The Labour Party is right to talk of reforming the economy and, for the Labour Party, to reform the economy you have to reform the state.

Ed Miliband has been right to concentrate on Labour’s plans to reform the economy at the Party Conference. There is growing and longer term evidence that the British economy really is broken. The prospect of our being able to revive it in its present form – so that it can provide prosperity for even the average earner let alone the lower paid – looks bleak.

• Carrying on as we are it looks as if it will take until 2020 to reach the level of GDP that the nation as a whole had in 2008.
• Carrying on as we are will mean that our economy is very unbalanced by a reliance on an uncertain financial services sector to provide our wealth.
• Carrying on as we are places us in direct and very difficult competition with the Far East who not only beat us in the competition for the economy of the 1970s but also the economy of the 1990s.

It may be possible for our current economy to successfully compete with international economies but we could probably only achieve that by cutting the living standards of the middle and the working class even further than they already have been.

If the purpose of an economy is to provide prosperity for the people that work with it, then it looks like ours is broken.

We must radically reform what wealth we make and how we make it.

Ed Miliband is not just intellectually correct to argue for a new form of capitalism, but looks to me to also be electorally correct.

People are becoming very anxious about the medium and long term economic position of their families. By the time of the next election the day to day cost of carrying on as we have been will look very high to many ordinary people.

More people are likely to see hardship as the most likely outcome of simple economic continuity.

Of course this level of economic anxiety will not make the British people revolutionaries in 2015. Their worries will make them very anxious about the future, but even if they are worried about carrying on with the economy as it is that fear will not make them want to leap into the unknown.

The necessary policies to transform our economy will have to be very clearly outlined, together with the costs and risks. By next May, with 2 years to go before the election, this will have had to move beyond slogans and a few tactical bits and pieces to a clear economic programme for Government.

This will not be a straightforward task for any political party. But for Labour there will be an additional problem.

This vision for change will be a vision of a reformed capitalism. Most of the public (and the electorate) will believe that markets will continue to distribute nearly all goods and service in our society. It is also the case that the majority will want those markets to operate with a much deeper and wider social responsibility.

But there will be a few in the Labour Party that see this economic crisis as an opportunity. For them this crisis of capitalism provides the opportunity to demonstrate that the only future for the economy is socialist. The problem with this world view is that it is not shared by the populace. Very few people in our society believe that there is another socialist way of organising an economy.  There is a vanguard that sees the world that way but with one person one vote running our democracy there are few who would vote for that future.

Historically it has been the Labour Party that has made the case for kinder reformed capitalism – and that will be their task again. To achieve this will not be easy but given the high level of daily economic anxiety experienced by most people this is the territory within which political leadership should operate.

It will be hard – but it is the right area.

These new economic policies will have to work alongside new Labour Party policies about government and the state.  For the Labour Party itself, and in the way in which it is viewed by the electorate, there is a close relationship between a Labour policy for a new economy and a policy for a new state. One of the political points for the Labour Party that is not true for the Conservatives is that the state is an important vehicle for regenerating any new economy.

This means that if you want to create a new economy you will need a new state to do it. The way governments have tried to do this in the past have failed.

There was clear example yesterday when the Leader of the Opposition announced a new vocational qualification for the 50% of young people that do not go to university. This is an intervention that only the state can make. Private and public employers have to recognise the currency of a qualification but the state needs to develop it.

If we are developing a new economy we will need a new education and training system. The old education and training system has intrinsically been a part of the old economy.

Page 1 of 2 | Next page