Ed Balls's Jedi speech: reality strikes back

Ed Balls has just given a speech called "Beyond the Third Way", which may mean he is now propounding the Way of the Fourth, confirming my belief that he is a Jedi.

That apart, however, the speech is a disappointing way to kick off Labour's week of trying to be the party of business. It is a dreadful load of old waffle, and a lot of its analysis is simply off beam. At one point he says "the failure of financial regulation led to a global financial crisis", which I think is just daft: you cannot regulate the business cycle out of existence, or credit bubbles or over-confidence. Almost as foolish as claiming to have abolished boom and bust.

Then he lists the changes he (and the Labour Party) didn't see coming when he (and it) devised the policies of the third way in the 1990s. The third is "profound technological change which is not just substituting for unskilled labour, but replacing traditional middle-income jobs too".

I seem to remember a period when Tony Blair and Gordon Brown used to go on about almost nothing else, and this apparent omission leads Balls into some rather contentious assertions.

"Now the advances in robotics and artificial intelligence means that intermediate skilled jobs will be lost too, in what economists call a ‘hollowing out’ of the labour market."

I don't know about economists. The only other person who talks this kind of gibberish is Ed Miliband. The Chancellor, George Osborne, rebutted the idea of a hollowing out in a speech in April: "Overall there has been little change in the proportion of people in middle-income jobs in recent years."

Then Balls makes an only-slightly-related but equally misleading claim:

"Meanwhile at the top, the returns from ideas, capital and top-class qualifications are getting greater and greater. And the result has been, for most developed countries, rising income inequality on a scale not seen since before the First World War."

I don't want to rehearse the whole Thomas Piketty argument here, but even Piketty himself has accepted that rising income and wealth inequality is something that is happening in America, but not so much in Europe. I would go further and say not at all since the 1990s in the UK – or, at least, not on the latest data, which go up to 2012.

Balls goes on:

"No developed country has escaped the impact of these global trends, but the UK has been particularly hit hard."

It is not clear at this point what we have been particularly hard hit by, but if it is not rising inequality or a hollowing out of the jobs market then I think he means the "cost of living crisis".

I have no problem with Labour policies devoted to raising the skill levels of the workforce. This is entirely sensible and has been espoused by the first, second, third and fourth ways of Labour politics. But it does the party's economic credibility no good at all for speeches of this kind to describe what is happening in the British economy in ways which are simply factually wrong.

Thanks to General Boles for the picture of O'Balls-Wan Kenobi