At the 2005 Labour party conference, Tony Blair described the world as ‘unforgiving of frailty. No respecter of past reputations. It has no custom and practice’, while also celebrating those who are ‘swift to adapt, open, willing and able to change.’ This apparent internal contradiction was never truly resolved under New Labour, with neither a larger state nor an unreformed private sector fully able to compensate for the pace of change set by globalisation.
Job security, upon which strong communities are built, has been eroded as corporations engage in an international race to the bottom in terms of pay and taxation in order to maximise profits. With this in mind, can Labour articulate a viable route to social justice? In a globalised world, turning workers into shareholders would begin to help resolve the contradictions of the age.
This stands in stark contrast to public limited companies whose duty it is to maintain shareholder value and pay out dividends – arguably conducive only to short-term profit maximisation and a paucity of investment in research and development.
The cooperative model illustrates that closing the inequality gap does not have to entail a statist approach; increased equality and job security can be achieved through market means. But the state can play a supporting role in bringing about this transformation: the government could introduce a strategic investment bank which stipulates a company be mutualised before funding is allocated.
So far, the government has focused primarily on the public sector in its interpretation of ‘Red Tory’ Phillip Blond’s advocacy of mutualisation. One of the meagre offerings of Project Merlin, George Osborne’s recent deal with the banks, was the ‘big society bank’. But it will make only £200 million of commercial loans available, and these from the traditional financial sector. But we learned, too, from Francis Maude that the bank will be independent of the government and enjoy the freedom to decide its own investment strategy. This, though, flies in the face of the Charities Aid Foundation’s recommendation that it ‘focus first and foremost on the social impact of investments, rather than the possible financial returns’.
In Germany, ‘soziale betriebe’ – market-oriented social enterprises – receive temporary public support, encouraging the unemployed and low paid to become workers and owners of a business. The Irish Labour party’s recent manifesto included the pledge to introduce a strategic investment bank, which would address the funding gap that currently handicaps small- and medium-sized businesses which have high growth potential. State investment might also encourage private sector institutions to co-invest.
Combining a state-backed strategic investment bank with an active industrial policy would catalyse the rebalancing of our economy away from a dependence on financial services, while maintaining the party’s commitment to social justice through the bank’s advocacy of mutualisation.
Labour should make the case for a state-backed strategic investment bank that would rebalance the economy, cushion the impact of globalisation and, dare we say it, in a direct, decentralised and easily understandable way, help secure for workers the full fruits of their industry.
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