These are all expressions of an underlying theme: the cost of living is too high. Before he became mired in the catastrophic miscalculations that were the Ed Stone and the
mugs that boasted of closing borders to foreigners, Ed Miliband tried and failed to make the cost of living the centrepiece of his leadership of the Labour Party (Miliband, 2014).
Overcome by the media pressure to deal with the big issues facing Britain with stern and direct action, as well as party insider insistence on
pursuing obsessively conservative methods (Glasman, 2011), Miliband's attempt to take the lead on the big issues of the day dissolved into populist political stunts. For just a moment the Labour leadership had grasped a single coherent theme that might have helped the party to form a distinctive position.
These two, big, long term problems facing the UK - that housing is too expensive and that welfare costs too much - have often been reduced to the result of 'migration problem' which, it is commonly believed, increases the burdens on both of the first two, so making them all the more expensive. Yet migration is little more than a scapegoat, or an exacerbation that exposes fears, and only distracts from the real issues moving beneath the surface. The fact is that the cost of living is too high - there is some dispute, however, as to why.
In the struggle to tackle the exorbitant cost of living, there are two schools. On the Right, the focus is upon so-called distortions of the market - instead of relying on market competition to set prices so that efficient
marginal wages will go further, the Right sees government as interfering and managing in a manner that leads to distortions and corporate oligarchies. On the Left, the answers lie with income inequality - provoking a need for intervention to introduce regulation, maximum wages, redistributive taxation, all to ensure that workers earn a better share.
Cost of Living and the Right
On the Right, one of the big criticisms of Left-wing economics is its failure to keep minimum wages, and other measures that inflate costs for business, under control. From the pro-market perspective, a rise in wages increases prices. That wage inflation drives price inflation, which gives rise to wage inflation, in a vicious cycle.
The argument goes that minimum wages hurt employment - they increase labour costs artificially and put basic low paid work at risk of replacement by more economically efficient automation (The Economist, 2015). More complex assessments argue that tax credits are a superior welfare alternative, encouraging people to work by offering subsidy without driving up business costs. Employers can respond by paying more, as they might say, 'competitive' wages - low enough that they can have more staff and more staff of greater skill - with incomes of low paid workers being effectively 'topped up' by tax credits, with the government taking on the cost.
However, with the age of austerity in full swing and public debt being used as the rallying banner for cutting back state taxation and spending, governments have wanted to cut their own budgets (Money Talks, 2015). Tax credits, as a sizeable public expenditure, has become a target, with its cost being passed on to businesses in the form of increases in the minimum wage. That, of course, needs to be paid for out of business profits and so is passed on to customers in higher prices - resulting in higher wages not necessarily meaning relatively higher incomes, as the cost of living also goes up.
For the economic Right, the focus is on trying to find ways to reduce the cost of living without tampering with the delicate functioning of the market (The Economist, 2015{2}). That has led to calls for planning regulation reform to ease way to profits in the house building sector (BBC, 105{2}).
However, the cost of living presents huge challenges, such as the gigantic housing costs, that have no easy or cheap fix. Building houses to address housing shortages is necessary. Yet it is also expensive and the profits that can be derived from a project are as much a part of the problem as the shortage itself. Nor does building them alone tackle the other issues like the unfairness of ownership and the need for economies of scale in the rental sector. Previous attempts in the UK to thrust this task upon the private sector, under Thatcher, only helped propel the country into the present crisis (Gulliver, 2013).
Cost of Living and the Left
For the Left, the pro-market analysis is taken as tantamount to an attack on the life security of the poorest. Moving away from minimum wages is seen as a dangerous step further along the road towards the precarious lives filled with constant stress of zero-hours contracts (Fleming, 2015).
They would seem to have good reason to be guarded. There is evidence that suggests in-work poverty is climbing and the gap between the poorest and prosperity is widening (Pradella, 2015). The relative wage, the value retained by workers from the value they produced, is under increasing pressure.
