David’s Speech to the LME Fringe event at #Lab12 on Sun 30 Sept 2012:

So we have been told that austerity is the only way forward

Something set in stone

Something you are not supposed to question

Something that essentially had to be done.


The rating agencies tell us so

Financial markets tell us they don’t trust in the state, otherwise, without austerity


We suspected it from the beginning, but know we know that austerity does not work

Labour has started talking about concepts like decent capitalism and pre-distribution, reforming the way we do business. In the Labour Movement for Europe, Social Europe Journal, Friedrich Ebert Foundation, Foundation of European Progressive Studies, Policy Network, Compass, Progress, CLASS & the Party of European Socialists we have all been working on new narratives, which are based on fairness and sustainability as core elements of a future model.

Casino Capitalism has shown itself to lead to crisis, social division and economic standstill.

Peer Steinbrück, SPD lead canditat for the 2013 elections in Germany, has been talking about better banking regulation in a big way last week. Ed Miliband called for a separation between Retail and Investment Banking this morning on the Marr Show.

Not only people on the left agree on that, quite notable economists have said the same.

We need to regulate markets better, especially financial markets. We need to support manufacturing, SMEs, co-operatives, social enterprise and a dynamic public sector, which have almost been forgotten during the unsustainable financial services boom. We need to put our economy back on a better-balanced footing.

We all know that austerity does not work

At the moment austerity holds the public sector and civil society hostage and forces us to do whatever it takes to improve credit ratings. Ironically, these rating agencies formed part of the system, which led us into crisis in the first place.

Yet whenever anyone on the left or center-left mentions financial services regulation and does question austerity we are being accused of spending frenzy and irresponsible mismanagement.

Conservative and Liberal narratives on max-ed out credit cards have struck a cord. Comparing family budgets with public finance may conjure images easy to understand, however misleading they are.

We, wherever we stand, on the progressive side, have not created a similar cohesive political argument. We are only starting to come together to re-state our alternative vision and make it meet the challenges we face today.

It is important but not enough to improve our campaigning methods and marginal seat tactics. We need to do more work on defining clearly, what we believe and make the for it.

We believe that the state has an active role to play

More than that, we believe in society, in how the individual should have a certain level of security, in how we spread the risk so nobody falls through the net.

This is exactly what we need more of not less of at a time like this.

Austerity is not a natural law. It is an ideological strategy.

In effect, the global financial crisis was caused by growing inequality in developed economies over the last three decades.

Income growth by the top one percent could never compensate for the relative decline of the rest, because in percentage terms rich people spend less of their increased income and save more. This is the macro-economic effect of growing inequality in developed economies.

The answer to the sovereign debt crisis which Europe faces can not be cutting more and cutting faster. When you look at it close up, what austerity has brought us so far is lack of growth. This means less tax income and ironically higher public spend on unemployment and other social transfer payments.

But there is no getting back to balanced budgets without sustainable growth.

We all know austerity does not work. We need a Plan B.

What we need as an alternative is a pro-active courageous state, which sets strategic investment impulses in infrastructure, housing and the green economy to coax private capital to end its self-imposed investment strike.

We want to work together with markets, not be played by them.

Martin Schultz, President of the European Parliament said this weekend: We do not need market-compliant democracies. We need democracy-compliant markets.

Such an alternative vision to austerity can not be implemented in one country alone, but needs to be addressed across the Single European Market.

Labour and its sister-parties across the EU need to work together to ensure that the crisis is not used by the Conservatives as a pre-texts to undermine workers-rights, rights to collective bargaining, etc.

The fact that they are getting away with it right now is not the fault of the EU. It’s the fault of those who currently hold the majority in most member-states, in the Commission and in the European Parliament.

That’s the Conservatives and Liberals.

The crisis response we see from them at the moment is designed to increase inequality. Even if it would work in the short term, it would never lead to sustainable growth. What it is really doing is sowing the seeds for the next crisis.

When Labour can do constructive opposition politics in the UK, we also need extend this to the EU level.

We believe the European project is one of co-operation, rather than letting ourselves be pitched against each other. Currently global financial interests play a very skilled game of divide an conquer.

A divided Europe focused on internal squabbling and envy. It should rather focus on regulating those market forces whose excesses got us into the crisis in the first place. And focus on developing an alternative growth model.

It’s not wrong to dislike what the EU enforces at the moment in terms of austerity measures. But we can not blame Europe, instead we have to blame Conservatives and Liberal, who currently have a majority in Europe.

We need to fight to take power away from them.

Let’s make the 2014 elections about something.

It’s up to us to break the Conservative majority

And up to us to make people understand that if they want things to change for the better, they need to change the power balance in the European Parliament.

They need to get more progressive governments into office across the EU

Interestingly the recent elections in France and The Netherlands have shown that pragmatic progressive pro-European messages can win votes.

People are waking up, they are getting ready to look at reasonable alternatives.

In the run-up to the 2014 European Elections Labour needs to make a confident argument for Plan B & work with its partners in all member-states.



as delivered by David Schoibl