On the left of the political spectrum there has always been a deep distrust of “business”. Business was seen to be the enemy of working men and women so politics was seen as a zero-sum game. Things that were good for business were assumed to be bad for workers and vice versa. Despite this view, there was general support for, and acceptance of the economic model that developed from the end of WW2. Increases in productivity fed through in to rising living standards for working people up to the late 70s. Inflation-adjusted average earnings stalled at this time and family income only grew because of the increasing number of women in the workforce. Once this stabilised in the 90s, families relied increasingly on house price-supported borrowing to increase their standard of living and we know how that ended.
Since the 2008 financial crisis, there has been a collapse in support for the established economic order and belief that it can deliver rising living standards for the majority of people. It goes without saying that the small number of people at the top have benefitted hugely but the anti-establishment zeitgeist that has taken over politics in countries like the UK and the US (Brexit, UKIP, Trump) has arisen directly from this feeling of dissatisfaction with the existing economic order.
How should Progressives respond?
In this Corbynista/Bernie Sanders era, there are an increasing number of people on the left of the political spectrum who call themselves Socialists (and this includes not just Jeremy Corbyn but Owen Smith as well). What do they mean by this? What are they trying to say?
A good place to start is the wording of Clause IV of the pre-1995 Labour Party Constitution that was printed on the back of my first Labour Party Membership card:
“To secure for the workers by hand or by brain the full fruits of their industry and the most equitable distribution thereof that may be possible upon the basis of the common ownership of the means of production, distribution and exchange, and the best obtainable system of popular administration and control of each industry or service.”
Do today’s Socialists still subscribe to this statement? Let’s be clear what it would mean. “Common ownership of the means of production, distribution and exchange” doesn’t just mean nationalising the railways or other natural monopolies like Electricity utilities. Walk down the High Street and it would have to include public ownership of almost everything you see. Tesco, Top Shop, Boots and Costa. Then add in car companies, airlines, capital goods makers and the drug companies. When pushed, my self-declared Socialist friends accept that this would be futile. For these people, calling themselves “Socialist” is more about virtue signalling. By calling yourself a Socialist you are saying “I care more than you about economic justice than you”. It is nothing to do with proposing an alternative economic model. It makes the person feel good about themselves. It does nothing to achieve sustained improvements in the lives of working people. How how self-indulgent.
To believe there is a viable non-market solution for growing the economy requires a complete lack of understanding of how economies develop. We have to separate the economic benefits that can be delivered by business, trade and markets from how the rewards of these activities are distributed. Clearly, the way these rewards have been distributed has led to a socially unjust and economically inefficient distribution of wealth and income, but that is a separate issue. The declining share of profits going to labour can be addressed but as Larry Summers recently pointed out, sustained economic growth is the one thing that would reliably reduce inequality. Organising workers is much easier in a growing economy and perhaps Corbyn would be better to spend more time talking about organising Uber drivers rather than miners. Either way, the first step is economic growth.
Only markets, business and trade are able to generate the economic growth that we need to fund the kind of education, welfare and infrastructure spending we need but unless Progressives are prepared to embrace and engage with the business world, the field will be left to the promoters of low tax/small government/low regulation policies with the usual consequences…financial booms and busts with widening inequality.
The fiscal problems since 2008 were a direct result of the collapse in government revenues from an economy that fell off a cliff. Progressives need to get comfortable with business and not see it as the enemy. When Jeremy Corby was asked to comment on successful British exporters like BAE and Rolls Royce, all he could mumble was something about big companies not paying tax. Again, two different issues…how to grow the economy versus how to ensure multinational companies are taxed properly.
It has become fashionable to decry the results of Globalisation but any Progressive who ascribes to this view has to first tell me what they think about the fact that Globalisation has cut the rate of absolute poverty in the world from 40 per cent to ten per cent in 30 years. Hundreds of millions of people have been lifted out of poverty and I’d love to hear how that could have been achieved with non-market policies.
Even if some people accept these global benefits, they decry the effect on certain sections of the U.K. population. I accept that these effects are real and need to be addressed but let’s not ignore the benefits. A 40″ Flatscreen TV for £399 at Currys, a complete school uniform from Lidl for £3.75, a pocket supercomputer from Apple or Samsung for £300, a dress from H&M for £10 and millions of products delivered next day by Amazon Prime. Global competition and sourcing have vastly expanded the choice and reduced the price of millions of goods which is one reason that inflation has been so low for so long. The main beneficiaries of this are working people.
An active government in a market economy has a vital role to play. Designing and regulating markets to ensure efficient outcomes. Aggressive use of fiscal stimulus to even out economic cycles and invest in improving infrastructure, human and physical capital. If markets are left to themselves, monopolies and barriers to entry will develop over time. Historically, the tax code has encouraged debt financing at the expense of equity and the spending of profits on stock buybacks rather than productive investment. An activist, informed and progressive government can address all these problems with real, sustained benefits for working people and the country as a whole.
For many of my Progressive friends, this all sounds too difficult. From their lofty moral perch, the world of business seems alien and malevolent, something to be fought against. There are some Labour politicians who get comfortable with business but they prefer to talk about cooperatives and small business. The old stat that gets trotted out is that most new jobs are created by small businesses. That is correct but since many new businesses fail, they are also responsible for most job losses. If you want to move the employment needle, you need to grow the big companies. Most business expansion is financed by investment from large companies. If you care about creating opportunities for working people then you have to engage with this world.
If you find this too difficult, then you are a social campaigner who rests in the comfort zone of a protest movement. That may make you feel good, but it won’t do anything to address our economic problems. Sadly, listening to the current Leadership contest it looks like I may have to wait a long time for the Labour Party to have something to say on these matters. In the meantime, working people will pay the price.