Capitalism can be a difficult subject for the left. Attitudes tend to range from those who are downright hostile through to the moderately suspicious. Sometimes those who see genuine positives in a capitalist system are challenged as to how they can even describe themselves as left wing. No wonder that we often just focus policy and debate on our traditional areas of strength in the public sector. Yet in Britain today, market-driven private firms accounts for around 60 per cent of GDP and 80 per cent of employment. They are just as essential to Britain as the public sector. Unless we truly believe that the state should control all the means of production (a view which surely has no place in the Labour party) then ignoring it is as ridiculous as deciding to ignore one of your legs. At the last election this perceived attitude of reluctant tolerance towards the part of the economy which employs the vast majority of British people clearly contributed to the impression that Labour could not be trusted with the overall governorship of the economy. Therefore Progress’ debate as to how to turn the ‘responsible capitalism’ described by Ed Miliband into reality is welcome and necessary.
All the contributors began from a basic position of accepting and welcoming the role of capitalism. As Stephen Kinnock puts it, ‘We believe in the market economy, as it delivers growth, and growth has lifted millions out of poverty, but we seek to build a new kind of growth’. In distinct contrast to the Tory laissez-faire attitude which is happy to tolerate any iniquity or failing in the private sector, all the writers made clear that Labour should be capitalism’s critical friends.
The criticism focused on three main areas. First, that too often companies concentrate on short-term profit as their sole focus, encouraging decision-making that takes no account of longer-term objectives or wider stakeholders than the current owners of their shares. Liam Byrne wrote that increasing numbers of business leaders recognise this themselves, but that current structures of corporate governance, and a financial system that favours speculation over genuine investment, continue to incentivise short-term thinking.
Second, too many of jobs that are being created are insecure and badly paid. Productivity is unusually low in the United Kingdom to the detriment of workers (who get paid less) and companies (which produce less). Ann Pettifor points out that the UK has one of the most deregulated labour markets among ‘developed’ economies and that legislation is needed to prevent the unjust behaviour which drives down income and standards.
Lastly, inequality is growing. Even if we had completely fair, efficient markets in which absolutely no exploitation existed, the huge social and economic changes brought about by globalisation, mass migration, capital mobility, asset inflation and technology would continue to increase the gap between rich and poor. The traditional leftwing response has been fiscal redistribution – essentially the answer that the last Labour government came up with – but as we know inequality continued to grow.
The ideas put forward by contributors as solutions to these problems are wide-ranging. They include using taxation to incentivise, investment in infrastructure and education, changes to corporate governance structures and reviving the idea of predistribution (essentially making sure that all our citizens start off on a level playing field rather than using fiscal redistribution to make adjustments afterwards). Interestingly, some policy proposals have long been associated with the left of the party, including nationalisation and job guarantees.
Part of the problem for the Labour party has been that too many people have believed that the only way of being radical is to be anti-capitalist. However, if only half of these ideas were to be adopted in a future manifesto, it would constitute a truly radical agenda. I would argue that a failure to truly engage with capitalism and a consequent retreat to the Labour comfort zone of talking about public services has ended up with the party adopting a less radical agenda than it needs.
The fact is that an economic policy which mainly focuses on how much the government spends is a giant trap for Labour. If we advocate too much austerity the electorate will question what the point of voting Labour is. If we advocate too little then we are ignoring the majority view that the deficit needs to be properly dealt with. Labour needs to expand the scope of economic policy beyond this, to offer something new, radical and fundamentally different from the ‘same old’ policies offered by the Tories. On this, surely, all members of the Labour party can agree.
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Christabel Cooper is a member of the Labour party
Read the full Responsible Capitalism series here
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Ignoring the facts and data simply will not provide the basis for anything. Almost every real metric, whether it is the GINI coefficient the 80/20 or 90/10 ratio shows that since about 1989 inequality in the UK has been constant and is actually lower now than it was under the Labour government. Inequality between nations has also fallen over recent decades. There are issues with chief executive pay which has become obscene – that is not a metaphor; it is liable to deprave and corrupt. However, when taken over the whole of the population it is insignificant. The recent report of the ONS on wealth distribution showed that the top 1% had less than 14% of the total and the median UK household had over £200000 in property, pension savings and cash and investments. Keeping repeating the mantra that inequality is increasing simply indicates either ignorance or dishonesty. There are plenty of arguments in favour of a Labour government; this is not one of them.
See this report from SPERI on inequality http://speri.dept.shef.ac.uk/2015/02/19/inequality-redux-wage-decline-welfare-retrenchment-politics-austerity-britain/
Inequality has decreased since recession because welfare cuts were delayed (as above report explains) whereas wages of those ‘in work’ dropped quickly; but will change once pace of cuts speeds up.
In response to the final paragraph of the original piece – this is exactly what Corbyn is doing – taking an integrated view (including growth) not just looking at spending or cutting, but you have to read what he actually says to see this and not just what he is reported as saying.
Several things: inequality did grow between 1989 and the start of the recession. Certainly not at the same rate as it had done under Thatcher, but it was nevertheless embarrassing for a Labour government (as Blair himself partially admitted) to preside over growing, rather than decreasing inequality. The fall in inequality post 2008, as StevenBoxall points out below was due to the fact that real wages declined whilst in the first years of the recession, benefits held steady.
To quote the IFS “In the years before the recession, inequality was still rising among working households. This was driven by growing inequality in the employment
income of such households. Since 2007–08, falls in inequality within this
group have not been driven primarily by trends in household employment
income, but by the fact that lower-income working households get more
support from in-work benefits.”
To further quote the IFS “Recent falls in inequality are likely to prove temporary. Stronger earnings growth and the Conservatives’ planned income tax cuts would do most for incomes towards the top of the distribution, while planned benefit cuts will
hit low-income households (both in and out of work) hardest.”
http://www.ifs.org.uk/uploads/publications/comms/R107.pdf
Also bear in mind that the usual GINI calculations do not take into account housing costs. As house prices continue to rise (and private rents along with them), this generates growing inequalities between those who were fortunate enough to buy their home several years ago, and those who are either buying now (with crippling house price to income ratios and therefore huge mortgage costs) or the increasing number of people who are still renting and having to endure annual rent increases well above the rate of inflation.
And none of the income calculations take into account asset inflation which soars above income inflation and which principally benefits the already well-off. You point out that the median household has £200,000 of assets, but given that this must provide for an average of 20 years of retirement for a household (generally two people), this isn’t actually that much. Furthermore, this figure will inevitably decrease as private pensions are now much less generous and fewer people can afford to buy their own houses.
I am just wondering what the divisions in in the Labour Party are about. the Corbyn Hard Left’ has not proposed ending a mixed economy,
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