The case for responsible capitalism

28th December, 2014 11:45 am

This article is from Our Labour, Our Communities – a pamphlet of 10 essays by Labour PPCs, published by LabourList in partnership with Lisa Nandy MP.

To win elections, political parties must undeniably demonstrate that they can handle the economy.

Labour did this in 1997 on a ticket that protected the well-off, that reassured we would not return to the tax-and-spend of the 1970s; we were the new Party of Business and we would get out of the way so that they could create wealth.

In 2010, we attempted to do the same by promising fiscal restraint: to cut public spending but not quite as viciously as the Tories would.  This is almost certainly one of the factors that allowed the Tories to win – they presented a more compelling version of the same economic narrative.

And since the election, the labour movement has grappled over the question ‘how can we be progressive with less money?’.

pounds in_hand money coins wage

Yet, talking about the cost of living and about spending cuts sees us simply examine the consequences of an unfair economic system – rather than outline the type of economy we want to see.

So why aren’t we talking about changing it?

In his 2011 conference speech Ed Miliband kicked off the debate with the term ‘responsible capitalism’ – a phrase which was then quickly adopted by the Lib Dems and the Tories. Who, they asked, would advocate irresponsible capitalism?  The answer of course is the political establishment. for over four decades.

The concept of ‘responsible capitalism’ is an interesting one that should be examined and pushed to its limits.  Can capitalism be responsible?  Is there any morality in markets?  What policies would be necessary to create an ethical capitalism – for workers, businesses and customers?

Disappointingly few voices on the Left have engaged in the debate.

In order to win elections and, more importantly, change society for the better, we must develop a distinct, alternative narrative to the Tories and the Lib Dems.  Time and time again I hear on the doorstep ‘but where is the money coming from?’  I retort wearily that it’s a matter of political choices where money is spent; we have the money to bailout the banks, why aren’t we bailing out the hundreds of small businesses that have gone bankrupt in Sheffield?  Why are we spending money replacing Trident and not on creating jobs and helping the long-term unemployed into work?

Imagine if the question wasn’t ‘where will the money come from?’ but ‘how can we distribute the money that’s there?’

Let’s change the system.

People cannot understand, nor should they have to, why the bankers have been left untouched whilst nurses and teachers suffer.  But we need to look beyond the banks towards the entire financial system.

Firstly, we, as taxpayers, are major investors both through government bonds but also through, for example, public sector pension funds and have enormous leverage as procurers.  So let’s start by investing that money for the long-term, demonstrating that long-termist investment decisions represent a better return on investment whilst supporting a more productive and sustainable economy.  That means diverting capital away from the oil, gas, energy and mining companies, all of which sit permanently on passive indices because they provide stable, short-term returns and towards manufacturing, construction and the emerging green sector, which will create jobs right here in the UK.

Secondly, lets shake up the way we do business. Most of the problems described above derive from the fact that the shareholder is king. This hasn’t always been the case and is not the way it has to remain.  Government should explicitly require companies to consider their employees, their customers and the communities they operate in alongside shareholders when making business decisions.  This wouldn’t be a burden, far from it, it would free directors to make decisions that benefit the company in the long-term and therefore the shareholders that are in it for the long haul as well.

And finally, let’s take a serious look at industrial relations.  When Tony Blair boasted that we had the most restrictive trade union laws in the Western World, the reality was this situation didn’t benefit anyone.  Our current system has led to a situation where workers don’t have a stake in their companies, union relations with business are fractious and we have one of the lowest levels of collective bargaining in the world.  Compare the UK with Germany, where unions work hand in hand with business, in the interest of jobs, productivity and better living standards for all.  We need to improve collective bargaining rights and put workers at the heart of our economy by putting them on boards and promoting different business models such as cooperatives.

Ultimately we must reflect on whether and how we can become responsible capitalists, how we can alter the landscape of the economy towards supporting all in society, creating long-term jobs, rebalancing the economy towards long-term, productive uses.  It is only then that we will reduce the benefit bill and increase our tax revenue, allowing us to fund our NHS and our world-class schools.

Without getting the economic policy right, all other discussion is practically moot.

Louise Haigh is the PPC

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  • Jonathan morse

    We ran last time on the ‘we have a pratt for a leader vote for us’ principle. Worked so well we’re doing it again.

  • Harry Barnes

    Louise’s proposal is to regulate and control the operations of capital.
    This should not, however, rule out the need also to advance and
    democratise the boundaries of social ownership. This is even the case if
    any intial moves towards social ownership are restricted for passing
    economic and political reasons. But a matter we need to consider in
    placing even just a passing emphasis upon controlling the unacceptable
    face of capitalism, is that capitalists will not just sit still and
    co-operate with a Labour Government who restrain their operations. They
    will look for ways around any regulations and controls which are placed
    in their way. This means that a Labour Government who really wishes to
    control and regulate the operations of capital, will persistently need
    to review and update those mechanisms. How far is Ed Miliband and those
    that are likely to make it into his hoped for government likely to be
    aware of this? Is this matter on Louise’s agenda?

