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It’s easy to dismiss predistribution as a gimmick but what does it actually mean?

Brian Strutton 17/9/12

"Hello Mr Smith, I represent the Labour Party and I wonder if I could talk to you about predistribution?". It's hardly a doorstep vote winner or a catchy billboard slogan, yet predistribution is the clumsy new buzzword borrowed from a little known American academic and paraded by Ed Miliband as the big new idea. However you will search in vain to find 'predistribution' described in the economic textbooks or debated in peer reviewed journals.

Even its protagonist Jacob Hacker's one line definition of predistribution as "market reforms that encourage a more equal distribution of economic power and rewards even before government collects taxes or pays out benefits" tells us little of substance. It's so easy to dismiss predistribution as a gimmicky word and nothing more. But, now it's out there, the enquiring mind might want to look beneath the surface and wonder what predistribution could mean, how it might shape policies and what implications it could have for Labour and the Trade Unions.

If it stands for anything, predistribution is about reducing the ability of the owners and operators of corporations to financially exploit consumers and ordinary workers. A stronger aim is to limit profits and executive earnings to keep prices down and improve the earnings of the workforce.

Through these mechanisms, it is meant to reduce some of the need for taxation on profits and high earnings by limiting them in the first place; similarly it is meant to reduce the need for income support for the lowest paid by raising basic pay and reduce the need for consumer subsidies through downward pressure on prices. So this is the 'pre' distribution part of the idea, a more developed form of price regulation and profit sharing which reduces but doesn't entirely replace the need for 're'distribution.

These are reasonable ideals that resonate with pretty much any socially responsible values. Predistribution picks up on the theme that markets have failed, that corporate greed has got out of control and that there is a role for government policy to do something about it.

Ed Miliband has spoken about the role of predistribution in changing the "model of the economy we have and the distribution of income it creates". He has given tantalising examples of higher wages and lower prices in some sectors to hint at how this new thinking might affect Labour's vision for the future, but what specific policies might we expect to see developed?

There are perhaps two broad categories. Firstly, policies that seek to restrict core cost-of-living prices affecting utilities, fuel, food and housing. These might include stronger regulation, anti monopoly/cartel legislation and direct price and/or profit controls. The objective would be to reduce the price of these commodities to consumers which would also have the effect of reducing the profitability of the providers.

Secondly, policies to rebalance the power and rewards between ordinary workers; and shareholders and senior executives at the top. This could mean increasing the minimum wage towards the living wage, improving employee and trade union rights, encouraging profit sharing and widening worker democracy in the boardroom whilst capping corporate profits and executive pay.

For Labour these ideas could lead to new policies that would have real appeal to voters who are crying out for someone to champion their cause. For workers and their Trade Unions it could mean an economic rationale for restoring collective bargaining to its rightful place as a necessary balance to corporate exploitation. If predistribution means these things to Labour then the policies behind the word just might lend themselves to the slogans and have the doorstep appeal that are going to be needed for the next election. Let's hope this is what we hear at Party conference next month.

Class's fringe meeting 'Why Inequality Matters' at Labour Party Conference will be on Tuesday 2 October at 5.30pm in the Unite the Union Marquee.

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