Why the Everyday Economy is the Innovation Labour Needs

The foundational economy/everyday economy approach promises much for the Labour Party. This is much larger than either the international tradeable sector or the public sector; it covers all essential public and private services, from transport to telephones, from personal care to education, from food supply to sewerage. Capital intensive services form a crucial part.

What would the politics of the economy look like if we focussed our attention on the foundational/everyday economy? Low productivity in the British economy is not going to be addressed by a politics of industrial strategy for manufacturing or research and development (R&D). Better pay and more efficient working in the economy means addressing the productivity of the foundational/everyday economy first. But more importantly still it focusses on what will improve people’s lives, as both users of the foundational economy, and producers in it.

Labour and the Economy: Labour today

That a radical rethink of political economy should be necessary is obvious. The 2008 global financial crisis and the Covid pandemic were unprecedented. Brexit, too, has involved radical change of direction in industrial, agricultural, population and other policy, without proper planning or understanding. Climate collapse looms.

Does Labour have a programme which reflects these new realities? The first point to note, that contrary to standard understanding, not least within Labour, historically Labour’s main economic impulse has been productivist rather than welfarist, with the great exceptions being the welfarist programme of the revisionists in 1959 and the policies of New Labour. As well as a return to productivism, three crucial novel elements in Labour thinking since 2015 seem to be the following.

First, a commitment to a very much greener economy backed by £28 billion per annum in investment (some 1 per cent of GDP); second, a more national economy. Third, a focus on the everyday economy. The first has not had much emphasis. The second, an industrial strategy to ‘buy, make and sell more in Britain’ has been repeated often, but without much detail. The everyday economy is new, perhaps the least developed, but is the most conceptually novel.

However, these ideas have not been central to most Labour proclamations on the economy, and elements have been contradicted. In July 2022, Keir Starmer made a speech billed as focussed on ‘growth, growth, growth’. He spoke of wanting to see people ‘contributing together’ to produce ‘strong, secure and fair growth’. He made clear that ‘Labour’s industrial strategy will contain a plan for the everyday economy.’ All of this, taken together, promises some new thinking. However, some elements, for example focussing on GDP growth above all else and on innovation, pointed away from novelty. Starmer claimed that the country needs ‘more innovation, more new technology, more research and development, more unlocking the commercial power of our universities, more specialising in the knowledge-rich industries of the future and more start-ups.’

Such a programme flies in the face of the foundational economy approach. So why is Labour in this position? Because it fails to understand the nature of industrial policy in the UK since 1945.

Industrial Strategies: Getting Back to Foundations

There is a long tradition on the British left which assumes that UK growth has been deficient because of a lack of what has come to be called ‘industrial strategy’. The dominant argument has been that the UK has never had a proper industrial strategy because its capitalists have been too globalist and imperialist to care about the national economy. In short, it never happened, and it would never succeed without radical changes. However, the UK has long had an industrial strategy. What needs to be understood is its successes and its failures, not its lack thereof. British state and state agencies played, for good or ill, a major role in transforming the British economy.

From the 1990s, we had a narrow innovation/R&D-based strategy, focussed on spinouts from academic research which continues to this day. The argument behind it is that the UK has superior research and universities, and it is necessary to create mechanisms for exploiting this. The essence of the policy is an innovation strategy which is cheap and promises growth and change with minimal interference in the economy.

However, it has not generated much growth: on the contrary, it coincides with historically low rates of growth. What is wrong with the policy? First, it seriously over-estimates UK innovation, which represents no more than about 2 per cent of the world total. Secondly, it assumes that most growth for a country like the UK comes from the exploitation of national R&D when this is a very minor source of growth. In other words, it is not a policy which we should expect would work. If British innovation has not transformed productivity in recent decades, it is unlikely to start doing so now.

Most new methods, such as new battery designs, hydrogen-powered cars and wind turbines are likely to come from overseas, via processes of emulation and imitation. That is what needs to be focussed on.

More British inovation would be a good idea, but probably not in these and other areas where other countries lead. It should be directed to new tasks, ones more likely to bear fruit, for example, to improving the foundational economy. The question for both innovation policy and imitation then becomes: what needs to be done to keep the foundational economy working and indeed working better?

The point is this – given what has happened to the world economy, and specifically to the British economy Labour needs not an old-fashioned strategy for growth that did not and could not work, but a new one which is directed not at growth per se, but at transformation. That requires a new kind of innovation and imitation policy.

Conclusions

That both Rachel Reeves and Keir Starmer have deployed the idea of the everyday economy in their speeches and publications is obviously a good omen. Yet, it is striking that the messaging and campaigning does not strongly echo these themes.

The everyday economy really is an alternative, not a supplement, or a variant view. It challenges the whole attempt to grow GDP by investing in industrial strategy and research (in manufacturing)—both of which are no longer suitable models. We need political economic, social, cultural, and indeed technical innovation. The old ways, whether Old Labour or New, will not do.