London: Prominent British Labour figure Ed Balls says neo-liberalism has failed but neither Jeremy Corbyn's socialism nor Donald Trump's nationalism are the remedy for the inequality which is driving the current political crisis gripping the west.
Mr Balls touches down in Australia on Wednesday for a week-long series of talks with former treasurer Wayne Swan and as a guest of the Labor think tank The Chifley Research Centre and the left-wing think tank The Australia Institute, to mark ten years since the global financial crisis.
Speaking to Fairfax Media ahead of his trip, Mr Balls said the failure to make the global economy work for middle and lower income earners had driven the dissatisfaction in politics that has aided the rise of Mr Trump and Brexit. He said at the heart of this inequality was the free-market orthodoxy that has dominated modern politics in Britain, Australia and the United States.
"Neo-liberalism has failed full stop and it was always going to fail," he said
"The idea that governments standing aside, leaving the market to its own devices, that you should just allow a group to get richer and hope that the benefits can spread to other people, that was never going to work, that's not how market economies work and I think the pace of change has exposed those flaws very quickly," Mr Balls said.
He said the collapse of confidence in neo-liberalism would have happened with or without the financial crisis because wages had begun stagnating before the crash in 2008.
"I don't think it's a product of its time, I think it's a deeper issue," he said.
And he said the business community needed to adapt to the new normal.
"Sometimes when you listen to people from the business community you get the feeling they just hope the politics will all just go away and we'll just get back to how things were before that but that's not going to happen, we're not going to go back to business as usual."
But he said Mr Corbyn would never win government for as long as voters did not trust him with their taxes.
"I don't think hard-left socialism is the answer," he said. "I don't think it will be possible to win an election and govern from the far-left... I don't think that the rules of politics have been suspended to that degree."
Mr Balls said despite the nationalist movements sweeping the United States and Britain, the only way to address some of the issues driving inequality - like multi-national companies shifting their profits to minimise their tax - was through more global cooperation, not less.
"That is impossible to solve country-by-country, it's got to be solved internationally," he said, and insisted domestic populist backlashes against unfairness would force potential rogue states offering themselves as low-tax havens to fall into line.
Balls remains a public figure
Mr Balls has remained in the public eye in Britain since his forced retirement from politics when he lost his seat in the 2015 election.
Mr Balls was a key player in the Blair government serving as top advisor to former Chancellor Gordon Brown and was instrumental in making the Bank of England independent, keeping Britain out of the Euro and convincing voters to pay more taxes for the National Health Service (NHS). After entering politics in 2005 he rose to the position of cabinet minister and in opposition was the shadow chancellor.
In 2010 he came third in the Labour leadership contest won by Ed Miliband, who also beat his brother David Miliband.
Last year he appeared on the BBC's reality television dancing competition Strictly Come Dancing. His performance to the global smash hit Gangnam Style has had nearly 1 million views on YouTube.
In 2016 he also published his autobiography Speaking Out which he wrote entirely by dictation and currently writes on a variety of political, economic and lifestyle topics for the British media including as a restaurant critic and first-time Glastonbury music festival-goer.
Mr Balls is married to the Labour MP Yvette Cooper, who came third in the leadership contest won by Mr Corbyn in 2015.
Corbyn needs to change
In the months before the 2017 election Ms Cooper was emerging as a potential replacement for Mr Corbyn. Labour sources told Fairfax Media at the time that the party conference scheduled in September would have been a chance to force changes to the way the leader is selected, that currently favour the party's more left-wing membership, compared to its more centrist parliamentary party.
But Mr Corbyn solidified his position with his much better-than-expected performance during the election, gaining 30 seats and a 9.5 per cent swing to Labour.
Jeremy Corbyn came closer to winning the last UK election than most people predicted. Photo: Bloomberg
Mr Balls said Mr Corbyn would lead Labour to the next general election, expected in 2022, but warned he would "have to pass a much higher threshold next time around."
"I want Labour to win, and I don't think Labour will win unless he learns some of those lessons, more of the same isn't going to be enough."
"I think the next general election will be fought between a new Conservative leader who I expect will have learned from the failure of Theresa May at this general election but I think the expectation is that the Labour leader will be Jeremy Corbyn, so it will be a tougher task next time around and I think more of the same isn't going to be enough."
He cited the Blair government's success in entrenching higher taxes to pay for the NHS as an example of why centrism in politics is vital, saying the most enduring reforms are those that end up being supported by both sides.
Free movement and Brexit
Mr Balls said Australians might find it difficult to grasp the factors, specifically the revolt against free movement, that drove Brexit, given Australia's approach to migration and bias towards skilled workers.
Mr Balls campaigned for remain but said the factors for Britain's vote to leave were the result of the failure of policy-makers to predict how free movement would spark mass economic migration. He said the Blair government miscalculated the effects of the European Union's rapid expansion in 2004, when Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia joined.
"We thought the numbers of people who would be moving would be small and that was a big miscalculation, for a country that has managed migration for a long time like Australia that might seem a bit odd," he said.
"One of the lessons you have to learn is that you don't always see the risks that are at the end of your nose," he said.
Britain's net migration quadrupled during Labour's last period of government, and peaked under Conservative Prime Minister David Cameron in 2015. Since the EU referendum vote, net migration has declined by 25 per cent.
Ed Balls will be speaking at the National Press Club in Canberra on Thursday and also at events in Sydney, Brisbane, Hobart and Melbourne.
