The Mainstream of Public Opinion

Today's Guardian is very good indeed. Not only Owen Hatherley on housing, and not only Zoe Williams on Rory Weal, but also Seamus Milne:

Alienation from mainstream politics is so entrenched in Britain it's hardly surprising that most people tend to dismiss any shift in direction as yet more spin and posturing. Disillusionment with New Labour in particular makes it difficult for many to take seriously the promise of change when it comes from the successors to Tony Blair and Gordon Brown. Add to that Ed Miliband's halting performance in Liverpool this week and a speech peppered with the kind of politicians' phrasemongering that leaves voters cold. But that would be to miss the essential fact: this was the most radical speech by a Labour leader for a generation.

Miliband signalled an unmistakable break with the corporate consensus of the past three decades and the model of unfettered market capitalism this has enforced. No wonder the bulk of the press, which has played a central role in championing that system – even as it has fallen apart – is outraged. "Lurch to the left, Red Ed, union poodle!" they squealed, stuck in a time-warp unconnected with reality or the concerns of their own readers. Rupert Murdoch's Sun, apparently unaware of the scale of economic breakdown, charged the Labour leader with suggesting the "modern capitalist system" was "a failure". Miliband had "declared war on capitalists", the Daily Mail shrieked.

Hardly. But what he did do was raise the prospect of a genuine social democratic alternative to the neoliberal order that has brought the economies of the western world to the brink of collapse and prolonged depression – along with insecurity, inequality and falling living standards not seen for a lifetime. There's no question who was in Miliband's frame: the bankers and vested interests of the corporate world, rigged markets, rip-off energy conglomerates, "cosy cartels" that control executive pay, and the companies so powerful "they can get away with anything".

But more importantly, he blamed the "economic system" that governments of both main parties have overseen for decades – and called for a "new economy" that rewarded "producers" not "predators", and "wealth creators" instead of "asset strippers". Whether such brave talk can be turned into effective policy is another matter – though there are pointers to the direction Miliband wants to take: including the use of government contracts and intervention to reshape the corporate sector, as well as employee representation on top pay committees. Even these limited steps are, of course, threatening to powerful interests.

But it reflects the mainstream of public opinion – contrary to the impression given by much of the media. And it represents the framework for a political challenge that can start to match the scale of the crisis now gripping capitalism across the western world. For all his tut-tutting about bankers' behaviour, what does David Cameron have to say about an economic model that has not only delivered mass insecurity, inequality and environmental destruction, but isn't working on its own terms?

Meanwhile, just as Labour's leader is under attack from vested corporate interests and their friends for breaking with New Labour, many others balk at the continuities: Miliband's support for the unpopular occupation of Afghanistan, his call to allocate social housing on the basis of behaviour, criticism of strikes (which even Blair avoided as opposition leader), and endorsement of Thatcherite shibboleths of the 1980s. More significant is the direction of travel and whether Labour's leadership as a whole is going to accept the challenge that Miliband made this week to an entrenched political settlement.

Labour's shadow chancellor, Ed Balls, called it right last year when he warned that the coalition's cuts would choke off recovery; and he drew blood this week with attacks on Cameron and George Osborne's disastrous austerity programme, and his call for an immediate stimulus programme for jobs and growth. But despite his apologies for failing to regulate the banks in government, there's less of a sense that Balls has really moved on from the City-framed economic framework that underpinned New Labour's glory days.

In particular, his promise (echoed by Miliband) to use any proceeds from selling RBS and Lloyds to pay down debt – while talking vaguely about a national investment bank – ignores the pressing need to mobilise the state-controlled banks to boost public investment and lending for growth. That's far from being just a demand of the left – the case for turning the part-nationalised giants into public investment banks to drive recovery is now being made by figures such as the Financial Times's Samuel Brittan and Adam Posen, of the Bank of England's monetary policy committee.

But it's also an idea that meets the challenge of the crisis, and fits precisely with Miliband's call for a new economic model that makes the banks a "part of the solution to our economic future, not part of the problem". As the Labour leader himself acknowledged this week, his greatest political breakthrough in the past year came when he was "willing to break the consensus" by defying Rupert Murdoch over the phone-hacking scandal. That's the lesson he now has to apply to his own party if he is to make the direction he has chosen stick. Half his shadow ministers behave as if they were still in government or remain locked in a New Labour mindset.

Like Margaret Thatcher in the late 1970s, Miliband is in a political minority in his own shadow cabinet. Blairite nostalgics – who have failed to grasp that New Labour died when Lehman Brothers crashed – remain entrenched and unreconciled at all levels of the party. Now Labour's leader has set a new course that reflects the times we are living through, he needs to impose his authority, put his stamp on Labour's policy review, reshuffle his shadow cabinet – and bring forward a few landmark policies that embody that direction.

The crisis that has now engulfed the eurozone is changing the political rules of the game. The neoliberal model is broken. Miliband has understood that, but the next year will be crucial to whether that understanding can be turned into a winning political platform. As the Conservatives are bound to make clear next week, economic breakdown can just as easily be exploited by the right.