centrism of Blair under Starmer. Despite the frequency of this lazy analysis, the Party’s trajectory seems to be following a middle path, closer to the Brown or Miliband leaderships but with a stronger rejection of austerity and a favourable political atmosphere given the Conservatives’ troubles. This has meant Starmer can be what they rarely could – electable. Influenced by sister parties abroad and domestic lessons of the 80s, 00s and 10s in particular, Labour are putting forward an ideology that rejects trickle down economics through limited state expansion, greening the economy, reforming public services and strengthening worker’s rights, while, importantly grounding this in rhetoric and policies that are seen to be business-friendly. This, at least for the moment, is Starmer’s economic ideology. Given the Conservatives’ willingness to take Labour policy – as with an emphasis on childcare in the Chancellor’s budget just last week – and the likelihood of a greater ‘giveaway’ budget in the autumn or spring closer to election time, time will tell if the scale of their policies are enough to distance Labour from the party opposite, or if a mix of the new tide and Stamerism will deliver the next Labour government.
