The severe crises humanity faces will not be solved by the outdated rules of the global economy. Keir Starmer came close to recognising this in his new year’s speech, when he spoke of his plans for “mission-driven” government. The phrase – borrowed from Mariana Mazzucato – implies governments setting economic goals (say, 100% renewable energy) and single-mindedly driving that goal forward through investment and regulation.
In essence, this is an acceptance that government planning, state intervention and public ownership, so derided over 40 years of neoliberalism, are necessary tools of government today, and it’s what makes Labour’s industrial strategy central to any progressive offer to the country.
But Starmer will need to go much further. First, Labour needs to be clear that any government support to the economy must come with serious strings attached. If the public is not simply paying for super-rich people to get even richer, then state support must require business to behave very differently. Second, Starmer’s Labour needs to realise that this way of operating is fundamentally at odds with some of the rules of the global economy – rules often written by big business to secure a right to operate how it wants, where it wants.
Here, Labour can learn much from the US, where President Joe Biden, who previously supported corporate-dominated free trade agreements, has responded to the growing ire against unfettered capitalism. In his State of the Union speech on Tuesday, Biden railed against the corporate monopolies that are “taking advantage of you”. He laid out a different path to the market-knows-best trickle-down economics that has enabled grotesque levels of corporate greed and intensified the many crises we now confront, not least climate breakdown.
Significantly, Biden has recognised that when the state is providing vast amounts of funding – for dealing with the climate crisis, for instance – governments need to set the terms. That’s the backbone, for instance, of Biden’s flagship Inflation Reduction Act, a necessary set of industrial policies aimed at helping the US transition to a greener economy by incentivising the growth of a domestic renewable-energy manufacturing base. As Melinda St Louis of US pressure group Public Citizen says: “For workers in North America, that must mean creating jobs in a sector of the economy that has been historically more unionised than other sectors, and has thus provided higher wages than others.”
Starmer has also made significant promises in this area, with renewable energy identified as a key “mission” for industrial strategy in Labour’s first term, including promoting local production, building a national wealth fund, and creating a public energy company. This is all potentially positive stuff. But Labour must be much clearer about how this builds public, as opposed to corporate, value. In particular, if the British government takes an equity stake in companies, how will it use that stake to promote the public interest, not only within the UK, but also globally?
Although Biden’s final bill was severely weakened by wrangles in Congress, it injects unprecedented funding into the economy. At the same time, it curtails the power of corporate America – for instance, cracking down on big tech monopolies and demanding big pharma provides cheaper medicines, albeit in a much more watered-down form than Biden wanted. Starmer has been silent on this. Sure, he has spoken of the need to unleash innovation. But unless this innovation is accompanied by a much less harsh intellectual property regime, which is at least partly publicly owned, this innovation will only benefit the few. This is as true for climate technologies as it is of new cancer treatments.
Of course, there are obstacles. Biden’s plans have come up against global trade rules. His green industrial policy is now at the centre of a major trade dispute with some of its closest allies – including the UK. The European Union and the UK demand that the US must change the Inflation Reduction Act to include European manufacturers, arguing that in its current form, it violates the unquestionable rules of the World Trade Organization, under which government policies that support domestic manufacturing are viewed as “discriminatory” towards multinationals.
Many would argue that the US has little right to decide when and where it bypasses rules that it spent the last few decades pushing on to the rest of the world. But we should defend policies that allow all countries to develop their own industrial strategies to build fairer, more sustainable economies. Rather than pushing back on US policy, Starmer should be clear that it is the trade rules that need to give. What’s more, the US, like all powerful countries, must now promise not to challenge reasonable industrial policies passed elsewhere around the world.
To date, though, Starmer’s move to embrace industrial policy is constrained by his determination to cosy up to business and to display excessive fiscal prudence. In office, he won’t have this luxury. To protect his industrial policy, to build a more equal world – indeed, just to maintain an electoral coalition – Starmer will need a more combative approach to big business and the rules of the global economy. Biden is further down this road already. There’s much Starmer can learn.
Nick Dearden is director of Global Justice Now (formerly World Development Movement)