A new agenda for Labour
The crash of 2008 remains a watershed for New Labour’s political economy. The reliance on the financial sector and public administration as the twin drivers of growth was revealed as incapable of generating the value necessary for a competitive economy. There was also an unhealthy reliance on private debt. Of the £1.6tn invested in the British economy between 1997 and 2007 more than 80 per cent was in mortgages and personal loans. Private debt and the growth of usurious payday loaning was more grievous than the public deficit, which was serious enough.
This was accompanied by a stagnation in wages that intensified the debt pressure on workers whose job security and standard of living were simultaneously threatened. The value of labour was diminished in three important ways: the percentage of profits going to wages declined; workers had less power in the firm through the marginalisation of unions; and labour was not considered a fundamental value in innovation. Technology, entrepreneurialism, knowledge, networks – all of these were rightly considered to be sources of innovation but labour was not included in this mix. The German economy, with its co-determination in corporate governance and pension fund management and its vocational labour market entry, tells a different story.
Neither was it the case that we successfully developed a pro-business position. We were pro-finance and pro-City but there was a lack of private sector growth throughout the regions of England. My experience of talking to businesspeople is that they make four key demands: less tax, less regulation, more skilled workers and reliable access to affordable capital. By 2010 we had delivered higher tax, more regulation, an unskilled workforce and the decimation of the regional and sectoral banking systems. Both capital and the state had centralised power and the age of the oligarchs was upon us. From banking to telecoms you cannot avoid the ‘big six’.
What is required, therefore, is a new pro-business and pro-worker political economy. This approach is less focused on external regulation and more concerned with relational accountability within the governance of the firm and sector, and less focused on tax and fiscal transfer and more on giving incentives to vocation and value through building decentralised institutions such as vocational colleges and regional banks.
What would such an agenda look like? First, Labour should champion a partnership model that gives a constructive role to trade unions and to workers in vocational training and corporate governance. It is necessary to give a primary role to work and labour value in the corporate governance of firms so that there can be an active negotiation of strategy that does not exclusively benefit the managers of firms. One of the principal causes of the crash was a lack of accountability which led to cheating and excessive risk. The workforce are the only people with internal expertise and an interest in the flourishing of the firm. A third of the seats on boards should be elected by the workforce. That would also give them skin in the game when it comes to the sacrifices required for profitability.
Second, there should be a decisive change in our attitude to vocation and skills. Half of our universities could be closed and turned into vocational colleges jointly governed by business, unions and local authorities. This could renew the skills lacking in our workforce. UnionLearn could yet become the most significant wing of the labour movement.
Third, we should establish regional and sectoral banks so that there is stable access to capital in regions that can support local business with an awareness of their specific needs, which was a key recommendation of Labour’s small business taskforce. The work that Unite is supporting with the Bank of Salford is commendable and needs to be built on.
Labour needs to value labour and business and seek a common good between them. That is the new labour political economy.
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Maurice Glasman is a member of the House of Lords and founder of Blue Labour
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Speaking as the director of a small engineering company, I must say I agree very largely with Lord Glasman. The emphasis on tax’s I do not think I share except that the National Insurance Contribution is Income Tax by another name and hits the low paid in a very unfair way.But I see that the total Tax burden can not be reduced at present.
For the last 40 years or so I have been appalled by the emphasis on Finance, it seems to me obvious that any gains made by financial transactions not related to the supply of a good or service or to forward such supply, is a contribution to inflation and comes from confusion between money and wealth which is the product of human en devour
Closing half the Universities and making them into vocational study centres might be a good idea but where on earth woudld you find the teachers?
I am dubious about the unions as a force for change.This may sound like heresy in a long term Labour supporter but is the result of a lifetime’s experience, perhaps things have or will change.
I have spoken to German engineers about the mixed Boards and their comments were mostly dismissive, but this was a long time ago and things might have changed.
I believe we must depend on enlightened management and I am aware that this would raise a wry smile among many but it is coming at least in Engineering because in the high quality end of the business it is the only way we can survive and the only business available to a developed, and hence expensive nation.
I am glad to say that there are signs of management improvement we ourselves are taking part in such a project with the help of The Nuclear Advanced Manufacturing Research Centre in Sheffield with promising results. it should perhaps be pointed out that the Nuclear element was central to the inception (Otherwise we would have to renew our capacity with no internal benefit) but the techniques are generally applicable.
Possibly the most successful scheme for helping SME’s in the UK is the Progressive Beer Duty introduced by Chancellor Gordon Brown in 2002 following EU agreement that a scheme used by Germany could be adopted by other EU countries. It means that smaller breweries do not pay as much duty on the beer they produce as the bigger firms. This has totally transformed the industry from one dominated by a handful of national and multinational companies (rather like banking) to one where there are thousands of local and regional breweries and the consumer has a much greater choice.
Could this be a model for all types of business? Perhaps a lower rate of corporation tax for SMEs balanced by a higher rate when they have become successful and bigger?
New Labour made the mistake of confusing wealth creation with money manipulation. Speculative gains from trading in existing assets do not create wealth. As the events of the last few years have shown, they destroy it. We urgently need a system which prioritises real wealth creation – the transformation of the useless into the useful – rather than the finance capital model we have which tends to do the reverse.
Dear Maurice, surely it is time to think of the short term, which is to win the general election in May 2015. We will never get workers representatives into one third of the seats around a boardroom in a hundred years and the very mention of it will lose Labour at least 1% of its potential support. I assume you have studied the proposals for revamping the French tax and employment system recently announced by Françoise Hollande which are practical and could easily be adapted to fit the UK economy which is far less regulated than the French economy. I know employers always complain that they have to retrain the workers they take on because of the lack of awareness of our universities, but so also do the British Army where the average reading age of recruits is 10 years. They still manage to produce one of the most efficient and effective armies in the world. Please start concentrating on proposals that can go forward for inclusion in the manifesto for the general election as there is no greater need in the UK at the moment than to get this current inept coalition administration out of office.
There is always going to be some conflict between business and those who work for businesses, but there is much that unites business and workers too. From the workers perspective, if the business doesn’t have enough customers with sufficient money to spend, jobs will be lost, pay rates will stagnate and possibly fall.
From the business perspective there is no surplus value to be had from an unemployed worker.
Therefore the concept of full employment is one which should appeal to both business and workers alike. We’ve had full employment before and we should be able to do the same again. Why not? That should be part of the 2015 manifesto not some neoliberal commitment to austerity.
To achieve full employment we need to move away from the concept of austerity economics which clearly doesn’t work in either the Eurozone or the UK.
An interesting video by Prof Stephanie Kelton which could be the basis of Labour’s 21st century economic understanding and offer a much more optimistic message to the electorate!
Google {petermartin2001 stephanie kelton}