  • Ace89

    “In 2010, we attempted to do the same by promising fiscal restraint: to cut public spending but not quite as viciously as the Tories would. This is almost certainly one of the factors that allowed the Tories to win – they presented a more compelling version of the same economic narrative.”

    Quite frankly, if you think this is why Labour was voted out of power, you must be on drugs. It was the Iraq war, the perceived lax immigration, the recession (happened under Labour’s watch), the inability to fire up the activist base, and the horrible PR management related to Gordon Brown that did Labour in.

    On the other points, I do agree about responsible capitalism, but Labour is losing the argument. And badly. It needs to be more radical about the solutions, and effectively put a canyon between it and the Tories and Lib Dems.

    Nationalization of the railways and mail, municipalization of the energy companies instead of more regulation the big companies can beat.

    A shifting of taxation from labour to capital (land value tax replacing council tax, wealth tax, replacing lower bands of income tax, inheritance taxes made more effective etc.)

    Radical end to cost of living crisis and job insecurity (universal jobs guarantee program and universal basic income to replace all welfare and pensions)

    People also demand austerity, but not on the backs of the poor. So how about Labour promising to look into government with a zero based review to completely slash government employee (including MPs) perks and pensions in line with private sector compensation, end all perks given to the royal family, fix the inefficient procurement regime, slash the need for massive computer systems, reduce the number of departments, do away with large expensive capital projects etc.

    Then the people will take Labour seriously.

    • treborc1

      A radical Ed Miliband do you know he is looking for a person to employ at £33,000 to enable him to get more people to back him not you or me mind you but celerities. The person will need to go out and get celebrities so that Ed can look like he’s one of the with it set, you know mixes with the singers dancers he should do well with comedians they seem to back him.

      The job application is in most of the bigger Tory News papers..

    • treborc1

      A radical Ed Miliband do you know he is looking for a person to employ at £33,000 to enable him to get more people to back him not you or me mind you but celerities. The person will need to go out and get celebrities so that Ed can look like he’s one of the with it set, you know mixes with the singers dancers he should do well with comedians they seem to back him.

      The job application is in most of the bigger Tory News papers..

    • treborc1

      A radical Ed Miliband do you know he is looking for a person to employ at £33,000 to enable him to get more people to back him not you or me mind you but celerities. The person will need to go out and get celebrities so that Ed can look like he’s one of the with it set, you know mixes with the singers dancers he should do well with comedians they seem to back him.

      The job application is in most of the bigger Tory News papers..

  • Markham Weavill

    Capitalism by its core principals can never be responsible. It is driven by greed and the devil take the hindmost attitude towards the losers. The Labour party has spent over a hundred years in and out of government in the blinkered pursuit of trying to square the circle. It came closest during the period 1945 to 50 when it nationalised what were thought to be those industries and concerns that were thought of as being of national strategic interest. Thirty five years later the government of the day decided that they weren’t and began privatising them. The voters acquiesced as did the majority of the then leadership of the Labour party.

    There’s little appetite in the country for a return to tighter controls, mainly because the likes of Ofcom, Ofgem etc. have shown themselves to be incapable of keeping the industries they supposedly regulate under control.

    As for the shareholder being king. Its laughable. The pension fund, overseas sovereign fund and normal fund managers are the real stakeholders and their horizon is just as short as that of the politicians. Their bonuses depend on churn, high dividend payouts and profiting from takeovers. They aren’t going to want more regulation and will move heaven and earth to stop them.

    The unions have been so demonised by politicians and the media that those not old enough to remember the advantages in better working conditions and wages membership brought dismiss them as an anachronism.

    • Quiet_Sceptic

      Yes of course it can’t, I’m amazed at the sheer irresponsibility of the capitalists in my local area.

      That village bakery! Why that baker has been quietly working away peddling his baked goods for decades now to the local community and no one has stopped him, can’t his loyal customers see the damage he is doing to society. Then there’s that news agent across the street… Don’t even get me started on the florist.

      Whilst I wouldn’t dispute that there are irresponsible businesses and companies, there’s a lot of businesses that are responsible and are at worst benign.

      Besides these failings are not unique to capitalism, you find plenty of irresponsibility within the public sector and a similar lack of accountability.

  • Quiet_Sceptic

    You can’t talk about capitalism as a single lump and have any meaningful discussion.

    At one end of the spectrum you’ve got the City and high finance, making billions and paying millions in bonuses, at the other end you’ve got small businesses and sole traders making a basic living like any employee.

    Lots of these businesses are responsible but by lumping them all together as ‘capitalism’, the rump of responsible businesses get tarred with the same brush as a few specific sectors or companies, like the banks that have been irresponsible and are attracting the politicians criticism.

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