Political Commentary: Today the EC, tomorrow the world

In just over a fortnight, Gordon Brown will make his first big set-piece speech since becoming Shadow Chancellor. The venue will be a conference at the Queen Elizabeth II centre, London, convened by the European Commission, with the title 'Europe and the World after 1992'. The line- up is pretty grand: fellow speakers will include Jacques Attali and General Colin Powell.

Mr Attali, once President Mitterrand's right-hand man, is the sort of Frenchman as happy debating East European literature with George Steiner as negotiating a multi-billion dollar loan in the international money markets. As chief of the European Bank of Reconstruction and Development, however, he is supremely qualified to talk about the economic relationship between the West and the former Communist world. Equally, there are few people better equipped than General Powell, chairman of the US Joint Chiefs of Staff, to speak about international military co-operation and the future of the United Nations as the world's policeman.

Mr Brown will sensibly resist the temptation to indulge in party political tub-thumping and instead use his speech on 7 September to venture a few thoughts on the world economy.

The thoughts will be tentative. But they will demonstrate that since the general election he has been reflecting on an as yet undeveloped strand of new thinking on the British left. There are even mutterings in some Labour circles of a 'New Economics'.

The sketchy, and entirely preliminary, post-election thinking goes something like this: in the Seventies, the British left kept faith in the public sector as the main economic motor, with well- known and adverse results. In the late Eighties, Labour under Neil Kinnock quietly buried that discredited dogma. The collapse of the command economies of Eastern Europe ensured the doctrine would not be disinterred. But in the same period free-market capitalism was not doing all that marvellously either. As a result, it is no more reasonable to assume that the state has no role in influencing the market than it is to assume that it is omnipotent.

One role for the state is as regulator; for example, over the prices of the privatised utilities. Another could be intervening in the market to help to secure the country's industrial base. This is hardly an outlandish idea; among those who helped - from the Tory backbenches - to make it respectable in the 1980s, was Michael Heseltine, as Mr Brown so devastatingly pointed out in the Commons before the recess.

'Interventionism' is one of those words, like devaluation, used mainly by its detractors; it invariably carries the assumption that public money is involved. But that is not necessarily the case; if planning permission, to take just one example, for industrial investment in the South-east is made conditional on parallel investment in the North, or building a new road, or laying playing fields, this may benefit the taxpayer.

But, and Mr Brown will lightly touch on this in his speech, there is an international dimension. Labour's embrace of the European Community may, in the end, prove Mr Kinnock's enduring legacy. Labour now stands by the exchange rate mechanism and, in the longer term, monetary union.

Thus, while there are real differences between the parties on how to manage Britain out of the recession - for example on job creation and training - there is little difference on macro-

economic policy. Labour's pro- European line will meet its severest test within its own ranks this autumn if the French vote 'no' in September's referendum on the Maastricht treaty, although the signs have been that John Smith will resist the siren calls to demand devaluation.

On Maastricht, Labour's parliamentary tactics have still to be worked out. Certainly, if the Bill comes back to the Commons, Mr Smith will run John Major extremely close, pointing out until the last minute that acceptance of the social charter would assure him of support in a crucial committee stage which will be fraught with hazard for the Government. However, Labour is not about to vote against the third reading of the Bill.

The longer term effect of Labour's policy shift on Europe is that the party has broken decisively, more so perhaps than the Tories, with its own historic hang- ups about national sovereignty.

Mr Brown will raise the question of whether global economic institutions will become as much a feature of political life in the next century as the EC is today. The left's and the right's visions of the EC differ in many respects. For the right - apart from the overtly anti-European right - fair competition and a free internal market make EC membership desirable. The left adds goals such as improved social provision, environmental control and regulation in consumers' interests. But the two share a belief that some form of supranational authority is needed.

Mr Brown will ask whether this is not a global, rather than merely European issue. First, even an enlarged EC does not remove the threat of growing tensions between three potentially opposed trading blocs, North America, Europe and the Pacific countries. Second, the market is already global; capital shifts across the world in milliseconds; the biggest corporations are transcontinental rather than merely multinational. Third, there is a relationship between the trading conditions of the industrialised countries and those of the Third World. For example, the subsidies paid to European farmers have a direct and adverse impact on the conditions of Latin American peasants. Advocating the removal of such subsidies might fit well into Labour's post-election thinking; an attack on vested economic interests in the name of lower food prices in the North and better economic conditions in the South.

Without adopting the European Community as a model, Mr Brown is suggesting that the pooling of sovereignty might eventually extend beyond European boundaries - for example through intercontinental management of exchange rates. Labour believes the pound is weak partly because the economy is weak. But it also recognises that with no institutional links between the dollar and European currencies, Britain is highly vulnerable to fluctuations between the dollar and the mark over which it has no control.

Mr Brown knows that his immediate job is to make the most of the Tories' present pain on the economy, but also to build the public trust which ultimately eluded Labour in the general election. There are those who subscribe to the seductive alibi that, contrary to popular belief, the recession did not present Labour with an electoral opportunity, and that it will be easier to win with a redistributive programme when the economy is growing. However, Mr Brown probably recognises that the importance of voters trusting Labour to manage the economy transcends such considerations. If nothing else, Mr Brown's speech is likely to be the first sign that Labour can use its period in opposition to develop some new ideas, rather as Margaret Thatcher did between 1975 and 1979. Global economics is only one issue; others are likely to be the use of environmental taxes and how to put training for skills at the top of the party's agenda in 1996-97.

The achievements of the Kinnock years were fundamentally revisionist: the necessary junking of Labour's most indefensible policies. On 7 September Mr Brown will take a small but important step beyond revisionism.