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Well is this it?
Since Ed assumed the leadership, he has been making noises about the need to “reform capitalism”, and to offer Britain an “industrial future”. And over the last week, Ed, and his shadow business secretary Chuka Ummuna, have made a few headlines by setting out some of their specific proposals.
None of their proposals are particularly awful. Yet amongst the ideas that Ed and Chuka have set out, it is painfully difficult to discern a plan to actually reform capitalism, and to build an economy better attuned to the interests of the majority.
So far, Labour’s proposals focus overwhelmingly upon the pay of bankers and executives. There is the plan to repeat the tax on bankers bonuses, the plan to force businesses to be more transparent about huge executive pay, and the plan to put workers on remuneration committees.
These ideas are all well and good. Yet we are kidding ourselves if we imagine that these ideas are genuinely capable of addressing the crisis facing millions of working people. Common to the economic thinking of both major parties is an exaggerated obsession with incentives and motivations. Cameron and Osborne appear to believe that business can be reinvigorated by offering greater rewards to entreprunership in the form of lower taxes, and that unemployment can be conquered by reducing the “incentive” not to work. similarly, the Labour leadership argue that the financial crisis was primarily a consequence of reckless greed. In their desperation for bigger and bigger bonuses, so the meme goes, bankers took bigger and bigger risks, such that the system eventually collapsed. As such, they argue, capitalism can be made safer by tackling high pay.
This arguement contains a few grains of truth, but no more than that. Bankers bought, en masse, into bubbles which were bound, at some point to burst. Yet this had more to do with the shape of the whole economy, than any desire, on their part, to earn excessive amounts of cash. Of crucial importance was the dearth of opportunities for productive investment. As Robert Skidelsky goes some way to explaining, the decade leading up to the crash saw huge inflows of loans and investment funds from countries such as China. Since this cash could not be profitably invested in industry – which faced insurmoutable competition from rapidly industrialising, low wage economies – it was instead diverted into unproductive speculative assets, that were bound at some point to crash,
Beginning to reverse decades of deindustrialisation is crucial, if we are to reduce the vulnerability of the whole economy to financial fluctuations, and if we are to put finance itself on a less cyclical footing. Rebalancing the economy is also vital, if we are to have a society that meets the needs of more people. As I have argued before, the problem with an economy that is overly specialised in financial services, is that it offers worthwhile and fulfilling work to increasingly narrow section of society.
The more countries trade with each other, the more they focus on a narrow range of goods or services which they flog to the rest of the world in return for everything else they need to consume. Yet human faculties are not so narrowly concentrated. In a nation of 60 million, different people will possess different skills. And yet a highly specialised trading economy can only provide meaningful work for a smaller and a smaller section. And people who would once have been employed making cars, may now instead be employed ferrying around bankers, or making their coffee.
Like every single politician, Miliband has spoken out about his desire to rebuild British industry, and to reduce the dominance of the city. And like almost every other politician, Miliband has offered no sense that he is ready to undertake the kind of bold, transformative measures that would be necessary to even partially reverse three decades of deindustrialisation. Building a more egalitarian economy is not simply a matter of cracking down on bonuses. Nor, indeed, is it simply a matter of higher public spending. It is also about governments actively seeking to alter the whole shape of the economy – not least by redirecting scarce capital – so that it functions in the interests of the many and not just the few.
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