What a difference a speech makes.

The reaction to Ed Miliband’s speech on Tuesday has been remarkable. The initial press reaction was hysterical. In a matter of minutes Miliband went from an ineffectual leader who was frittering away Labour’s poll lead through inactivity to a clear and present danger to capitalist society. The “Red Ed” epithet was rapidly resurrected.

Many on the right and, rather more disappointingly, in the self-proclaimed centre cried “socialism”. And that is never intended as a compliment. Yet it was quite obvious that if people were willing to label Miliband’s proposals as socialism then they either have no idea what “socialism” actually means or are willing to do any sort of violence to terminology for ideological purposes.

As Andrew Adonis has pointed out in today’s Independent, what Miliband proposes for the energy market – which is the part of his speech that has attracted most attention – is no more radical than Tony Blair proposed in 1997. And, as we know, Blair stands charged of abandoning socialism.

The reaction to the proposals from the rightwing commentariat and from the energy industry has been predictably apocalyptic. A temporary price freeze will lead to the lights going out, investment in new electricity generating capacity drying up, and the end of any aspiration for decarbonisation. Vague references are made to the blackouts in California. For these sorts of views to gain any traction it relies upon the audience having no idea of what is happening in other countries – because plenty of industrialised countries have greater energy price regulation than we do – and having no idea that the energy companies that survive perfectly adequately under more regulated regimes are the very same energy companies that are making such a fuss in the UK.  Equally, it relies on the audience having heard of the blackouts in California but not knowing that the primary cause of those blackouts was a combination of incautious deregulation and market manipulation by Enron.

Miliband has tapped into general public discontent on this issue. Energy prices and fuel poverty are a widespread concern. The other important point is that he is right. To be concerned about market failure and profiteering in the energy sector is not to adopt a radical socialist position dangerously detached from reality. As Alex Andreou explains succinctly, the energy market is almost the paradigm case for market failure. And that conclusion can be drawn on the basis of a relatively conventional industrial economic analysis. The structure of the industry is almost tailor made to ensure that customers’ welfare comes far down the list of priorities.

The subsequent reaction by some of the big energy companies – the apparent increase in the profile of fixed price contracts being offered to consumers, for example – suggests that even the threat of closer regulatory scrutiny can trigger a change in behaviour.

If we look at it dispassionately Miliband hasn’t proposed anything particularly radical. He is not, for example, proposing to renationalise the energy market. In fact, quite the opposite. He can style himself as both supporting the consumer and at the same time rallying to the cause of genuinely effective markets – pro-market but not pro-big business – and find himself on the right side of the argument all round. The smarter members of the right wing commentariat quickly realized this. Miliband has hit a nerve with the public and potentially boxed the Tories into a corner. If the Tories come out strongly against him then they will be seen as simply favouring their friends in big business. They will be standing against the sort of economic liberalism that they are supposed to champion.

It will be interesting to see how this debate develops. For a very long time market fundamentalism has held sway among the political elite. Markets are, by definition, the answer and regulation is a burden to be reduced. It is unquestionably the case that public services can be improved by handing them over to a private sector provider. A rhetoric of “choice and control” for the consumers of public services is used as a pretext for increased concentration of economic power, with negative political and economic consequences. Within the Westminster bubble it seems hard to grasp the idea that markets are in fact fragile and they are fundamentally social. Regulation is not always and everywhere a burden to be reduced. Rather it can be both constitutive and welfare-enhancing. Without it markets will be abused and consumers will suffer detriment. Or rather, it isn’t that this argument goes unacknowledged, but that a visceral dislike of the state blinds some people to the failings of unconstrained private power.

That is not an argument against the use of markets. It is an argument against the uncritical use of untamed markets. One of the most interesting current developments in economics is the acknowledgement by some economists that social scientists working in other disciplines may have been on to something when they insist that you need to make sense of markets and market activity in social and political context. The sociologists and the geographers may have been right all along. Alan Kirman’s recent book Complex Economics develops that type of argument. If you were an optimist you would argue that there is a profound ontological shift occurring in economics. If you were an optimist.

So there is considerable potential for Miliband’s argument to make headway. That isn’t the same as saying that it will. He is clearly trying to reposition Labour as less in thrall to the corporate sector and a particular brand of market fundamentalism. But it isn’t evident how many of his own side would join him in that ambition. While individuals can be transformative, I don’t think Miliband has the charisma or force of personality to gather broad-based support for this position on his own. So he needs others to join him in pushing the message from now until May 2015. Whether he has those backers on his own frontbench is not at all clear. Perhaps the imminent reshuffle is of more than usual significance.

What Miliband is proposing isn’t socialism, certainly not in relation to these key aspects of market regulation. But it will require patient argument to rebut such accusations from those with an interest in preserving the status quo. No doubt that’s not news. But it will be vital in shaping whether we are witnessing the beginning of a new era of more mature political debate or whether Miliband’s speech will feature in future history books as a brave but ultimately futile effort to stand up against ever more deeply engrained and heavily concentrated corporate power.

Image: DECC (archived image) via flickr.com under Creative Commons