TUC: We need to build a campaign to make the case for the alternative

Brendan Barber is the general secretary of the TUC

President Obama is putting forward a jobs package to try and get the US economy growing again; here, the best that ministers can do is talk about when to cut taxes for the rich. Of course our country has real economic problems – but government policies are making them worse.

Cuts in spending and the VAT increase have choked off economic growth. Inflation is eating away at wages and families throughout the country are struggling to make ends meet.

The government fails to understand what went wrong in 2008 when the global economy crashed.

For 30 years an economic consensus ruled. Markets were allowed to rip. Banks and finance were deregulated. The rich were allowed to get richer, while those in the middle and below were excluded from a proper share of the fruits of growth.

Many tried to keep up with borrowing, and with plenty of money sloshing around the finance system getting credit was easy.

To use just one telling statistic, the share of national output going to wage-earners fell from a peak of nearly 65 per cent in the mid-1970s to 53 per cent by 2008. And of course those at the top kept taking a bigger share of wages. Some unskilled and semi-skilled jobs now pay little more in real terms – and in some cases less – than they did in the late 1970s.

When you do not understand the problem, you are unlikely to come up with a solution. That is the tragedy of having a government come to power whose leading members see the 1980s as their model decade.

In the short-term their determination to eliminate the deficit in just four years has led the economy to flat-line. Serious economists talk of a possible double dip. The collapse of business and consumer confidence has been spectacular. Companies are sitting on a huge cash mountain rather than investing. And what is even worse is that they do not understand that the 1980s model has bust.

Rather than going back to business as usual with a spot of added bank regulation, we need a new economic model that works for ordinary families and reduces the inequalities that ultimately led what went before to collapse. No-one can yet know exactly what the next phase of economic success will look like.

But many elements are clear:

• It will need a banking and finance system that serves the rest of the economy with a return to utility banking;

• It will need new sources of investment through a national investment bank;

• The urgent move to a low carbon economy should be driven by a green investment bank, far more ambitious than Treasury neutered current proposals; and

• It will need a fair tax system and an emphasis on decent jobs that can help reduce the gap between the rich and the rest.

The challenge I will be setting the TUC Congress this week is to build a campaign that can make this case for a thorough-going economic alternative.

We have already defeated government claims that the cuts are fair and that they are protecting front-line services. But with the evidence growing stronger every day that austerity is simply making things worse, we now have our best opportunity to date to defeat their central economic claim they can eliminate a deficit built up by three decades of a faulty economic model in just four years.