This is intended to be a brief-ish post before I offer thoughts on the UK Labour Party’s leadership battle, which will be the subject of a forthcoming post. The Labour Party is currently plunged in existential angst, as the party debates how and in what sense it should be “pro-business”. It’s a loaded word in political discourse, hence the frequent need for quotation marks. A notable aspect of the UK general election campaign earlier this year concerned then Labour leader Ed Miliband’s attitude to business. Apparently Ed wasn’t “pro-business” as defined by his opponents in the Conservative Party, his enemies in the media, and his critics in the business community. But hardly anybody disputes the importance of wealth creation in order to for prosperity and opportunity to be available to a nation’s citizenry, and it is usually disingenuous to allege that some people do. However, one of the key issues in politics is how best to create that wealth, and how that wealth is distributed among the population.
Miliband’s critics are largely subscribers to an ideology supported by an entire policy apparatus has emerged over the past thirty-five years that promotes a certain view of how businesses are optimally run, and crucially, how much they are taxed. This is particularly so in America and the UK, and it has led to a business culture which plainly isn’t conducive to fostering the greater good.
Since the beginning of the Great Recession, there has been a marked tendency for companies to hoard cash rather than spend it at a time when national economies have been screaming for more demand to be generated, upending the risk-taker narrative of corporate propaganda. Another defining feature of ‘Anglo-Saxon’ corporate culture is spectacular remuneration at executive level while wages on the shop floor have been held down. Moreover, companies have an unapologetic focus on the short-term while jettisoning concern for building long-term value. This is often coupled with an indifference if not downright hostility to spending on R&D. In Britain, the business, financial and political elite are intensely relaxed about businesses being sold off to foreigners, which is an inevitable consequence of ‘quarterly capitalism’, in which stakeholders other than shareholders and senior executives are excluded from consideration. It is far from axiomatic that these characteristics are beneficial for business.
As with so much of the policy debate around stemming modern life’s iniquities, a lot of it comes down to taxation. Big business and the banks both feel that they’ve made it to the other side of the recession intact, and whatever humility they might have offered before has very much been put to one side. So it goes with the issue of tax. In the UK, business has a very sympathetic government, which is drawn to beggar thy neighbour policies such as lowering corporation tax. Countries like Ireland may cling to their low corporate tax rate, along with a host of offshore-finance friendly scams, but analysed fairly it represents a meretricious race to the bottom. No less a business titan Warren Buffett has claimed that “never did anyone mention taxes as a reason to forgo an investment opportunity that I offered”. Yet apparently a softly-softly tax regime is essential for “wealth creators” to work their magic. In any case, between the global offshore financial system and national tax codes riddled with loopholes, those self-styled wealth creators find ways to avoid paying tax at all if they can manage it.
It used to be a case of woe betide anybody tries to challenge this culture, but there appears to be a stirring of resistance, and it isn’t all emanating from the “Old” Labour left. Many figures across the spectrum realise that a contract has been broken with the public, and that business as usual is in the long run unsustainable, otherwise the system will eat itself. The governor of the Bank of England, and that institution’s chief economist, have separately questioned the way in which companies are run today. Hillary Clinton’s campaign platform for president of the United States explicitly challenges the quarterly view. And David Cameron’s former director of strategy has recently been railing about the concentration of power, including the market power of big business.
The conduct of business and the creation of favourable conditions for business development and wealth creation should not therefore strictly be viewed as a left or right issue. A dialogue has begun about how our global economy should be designed and overseen following neoliberalism’s failed 30-year hegemony. My own view is that while it is absurd to suggest that ideological convictions have no place in defining the terms of this debate, the extreme disciples of Ayn Rand can hardly be allowed to continue indulging their myths of heroic self-sufficiency. It would certainly be to our collective detriment if this mindset continued to have the influence on policy it has had since the 1970s. Taxation is not theft, and the public and the private are demonstrably interdependent rather than mutually antagonistic. As Barack Obama correctly said, “You didn’t build that.”