The response of the Left, historically, has been to try and ameliorate these conditions through welfare. The most obvious and blunt force approach has been deficit spending on public sector projects, a
Keynesian option to create more and better paid work - allowing workers to afford a more stable life. This is an idea that, with a new twist, is being considered again by Jeremy Corbyn (Peston, 2015).
For the broader economy, the benefits are proposed to lie in the Keynesian priority of propping up
demand. The struggle has become finding a way of doing so within the dominant capitalist market system, without upsetting its balance. The Left's main tools for the task have been tax credits and minimum wages.
Corbyn, in particular, appears to want to turn back - for the duration of the crisis at least - to the more blunt approach with his people's quantitative easing. To make up for lack of income distribution into the pockets of consumers, which suppresses demand, Corbyn suggests turning to credit - much as Reagan and Thatcher did after the suppression of workers' bargaining power in the 1980s (Harvey, 2010). But in true democratic fashion, the burden of that debt falls of the state on behalf of all of the people, rather than on the head of any particular debtor.
So while the pro-market Right is interested in seeking ways to make it possible to do more with less, the Left's focus on giving people more to spend.
Cost of Living: The Bigger Picture
However, because Corbyn's QE for the People is just a correction for a crisis, sooner of later the Left will have to come back around to Ed Miliband's aborted project to tackle the cost of living head on, which, under pressure from the clamour to tackle public debts, shows significant crossover with the Right.
Miliband's strategy included promises to tackle energy costs, to increase the housing supply, to tackle renting costs, to cut tax for poorest, to cut small business rates, to increase wages and clamp down on the illegal - and migrant-exploiting - practice of undercutting wages.
The pro-market groups on the Right also have to confront big questions. When the early free traders, like
Richard Cobden and
John Bright, wanted to extend free trade in the interests of peace, breaking the power of corporations and land owners, and
making food cheaper for the people. Modern free traders are battling against the land oligarchies of their own times, but the power and influence of rentiers over the high cost of dwellings will not be shaken off by a laissez-faire cull of regulations. Rentiers own the playing field as well as the pieces.
If the high price of housing and energy could be tackled, then a debate over minimum wages or marginal wages would be held on a much clearer, unfogged, field. The discussion of the impact of wage levels - and how they set the 'purchase power' of the poorest, with their
higher pay coming at the cost of higher business prices, potentially meaning higher prices and lower employment - would be substantially more straightforward.
Yet it is hard to shake the feeling that the wages debate would still mean buying into an economic rhetoric based on manipulation and coercion of
people into certain kinds of 'productive' behaviours, and which ignores key ideas. Particularly, who benefits, how and how equally
from the profits/net gains of an enterprise? There were elements of that idea in the debate that Ed Miliband tried to open up on the cost of living, in taking elements from both camps.
But it didn't go far enough, going only so far as to make a pitch to the middle class within present structures (Grice, 2014) - and was soon drowned out by populist support for closed borders and austerity toward welfare. Surely, the really progressive approach is to ask whether we can reconstruct the economy so
that people can get a better relative share of the product of their work, see their relative share go further, and have greater social security?
The only way to achieve that is to tackle the cost of living holistically. Such an alternative approach to solving the cost of living crisis would need to be coherent, with a core idea and theme that would bind the various parts together.
It would need co-operation and mutuality in all sectors, to give people the power to ensure they receive a proper relative share. It would need guarantees of basic economic securities that would have a minimal distorting affect upon the costs of business, such as a citizen's income. And, it would need to tackle the oligarchic rentier control over the basic fundamental resources such as energy and housing that siphon off so much of a wage - particularly in the housing sector where, both in ownership and rental, costs have spiralled up beyond any semblance of reality under the inefficient system of private landlords that blocks the positive affects of
economies of scale.
While presenting a progressive alternative would be a gigantic challenge, it also presents a clear and distinct path forwards. In a mainstream assembled around frustratingly similar politicians offering bafflingly similar ideas, a distinct and coherent economic alternative could be electorally popular as well as economically necessary.
