The core message in Ed Miliband's speech on the economy this morning was a key one. In that speech he rejected three of the planks of 80s and 90s macroeconomic policy, stating them to be the beliefs that:
- Low inflation was the key to growth.
- A rising tide would lift all boats and wealth would trickle down to all.
- And the rules governing our economy were unchangeable.
He went on to say:
New Labour challenged some aspects of those assumptions, but also left others unchanged. But as I will argue, all of them have been discredited by the events of the last five years.
That's very welcome. It means the logic of an indepndent central bank dedicated solely to constraining inflation has been rejected - and that must hurt Ed Balls.
It rejects Mandelson's relaxed view on people getting rich.
It rejects the market based mantra of neoliberalism.
But as important as all these were he went further. He said:
In future the lesson is that macroeconomics is much more complex and faces much more uncertainty than was believed.
And that's embracing the lesson of Keynes. As Keynes knew we do not live in the probabilistic world that neoliberals thinks exists where all outcomes are known and can be predicted: we live in a world of unknowns. And many of those unknowns are unknown (Rumsfeld's one true insight). In which case if we are to have a policy for sustainable, fair growth, for employment and for fair distribution of reward the government has no choice but intervene, with courage, in the economy. And that, of course, was what I called for in The Courageous State.
If that is what Labour is planning it's moving in the right direction.