by Jonathan Todd
Yesterday, we had a look at the Prospect big ideas for 2014 that will impact domestic policy. Today, it’s the turn of international arena; Prospect identify 3 key challenges.
1. Secular stagnation
What if Larry Summers is right? And what if he is wrong?
The global economy has, according to Gavyn Davies’ summary in Prospect of the argument recently made by the former US Treasury Secretary, been grappling with problems of excess savings and under-confidence for well over a decade, raising profound questions about monetary, fiscal and exchange rate policy in the US and the rest of the world.
In lay terms, Summers is saying that this recovery from recession is different and will not kick in as recoveries from previous recessions have done. Gloomy days are here to stay. If he’s right, it will be harder for Osborne to say in May 2015: “Haven’t I done well?” Equally, the obstacles between an incoming Miliband government and securing its economic objectives may be insurmountable. Still, if this is hand that Miliband is dealt, he should reflect how he’d play it.
Secular stagnation is a term usually associated with the 1930s depression and was revived by Summers. His argument that this is caused by a dearth of investment opportunities reminds me of the latest Robert D. Atkinson and Stephen J. Ezell book, which provides an original and convincing analysis of the failings of western capitalism.
But Summers stretches credulity in the incredibly basic sense that the 1930s ended and the post-war boom arrived. It need not take another world war for a similar cycle to occur. The digital revolution and the rise of the rest create tremendous opportunities. While they also pose challenges, their potential and inherently cyclical nature of capitalism makes Summers seem too downbeat. Labour should focus on overcoming these challenges – which may require the slaying of some Labour sacred cows – and not presume that we are stuck in an inescapable secular stagnation.
2. The new Cold War
How does Labour see the future of the Middle East?
Beyond the Arab Spring, it seems ever less likely that we shall arrive at a Middle East of liberal democracies and ever more likely that we’ll confront a region polarised between Shia Iran and Sunni Saudi Arabia. This is the new cold war, which is as hot as hell in Syria. If Labour wants to confront the Middle East as it is, rather than as we would wish it, we need to think through the implications of the ever more encompassing and visceral rivalry between Iran and Saudi Arabia.
3. Coalitions of the willing
Is Labour comfortable with the rise of bilateralism? If not, what will we do about it?
The Labour leader brought himself to wider prominence with, as energy secretary, an impassioned speech at the 2009 Copenhagen climate change conference. If he were female, perhaps his environmentalism would be described as strident. The conference has been subject to different interpretations. But it was hardly an unmitigated success. Like most big conferences of its type. Not just on climate change. On other issues, including trade and nuclear proliferation, too.
This dysfunctionality should be troubling to an internationalist party like Labour. It seems to support Ian Bremner’s G-Zero thesis: a breakdown in global leadership brought about by a decline of western influence and the inability of other nations to fill the void. It’s harder to strike global or multilateral deals in this context, so states are increasingly forming coalitions of the willing and reverting to bilateralism.
Critics of the EU want the UK to go it alone in this new world and strike whatever bilateral deals we can outside of the EU. Supporters of the EU – including Labour – need to prove that it remains capable of delivering a better deal for the UK than this freelance approach.
Tomorrow: Conclusions for Labour in 2014 as a result of these challenges
Jonathan Todd is Deputy Editor of Labour Uncut
Tags: big ideas for 2013, international policy, Jonathan Todd, Larry Summers, prospect
This is an excellent piece