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.
Christabel Cooper is a member of the Labour party
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